FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

General Fund The General Fund (GF) is the City's most visible fund because it accounts for City services that residents relate to including police, fire, recreation services, street maintenance, park maintenance, municipal governance, and administrative services. In the Adopted FY 2020-22 Biennial Budget, approximately 79 percent of General Fund revenue is derived from four main sources: 1) Property Tax; 2) Sales Tax; 3) Recreation Revenue; and 4) Transient Occupancy Tax (TOT). The remaining revenue is generated by other charges for services, grants, and transfers from other funds. Property tax revenue for FY 2020-21 and FY 2021-22 is $13.7 million and $13.4 million, respectively. While the pandemic is having an immediate negative impact on most of City’s major revenue categories, property tax typically lags in the effects of the economic downturn. The City is still expecting current year property tax revenue to come in higher than budget. However, the impact to the property tax for the next few years will be dependent on the duration of the pandemic. Staff has slightly reduced this year and next year’s projection to account for reduced supplemental property tax revenue as the real estate activities are halted due to the shelter-in-place order. In addition, staff has revised the projected growth rate for FY 2021-22 to 0 percent from 4 percent previously to account for the projected increases in Proposition 8 temporary reductions. The cumulative impact for three fiscal years is approximately $0.8 million. Sales Tax The City’s sales tax revenues are expected to be one of the hardest hit categories due to the COVID-19 global pandemic which has shut-down entire nations, locked borders, and shuttered businesses around the world. Locally, the County of Santa Clara issued the Shelter-in-Place (SIP) Order on March 16, 2020 and subsequently the State issued its SIP four days later. The Order required all businesses to close and residents to shelter at home, except for essential critical functions and services. According to HdL, the City’s sales tax consultant, excluding sales tax rebates, the City will collect approximately $8.7 million in sales tax revenue for the current year or approximately $1.5 million less than budgeted. This projected number does not include the recent Governor's Executive Order that 1) will allow businesses generating less than $1,000,000 in annual sales to delay filing for 90 days (until July 31, 2020) and 2) allow businesses with up to $50,000 in total sales and use tax liability to defer payment up to 12 months (until July 31, 2021). The sales tax estimates for FY 2020-21 and FY 2021-22 are $8.3 million and $9.3 million, respectively versus our prior estimates of $10.7 million and $10.9 million, respectively. The cumulative impact for the three fiscal years is approximately $5.5 million. General Fund Revenue Property Tax

14 ADOPTED BUDGET MESSAGE

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