HomeMy WebLinkAboutItem 08 - COUNCIL READING FILE_f_Economic Forecast ResourcesEconomic Outlook Resources
Exhibit A: HdL September 2020 Consensus Forecast
Exhibit B: Central Coast Economic Forecast Presentation Documents
Exhibit C: PFM Annual Economic and Financial Markets Webinar Materials
Exhibit D: CSFMO Revenue Update (Preparing for the coming year and beyond)
Links
•Recording of 2020 Central Coast Economic Forecast (11/18/20):
https://www.youtube.com/watch?v=bJUkXL7DDkw&feature=youtu.be
•League of California Cities Virtual Conference Materials (December 2020):
https://www.cacities.org/MFImaterials
•EDD California Labor Market Info: https://www.labormarketinfo.edd.ca.gov/
•California Department of Tax and Fee Administration Interactive Data Visualizations:
https://www.cdtfa.ca.gov/dataportal/visual.htm
•Economic Tracking Interactive Graphs: https://tracktherecovery.org/
•California State Auditor Department Data- Impact of COVID-19 on City Revenues:
https://www.auditor.ca.gov/local_high_risk/covid-19/data_download
Yosemite National Park, California
Delivering Revenue, Insight and Efficiency to Local Government Since 1983
HdL provides relevant information and analyses on the economic forces affecting California’s
local government agencies. In addition, HdL’s Revenue Enhancement and Economic Development
Services help clients to maximize revenues.
HdL serves over 500 cities, counties and special districts in California and across the nation.
CALIFORNIA FORECAST
SALES TAX TRENDS AND ECONOMIC DRIVERS
SEPTEMBER 2020
EXHIBIT A
FY 20/21 & 21/22 FORECAST
HdL 2Q20: Forecast vs Results
As part of preparing our April and June economic forecasts earlier this year, we acknowledged the
second quarter of 2020 (April to June period) would be the bottoming out months for sales tax revenues.
Beginning in March, shelter in place orders coupled with county-based health and safety decisions
triggered immediate closure of businesses, a spike in unemployment and much uncertainty about
economy recovery. Unlike prior calamities in our nation’s history, the COVID-19 pandemic was unique
for many reasons, not the least of which was closing entire industries that generate sales and transaction
taxes so vital for governments to deliver public services.
The high second quarter unemployment rates were primarily felt in the lower wage service sectors which
produced a lesser share of total sales tax revenues. Knowledge workers including professionals, analysts
and marketers continued to work at home; they found extra cash to spend because of reduced commute
and work-related costs as well as less entertainment/travel options. Though much of the quarter’s
government relief payments were spent largely on rents, utilities, debt, and savings, the money was not
distributed proportionally to income losses, thereby also triggering temporary increases in discretionary
income for some beneficiaries. Low interest rates and favorable lending practices allowed the extra
money to be spent on previously put off items such as autos and home improvements.
To our surprise, the Autos/Transportation results were better than expected in the second quarter
of 2020. While new vehicle sales were reported to be down 34% nationally, auto-related tax receipts
dropped only 17% in California. Car dealers proved adept at transitioning to online sales; unprecedented
government stimulus and rock-bottom interest rates were effective in avoiding worst-case possible
outcomes. Furthermore, consumers had more disposable income to spend after the cancellation of
vacation plans. Many thought it could be a good time to find a deal, taking advantage of attractive
manufacturer incentives. Some bought a new car to avoid public transportation and ride hailing services.
Others justified their purchase as an escape, wanting a new vehicle for road-trips. Recreational vehicle
and boat sales were especially strong as families looked for new activities to share. Finally, car pricing has
hit record levels after automotive production was curtailed earlier this year while manufacturers worked
to make assembly-lines safe and, in some cases, temporarily transitioned to the fabrication of medical
equipment.
Second quarter results from Building/Construction were 3.3% lower than this time last year, right in
line with forecast assumptions. Activity temporarily dipped following two months of job site shutdowns
ordered in six Bay Area counties and a 5% decline in Los Angeles county output. Around the interior of
the State, from Central California to the far northern areas, construction spending increased. Meanwhile,
statewide consumer spending on home improvements drove up returns at outlets which posted record
gains as home improvements occurred at a robust pace.
