Item 40 - Refinancing City’s Pension Obligations with California Public Employees Retirement System

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32 4826-7904-2280v7/200434-0005 Additional information relating to sales tax receipts by the City is set forth in Appendix B. As discussed under the caption “THE CITY—COVID-19 Outbreak,” the Governor extended the deadline to file and pay first quarter sales and use tax returns by 90 days for all but the very largest taxpayers. Up to 361,000 California businesses, with less than $5 million in taxable annual sales, were allowed to defer up to $50,000 in sales tax and enter into a 12-month payment plan at zero interest. The extension may result in a delay in the receipt by the City of its portion of sales tax payments. Property Taxes The City receives a share of property tax collected by the County, plus a share in-lieu of the vehicle license fees. See the caption “—State of California Motor Vehicle In-Lieu Payments” below. Property taxes represent the second largest source of revenues for the City. In Fiscal Year 2020, General Fund property taxes contributed approximately $73.5 million or 27.2% of general tax revenues and 22.7% of total general revenues. For Fiscal Year 2021, the City estimates that General Fund property tax receipts will be approximately $75.4 million, totaling approximately 26.5% of general tax revenues and 22.2% of total general revenues. For Fiscal Year 2022, the City has budgeted General Fund property tax receipts to be approximately $79.1 million, totaling approximately 27.5% of general tax revenues and approximately 22.8% of total general revenues. Property in the State that is subject to ad valorem taxes is classified as either “secured” or “unsecured.” The secured classification includes property on which any county levied property tax becomes a lien on that parcel. A tax levied on unsecured property may become a lien on certain other property owned by the same taxpayer. Secured property liens have priority over all other liens pursuant to State law, regardless of the time of the creation of other liens on the property. The exclusive means of compelling the payment of delinquent taxes with respect to secured property is the sale of the property securing the taxes for the amount of taxes that are delinquent. The taxing authority has three methods of collecting unsecured personal property taxes: (1) filing a civil action against the taxpayer; (2) obtaining a judgment lien on certain property of the taxpayer from the county clerk or county recorder; and (3) seizing and selling personal property, improvements or possessory interests belonging, or taxable, to the assesse. A 10% penalty is added to delinquent taxes levied with respect to property on the secured roll. In addition, beginning on the July 1 following a delinquency, interest begins accruing at the rate of 1.5% per month on the amount delinquent. If taxes are unpaid for a period of five years or more, the property is deeded to the State and then is subject to sale by the county tax collector. A 10% penalty also applies to the delinquent taxes or property on the unsecured roll, and further, an additional penalty of 1.5% per month accrues with respect to such taxes beginning on the varying dates related to the tax billing date. State law also provides for the supplemental assignment and taxation of property as of the occurrence of a change in ownership or completion of new construction. Collection of taxes based on supplemental assessments occurs throughout the year. Taxes due are prorated according to the amount of time remaining in the tax year. For a number of years, the State Legislature shifted property taxes from cities, counties and special districts to the Educational Revenue Augmentation Fund (“ERAF”). In Fiscal Years 1993 and 1994, in response to serious budgetary shortfalls, the State Legislature and administration permanently redirected over $3 billion of property taxes from cities, counties, and special districts to schools and community college districts pursuant to ERAF shifts. The Fiscal Year 2005 State Budget included an additional $1.3 billion shift of property taxes from certain local agencies, including the City, in Fiscal Years 2005 and 2006. On July 27, 2009, the Governor signed a revised Fiscal Year 2010 State budget that included an ERAF shift of approximately 8% of 1% ad valorem property tax revenues from certain local agencies, including the