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Hotel taxes also fell sharply in 2001-02, from a high of $4 million down to <br />$3 million, and continued to decline through last fiscal year. However, beginning in <br />the winter of 2004, the revenue source started to show some recovery. Therefore, <br />staff is projecting a 9% growth in 2005-06 from $2.75 million to $3.0 million, and a <br />6% growth in 2006-07 to $3.18 million. <br /> <br /> Hotel Tax Revenue <br /> <br /> 5 <br /> <br /> 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05' 05-06' o6-o7-i <br /> <br /> * Projected <br /> <br />Beginning in January 1999, the State lowered the Vehicle License Fees (VLF), but <br />backfilled the revenue to local agencies. Without a budget yet in the summer of <br />2003, the State failed to make three months of VLF backfill payments to cities and <br />counties resulting in a VLF funding gap. This time period is known as the "VLF <br />Gap" period, during which the City lost about $1.14 million in VLF allocations. In <br />2004, the State reduced the VLF rate and replaced the backfill to cities and counties <br />with "Property Tax in Lieu of VLF" funds that are now tied to future property tax <br />growth. As was previously discussed, Proposition lA requires the State to repay the <br />VLF Gap period loan no later than August 2006. <br /> <br />The following chart shows the changes in the VLF allocations to the City, as well as <br />the start of Property Tax in Lieu of VLF receipts in 2004-05. The "dotted" line <br />shows the total of the two. Note that the dip in 2003-04 total revenue reflects the loss <br />of the $1.14 million during the VLF Gap period. The 2006-07 projections reflected in <br />the chart include the required State repayment of this loan. <br /> <br />As part of the Governor's May Budget revision for 2005-06, he has proposed funding <br />about half of the VLF Gap loan repayment in 2005-06 rather than waiting until 2006- <br />07. The final outcome will not be known until the State ultimately adopts its budget <br />for next year. In any event, if any of the VLF Gap loan repayments are made earlier <br />(in 2005-06 rather than 2006-07), the proposed City budget already assumes their use <br />in 2006-07. Therefore, any early payment is not additional revenue. <br /> <br /> b43 <br /> <br /> <br />