Sales Tax Forecast&

Triple Flip Wind Down

Bobby Young, Principal, HdL CompaniesSCACA – Property Tax Managers’ Sub-Committee Conference

February 4, 2015

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Forecasting Is Not…

AN EXACT SCIENCE!

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• HdL receives approximately 98% of the statewide sales tax data each quarter for clients and some non-clients

•With data for all major categories – use as the starting point to identify past trends then factor in current economic conditions

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Sales Tax Revenue by Fiscal Year – Overall

05-06

06-07

07-08

08-09

09-10

10-11

11-12

12-13

13-14

14-15 *

15-16 *

16-17 *

3,000,000,000

3,500,000,000

4,000,000,000

4,500,000,000

5,000,000,000

5,500,000,000

6,000,000,000

6,500,000,000

7,000,000,000

7* - projected

Sales Tax Revenue by Fiscal Year – By Industry

05-

06

06-

07

07-

08

08-

09

09-

10

10-

11

11-

12

12-

13

13-

14

14-

15 *

15-

16 *

16-

17 *

200,000,000

400,000,000

600,000,000

800,000,000

1,000,000,000

1,200,000,000

1,400,000,000

1,600,000,000

AutosBuildingB & IFoodFuelGCGRestaurants

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1Q01

2Q01

3Q01

4Q01

1Q02

2Q02

3Q02

4Q02

1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

3Q04

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

-50.0%

-40.0%

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Adjusted Revenue - Fuel Prices vs. ConsumptionPercentage Change 2001 - 2015

Adjusted Database Revenue Fuel PricesConsumption

Perc

enta

ge C

hange

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Impacts on Global Oil Market

• Shale oil & fracking on global production• Bakken Oil Formations in North/South Dakota and Canada

• OPEC and Saudi Arabia’s decision on future production

• ISIL/ISIS and conflict in the Middle East

• Future/continued sanctions on Russia

• National political interests

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Other Economic Impacts

• Offset effect of lower gas prices on General Consumer Goods and Restaurant categories

• Federal interest rate changes may affect long term financing options thereby purchases

• More online shopping shifting tax dollars from local point of sale to distribution centers and countywide pool allocations

• Possible expansion of the sales tax base by way of legislative action 11

Sales Tax Triple Flip Wind Down

• Originally created to finance State Economic Recovery Bonds (Prop 57) because Wall Street wanted a dedicated revenue stream

1.Decrease monthly sales tax allocations from 1% to 0.75%

2.Counties transfer from ERAF to SUTCF then pay cities & counties their 0.25%

3.State General Fund reimburses County’s ERAF for schools (if needed)

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Wind Down Procedures…. (As of Today)

• Bonds paid off July 2015

• Department of Finance (DOF) to advance for 2nd Quarter 2015

• Continue to take ¼ cent in 3rd Quarter and 4th Quarter 2015

• Reimburse 3Q & 4Q and “true up” 2Q, 3Q & 4Q by May 2016

• Return to full 1 cent Bradley-Burns allocations in March 2016 (1Q16 advance)

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What / When Timeline

• July 2015 – Bonds Paid Off

• September 2015 – DOF calculate 2nd Quarter 2015 advance and provide notice to County’s of estimated advance amount (equivalent of 1 quarter)

• January 2016 – Counties pay agencies SUTCF advance

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What / When Timeline

• March 2016 – DOF & BOE calculate 2Q clean-up, 3Q & 4Q reimbursement amounts

• April 2016 – provide notice to Counties of final amounts to pay agencies

• May 2016 – Counties pay agencies final SUTCF amounts

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Effect on Fiscal Year Actuals

• Most of 2Q15 will be accrued back to FY 2014-15 – ¾ cent as usual

• Many agencies will likely see a one-time “bump” in FY 2015-16 due to:• 2Q15 clean-up as part of May 2016 final

payment• Increase of FY 2015-16 year end accrual

compared to FY 2014-15Full 1 cent allocation vs. ¾ cent allocation

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Questions???

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Sales Tax Forecast&

Triple Flip Wind Down

Bobby Young, Principal, HdL CompaniesSCACA – Property Tax Managers’ Sub-Committee Conference

February 4, 2015

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