Item 1 - Additional Materials Attachment C posted 04-30-20Revenues 101: The Essentials of Municipal Financial ResourcesMichael Coleman Fiscal Policy AdvisorLeague of Calif Cities530.758.3952coleman@cal.netwww.californiacityfinance.comCalifornia Society of Municipal Finance OfficersSan Francisco, CA February 19, 2009
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Feb 19, 2009CaliforniaCityFinance.comCities Vary and so do their finances¾Geography: proximity, climate, terrain, access¾Community Character / Vision: Land useBedroom? Industrial? Tourist? Rural? etc.¾Size – urban / rural¾Governance – full service / notStatewide generalizations often mask trends among sub-groups14 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comThe Mechanics of Government RevenueWho pays?e.g., visitors, residents, businesses, subclass, etc.What rate / base?e.g., $per gallon, % per price, limited AV, depreciated AV, etc.How’s it allocated?e.g., situs v pooled / population, etc.What is the revenue used for? e.g., water fees, roads tax, etc.Who collects? Who enforces payment?Who decides? oStatewide voters / ConstitutionoState law / LegislatureoLocal votersoLocal law / City Council15 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comUtility Fees25%Fees15%Not Restricted37%Other5%Federal4%State4%Investments& Rents 2%Fines &Licenses 1%Taxes5%Assessments2%Property Tax12%Sales Tax8%Utility User Tax4%Other Tax8%Other5%California City RevenuesSource: CaliforniaCityFinance.com computations from data from California State Controller (revenues). Does not include data from the following cities that failed to report: Beaumont, Gustine City, Loyalton, San Diego, Taft, and Tulelake.16 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comOtherHotel TaxBusn Lic TaxUtility User TaxFranchisesSales & Use TaxProperty TaxOtherPlanningStreetsLibraryParks&RecPoliceFire0%10%20%30%40%50%60%70%80%90%100%12Revenues ExpendituresDiscretionary Revenues & SpendingTypical Full Service CitySource: Coleman Advisory Services computations from State Controller reports17 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comCalifornia County RevenuesSource: CaliforniaCityFinance.com computations from data from California State Controller.Other Revenues3.2%Interest,Rents2.0%Fines,Forfeitures2.1%Licenses,Permits1.3%Other Taxes & Assmts2.7%Sales Tax1.3%Other Gov't Aid1.7%State Assistance34.8%Federal Assistance19.0%Property Tax20.6%Service Fees11.5%Counties are hybrid local/state¾state/federal programs: Aid to families (CalWORKS), food stamps, foster care, In-Home Support Services (IHSS), alcohol & drug treatment.¾countywide services: jails, courts, elections, property tax collection & allocation.¾“city” services to . unincorporated areasCounties have moremandates, less discretionary $, and are more vulnerable to state budgetary action.18 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comTaxesA charge which pays for public services and facilities that provide general benefits. No necessarily any direct relation between individual taxpayer’s benefit and tax paid.Cities may impose any tax not otherwise prohibited by state law. (Gov Code §37100.5)The state has reserved a number of taxes for its own purposesincluding: cigarette taxes, alcohol taxes, personal income taxes.19 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comTaxes: General and SpecialGeneral Taxes - revenues may be used for any purposeMajority voter approval requiredfor new or increaseSpecial Taxes - revenues must be used for a specific purpose2/3 voter approval requiredfor new or increaseParcel tax - requires 2/3 vote
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Feb 19, 2009CaliforniaCityFinance.comProperty Tax✔An ad valoremtax imposed on real property and tangible personal property✔Maximum 1% rate (Article XIIIA) of assessed value, plusvoter approved rates to fund debt✔Assessed value capped at 1975-76 base year plus CPI or 2%/year✔Property that declines in value is reassessed to the lower market value.✔Reassessed to current full value upon change in ownership (with certain exemptions)✔Allocation: shared among cities, counties and school districts per AB8 (1980)21 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comWhere Your Property Tax GoesTypical homeowner in a full service city notin a redevelopment area.Source: Coleman Advisory Services computations from Board of Equalization and State Controller data.Includes Property Tax in-lieu of VLF.Typical city residentCity21%Special Districts7%County27%Local Schools 45%22 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comThe Mechanics of the Property Tax9Who pays? – property owners9What rate / base?1% of assessed valuation AV is 1975-76 cash value increased annually by 2%AV is reset to cash value upon change in ownership9How’s it allocated?Fixed shares among cities, counties, special districts and schools9What is the revenue used for? General purposes of each agency9Who administers?County Assessor, County Tax Collector, County Auditor-Controller9Who decides? o California Constitution Article XIII Section Co Revenue & Taxation Code §§95, 9723 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.com2003004005006007001984-851985-861986-871987-881988-891989-901990-911991-921992-931993-941994-951995-961996-971997-981998-991999-002000-012001-022002-03Assessed Valuation in Millions-100200300400500Median Single Family House Price in ThousandsSOURCE: Calif Assn of Realtors, Board of EqualizationAVMedian SF HomeProperty Tax Effects Lag a Deflating Housing BubbleLos Angeles Area AV vs Housing PriceAssesssed Valuation in billions
