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SALES TAX TRENDS Moderate Growth Despite Headwinds AGA Conference September 10, 2014

SALES TAX TRENDS Moderate Growth Despite Headwinds AGA Conference September 10, 2014. FRBSF GDP FORECAST. INLAND EMPIRE. 19 YEAR HISTORY – Inland Empire SUT Compared to HdL State. INLAND EMPIRE. 20 YEAR HISTORY – All Agencies Combined. STATEWIDE LOCAL SALES TAX AND USE TAX.

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SALES TAX TRENDS Moderate Growth Despite Headwinds AGA Conference September 10, 2014

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  1. SALES TAX TRENDS Moderate Growth Despite Headwinds AGA Conference September 10, 2014

  2. FRBSF GDP FORECAST

  3. INLAND EMPIRE 19 YEAR HISTORY – Inland Empire SUT Compared to HdL State

  4. INLAND EMPIRE 20 YEAR HISTORY – All Agencies Combined

  5. STATEWIDE LOCAL SALES TAX AND USE TAX

  6. INCOME DRIVES MOST RETAIL SPENDING1994-2012

  7. LIST OF FASTEST GROWING CITIES Source: California Department of Finance, AAA

  8. LIST OF FASTEST GROWING CITIES Source: California Department of Finance

  9. PER CAPITA INCOME COMPARISON Inland Empire and Coastal Southern California Source: Fred, Fed. Reserve Bank of St. Louis

  10. HEADWINDS • LINGERING EFFECTS OF RECESSION • LAGGING JOBS AND INCOMES • BOOMER RETIREMENTS • CONSUMER SHIFT FROM TAXABLE SALES • SOCIAL CHANGES • SHIFT TO INTERNET PURCHASING

  11. Sources: St. Louis Federal Reserve

  12. INCOME VARIES BY AVAILABLE EMPLOYMENT We talk about “jobs” but wage levels can be key

  13. EMPLOYMENT UP BUT WELL BELOW PEAK

  14. CONSTRUCTION JOBS GROWING BUT . . .

  15. TAXABLESPENDING DECLINES WITH AGE

  16. ACCELERATION OF A TREND Sales Tax Collections as a Percentage of Personal Income Revenue From a 1% Sales Tax Rate as a Percentage of Personal Income Source: Bureau of Economic Analysis, California Board of Equalization

  17. SPENDING PRIORITIES MOVING FROM TAXABLE GOODS….. • 27% Increase in Household Spending 2000 -2010: • Housing • Healthcare • Food • Entertainment • Education • Entire spending gain by top 20% income households – household spending by remaining 80% declined.

  18. DECLINING PRICES OF TANGIBLE GOODS • Technology reducing cost of goods – autos, apparel, electronics. • On-line shopping forcing increased price competition. • Shopping Habits of Affluent shifting downward.

  19. Then come the cheapskates …..…THE MILLENNIALS (GEN Y) • Lower Financial Expectations • Urban Dwellers • Pick Education & Social Networking over Stuff • Traders, Renters, Borrowers, Recyclers

  20. PERCENTAGE GROWTH IN E-COMMERCE E-Sales versus Total Retail Sales (Billions of Dollars) (p)=Preliminary Estimate Source: U.S. Census Bureau

  21. THE RISE IN E-COMMERCE HAS MULTIPLE REVENUE IMPACTS • Lower tax collections due to price competition and non-compliance • Revenue shifting from place of sale to location of delivery (sort of) • Buy online, return to store cuts local sales tax allocations

  22. SO THE GOOD NEWS IS . . .? • California’s economy is still vibrant and about equal in size to that of Russia • SoCal produces 47% of state GDP enough to be roughly on par with South Korea • Economic strength in the region will continue to boost incomes in the Inland Empire • IE home construction will pick up speed • IE job growth predicted to outpace state

  23. CALIFORNIA IS STILL AN ECONOMIC POWERHOUSE DESPITE TEXAS POACHERS

  24. IE HOME CONSTRUCTION PERMITS ARE TRENDING UP2014 Estimated

  25. BUSINESS INVESTMENT UP

  26. WHERE WOULD YOU RATHER LIVE?

  27. WHAT TO EXPECT FY 2014/15 Based on individual estimates excluding solar energy projects for our 41 clients in the Inland Empire: 3.0% FY 2015/16 2.6% Results in your community will vary based on location and tax base characteristics

  28. “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” Bill Gates, The Road Ahead….1996 Questions/Comments? (909) 861-4335 www.hdlcompanies.com Brice Russell, Sept. 10, 2014

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