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6.1. B. - Page 17 State of California As part of the 2011-12 State budget package, the California Legislature enacted and the Governor signed two companion bills addressing redevelopment, AB1x 26 ("Dissolution Act") and AB1x 27 ("Voluntary Program Act"), which took effect on June 29, 2011. The Dissolution Act, which is discussed more fully below, immediately suspended all new redevelopment activities and incurrence of indebtedness, and eliminates redevelopment agencies as of October 1, 2011. The Voluntary Program Act, which is discussed more fully below, allows the community that created the redevelopment agency to avoid dissolution by opting to pay a substantial community remittance ("Remittance") beginning FY 2011/12 and each year thereafter. If all communities with redevelopment agencies opt in to the Voluntary Program Act, the total statewide remittance would be $1.7 billion in FY 2011/12. Remittance each succeeding year would be approximately $400 million statewide. If Redwood City opts in to the Voluntary Program Act, the FY 2011/12 payment is $4.9 million and each subsequent year is approximately $1.16 million based on preliminary estimates by the California Redevelopment Association. Biannual payments would be due by January 15 and May 15 of each year. On July 18, 2011, the California Redevelopment Association, the League of California Cities, and others filed a Petition for Writ of Mandate in the Supreme Court of the State of California (California Redevelopment Association, et al. v. Ana Matosantos, et al., Case No. 5194861), challenging the constitutionality of the companion bills, the Dissolution Act and the Voluntary Program Act, on behalf of cities, counties and redevelopment agencies, and requesting a stay of their enforcement. As of the date of this report, a partial stay of enforcement of the companion bills has been granted by the California Supreme Court. The partial stay continues to prohibit redevelopment agencies from taking on any new obligations or engaging in any redevelopment agency activities (other than meeting prior enforceable obligations) on or after the effective date of the companion bills, but it is unclear whether cities may still adopt opt-in ordinances during the stay. Downtown Parking Operations With the opening of the downtown cinema/retail complex in 2006 along with the 590 space underground parking garage that is owned and operated by the City, the parking enterprise fund that was formerly financially self- sufficient now requires an annual subsidy from the City. In FY 2011/12 the City expects to transfer $637,000 from the general fund to the parking fund to support the parking fund's operations. The length of time that this subsidy continues and the extent to which it continues are a function of how quickly paid parl<ing activity in the downtown area increases and whether such increased demand will justify increased parl<ing fees. It is expected that some level of general fund financial support to the parking fund will be required for the indefinite future. Sales Taxes Sales tax is critical general fund revenue as it accounts for about 18% of total general fund revenues. As the local economy slowly recovers from the 2007 recession, sales tax revenue is beginning to reflect this recovery increasing 4.3% from FY 2009/10. Most of this increase was attributable to increased sales at department stores and new car sales. The City continues to rely heavily 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 lnternet 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. In FY 2010/11 the City continues to experience a decline in sales tax derived from business-to-business transactions with revenues from this sector dropping almost 10%from the prior year. iii