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ATTACHMENT2 Explaining the "Triple Flip" The following provides an explanation of the "triple flip". Until 2004-OS the local sales tax rate was 1% and was received monthly (5% of Pleasanton's 1% actually goes to Alameda County under a prior agreement). The State legislature and voters changed the 1% distribution in the 2004-OS fiscal yeaz. During 2004-OS the local sales tax was split with 75% of the 1 % sales tax remaining local and received monthly. The remaining 25% of the sales tax became part of the State legislature's proposal called the "triple flip" and is received in two equal payments in January and May. The `triple flip" swaps one- quarter of the City's 1% local sales tax to secure $15 billion in State deficit financing bonds approved by voters with the passage of Proposition 57 (flip #1). The State is replacing the one-quarter cent with property tax money that has been diverted from cities and counties on a continuing basis since 1992-93 to fulfill school funding obligations (flip #2). Using diverted property tax money previously earmazked for schools requires the State to fulfill their obligation to fund schools from the State's general fund (flip #3). The methodology the State uses to estimate the amount of sales tax loss from the 25% take-a-way to be reimbursed from diverted property tax involves a formula using statewide sales tax growth first, and then second, each city receiving apro-rata shaze of the state-wide growth based on the change in county population. Economic growth in sales tax in individual cities is not a factor in this formula. The amount received using this estimate is compazed with the actual local sales tax collections in any given yeaz to determine the amount of a "true up" payment which is made in the following fiscal yeaz and could be either positive or negative. The formula doesn't take into account the actual sales tax being produced in each jurisdiction and there can be a lag time of up to 18 months before the actual true-up payment is received and the jurisdiction made whole.