As California continues to address all aspects of COVID-19, we have modified the September
2020 HdL Economic Forecast. Given the dramatic onset of the pandemic, we are sharing
explanations about how second quarter 2020 sales tax results compared to our forecast for this
time period. Information is summarized by major industry groups. It is our hope these explanations
not only capture what occurred this past spring but will be helpful in explaining how fiscal
year 2019/2020 sales and transactions tax results were affected by this public health crisis.
EXHIBIT A
The Business/Industrial group reduction was slightly less than projected because of unanticipated
increases in agricultural related expenditures and demand for equipment, supplies and technology to
accommodate work and school at home conversions. One-time transit projects also produced temporary
gains for the group overall.
Lack of dining opportunities along with stay at home mandates drove sales from full-service grocery
stores up by 8%. Cannabis retailers were deemed essential; the addition of new merchants partially
contributed to the 40% growth by this sector. Overall performance of the Food/Drugs group was slightly
better than our estimates.
The full brunt of COVID-19 struck the Fuel and Service Stations industry hard during this time. While
regular and diesel gas pump prices in California began to go back up at the beginning of the quarter,
this did not translate into an increase in sales tax associated with fuel. People stayed home and did
not travel or participate in many road trips. The airline and travel industries were hit hard, and this
translated to lower sales tax on jet fuel. Total sales tax in the industry dropped 47% in the quarter
completely attributable to lack of demand and consumption of fuel. Results varied in different parts of
the State, depending upon the severity of shelter in place orders, local reliance on workers and facilities
that supplied diesel fuel for the trucking industry.
General consumer goods receipts did better than projected declines, coming in 38% lower than the
same period in 2019. Categories that exceeded expectations included electronics, home furnishings,
sporting goods, and specialty stores. Statewide, these categories still reported extreme losses ranging
from declines of 36% to 51%. Sporting goods/bike stores decreased only 11%. As households became
local offices and learning centers it was clear spending shifted to categories that improved these spaces
like home furnishings. Discount department stores, expected to perform well, grew market share
and accounted for over 43% of revenue in from this group. Overall big box retailers declined which is
attributed to reduced fuel consumption/prices that are combined with store transactions reported by
some companies.
Restaurant spending hit a low point in April. The varying levels of restrictions across the state resulted
in varying performance for restaurants in the second quarter. Restaurants in the
Far North, Sacramento region and San Joaquin Valley were not hit as hard
as the rest of the State. These areas boosted the statewide losses. Diners
were anxious to return to restaurants and rushed to eat out during the
re-opening in June. This behavior proved to be a momentary lift on
restrictions, but provided a much needed, albeit small boost to casual
and fine dining at the end of the quarter.
Our forecast for State and County Pools was inclusive of the Wayfair
decision for both remote sellers plus newer marketplace facilitator
taxpayers. Expectations were housebound families would be more
judicious in spending, focusing on essential products and limiting
discretionary spending. However, robust shopping pushed this group up
29%. Record numbers of online customer accounts were created during
the shelter weeks. Online sales from segments like shoes, furniture, leisure
wear and exercise equipment were beyond expectations. The largest impact
emerged from general retailers who exceeded estimates; revenues from this sector
rose $71 million, a 264% improvement. Significant store closures across the State along with generous
temporary unemployment benefits helped spur a greater than anticipated growth by the pools.
Pandemic based sales tax outcomes over the last two quarters of fiscal year 2020/21 have influenced
our most recent September economic forecast. While these projections are a statewide perspectives,
we remained focused on fine tuning budget estimates and addressing unique concerns based upon the
expectations and needs of each client.
EXHIBIT A
HDL CONSENSUS FORECAST – SEPTEMBER 2020STATEWIDE SALES TAX TRENDS
Autos/Transportation 0.7% | 4.4%
Vehicle sales have bottomed and are beginning a recovery
that will take 2-3 years, according to forecasts from
WardsAuto and the Center for Automotive Research.
