okay i'll call today's april thirtieth meeting of the finance committee to order mister samari oh what's on the adjust all introduce it initially so we're here to talk about general fund revenues in a multi or forecast in the context of our proposed fiscal year two thousand and twenty and twenty one financial plan as you know the we're really going to focus a lot on next year in general because that's the recommended budget the second is more of a plan so today's revenues general fund we're not talking about any other other funds like enterprise funds unlike the focuses general fund where we have revenues that we tend to be more volatile and revenues where we don't have ability to control them as much tax revenues we we can't really control what they do and historically we've seen a lot of volatility in our revenues particularly tax revenues so for us it's really important for us to monitor them monthly we do this all year long this is something that jennifer and her staff do year round monitoring all our key revenues to see how they're performing based on expectations and see what's going on in the economy both local estate and so forth but from a budgeting perspective it's important because in the general fund it sets the table for how much we have to spend so they're really important numbers and we try to be not too conservative not too liberal because either one of those can get us in trouble we try to be really kind of moderate we use the best data we can't we have there isn't always a lot of data for us to use in developing these project so some of it is just sort of general trends and we look a lot on last few years but wanted to share with you kind of some more detail than you've probably seen in the past in terms of how we've come up with our projections for the net for the next year and let you sort of kick the tires a little bit tell us where we might be too conservative might be too aggressive ultimately we would like you to make a recommendation on these revenues to the full council as to whether our assumptions are reasonable or not and whether you want to change those or not so we are going to go into a little more detail than you have in the past but it's not exhaustive but we're still going to be probably within a half an hour or forty minutes once we go over that i'll just show you a couple quick slides on a multi or forecast projecting out beyond the two your financial plan another two years what are the trends and doing some what if scenarios so with that i'll turn it over to jennifer thomashefsky she is our treasury manager she's been with the city of almost five years now but our treasury manager for about a year or so right nine month you i'm jennifer thomashefsky and for my presentation today i will start with a summary of the non departmental revenues and then i'll go into more detail in the individual revenues themselves but this first sli is a little bit hard to see i should have used different colors i see that now apologize for that this is a summary you know sales tax measures see property tax and so on and the what we see here in fiscal year eighteen we had about ninety two seven million dollars in tax revenues and in the second section the orange section we see this is what's going on current year we have our adopted budget of about  hundred and twelve point six million compared to one hundred and sixteen point two for a variance of about three point six i'm gonna go into these again in more detail but the main takeaway with this slide is that we see the the biggest variances in that sales tax in measure c and that's because that recurring theme you've been hearing that we've been that we received some of that money that should have been received in eighteen this year so we'll we'll look at that in more detail but to put a little bit more context to what does that mean for the twenty and twenty one budgets in total we see growth of about two point nine percent for two thousand and twenty and about three and three point three percent for fiscal year twenty one i'm going to talk about sales tax so sales tax is our second largest source single source of revenue so our sales tax rate in the city is eight point seven five percent so one percent of that comes back to the city the rest well and then one percent also now comes back in measure c money the rest of that goes to the county in the state so what we're looking at here is the one percent the regular sales tax we look at sales tax on a quarterly basis we track it on a quarterly basis we receive monthly payments from the state they pay us every quarter the first two months we get in advance and then at the end of the quarter we get a true up so really that true ups what's important they you know those advances sometimes they may be higher or lower but it's that true up that really matters so when we put together our twenty  our twenty one budget we had received two quarters worth of information or of sales tax so you see in the white areas those are actual numbers the grayed out areas are our forecasted or projected numbers so looking at it this way in fiscal year eighteen we see that we had about you know a little over twenty million dollars for for fiscal year nineteen we're projecting about twenty three point seven which is about one nine million higher than what we originally budgeted and this this slide is titled unadjusted and that's because it includes it's when we received that cash so that in that one nine million is buried about a little over a million dollars that we should have received last year which skews our growth to over fifteen percent so in the next slide this adjusts for that so this is really where we want to look at our talking points so when we adjust out that prior your money we see that about that one nine drops to about a little over seven hundred thousand dollars in about four point seven percent now when we look at that on a quarterly basis just to put a little bit context to this and we will look at historical sales tax on the next slide but when we put the budgets together we we use a growth rate of about one and a half percent and that's what we've been using in the last few years and and then we go we go from there so when we look at our first quarter this year we see that that came in a little bit hired about two percent in the second quarter it's a it's a lot higher and thirteen percent but that's also a little bit skewed because last year we had the impacts of the thomas fire so that changes those percentages and then we recently just received a letter from the state which they in in an error they gave us about two hundred