CC 2024-05-14_Discussion on Financing Options_PP
Discussion of Financing Options and Consideration of a Sales Tax Measure
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Background
The 4 major City goals that are incorporated in the Fiscal Year (FY) 2023-25 Biennial Operating Budget are:
Funding
Fire Services
Infrastructure
General Plan Update
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Community Priorities Rankings
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Maintain fire protection services
Maintain 911 response and emergency police services
Repair, pave and maintain 73 miles of roads; fix potholes and damaged sidewalks
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Background - Maintain Fire Protection Services
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Background - Maintain 911 Response & Emergency Police Services
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Background - Repair, Pave, and Maintain 73 Miles of Roads
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Background – Sales Tax
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Sales & Use Tax Rates for the Region:
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Maintain Fire Protection Services
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Maintain 911 Response & Emergency Police Services
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Repair, Pave, and Maintain 73 Miles of Roads
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Future Pavement Conditions
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Financing Options – Types of Municipal Debt
General Obligation Bonds (GO) Bonds
Lease Revenue Bonds (LRBs)
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General Obligation Bonds
Pros:
Lowest Cost
Does not rely on existing General Fund resources
Cons:
Long lead time, usually 9-12 months
High voter hurdle, requires 2/3 voter approval
Limited flexibility of use of proceeds
Property owners are paying for the use of the City instead of users paying
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Lease Revenue Bonds
Pros:
City Council approval of bond issuance, although voter approval is needed for the funding source (Sales Tax Measure)
Quick implementation
Very flexible/widely available
Cons:
General Fund obligation
Encumbrance of facility
Requires a new funding source, such as a voter approved sales tax measure
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Sales Tax Measure Advantages
Sales taxes are paid by a greater distribution of the population
Sales taxes are not paid on many basic necessities
Sales taxes are paid based on consumption
Because the tax is established by a vote of the local electorate, it cannot be taken by the State
Generates additional revenue the City’s Police Services, Fire Services, and Roads Infrastructure
Comparative sales tax with other local jurisdictions
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Sales Tax Measure Disadvantages
Additional taxes reduce the discretionary income
Tax increases are not generally perceived positively by citizens
Use of the additional revenue from a general tax is not legally restricted to certain uses
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Potential Impact on Local Sales
For every $100 spent on taxable goods, the increase would result in an additional $1.00 paid by the consumer.
1% sales tax would generate approximately $6 million annually
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Sales Tax Options
Amount of Increase
Local Sales Tax Allocation Report
Sunset Clause
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Next Steps
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Recommendation
Review and provide direction on financing options related to the top three priorities from the Community Priorities Survey Results and consider directing staff to prepare a resolution
and ordinance for City Council consideration at the May 28, 2024 meeting, to place a 1% Transaction and Use (“sales tax”) measure on the November 5, 2024 ballot.
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