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EXECUTIVE SUMMARY This report presents the options available to the City for financing the Bernal Property Improvements identified in the Bernal Property Specific Plan (the "Program") and ratified by the voters in 2006 (Measure P). This report looks at both "pay-as-you-go" -which is to pay cash for the Program and "pay-as-you-use" -which is to borrow the money for the Program (i.e., debt finance). The first step was to review the City's existing revenues and identify those revenues to be dedicated to the financing of the Program on a "pay-as-you-go" basis (i.e., pay cash for the project). This step is always recommended prior to contemplating increasing taxes and issuing debt. Staff has done this and identified existing reserves and annual transfers from the General Fund as a source of revenues to finance the Program. However, after utilizing the existing reserves and the annual General Fund transfers of surplus revenues there is a shortfall in the financing of the Program. Therefore, the City will need to supplement its existing revenues with new revenues and/or a debt financing program to fund the Program. Based on this, the report (the "Financing Plan") includes an in-depth review of transient occupancy tax (the "TOT"), developer fees, general obligation bonds, certificates of participation, parcel tax, benefit assessment and Mello-Roos special tax bonds. The following is a brief synopsis of each of these alternatives. Existing Reserves. Based on a review of the City's existing reserves for the Program, it was determined that the City has a $9.3 million reserve for Phase I and other improvements included in the Program. These monies have been included as a financing resource in the Financing Plan. Estimated Annual General Fund Trans ers. Based on a review of the City's projected General Fund surplus, the City could annually transfer approximately $2.SM to support the Program. However, as the projects within the Program come on line there will be an increase in operating costs. Therefore, these additional operating costs for the projects within the Program will reduce the annual General Fund surplus over time. The annual General Fund transfer of $2.SM and the additional operating costs have been estimated and included in the Financing Plan. Transient Occupancy Tax. When a jurisdiction looks at existing revenues and they are not adequate to support the development of a capital improvement program on apay-as-you-go basis or cash basis, an alternative available to the jurisdiction is to implement new fees or increase existing taxes. One vehicle that has been used by several jurisdictions for the financing of capital facilities that are utilized by both the existing population and visitors to the community is an increase in their transient occupancy tax (the "TOT"). The City imposes a TOT of 8% currently on hotel room rates for stays of 30 days or less. The City currently has thirteen hotels/motels plus an inn with a total of 1,829 rooms. The tax was last raised in 1983, from 5% to 8%. The proceeds from this tax currently represent approximately $3.6 million or 3.5% of the total General Fund revenues. By increasing the TOT from 8% to 12% this would generate approximately $1.8 million of additional monies in the first year of enactment and these monies have been estimated to increase by 3% per year thereafter. The increase in TOT is also currently being considered by other Tri-Valley communities for capital improvements in their respective communities.