thousand dollars more than they should have which kind of feeds into my next my next point being there's a lot of moving pieces with sales tax and in the last year we switched from the state used to the board of equalization used to be the agency that managed that the sales tax program that was changed to the california department of tax and fee administration and with that they implemented a new software and ideally when all the bugs are worked out of that software it will be you know better information but we're not there yet and we're seeing a lot of errors that that part of what why we received that million dollars so late is because they were working through those bugs and they weren't processing sales tax returns now they're processing them but they're finding errors we are also hearing that with once all the bugs work out they'll they'll they have potential to look for anomalies in sales tax returns so hopefully they'll find you know issues and we'll get paid you know those those will get corrected sooner but we're seeing revenues now coming in higher than we had expected i think every day it's highs and lows you know every month we get that check and you know when it's higher you know we we hope we can trust it but we're still waiting for the dust to settle with the state so so the so that's why we see a high number in the second quarter for the third and fourth quarters we're projecting that one and a half percent growth with the june the last quarter there's a little adjustment built in for the new target store so that's a little bit higher  a lot of information but the result is we're expecting it to be a little bit higher than our budget even adjusting for that prior year revenue probably depending on the corrections that they make it may not be this high but this is the best information we had at the time that we were preparing the budgets so how does that translate into twenty and twenty one again we start with that one and a half percent growth and then we adjust for the items that are coming down you know coming that are that are coming that we don't see in the current numbers so for example the effect of cannabis sales that's going to add to our sales tax base online sales  recent court decision with wayfair we are already we think that could potentially be what we're already seeing in the second quarter amazon and wayfarer are already voluntarily starting to collect sales tax but we anticipate that could go higher as well and then also new retail so that translates to about a four three percent increase in twenty and one and a half percent in twenty one so next we'll look at what does that look like in a year over year trend did you have a question yeah so your subtotal for two thousand and twenty is four point three percent growth so why is that so strongly deviating from the one point five because we we start with that base growth and then we factor in new new taxes that that we haven't that we haven't started receiving yet so for online sales cannabis sales we anticipate that sales tax will go up for those purposes as well but those aren't in our current numbers those are new new revenues that are that will be coming in the future so the cannabis tax is rolled into these numbers into that yes so we start with that one and a half percent and then we build from there for those we adjust i shouldn't say we build but we adjust for the items that we know that are coming and just to be clear we're talking about the sales  taxes on cannabis revenues they're subject to sales taxes unless them medical card from the state in addition to our excise tax so there's two things going on we're talking about the sales tax on cannabis sales not the excise tax which is something different and then the reason it's  thousand and twenty one is because once those new revenues come into play in two thousand and twenty that becomes our new base and then we're just growing our typical growth from there about one and a half percent at least that's what we're projecting so the the actual change looks like you have forecast about a million dollars so to go to twenty to twenty two million five hundred and eighty nine to twenty three five hundred and seventy six that's correct so the million dollars and would include the target the cannabis sales tax  d online all right okay thank you so this next chart shows sales tax from two thousand and twelve to our current two year budget and before two thousand and fifteen we saw higher growth in sales tax and then it tapered off in sixteen and seventeen eighteen there's the impacts of both the thomas fire and the prior year the payments that we received in nineteen so 's a little bit higher again when you adjust that down that's closer to the four percent and then that's kind of holding you know it's more conservative from that point on but just to put a little bit of context what that looks like compared to historical numbers so i also put our added measure c in so measure c is new and  's the first year of a full year of measure c it follows similar to sales tax there's a little bit there's some differences in district tax and sales tax but for the most part they're very close we also had about a million dollars i think it's one two million dollars we received a nineteen that should have been in eighteen as well so again just to put some context to what that growth looks like next i will talk about property tax so property tax is our single largest source of revenue and it's also our highest growth for our for our revenue our revenue budgets and so again the the county manages the property tax payments so taxpayers pay the county and then the county distributes that money to the different agencies to the county the special districts the school districts and the city gets a portion of that and that percentage can change based on tax rate areas and property values but so we get a portion of that and i should say that most of the tables are going to look very similar but we track them a little bit different so sales tax we track by quarter property tax we have different categories of property tax but when we're talking about property tax we're really talking about that first line you see on this table that's the majority of our property tax revenues we also have airplane tax interest supplemental tax and then the county collects a an administration fee allocated is the properties within that previous rda get that tax revenue they it's also the county also manages that they subtract out an administration fee in any bond debt this last year we have we've been paying bond debt of about eight million dollars a year when