High consumer debt and work-from-home policies are
likely headwinds, but sales will be pushed forward by
strong natural demand. Recent surveys indicate the
biggest concern for car dealers is not economic issues but
a shortfall of popular SUV and truck models on dealership
lots after production was disrupted earlier this year.
Consequently, vehicle pricing is at record levels. While lack
of choice and fewer incentives may temporarily hamper
sales, the higher pricing will be supportive of tax receipts
going forward. Production issues should also be resolved
in time, with WardsAuto reporting that North American
factories recently reached 100% capacity utilization for
the first time since 2005.
Building/Construction 1.6% | 5.0%
Despite seven straight quarters of declining construction
permit issuance, delays caused by Covid-19 workplace
standards slowed projects enough to create a backlog that
will mask the decrease of future development inventory
through November for the Bay Area and Southern
California regions. Between January and June, expect Bay
Area and Southern California total construction levels
to remain static while outlying areas will see growth
because of the continuing need for affordable housing.
Reconstruction of fire damaged structures should
begin within 6 months after the fires are completely
extinguished.
Business/Industry 0.4% | 6.0%
Initial recovery is primarily related to accommodation of
pandemic and climate-related changes. Strong demand
for warehouse and shipping technology and equipment
support the shift to online shopping in addition to home
offices and virtual classrooms. Climate induced investment
in irrigation and agricultural technology remains.
Anticipate a strong rebound in medical equipment and
pharmaceuticals once pandemic controls allows return
of elective and non-emergency medical procedures.
Unprecedented fires and hurricanes may temporarily
close some production capacities and cause new supply
chain interruptions. Expect uneven gains through fiscal
year 2020-21 with overall improvement not until 2021-
22. Each jurisdiction’s experience will differ according to
the size and character of its specific business/industrial
base.
Food/Drugs 3.5% | 3.0%
Most entities within this group remained open as
essential businesses during the shelter in place orders.
As such, people had to adapt to eating at home more
often; this trend should continue for grocers and food
sellers who have ramped up home delivery in a big way.
Cannabis companies are adding new tax revenues as more
establishments become open with approval from local
jurisdictions. Drug store consolidations or reductions are
likely in over-saturated markets.
Fuel/Service Stations -5.9% | 12.2%
Oil demand and consumption has plummeted throughout
the globe. OPEC eased back production by two million
barrels per day in early August. Saudi Arabia sees fuel
demand wavering among the coronavirus flare-ups
around the globe; they cut pricing for October oil sales.
Inventory levels for U.S, European and Asian producers
are above levels for what is typical right now. United
States production slowed from a year ago. COVID-19 has
significantly curtailed demand for jet fuel. With economic
signs reflecting downward pressure on the fuel industry,
we forecast taxes declining for the next three quarters
with recovery beginning in the spring of 2021.
General Consumer Goods 1.5% | 9.4%
Brick & mortar’s turbulence lingers as merchants navigate
economic headwinds while trying to balance reopening
stores with public health and safety concerns. Consumer
spending saw a quick recovery in June as retailers
began opening doors but has leveled off since July at
just under 15% of pre-COVID levels. New demand for
electronics, appliances, and home furnishings spurred by
the need to create work from home and virtual learning
environments are anticipated in the short term. Federal
stimulus combined with a lack of outlays on fuel and
entertainment allowed households to make use of excess
discretionary income. Initial third quarter reports show
spending being tempered as unemployment benefits
expired and consumer confidence staggered to a six-year
low. Our projections have tax volumes staying below the
pre-pandemic peak through fiscal year 2021-22.
2020/21 | 2021/22
HdL Companies | hdlcompanies.com
TOTAL 0.6% | 8.4%2020/21 | 2021/22
2020/21 | 2021/22
EXHIBIT A
Restaurants/Hotels -15.5% | 20.1%
Restaurant spending has slowly started improving, but
the Governor’s Blueprint for a Safer Economy imposes
capacity limits for indoor dining with the best scenario
allowing indoor dining at 50% capacity. The CDC has
released a study that is leading health officials to state
that eating out is one of the riskiest activities for COVID.
Large gatherings are still not allowed. As Paycheck
Protection Program (PPP) loans run out, many types
of restaurants are facing dire situations; the forecast
assumes that 20% will not survive the restrictions.
