Sales Tax Council PPT
Preparing For The Next Recession
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Since WWII the average economic expansion has lasted 58.4 months
NINTH INNING for the economy?
The current economic expansion has lasted 101 months and counting…
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Data from the National Bureau of Economic Research
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Five year forecast show small deficits even with modest growth assumptions
DEFICITS WITH MODEST GROWTH
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*Operating & Capital Summary Budget FY 2017/18 page A-9
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Potential 5 year forecast if we have flat/negative growth
DEFICITS expand IF ECONOMY DOESN’T
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What can we do?
what can the town do to prepare?
Factors Out of Our Control:
Timing of Economic Cycle
High Dependence on Elastic Revenues
Variability of Pension Expense
Factors Within Our Control:
Certain Expenses
Certain Revenues
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During the last two recessions staffing reduced by 20%
limited options to reduce expenses
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While staffing levels have decreased, service levels either remained the same or increased
limited options to reduce expenses
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Property Tax (including VLF)
Legislated at State level (Prop 13)
Town receives only 9.3 cents of each dollar paid by property owners
37.2% of 2017/18 adopted budget GF revenues
Transient Occupancy Tax (TOT)
Legislated at the local level
Town receives 12% on hotel room night cost
5.2% of 2017/18 adopted budget GF revenues
Voter approved increase from 10% to 12% in November 2016
Sales Tax
Legislated at State level (Prop 218)
Town receives only 1.0 cent of every 9 cents of sales tax per dollar
20.3% of 2017/18 adopted budget GF revenues
revenue options are limited as well
Over 60% percent of Town GF revenues are highly tied to the economy and heavily regulated
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$10 = 1.25 cents
$100 = 12.5 cents
$1,000 = $1.25
$10,000 = $12.50
how much is an 1/8?
What does an eighth cent increase mean for our community?
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sales tax per capita
Los Gatos is on the lower end of sales tax per capita of peers regionally
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Remaining Sales Tax Capacity
the sales tax window is closing
With the current 9.25% cap there is only 0.25% of remaining sales tax capacity
9.25%
9.0%
0.25% Remaining
State Cap
Current Rate
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Current Sales Tax
the sales tax window is closing
California Sales Tax Law
Cap of 9.25%
Statewide rate 7.25%
Cities and Counties can add additional 2.0%
1.75%
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CONCLUSIONS AND NEXT STEPS
Determine if 4/5 of the Council support either a general or special sales tax measure.
If 4/5 support for a general tax, provide direction on which sample ballot language is preferable.
If 4/5 support for a special tax, provide direction on which sample ballot language is preferable.
If 4/5 support is not achieved for a sales tax measure in 2018, provide direction if additional revenue measures should be reviewed for the November 2018 ballot.
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