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

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36 4826-7904-2280v7/200434-0005 Franchise tax receipts of approximately $9.2 million provided the fifth largest tax revenue source for the City in Fiscal Year 2020. In Fiscal Year 2020, franchise taxes contributed approximately 3.4% of general tax revenues and approximately 2.8% of total general revenues. For Fiscal Year 2021, the City estimates that General Fund franchise tax receipts will be approximately $10.5 million, totaling approximately 3.7% of general tax revenues and approximately 3.1% of total general revenues. For Fiscal Year 2022, the City has budgeted General Fund franchise tax receipts to be approximately $11.8 million, totaling approximately 4.1% of general tax revenues and approximately 3.4% of total general revenues. Hotel Visitor’s Tax The City levies a hotel visitors’ tax, which is levied on users of hotels in the City at a current rate of 11%. In Fiscal Year 2020, the City received $7.7 million in general revenues from hotel visitors’ taxes. As a result of the general economic slowdown and the closure of business in the wake of the COVID-19 outbreak, the City estimates that it will receive approximately $4.1 million in general revenues from hotel visitors’ taxes in Fiscal Year 2021. For Fiscal Year 2022, the City it has budgeted for the receipt of $5.0 million in general revenues from hotel visitors’ taxes. Other Taxes The City also receives tax revenues from other sources, which together totaled approximately $1.2 million in Fiscal Year 2020. The City estimates that it received approximately $1.3 million in general revenues from other taxes in Fiscal Year 2021 and it has budgeted for the receipt of $1.2 million in general revenues from other taxes in Fiscal Year 2022. Other Indebtedness General Fund-Supported Obligations. The below-listed obligations are payable from general revenues of the City, which revenues are also the source of repayment for the Bonds. The City may issue other obligations payable from its general revenues at any time. See the caption “RISK FACTORS—City Obligations.” Capital Lease. On November 23, 2004, the City and thirty seven other cities in the County executed a Joint Agreement for the Operation Maintenance and Financial Management of the Orange County 800 Megahertz Countywide Coordinated Communications System, which provides for the management and governance of the 800MHz Countywide Coordinated Communication System (the “800 MHz CCCS”). On May 5, 2015, the City entered into an amendment with the County for the operation, maintenance and financial management of the 800 MHz CCCS, which consisted of the replacement of the backbone infrastructure equipment, along with agency owned equipment and dispatch consoles with the radio equipment. The City financed the purchase of equipment necessary to implement the 800 MHz system upgrade by entering into an equipment lease-purchase agreement with Motorola Credit Corporation and Motorola Solutions, Inc. The minimum lease payments required during the ten year term of the agreement are $4.9 million. The lease payment, discounted at an estimated interest rate of 3.12%, results in a present value of $4.3 million, which is capitalized as equipment in the City’s capital assets with a cost of $4.0 million and accumulated depreciation of $1.7 million as of June 30, 2020. The outstanding principal amount as of June 30, 2021 is $2.2 million. Holman Capital Financing (800 MHz Radio System Project). The City entered into two separate financing agreements with Holman Capital Corporation on May 22, 2015 and June 15, 2017, respectively, to fund the City’s partnership cost for participating in the County of Orange 800 MHz communication system. The City’s partnership costs total $3.8 million. As of June 30, 2021, the financing agreements outstanding principal amount is $1.3 million.