Restaurants with drive-thrus are a valuable asset and
are performing better. The unknown timing for indoor
dining and the changing weather ahead present the
next obstacles for restaurants. The industry is being hit
hard and the recovery will lag far behind other industry
groups.
HDL CONSENSUS FORECAST – SEPTEMBER 2020STATEWIDE SALES TAX TRENDS
TOTAL 0.6% | 6.4%2020/21 | 2021/22
HdL Companies | hdlcompanies.com
2020/21 | 2021/22
Proposition 172 projections vary from statewide Bradley-Burns calculations due
to the state’s utilization of differing collection periods in its allocation to counties.
HdL forecasts a statewide increase of 0.32% for Fiscal Year 2020/2021 and 8.42%
for 2021/2022.
State and County Pools 12.9% | 8.0%
Thrust forward by the pandemic, online sales still
dominate a growth pattern in contrast to most of the
on-the-ground retailer’s short-term declines noted
above. Recent shelter in place mandates created
some category winners, especially from direct to
consumer and marketplace facilitator companies. The
coronavirus spurred many more customers shopping
on the web while much of the retail industry addresses
location closures, layoffs and bankruptcy. The final
implementation of the Wayfair decision in California
occurs in the first months of fiscal year 2020-21 and
will influence the forecast for that year. Thereafter,
consumer’s behavior continues a steady ascent into
more essential and discretionary spending away from
stores; next year’s increase reflects this trend.
2020/21 | 2021/22
EXHIBIT A
NATIONAL AND STATEWIDEECONOMIC DRIVERS
Beacon Economics | BeaconEcon.com
U.S. Real GDP Growth 12.4% | 2.4%
One month the economy was fine, the next it was in complete
freefall. With the second quarter behind us, we have a good idea
of the damage generated by the pandemic – output dropped
almost 12% from the fourth quarter of 2019 to the second quarter
of 2020, the sharpest decline ever recorded. The big question is
where does the economy go from here? A collapse in consumer
spending occurred, but not because people couldn’t spend money
(driven by a collapse of wealth), but because fear and caution
surrounding the disease itself prevented them from spending. A
prime example is the healthcare industry. Over one-third of the
decline in consumer spending occurred from a drop in healthcare
consumption. Healthcare is not a cyclical sector and did not
experience a single quarter of lower spending in previous cycles.
Therefore, the hit this time was not driven by reduced demand but
because the healthcare system deferred non-essential visits until
the virus was brought under control. So to answer the big question
– there will be a bounce in economic activity in the second half of
2020, aided by the resumption of delayed spending.
U.S. Unemployment Rate 7.2% | 5.1%
As dramatic as the second quarter numbers have been, there is
plenty of evidence indicating that the shocks to the economy
are largely transitory. The enormous surge in unemployment was
not driven by true job losses but by temporary layoffs. At 14.7%
in April 2020, the U.S. unemployment rate reached a post-WWII
high. However, in the subsequent months, the unemployment rate
has steadily and consistently declined to 8.4% as of August 2020,
as businesses continue to reopen and economic activity contintues
to resume. Additionally, the share of the labor force that was truly
unemployed – either lost their job permanently or have entered the
labor market and are looking for work – was roughly 3% in April,
substantially lower than the 8% plus rate seen back at the peak
of the Great Recession. In a less positive sign, the unemployment
rate for those who are truly unemployed increased in the following
months, reaching 4.1% in July.
CA Total Nonfarm
Employment Growth -2.3% | 4.4%
California’s labor market began to recover from the effects of the
COVID-19 pandemic in May and has continued that recovery
through August, adding 885,000 jobs. There was a slowing of job
growth through July and August, but that was in large part a reaction
to the resurgence of the virus in the form of renewed public health
mandates. Yet, even with this moderation in employment growth,
the previous four months account for some of the strongest month-
over-month job gains in the state’s history. Notwithstanding these
record-breaking gains, California has only regained 33% of the jobs
that were lost in March and April. Considering the trauma sustained
by the state’s economy, the key question centers on how long it will
take the labor market to recover. Simply put, the roughly 2.6 million
jobs lost in March and April will not return over night, even after
the spread of the virus is fully contained. Indeed, about 100,000
jobs were added to the state’s economy in August, and while this is
a positive sign, if the state continues to add jobs at this rate, it will
take until the second half of 2021 to reach February 2020 levels.
