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The other issue one must consider when contemplating alease/purchase financing is "where is the revenue going to come from in order to make the annual debt service payment?" In the case of a general obligation bond (and the reason why voter approval is required) the annual debt service is paid through the levying of an ad-valorem tax. In the case of certificates of participation, the annual lease payment is typically paid with excess city funds and/or excess revenues over expenditures. Therefore, no new tax is generated and, (therefore), the basis for why voter approval is not required for this type of financing. The City's current financial condition does not allow the city to "look to" existing excess revenues over annual expenditures to make the (proposed) annual lease payments. Therefore, one option available to the city would be the levying of a parcel tax or benefit assessment equal to the annual lease payments and then selling certificates of participation secured by the parcel tax revenues or benefit assessment. Parcel Tax and Benefit Assessment Super majority (67%) voter approval would be required in order to levy a parcel tax and simple majority (50%+1) would be required to levy a benefit assessment. This type of tax or assessment has been used throughout California to finance emergency and paramedic services and improvements. The advantage of this type of a tax is that the actual amount of the tax per household, business, etc. can be structured in such a way that it is reflective of the benefit derived from the improvement or service. This is, as opposed to, the general obligation bond tax that can only be based on assessed valuation. In the case of the parcel tax or benefit assessment, the tax can be based on anything except assessed valuation. Benefit assessments are typically used to pay for on-going maintenance and operation costs associated with the city operations and/or maintenance and operating costs associated with capital facilities. For example, the Program will require additional monies to pay for increased operating and maintenance costs. Therefore, the benefit assessment could be viewed as a financing mechanism for these costs. However, it should be noted that the currently proposed Financing Plan contemplates using a portion of the annual transfer of surplus funds from the General Fund. Also, it should be noted that proceeds from the issuance of general obligation bonds and certificates of participation can not be used to fund operating and maintenance costs. An additional issue that must be pointed out when considering the financing of capital costs with the issuance of general obligation bonds versus a parcel tax or benefit assessment in concert with a certificate of participation is the impact on the taxpayer. In the case of a general obligation bond, the tax is levied based on assessed valuation. Therefore, commercial properties will pay a higher percentage of the overall cost than residential properties. For example, in Pleasanton the 2006-07 FY assessed valuation breakdown is as follows: T e of Pro e # of Parcels 2006/2007 FY Assessed Valuation % of Total Commercial* 1,165 $3,923,756,929 26.2% Residential 21,492 $11,062,204,187 73.8% Public A enc 584 0 0 Total 23,241 $14,985,961,116 100.0% *Includes industrial, light industrial, all non-residential property. 10