Correspondence - #16 - Laserfiche WebLink

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I believe that the council is hearing staff and MX Committee recommendations to focus additional MX spending on one- time expenditures. However, a very good share of MX revenue is spent on recurring expenditures. As staff indicates on page 18 of the Staff Presentation you are receiving tonight,you will see that approximately$22M (or 24% of MX spending) is devoted to one-time spending while 76% is spent on recurring expenditures. Recurring expenditures generally increase each year. Mathematically,this means that when the first MX sunset occurs, if we continue to increase recurring expenditures at the same rate as MX revenue increases,that there will be a fiscal issue to contend with due to the drop in revenue by one-third ((1.5%existing rate—1.0%4/1/29 rate= 0.5% rate drop/ 1.5% existing rate= 1/3 drop). When we are spending 76%on one-time spending and the future MX revenue may be 66% of revenue, there is mathematically a 10%shortfall. We need to plan for that shortfall. There are multiple ways to plan for this...I am suggesting that we need to save today at a MINIMUM the increase to MX revenue received in a year over year basis in order to smooth out that decrease in future revenue. For the future FY22/23 budget being discussed this would be to save (or appropriate to a MX Sunset Stabilization Fund) approx. $7.8M out of the projected $92M revenue generated by MX. This$7.8M is the difference between the$92M FY22/23 projected MX Revenue figure and the most recent FY21/22 MX revenue projection. Another way to look at this is that we essentially"freeze" our utilization of the MX for annual expenditures at the FY21/22 level and "save" annual increases in order to prepare for the sunset period. This will allow for recurring expenditures to still be funded at present levels AND also continued use of funds for continued one-time projects also. Since our use of MX revenue for recurring expenses is approx. 76%whereas we will only have 66%of MX revenue available during the first sunset period, we will need these funds to keep recurring levels of services the same. Even this reserve method may not be enough, but it will be better than the alternative. Additionally, each year we wait to address this will only compound the issue. It is important to act now to avoid additional strain in the future. 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 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% you can see the problem-there is a 10%gap on what we spend (approx. $8M to$9M in dollars). Just to MAINTAIN services residents expect,we will either have to have other sources of revenue increase, cut expenditures, utilize other 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 last resort of a voted increase. Further, during the first sunset period not only will those expected recurring services be impacted but one-time spending will have to go to zero without other corrective actions. When one-time spending is done annually, it certainly starts to feel like recurring items even when they are separate projects. Equally important as actually saving some of the MX revenue to stabilize the services that residents expect during the sunset period is the use of such funds. Now legally MX is general fund revenue BUT realize that the voters approved MX for reasons as outlined in the ballot language with an emphasis on maintaining effective 911 response, retaining firefighters/police offices, addressing homelessness,fixing streets, and maintaining parks and youth/senior services. If established,this fund should continue to follow that emphasis when it comes time utilize the Stabilization Fund. One only needs to look to our neighbors in Westminster to see what happens when sales tax sunsets are ignored. I am not intimately familiar with their situation but I hear it is not good and may get substantially worse. We should not be budgeting by emergency which is what may happen if we do not plan for the sunset now. There are some (many?all?) who may not be an elected leader when the sunset happens, however many of us residents will still be here. We need you to be good stewards of public funds by planning today for the sunset. We also must remember that this sales tax is 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 future instead of spending it on an otherwise worthy project today, may not feel the best today but I believe our"future selves"will thank us if we embark on this now. I would urge you to provide guidance to Director Down to provide a budget that establishes a Measure X Sunset Stabilization Fund for the FY22/23 year in the approx amount of$7.8M which is the presently budgeted difference between the$92M projected FY22/23 MX revenue compared to the latest 3Q budget update of anticipated MX revenue for FY21/22 ($84.2M). Many may say that we should really utilize the difference between the mid-year budget update 40