we take the net of that then the rest gets allocated to the different jurisdictions within that former r that percentage that the city's percentage of that has fluctuated between eleven and a half and twelve and a half percent we see in fiscal year eighteen we have a little bit higher  and let me just back up again so our axe jewelle fiscal year eighteen was about thirty four point nine million there's about one and a half million that was one time monies and both in the property taxes and in that rda so that's  those growth the the some of the growth that you see here as well but when we're looking at nineteen compared to budget we're projecting a little over three hundred thousand additional revenues we project this based on schedules that the county gives us so this is the majority of it you'll see just looking at adopted budget compared to the forecast it's in that rda amount so most of that three hundred thousand resides there and i did want to point out some of that one time money also from fiscal year eighteen revived revised this growth down if we adjust for that one time money that growth is really about five point four percent so when we look at what we're going to budget for twenty and twenty one and again on the next slide we'll look at historical little a historical percentage gro we we've been budgeting about five and a half percent is what we've been seeing we feel that that's been pretty accurate to this point we do have the impacts of prop eight so back in the wrist you know  two thousand and eight when the recession hit the county assessor reduced property values to adjust for market at the time and then over time they've been they're allowed to increase that back as property values align back up out you know after the recession but the assessor has the ability to do that all at once or do that incrementally and what we've seen is that they've been doing that incrementally so over time i think they're about sixty to seventy percent back to where they were a pre recession so for the next few years we feel confident that we're going to see that continued five and a half percent growth  so that's where that's what we used as our base for twenty or for two thousand and twenty it sure i'm not sure if this is the appropriate place but i'm i think is the rda but i'm gonna refer to our actual budget binder  y'all copies of it but on c fourteen which is the summary schedules of appropriations by fund there's a line item that says general fund and it says that the  year eighteen was three four million and then the fiscal year nineteen amended is nine point one million and in the proposed fiscal year twenty is one eighty eight million so it goes from nine million to one eight i can show you this but i have to do with the rda i think what you're looking are you looking at the successor agency budget  so the eight million is the bond payment so this last year in nineteen is the last year we're paying that bond and then so what happens in in two thousand and twenty is the the net amount of  increment received that would have gone to the rda is increased by that eight million and then we get our proportionate share so we get about another million of that so we don't get all of it but we get a portion of that and that increases our share of the okay let's see so this thomashefsky made the comment that the county provides us data so when we developed the budget for the current year or we did that you know really you finalize number in march about this time we don't we don't get the real data until october so in october we will know exactly what that what the assessments are what the levy was so we have will have a pretty good sense of where like we know this year based on that da we got in october from the county where we're going to be particular with a property tax line the ones that will vary are some of those other categories and in particular the supplemental tax as you'll see it's that's the supplemental taxes that occur when between the levy and the and terms of what the real numbers are but for the property tax number we have a we now know what that number is that's why you feel pretty confident our projections so at what point if ever do you take into account the fact that we're in a historically long recovery from a recession and that our property values are starting to get close to i guess was a two thousand and six when it peaked do you just ignore those and as long as we're going up we're going to use five five or  oh i'll take the first stab at it so some of that growth is just there's also property sales that occur within the year you know and so as as properties sell those that base increases as well so it's a combination of that as well as the adjusting back up for those previously the prop eight decrease to those previous properties bringing them back up to their pre recession values we always have to you know we do try to look forward but it's really hard to project what you know i mean it's really hard to know what the markets going to do it's the same thing with our investments you know we use the best information that we have  we don't really know what's going to happen you know to the real estate market in the next couple years but i mean we try to factor in everything and try to be very conservative with with that growth you know we based on the historic percentages we probably could have gone up to six percent but we try to be a little bit more conservative with looking at well what you know what's a realistic number that we think could end up happening so there's a lag between when property values flatten out and when the property tax increases start to flatten out it just takes a while because of what you talked about the constant reassessment of properties and thirteen and so even if the market you know goes down those property values are art those and until they sell a property it's pretty much locked in at you know at its base those aren't going to change a lot with the fluctuations in the market what really triggers  a property sale and in broad terms it's probably fair to say that today the the market value of homes is far exceeds the overall prop thirteen assessed value that they used for purposes of assessing every year so as long as cpi can support it they're going to assess it increase that assessed value every two percent every year until we another real estate driven recession or values stop growing for a long time and we're prop thirteen assessed values catch up to that but i don't sort of a recession that's real estate based i don't you know we're going to be looking at at least two percent on the cpi