FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

At this time, the exact impacts of COVID-19 are difficult to quantify due to the evolving scope and unknown duration of the pandemic. Businesses, large and small, have had to close or significantly reduce service. Many of these businesses provide sales tax or transient occupancy tax (TOT) that support the City’s General Fund which supports City services. Additionally, the City had to discontinue recreational programs, which will also impact General Fund revenues. Recreation services revenues, the City’s third largest revenue source of the General Fund, is expected to be one of the hardest hit categories due to the closure of facilities during the shelter-in- place order. While it is still early to tally the total financial costs of the shelter-in- place order on the City’s General Fund, we can expect the City’s finances to incur a significant reduction as hotels, retail stores, automotive sales, and gas sales are all going to be greatly affected. Some economists have compared the current crisis with those of the Great Recession, or worse, the Great Depression. The Great Recession, which was triggered by the subprime mortgage crisis, started at the end of 2007 and lasted about 18 months as compared to the current economic downfall, caused by the shelter-in-place order, due to the COVID-19 pandemic. Using the Great Recession might not be a perfect comparison as the financial impacts could be different depending on the duration as well as the level of severity of the immediate impacts due to the shelter-in-place order. However, we can use the Great Recession, and its impacts to City’s finances, as a guide to predict what we can expect to come. The table below shows the percent change of the General Fund’s major revenue sources over five fiscal years from FY 2006-07 to FY 2011-12, which includes the fiscal years impacted by the contraction of economic activity to the start of the recovery from the recession. Property Tax, Sales Tax, TOT and development related revenues (Fund 206) were deeply impacted by the Great Recession. In addition to the aforementioned revenue categories, recreation services revenue is also shown here as the current crisis is having a significant impact on recreational programs.

Percent Change from FY 2006-07 to FY 2007-08

Percent Change from FY 2007-08 to FY 2008-09

Percent Change from FY 2008-09 to FY 2009-10

Percent Change from FY 2009-10 to FY 2010-11

Percent Change from FY 2010-11 to FY 2011-12

Revenue Type

Property Tax

24%

-6%

-1%

-8%

0%

Sales Tax

1%

-14%

-24%

25%

19%

Recreation Svcs.

31%

9%

11%

6% 4%

9%

Hotel Tax

8%

-16% -50%

-10%

19% 21%

Fund 206 Rev.

-25%

-6%

90%

ADOPTED BUDGET MESSAGE 13