City of Irvine - Fiscal Year 2019-21 Proposed Budget

REVENUE AND EXPENDITURE ASSUMPTIONS

SALES TAX

Description California sales tax is imposed on the total retail price of tangible personal property (excluding a variety of state mandated exemptions), while use tax is imposed on the purchaser for eligible transactions when sales tax has not been collected. The sales and use tax rate in Orange County is 7.75 percent and is collected from the California Board of Equalization (BOE) of all taxable sales occurring within the City. Irvine receives 1 percent of the 7.75 percent tax collected. Additionally, included in the City’s sales tax revenue projection is $430,000 from the State’s Public Safety Augmentation Fund. Sales tax is one of the top three largest components of the City’s General Fund operating revenue sources, comprising 31.3 percent of next year’s overall General Fund resources. Trend Sales tax revenues have grown since the recessionary low in FY 2009-10. However, sales tax revenues affected by fuel prices and declines in spending on general consumer goods are expected to remain flat. The City expects to see declines from FY 2018-19 levels in most categories, with the largest declines in autos & transportation, fuel and service stations, and building and construction. Anticipated growth continues in food expenditures, restaurants and hotels, and State and County pools affecting overall growth in sales tax. Outlook The City works closely with its sales tax consultant, HdL, in projecting sales tax revenue. Based on HdL’s analysis of the trend in year-to-date tax receipts, macroeconomic conditions (done in collaboration with its partner Beacon Economics) and an examination of local business data, the City’s sales tax revenue is anticipated to flatten in the next two years, and growing only slightly, at less than two percent, in years three through five. The moderate growth in the latter part of the forecast reflects the anticipated addition of the Lamborghini and McLaren auto dealers, growth in the Irvine Business Center and Spectrum, and positive influences of the Shop Irvine initiative.

FY 2019-21 Proposed Budget

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