CA Unemployment Rate 9.9% | 7.4%
One ostensibly positive sign is that the state’s unemployment rate
fell to 11.4% in August, a 4.1-percentage-point decline relative to
April, although this remains a far cry from the 3.9% rate enjoyed one
year ago. It could be the case that the month-over-month decline was
driven more by a decline in the state’s labor force than by an increase
in employment. California’s labor force – the sum of the state’s
employed and unemployed - contracted for the second consecutive
month, losing 117,100 workers in August. From a year-over-year
perspective, the labor force has declined by 3.7% - a steeper drop
relative to the 1.9% decline in the nation overall. Since February,
the number of people looking for work in the state has fallen by
807,000, a sign that many workers have become discouraged and
have stopped actively looking for employment. A possibly better sign
is that 50% of the state’s unemployed workers report their layoff as
temporary, and that they should be returning to work in the coming
months. Notably, however, in April more than 70% of the state’s
workers described their unemployment in these terms. The shrinking
number of people who identify as being temporarily unemployed
creates concern that many exisiting layoffs are turning permanent.
CA Median Existing
Home Price $505,006 | $527,356
While the impact of the pandemic has been broad-based throughout
the economy, the impact on the residential housing market has
been relatively mild. Homebuyer sentiment took a hit in the early
months of the pandemic, as buyers and sellers grappled with the new
constraints of homebuying in a pandemic. Statewide, year-over-year
home price appreciation fell to 0.7% in the second quarter of 2020,
the lowest rate recorded since the 2008-09 recession. Meanwhile,
home price growth tracked into negative territory on a quarterly
basis, falling 4.1% from the first quarter to the second quarter of
2020. Fortunately, California’s housing market is recovering swiftly,
in tandem with the nation as a whole.
Monthly data show home sales in a high growth climate, with
significant activity occurring in more rural parts of the state such as
the Central Coast, Sierra/Gold Country, and north Bay Area counties.
Prices are recovering as well. The resumption of sales at higher ends
of the market is helping prices increase overall, while the persistence
of low housing inventory adds upward price pressure in response to
the surge in demand.
CA Residential
Building Permits 92,879 | 108,215
The COVID-19 pandemic has had less of an impact on the residential
housing market than most other sectors of the economy. The
quintessential V-shape recovery seen in home prices and sales
testify to this dynamic. Residential construction activity in California
declined in the second quarter of 2020, (despite most construction
activity being deemed “essential”), and the state permitted roughly
5,000 fewer permits relative to the first quarter of the year.
Thereafter, residential permitting has recovered rapidly, returning to
pre-COVID levels in July. Beacon Economics considers housing to be
among the least affected sectors going forward.
2020/21 | 2021/22 2020/21 | 2021/22
EXHIBIT A
Beacon Economics LLC
5777 West Century Boulevard, Suite 895
Los Angeles, CA 90045
Telephone: 310.571.3399
Fax: 424.646.4660
Beacon Economics has proven to be one of the most
thorough and accurate economic research/analytical
forecasting firms in the country. Their evaluation of the key
drivers impacting local economies and tax revenues provides
additional perspective to HdL’s quarterly consensus updates.
The collaboration between Beacon and HdL helps both
companies enhance the accuracy of the work they perform
for their clients. In addition to forecasting, Beacon specializes
in economic impact analysis, sustainable growth and
development, housing and land use, and regional economics.
HdL Companies
120 S. State College Blvd., Suite 200
Brea, CA 92821
Telephone: 714.879.5000 • 888.861.0220
Fax: 909.861.7726
California’s allocation data trails actual sales activity by three
to six months. HdL compensates for the lack of current
information by reviewing the latest reports, statistics and
perspectives from fifty or more economists, analysts and
trade associations to reach a consensus on probable trends
for coming quarters. The forecast is used to help project
revenues based on statewide formulas and for reference
in tailoring sales tax estimates appropriate to each client’s
specific demographics, tax base and regional trends.