is below that because they're limited to the lower of the two and then it's just a matter of how much property recapture we're going to see and then how much happens so if i understand correctly you know even if we're not seeing growth there's there's a level of stability because is that kind of what you're saying if there's not turnover then we we do kind of understand what we're gonna be getting rise or values in property in real estate and then the prop eight recapture is going to eventually run out in a few years so it'll be really other factors and again the five percent growth in two thousand and twenty one this next slide might help put a little bit of context to that so you can see here's our and when we're talking about property tax we're talking about on that last table that first line  just the property tax we we don't have the rda money and all the other categories on this chart this is just the property tax so we see that you know up until two thousand and sixteen growth average growth from fiscal year twelve to sixteen was about you know on average about three nine percent i think twelve kind of skews it down a little bit but then you look at seventeen and eighteen and you know we were seeing higher gro some of that growth in eighteen is because of those one time payments we received there was a sale of property in the rda which impact i think there was about seven hundred thousand extra that we got for that and there was some settlements on some delinquencies that were received from several years back that the county finally distributed as well so that skews it up a little bit and then you know so we see that that trajectory is pretty tax for the city of santa barbara rto t is twelve percent ten percent of that goes to the general fund and two percent of that goes to creeks that's our measure b revenues and we track these monthly hotels are required to report their gross receipts at the end they have by the th of the following month to provide their reports to the city as well as the payments  for the you know their remittance and when we prepared the twenty and the two year budget we had actual information through january and in eighteen we had about  eighteen point nine million dollars so there was a little bit a dip there again because of the thomas fire and i'll loop back to that this year we're looking at about a two hundred thousand dollar deficit from our budget we forecasted when we built the budget we assumed about a three percent growth and we're still seeing growth of about we're estimating about two eight percent but it's just not as high as we had originally budgeted so it's close i mean it's less than i think it's like zero two percent you know it's a point two percent different so you know we're close but i did want to point out when we look at december in january last year so december is where we had the fire so it there was about a twenty eight percent drop and then in january when when the mudslides occurred and people were evacuated we had a lot of the hotels were full or or at least there was a higher occupancy rate and so that skews our percentages this year so this year if we see the opposite december's lower compared to or i'm sorry higher compared to last year and january's a little bit lower so again you know the main takeaway here is that we're tracking pretty flat slightly below what we had originally anticipated but we're still seeing some growth so again for our twenty and twenty one we're sticking with the three percent growth what does that look like in a year over year comparison up until two thousand and fifteen we were seeing a lot of growth and then that kind of tapered off in about sixteen and seventeen seventeen we had the reduction of our vacation rental  enforcement so there was an impact of that and then in eighteen we see the thomas fire so there there's a negative growth there and then the green lines being  forecasted so you know it it's a moderate you know we're hoping that it comes in with three percent we've also factored in some of the new hotels there was some construction last year for some of the when one of the larger hotels we factored in you know with the higher occupancy rate a percentage increase for for that so we did factor those into our assumptions as well i think you yeah i think you just spoke to this a little bit i am concerned given that this is so flat that three percent may be a stretch do you guys feel that that's sufficiently conservative i mean i i just i'm just wondering this is another one that's a little bit hard to predict we work with visit santa barbara you know we have more flights coming in which bring more people which you know potentially you know can draw more tourism to increase tod and it's not necessarily flat its flat compared to budget why i shouldn't say compared to but we budgeted three percent but we're really seeing close to that at two eight percent so you know with you know the increased occupancy and you know we're you know you have to be a little optimistic you know it's i think it's it's within a reasonable range i don't feel that it's outside of a reasonable range so next is our utility user tax so utility user tax we have six percent uut and on telecom that's about five point seven five percent we receive those monthly and we have several categories of utility users taxes that we track we have cellular we have voice over internet protocol or  never like saying that word it just doesn't sound right telephone and prepaid which combined make up our telephone source uut we've actually seen negative growth in some of these areas cellular were not seeing less users but with competition and providers revenues are dropping people of providers are dropping their rates a couple years ago we were seeing prepaid was you know going up as cellular was going down but with those rates dropping we're seeing less demand for prepaid and with the same thing with telephone with the landlines more people or just don't have landlines so we're seeing negative growth there we assume negative growth in our nineteen budget in total were we're estimating that will be about a hundred thousand below budget by your end if you look at eighteen nineteen and twenty and twenty one there's not a lot of change there there's not a lot of variants cable is another one that we're seeing you know kind of decline more people are going away from traditional cable to netflix and other you know streaming services like that we don't tax currently on netfli it's in the legislation in the legislature they're looking at that but we're not collecting currently okay clarify so when we