75A - BUDGET FY 2010- 2011 - EXHIBIT

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• Address minor deferred maintenance projects in all parks; and • Ensure the City's long -term financial stability. As a result of the global financial crisis and its impact on local and state resources, ensuring the City's long -term financial stability has become even more important. The proposed FY 2010- 2011 budget has been developed to move Santa Ana closer to such stability, while maintaining core programs and services to the extent possible. Economic Outlook The economic crisis at all levels of our country is being felt in many areas, such as depressed retail sales, declining property values, and increased unemployment —and Santa Ana is feeling these impacts as a community. Median home prices have fallen over 40 percent, their lowest since 2 003. It is estimated that the declining property values will now spill over into the commercial sector. A recent report from the State of California Employment Development Department (EDD) puts the preliminary April 2010 unemployment rate in Santa Ana at 14.8 %, the second highest in Orange County. These economic indicators mean Santa Ana residents have less disposable income due to job losses and decreased home values. Consequently, discretionary spending is down, which has a major impact on both the businesses in our community and the revenues we receive as a City. Since revenue high's in 2006 -07, the City's sales tax revenue has experienced a 27 percent (over $12 million) decline and is expected to flatten -out during fiscal year 2010 -11. Major declines within auto sales, business -to- business and construction sectors have contributed heavily to the City's overall sales tax declines. Property tax revenues will continue to decline due to a high number of assessment appeals combined with depressed housing prices associated with foreclosures The State of California continues to have its own budgetary challenges, which potentially puts the City's revenues at risk. In its May Budget Revise, the State's deficit was estimated at $19.1 billion ($7.7 for the current year, $10.2 billion for the coming year with a reserve of $1.2 billion). As part of the current state budget, the State decided to raid $2.05 billion in local redevelopment funds. Although a challenge of the transfer was made to the Sacramento Superior Court, on May 4 the California Redevelopment Association request for a stay was denied. As a result, the City of Santa Ana was obligated to pay the County Supplemental Educational Revenue Augmentation fund $17.8 million by May 10 with an additional $3.4 million scheduled during next fiscal year. In March, the Governor signed the Gas Tax Swap. In effect the legislation eliminated the protection established under Proposition 42 by repealing the sales tax on gasoline and increasing the excise tax instead. The current plan which calls for a deferral o f I ocal cities allocations jeopardizes the City's ability to meet its continued debt obligations on the Residential Street Repair Program without impacting other existing capital projects. Staff is currently working with its lobbyist, Townsend Public Affairs, to introduce language that will exempt the City in participating in the deferral program. -2-