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Feb 19, 2009CaliforniaCityFinance.comAssessed Valuation of Property$1.5$1.7$1.8$1.8$1.8$1.8$1.9$1.9$2.0$2.1$2.3$2.5$2.7$2.9$3.2$3.5$3.9$4.3$4.5$4.4$110$117$116$110$102$95$91$88$86$82$80$78 $78$78$80$82$83$82$80$83$0$1$2$3$4$5$6FY90-91FY91-92FY92-93FY93-94FY94-95FY95-96FY96-97FY97-98FY98-99FY99-00FY00-01FY01-02FY02-03FY03-04FY04-05FY05-06FY06-07FY07-08 08-09e 09-10eAssessed Valuation - Trillions$0$20$40$60$80$100$120ThousandsAssessed Valuation Per Capita Inflation Adjusted to 2008 .Assessed ValuationTotal-PerCapita-InflationAdjusted25 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comSales and Use Tax✔Sales Tax: imposed on the total retail price of any tangible personal property✔Use Tax: imposed on the purchaser for transactions in which the sales tax is not collected26 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comSales and Use TaxLocal portions …►Bradley Burns Uniform Local Sales&Use Tax (1955)1.0% allocated on “situs” - general purpose0.25% to countywide transportation►Proposition 172 (1993) - 0.5% ratelimited to “public safety” use Allocation formula related to ERAF property tax shift. 94% to counties ($2.3B), 6% to cities ($150M)►Special Transaction & Use Taxes - usually transportation - varies by county, some cities
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Feb 19, 2009CaliforniaCityFinance.comWhere Your Sales Tax GoesCountywide Transportation ¼ %County Health&Welfare ½ %Proposition 172 ½ %Add-on / Transportation (varies)State General Fund 5 %City* 1%* For taxable sales in unincorporated areas, the local 1% rate goes to the county.28 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.com$143$155$155$169$194$209$217$232$251$272$282$275$273$271$278$293$312$329$350$373$420$447$437$448$480$515$554$565$554$526$523$132$113$99$0$100$200$300$400$500$600$700$800$900$1,00076-7777-7878-7979-8080-8181-8282-8383-8484-8585-8686-8787-8888-8989-9090-9191-9292-9393-9494-9595-9696-9797-9898-9999-0000-0101-0202-0303-0404-0505-0606-0707-0808-09e09-10ebillions$0$2,000$4,000$6,000$8,000$10,000$12,000$14,000$16,000$18,000$20,000Taxable Sales Per Capita Inflation Adjusted to 2008 .Declining Taxable SalesTotal-Per Capita-Inflation Adjusted29 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comThe Triple Flipsales tax for property taxState General FundState Fiscal Recovery FundIncrease State Sales Tax Rate +0.25%Decrease Local Sales Tax Rate -0.25%SchoolsProperty Tax in Lieu of Sales Tax$1.4 b$1.4 b $1.4 b30 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comThe VLF-PropTax SwapVehicle License Fee for Property TaxState General FundVLF BackfillSchoolsProperty Tax in Lieu of VLF$4.4 b$4.4 b $4.4 b**in FY2004-0531 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comOther Locally Adopted Taxes✔Business License Tax✔Utility User’s Tax✔Transient Occupancy (Hotel) Tax✔Documentary Transfer Tax / Real Property Transfer Tax✔Parking Tax✔Admissions Tax32 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comIntergovernmental SubventionsMoney granted to support or aid some cause, institution or undertakingto cities …✔Motor Vehicle In-Lieu Tax (VLF) $150 Million•A state-imposed tax distributed to cities and counties in-lieu of property taxation of automobiles.✔Proposition 172 Public Safety Sales Tax $180 Million½ cent approved by voters to mitigate the effects of the ERAF property tax shifts on cities & counties. ✔State GrantsHomeowners Property Tax Relief . . . $ 50 MillionHighway Users Tax (Gas Tax) . . . $600 MillionSales Tax on Gasoline (Prop42) . . . $300 MillionOther . . . $600 Million✔County Grants . . . $240 Million✔Federal Grants . . . $1.5 Billion33 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comFees & ChargesA voluntary charge imposed on an individual for a service or facility provided directly to that individual. A fee may not exceed the estimated reasonable cost of providing the particular service or facility for which the fee is charged, including overhead.Cities have the general authority to impose fees (i.e., charges, rates) under the city’s police powers.*Specific procedures in state law for fee & rate adoption.“Property related” fees - special rules under Prop 218.Examples: water service, sewer service connection, building permit, recreation class, development impact fees.*as defined by Article XI, Sec. 7 and Article XIIIB, Sec. 8 of the California Constitution.34 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comOther Locally Raised Revenues✔Assessments✔Licenses and Permits✔Franchises: cable/video, solid waste,electric, gas, water, oil✔Rents, Royalties & Concessions✔Fines, Forfeitures & Penalties✔Investment Earnings35 of 36 April 30, 2020, Item #1
Feb 19, 2009CaliforniaCityFinance.comRevenues 101: The Essentials of Municipal Financial ResourcesRecommended resources:The California Municipal Revenue Sources Handbook, 2008 editionby Michael Coleman. League of California Cities. 2008Understanding the Basics of City and County Revenueby Charles Summerell. Institute for Local Government. 2008*Cal Facts, California’s Economy and Budget in Perspective – State and Local Finances. Legisl Analyst’s Office 2006*A Primer on California City Financeby Michael Coleman. Western City. Mar 2005**available on-line at …Available for purchase at CityBooks36 of 36 April 30, 2020, Item #1