CITY COUNCIL WORKSHOP AGENDA PACKET

CITY OF PLEASANTON, CALIFORNIA 14 | eidebailly.com information be identified, we recommend that it be communicated to the City’s property tax consultant so that they can evaluate its impact on their growth projection and revise their forecast, if appropriate. Sales Taxes. Sales taxes are the City’s second largest General Fund revenue source. Sales tax revenues are generally more volatile than property tax revenues and are more challenging to accurately forecast in the long-term. However, forecasting sales tax, particularly in the short-term, can be significantly enhanced through the use of an expert consultant such as the consultant utilized by the City. The table below highlights our sensitivity analysis for sales tax revenue, reflecting the impact on the projected structural deficit that would result from a change in the projected 2.0% growth rate of plus or minus one percent. As can be seen in the chart, a 1% change in the sales tax growth rate does have an increasingly significant impact as the growth compounds over the period covered by the forecast. However, the impact is small in comparison to the overall size of the structural deficit. As we discussed earlier in the report, we recommend using the consultant’s exact projection rather than a rounded or averaged number for all years, as well as using the consultant’s statewide consensus growth factors for years beyond the City-specific forecast absent more agency- specific information. However, the City has discussed the projection for these years with the consultant and they have arrived at the 2% growth factor shown in the City’s existing financial forecast. Absent any additional information not considered by the City’s sales tax consultant, we have not observed any reason to deviate from the City’s existing assumptions for sales tax revenue. Should any additional information be identified, we recommend that it be communicated to the City’s sales tax consultant so that they can evaluate its impact on their growth projection and revise their forecast, if appropriate. Total Expenditures. Forecasting expenditures is generally more difficult than forecasting revenues due to the complexity of the data involved and the significantly larger number of line items involved. Although the scope of our work and the time allotted did not allow for a detailed examination of the City’s expenditure forecast, we observed no concerns in the short-term expenditure assumptions other than the opportunity to provide greater detail in the expenditure projections in the future. The table below highlights our sensitivity analysis on total General Fund expenditures, reflecting the impact on the projected structural deficit that would result from a change in the total projected expenditures of plus or minus five percent. (20,000,000) (18,000,000) (16,000,000) (14,000,000) (12,000,000) (10,000,000) (8,000,000) (6,000,000) (4,000,000) (2,000,000) - 2026 2027 2028 2029 2030 2031 2032 2033 ANNUAL SURPLUS/(SHORTFALL) SALES TAX SCENARIOS 2% CITY PROJECTION 1% INCREASE 1% DECREASE Page 23 of 33