back in two thousand and six we went to the voters to have them validate our utility users tax there was some legal challenges across the state on the the validity of utility users tax so we went to the voters took it to confirm it to avoid a lawsuit and they  supported it it was a gentle tax one of the things we did was to reduce the telecommunications piece to five and three quarters to four induce sort of support but what we also did at that time was we modernized our ordinance because there was even and back in two thousand five and six we were seeing so many changes to technology and how some of these services were being provided electric companies providing phone cable providing phone you know all those things were just changes so we modernized it to make a technologically neutral which meant that no matter how you provide video services whether it's through coax or broadband you're still subject are you to their users tax no matter how you provide telephone doesn't matter its telephone it's telephone so our ordinance in all those cities  the industry has not agreed with that and and so we there's a working group statewide working with our consultants i'm part of that we started that a couple years ago to try to convince the industry that yes this is the right thing you should be paying this and they argued that some of the stuff is confusing and then there was a piece of legislation that was proposed by by us i think a senator november his name ridley and it would have made the imposition of tag utility users taxes on those kinds of services you know prohibited that taxation in event so we sort of backed up a little bit that legislation never went through never you know got really move forward so we're kind of reback back to what of which should we do a finance director in pasadena didn't help her cause they issued an administrative ruling to all these companies saying you were subject to our ordinance and it got to hit the papers the netflix tax kind of a thing so it kind of did a service disservice to our efforts to work with industry cooperatively we  just met with our consultant we're gonna you know get back at trying to work with them just at least incrementally get them to say yes to some really easy things like things that are more like tv programming that's really similar to what you would get through cable tv service but just get them to agree some basic things but we're gonna start that up but it is subject to our ordinance we have no doubt about that it's just how we move forward with that without running into problems and it's a little  so just to continue on after cable elect electric is one of our larger revenue streams with you ut it's been flat and the last few years it's been somewhat flat there has been talk that the providers are looking at raising their rates with the recent infrastructure needs to kind of beef up their infrastructure and you know not sure how that's going to factor in with litigation  but there is talk that electric rates could go up so if those go up then we would see impacts to the revenues as well we're holding our budgets fairly flat on on electric  is a little bit higher but again you know there's not a lot of fluctuation with these refuse is probably our largest growth category of growth rates have been recently increased for refuse so that translates to higher uut for refuse as well waters been a little bit flat this year with more rains there's less water need which results in it you know idiom the water sales impact the uut as well so just looking forward next year for cellular for the next two years we could we're we're expecting that that will that negative growth will continue so ten percent negative growth for both years and then on the opposite end of the spectrum refuse up about eleven percent and then five percent the second year i put a little bit different slides in here i took a four year trend of kind of how they track each year just i think it's it's kind of interesting to see that they're in total there's not a lot of change but when you look at them individually they all track very differently so this is you know you can see this year is pretty flat compared to the last three years but then when we start looking at these separately we see electricity's higher in the first half of the year and lower in the second half gas is just the opposite it's lower in the first half and then higher in the second half and not a lot of fluctuation from year to year refuse same thing but with refuse the rates are higher so we see that blue line is nineteen and it's a little bit higher than the prior three years whereas water it's higher at the beginning in the end of the year when the summer months and then it there's a kind of a dip in the middle of the year then we have cellular and prepaid and they're just all over the place so they're really hard to predict and then we have cable again we see cables lower than you know where we were at fiscal year sixteen was the highest and it's been dropping ever since then and then  i will say voice over internet protocol it's higher than the last three years but it's in a much smaller scale so it's not a lot of money and so i just thought those were interesting to kind of see the different patterns that we track and so there's a few other revenues i'm not going to spend a whole lot of time on these franchise they fall out there fairly flat as well you see there's not a lot of growth and they're staying about three  percent we have oh i've lost track of all my slides so we have electric that is very similar to uut so similar you know it's the uut is the end user pane the utilit tax the franchise fee it's the hauler or not the it's the provider pane for the access to the right of way the public right away so i'm not going to spend a whole lot of time on that there is one slide just to put a little just to show you the trends but business licenses i have a couple slides as well that we'll look at but the same story you know there there's not a lot of change there our business license marijuana that we that we're seeing the excise tax on that for for twenty and twenty one that's been really hard to estimate you know the state expected that those revenues are going to be really strong and now there's looking at you know they're saying well maybe forty percent of our their original you know what they originally estimated we took those the three permitted retailers and what they reported as their estimated revenues and we cut that in half and calculated the tax based on that and i think we've even reduced it from that so right now it's just you know we don't