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Explafning the "Triple Flip" <br />The following provides an explanation of the "triple flip". Until <br />2004-05 the local sales tax rate was 1 % and was received <br />monthly (5% of Pleasanton's 1 % actually goes to Alameda County <br />under a prior agreement). The State legislature and voters <br />changed the 1 % distribution in the 2004-05 fiscal year. During <br />2004-05 the lx;ai sales tax was split with 75% of the 1 % sales tax <br />remaining local and received monthly. The remaining 25% of the <br />sales tax became part of the State legislature's proposal called the <br />"triple flip" and is received in two equal payments in January and <br />May. The 'triple flip' swaps one-quarter of the City's 1 % local <br />sales tax to secure $15 billion in State deficit financing bonds <br />approved by voters with the passage of Proposition 57 (flip #1 ). <br />The State is replacing the one~uarter cent with property tax <br />money that has been diverted from sties and counties on a <br />continuing basis since 1992-93 to fulfill school funding obligations <br />(flip #2). Using diverted property tax money previously earmarked <br />for schools requires the State to fulfill their obligation to fund <br />schools from the State's general fund (flip #3). <br />The methodology the State uses to estimate the amount of sales <br />tax loss from the 25% take-a-way to be reimbursed from diverted <br />property tax involves a formula using statewide sales tax growth <br />first, and then seoond~ each city receiving apro-rata share of the <br />state-wide growth based on the change in county population. <br />Economic growth in sales tax in individual cities is not a factor in <br />this formula. The amount received using this estimate is <br />compared with the actual bcal sales tax collections in any given <br />year to determine the amount of a "true up" payment which is <br />made in the following fiscal year and could be either positive or <br />negative. The formula doesn't take into account the actual sales <br />tax being produced in each jurisdicfion and there can be a lag time <br />of up to 18 months before the actual true-up payment is received <br />and the jurisdiction made whole. <br />THE l:liY Of <br />[~L£~St4NTON. Attachment # 2 <br />