714.879.5000 | hdlcompanies.com
EXHIBIT A
Beacon EconomicsBeacon Economics | beaconecon.com
Taner Osman, PhD
Director of Regional and Sub-Regional Analysis
Beacon Economics, LLC
San Luis Obispo County
Economic Forecast
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: Los Angeles Times
COVID-19 Statistics: San Luis Obispo
0
50
100
150
200
250
3/16/204/16/205/16/206/16/207/16/208/16/209/16/2010/16/2011/16/20New Cases
New Cases 7-day MA
0
5
10
15
20
25
30
35
40
3/16/204/16/205/16/206/16/207/16/208/16/209/16/2010/16/2011/16/20Cumulative Deaths
Cumulative Deaths
0
5
10
15
20
25
3/16/204/16/205/16/206/16/207/16/208/16/209/16/2010/16/2011/16/20Hospitalizations
Hospitalizations 7-day MA
EXHIBIT B
Beacon EconomicsBeacon Economics
Lagging Indicators -SLO
Source: California EDD
-20
-15
-10
-5
0
5
10
70
80
90
100
110
120
130
Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Month over Month % GrowthEmployment (000s)San Luis Obispo Employment
Employment Month-over-Month % Growth
Industry
Sep-2020
Emp
(000s)
Feb to Sep Growth
% Abs.
Total Nonfarm 106.2 -12.7 -15.5
Leisure/Hospitality 14.4 -29.6 -6.1
Manufacturing 6.1 -20.7 -1.6
Other Services 3.4 -17.9 -0.7
Construction 7.0 -16.4 -1.4
Information 1.1 -13.5 -0.2
Prof./Business 10.2 -12.0 -1.4
Wholesale Trade 2.5 -8.4 -0.2
Retail Trade 13.0 -8.2 -1.2
Government 22.6 -7.8 -1.9
Education/Health 17.8 -6.2 -1.2
Logistics 19.6 -5.4 -1.1
Finance 3.9 1.0 0.0
EXHIBIT B
Beacon EconomicsBeacon Economics
Deep Dive: Tourism and Hospitality
Special Thanks to Chuck Davison
Source: California EDD, Visit SLO CAL (Tourism Economics, STR)
30
40
50
60
70
80
90
100
110
120
Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Change in Employment
Index at 100
Accommodation and Food Services
Arts and Entertainment
59%
6%
30%
3%
White Asian Black
Hispanic Native Other
53%
31%
9%
7%
Under 25 25-44 45-64 65+
51%49%
Male Female
EXHIBIT B
Beacon EconomicsBeacon Economics
Deep Dive: Construction
Special Thanks to Pat Arnold
Source: California EDD
4
4.5
5
5.5
6
6.5
7
7.5
8
8.5
9
Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Emp (000s)Employment Change
81%
16%
White Asian Black
Hispanic Native Other
6%
41%
28%
25%
Under 25 25-44 45-64 65+
55%
45%
Male Female
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: California EDD,
75
80
85
90
95
100
105
Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Deep Dive: Healthcare
Special Thanks to Alan Iftiniuk
Health and Education
Employment Change (Index at 100)
California Santa Barbara San Luis Obispo
63%7%
24%
3%
White Asian Black
Hispanic Native Other
17%
37%
33%
13%
Under 25 25-44 44-64 65+
60%
40%
Male Female
EXHIBIT B
Beacon EconomicsBeacon Economics
Deep Dive: Government
Special Thanks to Derek Johnson & Guy Savage
California EDD, City of SLO
8
9
10
11
12
13
14
Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Employment Changes in Government
Local Gov State Gov
67%7%
20%
White Asian Black
Hispanic Native Other
18%
32%40%
10%
Under 25 25-44 45-64 65+
46%54%
Male Female
EXHIBIT B
Beacon EconomicsBeacon Economics
-45%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
1/13/20 2/13/20 3/13/20 4/13/20 5/13/20 6/13/20 7/13/20 8/13/20 9/13/20 10/13/20% Change in Consumer Spending since JanuaryCalifornia San Luis Obispo County
Consumer Spending -SLO
Source: Opportunity Insights/Affinity Solutions
EXHIBIT B
Beacon EconomicsBeacon Economics
Home Sales
Source;: CoreLogic, California Realtors Association
Region Q3-20 Sales
Growth (%)
QoQ YoY
California 1,00,937 53.0 11.4
San Luis Obispo 1,096 65.3 16.0
Santa Barbara 1,138 55.5 21.6 -60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20YoY GrowthSan Luis Obispo Home Sales Growth
EXHIBIT B
Beacon Economics
What can Beacon do for you?
