FY 2018-19 and 2019-20 Adopted Operating and CIP Budget

General Fund Five-Year Projections

The General Fund Five-Year Forecast for Fiscal Years 18-19 through 27-28 incorporates all known expenditures throughout the forecast period including all personnel cost increases due to existing Memoranda Of Understanding with represented employees. All negotiated salary and benefit increases, including CalPERS contribution rates, are included in the forecast.

In years that are absent negotiated increases, a general 2.5 percent increase is assumed for all employee services and supply categories.

Revenue estimates are based on assumed growth for all general fund revenues, including property tax, sales tax, and transient occupancy tax (TOT).

Property tax revenue for FY 18-19 and FY 19-20, based on the most recent information provided by the County of Santa Clara, is projected to increase by 4 percent and 5 percent, respectively, compared to the FY17-18 Mid-Cycle Revised Estimate as newly built housing units are added to the assessor’s roll, Proposition 8 temporary reductions granted by the County Assessor’s Office during the Great Recession are gradually restored, and property values increase. Subsequent years are estimated to increase by 4%. Sales tax revenue, based on most recent analysis done by City sales tax consultant, Avenue Insights and Analytics, is estimated to decrease slightly in FY 18-19 by 2 percent for FY 17-18, compared to FY 17-18 year-end projection, primarily due to current year mis-allocation resulting in adjustment being made in subsequent fiscal years. However, the amount is approximately 5% higher than at Mid-Cycle Revised Estimate as consumer confidence remained high. For FY 19-20, sales tax revenue is expected to increase by 5% compared to FY 18-19 largely due to continued moderate economic growth forecasted for the region and new business growth. Subsequent forecast years assume an average annual growth of approximately 2 percent. Recreation revenue from membership sales, program registrations, and facility rentals continue to maintain their high levels. To ensure the City has the resources to operate and maintain its recreation facilities, the City's membership rate strategy was to increase rates once every three years, most recently in January 2018. Due to the larger than anticipated drop in membership after the most recent increase, it is proposed that beginning January 2020, rates be increased every year by smaller increments. This would soften the impacts to members with the intent of decreasing the number of cancelation and increase revenue year over year as the increases compound. Furthermore, additional programs and fee based events are planned such as group exercise classes and community building activities. The City has experienced a historic high level of revenue from TOT due to a strong economy, the regional use of the City's Outdoor Sports Center and Aquatics Center, and a burgeoning tourism economy in the past few years. However, it appears this revenue category has plateaued and remained flat since FY 16-17. It is estimated that this trend to continue with the increase mainly from the anticipated opening of the 60-room boutique hotel in Downtown in FY 19-20.

324 SPECIAL ANALYSIS