CITY COUNCIL WORKSHOP AGENDA PACKET

CITY OF PLEASANTON, CALIFORNIA 13 | eidebailly.com SENSITIVITY ANALYSIS Per the City’s request, we conducted a limited sensitivity analysis to highlight the impact of modifying certain key assumptions contained in the City’s current financial forecast. This analysis is provided for illustrative purposes only and does not reflect alternative scenarios that we believe to be viable or appropriate based on the information examined. Where appropriate, we have provided observations regarding each data element presented below to assist in interpreting the information provided in each scenario. Property Taxes. Property taxes are the City’s largest General Fund revenue source, which in our view is a positive. Generally speaking, cities that have large percentages of their revenue derived from property taxes are better insulated from the impacts of economic downturns and revenue variability. Forecasting property tax growth, particularly in the short-term, is also more straightforward and can be significantly enhanced through the use of an expert consultant such as the consultant utilized by the City. In our experience, utilizing these consultants is a best practice and cities generally take the consultant’s forecast at face value and utilize it without adjustment due to the time involved in the consultant’s work and their significant expertise in the nuances of this revenue source. The table below highlights our sensitivity analysis for property tax revenue, reflecting the impact on the projected structural deficit that would result from a change in the projected 3.5% growth rate of plus or minus one percent. As can be seen in the chart, and as is expected given the size of the City’s property tax revenues, a 1% change in the property tax growth rate has an increasingly significant impact as the growth compounds over the period covered by the forecast. However, it is important to recognize that even in the best of the three scenarios shown above, a deficit persists, and one that does not yet include all of the known long-term costs that the City’s General Fund is facing such as infrastructure replacement. Absent any additional information not previously considered by the City’s property tax consultant, we have not observed any reason to deviate from the City’s existing assumptions for property tax revenue other than to implement our recommendation of using the consultant’s exact projection for each year rather than a rounded or averaged number for all years. Should any additional (25,000,000) (20,000,000) (15,000,000) (10,000,000) (5,000,000) - 2026 2027 2028 2029 2030 2031 2032 2033 ANNUAL SURPLUS/(SHORTFALL) PROPERTY TAX SCENARIOS 3.5% CITY PROJECTION 1% INCREASE 1% DECREASE Page 22 of 33