9
Housing, Land
Use, & Real Estate
Advisory
Sustainable
Growth and
Development
Economic &
Revenue
Forecasting
Economic, Fiscal
and Social Impact
Analysis
Regional and Sub-
Regional Analysis
Litigation and
Testimony
For more information, see Slide 2.
Continue the conversation.
Contact Dr. Taner Osman directly at
taner@beaconecon.com or
310.571.3399
Let’s discuss your goals and
needs.
Beacon has 6 Practice Areas covering
a range of services and products.
To view again or download this
presentation and for further information,
go to: www.BeaconEcon.com
Connect with us.
Our 6 Practice Areas
EXHIBIT B
Beacon Economics
Portfolio Spotlight
10
Housing, Land Use, &
Real Estate Advisory
Economic & revenue
forecasting
Litigation and
testimony
Sustainable Growth &
Development
Impact (Economic,
Fiscal, Social) & EB5
Analysis
Regional and Sub-
Regional Analysis
Beacon conducts analysis at an
international, national, state, county, and
city level --and even down to the zip
code, pending data availability. We
analyze data on Employment, Industry,
Real Estate, and Consumption.
Past Clients:
• City and County of Los Angeles
• City and County of Riverside
• East Bay Economic Dev. Agency
Beacon has evaluated the impact of
entities like universities, music
festivals, infrastructure projects, and
real estate development projects.
Beacon has also conducted impact
analyses that combine more than one of
the above like that of L.A’s Olympic bid.
Past Clients:
• University of Southern California
• Metropolitan Water District
• LA 2024 Olympic Bid Committee
Beacon conducts industry and policy
analysis on topics like green innovation,
tech and workforce development, and
industry sector strategies. Beacon has
strong in-house expertise around housing
policy and economic development
support.
Past Clients:
• California Apartment Association
• Long Beach Downtown Dev. Corp.
• Santa Cruz Workforce Dev. Board
EXHIBIT B
Beacon EconomicsBeacon Economics | beaconecon.com
Adam J. Fowler
Director of Research
Beacon Economics, LLC
UCR SoBA Center for Economic Forecasting and Development
Economic Development
in the age of COVID
EXHIBIT B
Beacon EconomicsBeacon Economics
§Covid-19 has accelerated existing challenges
High cost of living for many coastal cities in CA
Supply constraints
The demise of traditional retail
§The future of economic development is talent.
Gone are the days of only trying to lure big box stores or businesses
The power of firms shifting to the power of talent
§Short- run disruptions vs. new paradigms
§Attempting to recreate the past rather than envision the future
Beyond Triage
EXHIBIT B
Beacon EconomicsBeacon Economics
§Housing Matters
The SLO Housing Element is an Economic Development opportunity.
Jobs needs beds; remote workers need desk space
§New Businesses Won’t Look Like Old Business
New business formations are on the rise
Is the regulatory process positioned to support them? Is the commercial and residential
space nimble enough to accommodate?
Adaptive reuse
§Liberate the County’s assets
Parks, curbs, sidewalks, streets
Leverage the Cal Poly architecture program
Key Areas of Opportunity
EXHIBIT B
Beacon EconomicsBeacon Economics
Our Global Framework
ENTREPRENEURSHIP
Select Components
TALENT DEVELOPMENT
SKILLSETS
RESIDENTIAL REAL ESTATE
COMMERCIAL REAL ESTATE
TRANSPORTATION ASSETS
SMALL AND MICRO BUSINESS
YOUNG BUSINESS
COMMUNITY COLLEGE
WORKFORCE PARTICIPATION
BROADBAND ACCESS
CULTURAL ASSETS
HIGHER EDUCATION
K-12 EDUCATION
BUSINESS FORMATION
DEMOGRAPHIC LANDSCAPE
Human
Economic development
requires nurturing and
deploying people in ways that
maximize their productive
potential.
