RES 03081 - Laserfiche WebLink

II. FINANCING THE BUDGET PLAN The City's financial goal is to support and enhance services to the community with locally generated revenue. While Pleasanton's General Plan sets the framework for a diverse revenue system, many factors impact Pleasanton's finances, including external circumstances over which we have little control. While the San Francisco Bay Area's economy is still feeling the negative effects of the "dot corn" bust, the East Bay including Pleasanton has fared better than much of the region. Of the over 18 million square feet of commercial space in Pleasanton's business/industrial parks and mall area, approximately 87% is occupied. While business to business taxable sales transactions are down significantly from their high, the diversity of Pleasanton's sales tax base has kept it from seeing even bigger losses in its second largest revenue source. Like much of the Bay Area, hotel taxes in Pleasanton experienced a significant decline (25% in 2001-02), and to date have shown no signs of recovery. Fortunately, while the real estate market shows weaknesses in some sectors, the property tax base is still growing. Property tax revenues are the primary funding source for Pleasanton's General Fund. This revenue source has grown significantly with new commercial development in the last few years, as well as the strong resale housing market, and the nearing completion of residential projects such as Bridle Creek. While commercial development has slowed significantly, some housing development continues, including development of the Bernal property. In addition, housing resales remain strong, particularly in the mid to upper mid-range. Therefore, Pleasanton should continue to see good growth in property tax revenues for several years to come, unless the economy weakens even further. Of concern are the State's economy and its impact on the State Budget. The State reportedly expects a $35+ billion shortfall over the current and coming fiscal years. With little agreement on how to resolve this crisis, local governments wait for the fallout. One of the strategies initially discussed to address this shortfall was the elimination of the Vehicle License Fee (VLF) backfill. The VLF backfill was created in 1998 to assure cities that they would not be impacted by the State's decision to reduce VLF by 67%. If the State were to eliminate the City's VLF backfill, the City would lose about $2.4 million annually. This is especially important as the VLF revenue is part of the City's General Fund, which is used for all types of ongoing operations. The concept of eliminating the VLF is subject to change as the State Legislature and Govemor continue the budget process. However, it is most likely indicative of the magnitude of budget relief the State might seek from local governments like Pleasanton, if not in the year coming up, then at some time in the future. Since 1991-92, the City has lost $45 million in revenue and responsibility taken on for added costs as a result of statewide property tax shifts initiated by the State during the recession of the mid 1990s. Although the State amassed large surpluses in the late 1990s and 2000, only about 10% of the property tax shift dollars were returned. The returned dollars have largely been done through annual appropriations with no guarantee of iii