really know how that's going to pan out and then property transfer tax that is that can fluctuate from year to year if you have one large property sale that can really skew that so we keep that at about a three percent growth for twenty and twenty one but that's hard to predict as  well so just looking at franchise fees just to really the main takeaway on this is that it's very flat there was a blip in sixteen and seventeen with some late payments for electricity that should have been received in sixteen but other than that there's not a lot of fluctuation there and then this one i just thought this one was interesting we have the orange or the orange line at the bottom is new licenses from two thousand and six to current and they don't change a whole lot they're kind of you know hovering at about two thousand a year whereas the blue line our renewal so over time they're tracking a little bit higher but again not a lot of fluctuation there so that revenue doesn't change a whole lot and again here's the bar chart to show that so i kind of already hit on these with the property transfer tax in the cannabis tax so i don't really need to go through those again good question about the cannabis to the seventy two thousand dollars figure did that include the application fees or is that all x ice revenue that did not include the application fees i think we received those actually in eighteen and it was a little over one hundred thousand dollars this is strictly the excise tax on the medical marijuana dispensaries that are currently operating and is it fairly even between the two dispensaries that are open are we looking at thirty five zero each or that is a good question i i can find out  because that's a that's a pretty big increase so that's a four hundred and thirty thousand dollar increase so and so we clear that on the recreational side we're looking to permit the retail dispensaries but we also have manufacturers that are going to be that have been permitted with total of nine different businesses or permits three dispensaries in manufacturing retail by delivery and so forth so there are really nine businesses versus a two do we have today ok great thank you and this last slide is actually the first slide we saw i just put it back in there too recap so again we're looking at about three six million higher than our original budget for the end of this year and then moderate growth of about two nine percent to three point three percent for the next two years and so i'm gonna go through the multi year forecast pretty quickly and then oh sure sure it's unrelated to these but i just wanted to ask the is with the recent court case about chalking tires do we expect a decrease in revenue from parking citations so mister chair committee member freedman spoke to our attorney about that decision and according to him that decision doesn't apply to our state california but i think we are going to be looking at new technology anyway where we're taking video or pictures of vehicles we tried before with the license plates and a reader then that then when you circle back it would automatically identify a license that was there again but it didn't work because it was slow to pick that up and you're kind of beyond that point when you finally registered but we're gonna be looking at the technology anyway but at this point according to our  sources i know on our on our calendar we're looking at fee changes on may th so are things like parking tickets will those be seen on that day they will okay well we tweak we cover them here um i'm not sure we did them here but yeah we didn't so yeah it'll be brought forward because they are proposing some increases to those to those citations and that is a fascinating um decision i'm glad you brought that up as someone who teaches criminal procedure in the fourth amendment i think it is distinguishable because our city code does basically tells the public for the privilege of parking on our streets you consent to this type of search which is just the chalk the other jurisdiction which was out of our state they don't have that written into their code so this is something how we're legally distinct so it'll be interesting to see if that would hold up in court under a further study but seems like it would so we'll come back to just wrap up and ask you for any kind of direction or thoughts but i wanted to go through them all to your forecast pretty quickly so this is going to go out through fiscal year two thousand and twenty three our two year plan goes through twenty one so just add in two years and you at some point you will see the enterprise funds like water wastewater bring you you know sometimes a ten year multi or forecast because their rate driven and they can kind of you know control those to stoop to a large extent  they have the ability to look out ten years and they do that for capital purposes how much are we going to need to finance or pay for capital we have don't have the luxury so going out really to two thousand and twenty three is about as far as we can that's really meaningful but i just wanted to point out a couple things so two thousand and twenty twenty one we're balanced so obviously we submitted a balanced budget for the next few years or plan and just to remind you that we were able to accomplish that in large part because of some new revenues that we are budgeting the million dollars additional property taxes we're going to be getting from the successor agency slash rda those are all currently going to pay for we're going to pay for bonds eight million dollars of bonds that we had outstanding from the old rda that's good that's gone away so that money will be redistributed we initially estimated about a million we've been in talks with the county it's going to be closer to nine hundred and fifty but it's in the same ballpark and then the the cannabis revenues of five hundred thousand dollars next year conservatively hope we get it hope we get something close to that in eight hundred thousand and two thousand and twenty one that really helped us balance the budget in terms of kind of looking out we are in my multi forecast at least i'm assuming similar growth in the key revenues so i'm assuming a five and a half percent for property taxes one and a half four for sales taxes and about three percent for bed tax and what i've also assumed and you know you won't see the details of this because it's just gonna be a kind of a line chart i didn't want to you know bogged you down with a lot of the details in th expect to see in salary and benefits savings through vacancies and turnover and all that over the last