AgdaPkt 2015-01-12 Joint SA Amended

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7.1.A. - Page 17 The median price paid for a home in the Bay Area in July 2014 was $617,000, up 9.8% from $562,000 in July 2013. Within San Mateo County, the median price for a home in July 2014 increased to $788,000, a 5.8% increase from July 2013 when the median price was $745,000. A steady improvement in the County's real estate market is anticipated to result in higher assessed property values and property tax revenues in the future. We believe these indicators paint a very positive picture of the local economy and provide a solid underpinning for future growth. Sales Tax Sales tax is an important source of general fund revenue as it accounts for about 20% of total general fund revenues. Sales tax revenue has increased 13% and 8% on a year over year basis in FY 2012 -13 and FY 2013 -14 respectively. Most of this increase was attributable to increased sales from new and used vehicle dealers. The City continues to rely on sales tax generated by businesses engaged in selling software. A threat to this revenue stream is the progressive migration of businesses delivering software to their customers electronically (via internet download or over dedicated phone lines) which then, under regulations adopted by the State of California Board of Equalization, provides that such products are no longer subject to sales tax. Mitigating this downward trend are significant increases in sales tax revenues generated by the chemical products and the general retail economic categories. Property Taxes Property tax accounts for almost 40% of City revenue and is a key indicator of the City's economic outlook. Projections for secured taxes in Redwood City in FY 2014 -15 call for a 5.5% increase over FY 2013 -14 with indications that growth will continue in FY 2015 -16. The housing market is strengthening and it is anticipated that assessed values will be increasing over the next several years. In addition, recent commercial real estate transactions, including the sale of several office buildings in Pacific Shores, are expected to result in an increase in the assessed value of those properties and an associated increase in property tax revenue in FY 2014 -15. Utilities User's Taxes The Governor approved Assembly Bill 1717 on September 30, 2014. This legislation allows for cities with Utilities Users Tax to apply the voter - approved tax on prepaid wireless services starting in January 2016 and sun - setting in 2020. It is anticipated that the City could potentially receive an increase of 15 - 20% in UUT revenue once the bill is in effect in 2016. Educational Revenue Augmentation Fund Refunds In FY 1992 -93 and FY 1993 -94, the State shifted property taxes from cities, counties, and special districts to school districts to supplant funding that the State was providing to school districts. The funds shifted from these local governments are placed into the Educational Revenue Augmentation Fund (ERAF) by the county controller. The controller then disburses these funds to school districts based upon the formula prescribed by State law. Any funds remaining in ERAF (after the distribution to the school districts) are returned to the cities, county, and special districts in proportion to the amount they contributed to ERAF. The City's continued receipt of these funds, which amounted to $4.2 million and $4.7 million annually in FY 2012 -13 and in FY 2013 -14 respectively, depends upon the State's complicated school financing formula and the State legislature not redirecting these revenues elsewhere. Recent changes in school financing could result in this revenue decreasing significantly in FY 2014 -15 and future years. In Lieu Sales Tax Triple Flip The "Triple Flip" was part of the State's 2004 budget in which sales and use taxes that previously went to cities and counties were diverted to the State to be used to repay the State's Economic Recovery Bonds. In turn, funds from the Educational Revenue Augmentation Fund (ERAF) were used to repay the cities and counties their lost sales and use taxes. There is no current statutory mechanism to fully reimburse cities and counties for these lost iii