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Orozco, Norma From: Tim Johnson <tjohnson@jlkrllp.com> Sent: Thursday, May 11, 2023 12:09 PM To: eComment; Amezcua, Valerie; Phan, Thai; Bacerra, Phil; Penaloza, David; Hernandez, Johnathan; Lopez, Jessie; Vazquez, Benjamin Cc: Downs, Kathryn; Mendoza, Steven; Ridge, Kristine Subject: City Budget- Agenda Item (5/11/23) Good day mayor, council, and selected city leaders...I am writing today about tonight's special council session agenda item 1,Work Study Session on the FY 23/24 Budget. I pray that tonight's session is productive for the council receiving and providing information as well as for the residents and staff. I have a few thoughts that I think are relevant-they may be a little scattered but the theme is that we need to prepare today for the future. We are not as financially stable as many may think. We have a significant reduction in revenue on the horizon with the Measure X rate reduction AND our city has a deficit net position balance meaning that we do not have assets to cover the liabilities that have accrued to date. We need a plan to improve. Disclosure...I am on the Measure X Citizen Oversight Committee but these thoughts are my own only as an interested and vested resident of Ward 3 in our great city and may not reflect the Measure X Citizen Oversight Committee's thoughts/recommendations. Although some of my thoughts will echo those presented in the Oversight Committee's Annual Report which you received at your April 18t" meeting, again,these thoughts are my own. Summary If you think our city is on secure sound financial ground, I ask that you be open to additional information and to look at the long game financially. Our city is able to pay its current bills and provide a level of services according to the revenue being generated presently. However,when you look at the big picture I believe you will see that: • Our city is not prepared for the 1/3 drop in Measure X (MX) sales tax revenue (1.5%to 1.0%; 0.5%= 1/3). In today's dollars,that is around $29.5M (using the proposed 23/24 budget MX revenue of$88.616M). Ask yourself,what our city will look like with reduced revenue of$29.5M. That is what will be coming. We need to prepare today because next year or 5 years from now may be too late and will only make it that much tougher to make meaningful change. • Our city has an extreme unfunded debt burden to our residents. Even though we are paying our bills, our city has a deficit Unrestricted Net Position from Governmental Activities of$468.4M as of 6/30/22. That is approx $1518 of debt allocated to each of our 308,459 residents. Let that sink in...each of us are in debt to the tune of $1518. My family of 5 would be$7592 in debt. We need to understand and recognize that, determine if it is acceptable, and then come up with a plan to tackle it assuming the council agrees that our city's residents should not be in debt or at least commits to decreasing the level of debt. We are using today's revenue to pay for liabilities generated in the past...we need to make headway. We need to take steps now to address both of the above items. This needs to be part of a long term financial strategic plan which would contain goals, steps to achieve those goals, and monitoring of the progress. This also means that such a plan will span across multiple councils, councilmembers, and possibly even other city leaders such as our city manager and police chief. We need to take long term financial stability seriously. We need to implement change now in order secure a better future. Ten Year Outlook Director Downs previously provided to you at the April 18t" council meeting on Agenda Item 22,the below Ten Year Outlook. She has previously provided the a similar schedule multiple times over the past few years. Fortunately, due to MX,the city's revenue is projected to cover its expenses for the next few years. However,the concern lies when the MX sales tax rate is reduced from 1.5%to 1% in 2029. As you can see there is a huge gap when this drop off occurs. The city 1