few years that number has been extremely high relative to prior years we've seen a lot of vacancies such as in police press recreation community development just a not just one but multiple departments they've had extensive vacancies and so the where we typically may expect two to two and a half million dollars of savings we've been saying four to five million dollars in savings that have really helped us because in some cases it's offset some revenue losses so we felt pretty comfortable with projecting next year and i think x to the next two years we budgeted thirty point three million dollars but in my forecast going beyond that i've only assumed two point two million dollars because that's been our historical norm normal i expect that we're gonna fill up those positions in fact we've made a lot of progress in those departments or a lot of departments in doing so so just be more conservative and then the forecast assumes that like we've had in the last couple years that salaries will go up by one percent per year the total compensation cost or the total cost will go up more than that because of the retirement component and all that but the salary piece we're assuming one percent so this is what it looks like under this sort of status quo environment that by two thousand and twenty three we would have about a two and a half million dollar gap not a big number because this remember the pension costs are going up they were factored into this so it's it's within reach but it's still not a balanced budget if you go beyond you were obviously the first two years twenty and twenty one are balanced but then you could see the lines separate once you know go away from these new revenues and we start relying on revenue to cover our increasing cos again as paul has said in the past net said in the past the pensions is really the driver of a lot of this because we're seeing it go up about two and a half million dollars per year or two to two and a half million dollars per year so we're relying on revenue gro so that that number before we even talk about sour increases than the like but i just wanted to show you one thing because i you know without going without going into the details i just wanted to give you a sense of how reliant we are on that revenue quote there even that the nominal levels were say we we are very reliant on the continued growth so i wanted ish to show you what would happen if we had a what i would consider a mild recession in two thousand and twenty one so the second year that to your financial plan and would be only a one year event which is pretty unusual but a one year event where our sales taxes instead of going one and a half percent they declined by two percent the recession we had in two thousand and one and two we declined by about four percent when we had the great recession two thousand and eight sales taxes declined by about sixteen percent over a two year period just to give you sort of some sense of magnitude i've also assumed that tlt declines two percent versus growing at three percent i think again very moderate eot decline in one year something like nine percent in two thousand eight so again i'm very mild short lived recession and then i also assumed in this forecast that once we got beyond twenty one and twenty two and twenty three that we got back to normal growth so we cut back to one and a half and then three percent and i didn't even assume anything on property taxes that it would be impacted is there realistic i don't know in two thousand and eight that would be unrealistic but in two thousand and one it was the dot com bubble that burst property tax revenues didn't even blink they stayed from that seven percent every year and it was like almost we didn't have a recession from real estate perspective so i'm assuming in this scenario that we are property taxes will continue grow around five percent and then other revenues that maybe tied the economy are also good in this scenario are unaffected so you know everything continues to grow beyond normal you know normally beyond that but just that one year impact permanently lowers the bar and that's what would happen in two thousand and eight where we saw the dramatic decline we've never recovered from that because that bar becomes so much lower and you really don't recover unless you have a twenty percent growth the following year you're always going to be below where you would have been had that recession that occurred or that dramatically so the point here is that we are subset susceptible to even a mild recession in terms of our long term planning and having to be able to being able to pay for our pension costs going up the pension cost it's it's interesting because it's sort of a little bit of a curve up and that the the increase is increasing because as these these discount rate moves are phased in the third phase that that is more dramatic so it goes from seven and a half percent to seven point three seven point three seven to seven point two five and then it drops a lot of all the way to seven percent and near three each of those being phased in in five years so we're gonna see the impact sort of rise over time and then actual tenth cannabis tax revenues could vary substantially from our estimates up or down i'm not as confident in year one i think that there were probably being a little aggressive in year one but don't know we have have yet to see a business open up we expect to see one or two open up in the next couple months but there's a phase in to that and then we have the other ones that are probably gonna generate more revenues like manufacturing  that are not yet up and running and will likely be sometime during next fiscal year so our bidder to achieve half a million dollars to me is hopeful but you know it's not we're not we're not budgeting two million dollars so it's not our  vulnerability is not that great our exposures not that great but we can also do better than he turned a thousand in year two i just don't know i'm just it's just one of those uncertainties we have no data to give us to help us and decide what do we think other than what they told us we cut it in half and then we cut it in half again in terms of how we came up with those numbers so the forecast you give us this is assuming the two point two million in salary savings yes in twenty two and twenty three so can you tell us historically back with the previous dip none of us were uncounseled then what did the city do in terms of salary savings and freezing positions that's a good question you know we we did a lot of so we we eliminated about eighty positions in in that time frame