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Correspondence - #1
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05/12/2022 Special
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Correspondence - #1
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City Clerk
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FY22/23 projected MX Revenue figure and the most recent FY21/22 MX revenue projection. Another way to look at this <br /> is that we essentially"freeze" our utilization of the MX for annual expenditures at the FY21/22 level and "save" annual <br /> increases in order to prepare for the sunset period. This will allow for recurring expenditures to still be funded at <br /> present levels AND also continued use of funds for continued one-time projects also. Since our use of MX revenue for <br /> recurring expenses is approx. 76%whereas we will only have 66%of MX revenue available during the first sunset period, <br /> we will need these funds to keep recurring levels of services the same. Even this reserve method may not be enough, <br /> but it will be better than the alternative. Additionally, each year we wait to address this will only compound the issue. It <br /> is important to act now to avoid additional strain in the future. <br /> I know that this is a lot to take in but if you think about 76%of current MX funds being spent on recurring items whereas <br /> in the first sunset period our revenue will only be 66% of what we have now due to the MX rate drop from 1.5%to 1.0% <br /> you can see the problem-there is a 10%gap on what we spend (approx. $8M to$9M in dollars). Just to MAINTAIN <br /> services residents expect,we will either have to have other sources of revenue increase, cut expenditures, utilize other <br /> reserves, or have a vote to increase the tax rate again. In reality, it will likely be a combination of all budget items with a <br /> last resort of a voted increase. Further, during the first sunset period not only will those expected recurring services be <br /> impacted but one-time spending will have to go to zero without other corrective actions. When one-time spending is <br /> done annually, it certainly starts to feel like recurring items even when they are separate projects. <br /> Equally important as actually saving some of the MX revenue to stabilize the services that residents expect during the <br /> sunset period is the use of such funds. Now legally MX is general fund revenue BUT realize that the voters approved MX <br /> for reasons as outlined in the ballot language with an emphasis on maintaining effective 911 response, retaining <br /> firefighters/police offices, addressing homelessness,fixing streets, and maintaining parks and youth/senior services. If <br /> established,this fund should continue to follow that emphasis when it comes time utilize the Stabilization Fund. <br /> One only needs to look to our neighbors in Westminster to see what happens when sales tax sunsets are ignored. I am <br /> not intimately familiar with their situation but I hear it is not good and may get substantially worse. We should not be <br /> budgeting by emergency which is what may happen if we do not plan for the sunset now. There are some (many?all?) <br /> who may not be an elected leader when the sunset happens, however many of us residents will still be here. We need <br /> you to be good stewards of public funds by planning today for the sunset. We also must remember that this sales tax is <br /> paid mostly by our residents and businesses. This is a tax that hits us all daily. Taking a vote today to save money for the <br /> future instead of spending it on an otherwise worthy project today, may not feel the best today but I believe our"future <br /> selves"will thank us if we embark on this now. <br /> I would urge you to provide guidance to Director Down to provide a budget that establishes a Measure X Sunset <br /> Stabilization Fund for the FY22/23 year in the approx amount of$7.8M which is the presently budgeted difference <br /> between the$92M projected FY22/23 MX revenue compared to the latest 3Q budget update of anticipated MX revenue <br /> for FY21/22 ($84.2M). Many may say that we should really utilize the difference between the mid-year budget update <br /> which would provide for a Stabilization Fund of$13M which if I was in a "negotiating position" may be a better starting <br /> point in hopes actually arriving at$7.8M but I will leave that to your group how best to decide the exact amount. <br /> Thank you for your time and commitment to our city. I am, as always, available to expand further at anytime you <br /> want. My contact information is below...feel free to reach out. <br /> Tim Johnson, CPA <br /> ROW iiberucr Partner <br /> QD{frl..f.ewl"�uG' Ae[w9la stls <br /> (949) 860-9892 <br /> Proudly part of the P Fglobal family (714) 743-1065 <br /> 91130 tjohnson@jlkrllp.com <br /> 2601 Main Street,Suite 580, Irvine,CA 92614 <br /> 2 <br />
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