over a kind of a two year period we didn't have we didn't lay anybody off but we eliminated positions we use some reserves some are very contingency reserves that can help minimize the impacts and so i just i don't remember you know we didn't even do a hiring chill we did a hiring freeze but i don't remember the magnitude of all those that was ten years ago so i didn't we also believe we also had a furlough yeah we did concessions that was part of the strategy we we had essentially a five percent cut in salaries through mandatory furloughs i just remember the magnitude of all of those components but we had about a tenure than this oh yeah we had about a ten million dollar number and not to solve in one year right and then the following year another six so was a big deal was a big number thank you i'm i really appreciate you pointing out the impacts potential impacts of our session i know we've had this conversation it's something that i'm quite nervous about to be perfectly honest with you and and i'm i i also understand the tension here you know we we want to provide services and we want to be responsive to the fact that things are going well as well as plan for a potential rainy day if we were to have a recession say next year or the year after do we have a plan in place to adjust the budget in the event that things go wrong in the economy or do we just what i'd like to avoid a fire drill and so i'm just curious from a planning perspective how we would approach that yeah you know we have we have some some lessons to draw upon so we've done been through this before so one of the things we're gonna look for what's the magnitude of it is that if two million dollar problem versus a ten million dollar problem that's that's a big sort of different exercise to some extent a ten million dollar problem like we sort we had before is a little bit of a fire drill but we still managed to you know to implement a good to minimize the impacts to the organization to the community in terms of services we don't want to have to layoff people so the attrition and the like we can do that and and then over time you know we would be looking to reduce our organization to the extent needed or raise new revenues if possible typically it's risk cuts but doing that really incrementally again using the combination of reserves and the like so that's typically what we do if it's a two million dollar but problems that's what we look at we didn't them in a hiring freeze those kinds of things in order to make that happen paul sounds like he must have jump in as well it's a great question thank you one of the things we can do quickly and we can do it anytime in the budget cycle or in the fiscal year is start holding positions open and there's just you say it you tell departments it happens three to five percent of the organization turns over every year and so once you see a recession kind of come if it comes quick you can put a hiring freeze on hold those positions open and that your invariants will then grow and be larger than what we budgeted and so that's how you can kind of course correct in the middle of a fiscal year and then so set yourself up for the next fiscal year to have that discussion so between that and  reserves that's usually how we can manage some mid mid cycle just about the comments one just the cadet is more of a question about the one percent solder increases that we're forecasting you know at some point you were gonna have to deal with the market in are we keeping up with in the market and the like but in reality if we stick in my least my opinion and based on the magnitude and numbers that i'm saying that if we stick to one percent so our increase that we don't have a recession which is a big you know and  frogs had wings we would likely be able to manage with minimal reductions to the budget over the next three or four years the recession is really the wild card when it comes to how big is it and the like in my opinion i think absent a recession even with the pension cost increases i think we'll be able to sort of work our way through that with some maybe some reductions in services and positions but nothing dramatic so that ends our presentation that we have any entry questions and then ask you for you you know for a direction on what we presented particularly in the revenue scenario so it's i guess less of a question or just presenting a concerns all of the numbers do seem positive the property tax you know the five and a half plus with the rta you know it's up to an eight point two percent increase so it's it seems higher than it really is in terms of looking at that figure t ot is positive you know it's only three percent my only concern there is with the miramar and the what's the other one that went back online after the floods in montecito biltmore and san ysidro so i worry that maybe that slows down the cities because those add but then again maybe their marketing efforts brings more people to the city so i just worry that we have a lot of pretty big numbers up here and we are in a position where we've been in a long economic expansion so i just wonder you know i'm trying to be optimistic you know we had a boom first quarter in the us three point two percent gdp growth so that was amazing so i hate to be a bear and a bulls run but i just want to make sure we're not being too too optimistic but it sounds like you've done all the research and broken these things down in their components so yeah and we don't really forecast for a recession you know because we don't that's being too conservative because we'd be looking to make cuts the organization on expectation of recession and we don't know when that's going to come i thought it would have come sooner and now you've already look at our assumptions i think we're all really appropriate maybe we're being a little aggressive on the t ot there was gonna pick one but maybe you should be two percent instead of one but i think and five and a half for property taxes i think those are very reasonable and then essentially one percent growth on the other taxes like you team and franchise fees is that's what we've been seen any other questions there's no public comment we'll open and close public comment and so you don't need a recommendation at this point but then if you feel like at some point we'll be asking you for a recommendation we finish up this process in a few weeks we'll be asking you for the kind of a overall recommendation of their areas we'd like to see changed or different then we would certainly want to hear that okay great so we'll see you on may th in this meetings address thank you thank you