Physical
Economic development
requires long-term investments
in infrastructure to address the
fundamental conditions
necessary for economic growth.
Organizational
Public and private sector
enterprises must coordinate to
invest in and facilitate the
generation of new ideas and
knowledge transfer.
+
+
+
REMOTE WORK
EXHIBIT B
Beacon EconomicsBeacon Economics
Creating a Supportive Environment
Attracting Skilled
Talent Urban
Renewal A New Retail
+++
EXHIBIT B
Beacon EconomicsBeacon Economics
Attracting Skilled Talent
EXHIBIT B
Beacon EconomicsBeacon Economics
Attracting Skilled Talent
EXHIBIT B
Beacon EconomicsBeacon Economics
Attracting Skilled Talent
0.56 0.54
0.50 0.49 0.49
0.40 0.39 0.38
0.36 0.35
0.0
0.1
0.2
0.3
0.4
0.5
0.6
Maine
(1)
Vermont
(2)
North
Dakota
(3)
West
Virginia
(4)
Montana
(5)
New
Jersey
(46)
Texas
(47)
Hawaii
(48)
California
(49)
Utah
(50)Housing Units/PopulationHousing Units per Capita -Top 5 and Bottom 5 States
US Average:
0.422
- California ranks 49th (2nd
Lowest) in housing units to
population ratio.
- The ranking has been
unchanged for several years.
-But the gap between
California and Utah has
narrowed.
- At current trajectory,
California would overtake
Utah to becoming the state
with the lowest housing units
per capita in the next decade.
EXHIBIT B
Beacon EconomicsBeacon Economics
Attracting Skilled Talent – Housing
56.4 56.1
55.4 55.3
52.7
52.0 51.7 51.6 51.4
50.7
46
48
50
52
54
56
58
Florida (1)Hawaii (2)Louisiana (3)California (4)New York (5)Colorado (6)New Jersey (7)Oregon (8)Connecticut (9)Vermont (10)Percentage of Renter Households that
are Rent Burdened
U.S. Average = 49.5%
Note: Ranking denoted in parenthesis (1 = most burdened).
31.8 31.3
29.4
28.1 27.7 27.7 27.6
26.7 26.6
25.6
20
22
24
26
28
30
32
34
California (1)New Jersey (2)Hawaii (3)Rhode Island (4)New York (5)Vermont (6)Connecticut (7)Oregon (8)Massachusetts (9)Florida (10)Percentage of Owner Households that are
House Burdened
Note: Ranking denoted in parenthesis (1 = most burdened).
U.S. Average = 22.3%
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail – Bankruptcies
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail – Early Indicators
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail – Early Indicators
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail – Early Indicators
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail
EXHIBIT B
Beacon EconomicsBeacon Economics
A New Retail
Small firms account for 97.7%of total
business establishments in the state
Small sized firms account for 59.5%of
total payroll employees in the state
EXHIBIT B
Beacon EconomicsBeacon Economics
New Business Will Be Different
EXHIBIT B
Beacon EconomicsBeacon Economics
Urban Renewal -Short Term to Long
EXHIBIT B
Beacon EconomicsBeacon Economics
Urban Renewal -Short Term to Long
EXHIBIT B
Beacon EconomicsBeacon Economics
Urban Renewal –Short Term to Long
EXHIBIT B
Beacon EconomicsBeacon Economics
Relief and Recovery Resilience
Opportunities and
Challenges Short to Medium Term Long Term
ATTRACTING TALENT
Components
COMMERCIAL REAL
ESTATE
PUBLIC SPACE AND
ASSETS
Human
Economic development
requires nurturing and
deploying people in ways that
maximize their productive
potential.
Physical
Economic development
requires long-term investments
in infrastructure to address the
fundamental conditions
necessary for economic growth.
Organizational
Public and private sector
enterprises must coordinate to
invest in and facilitate the
generation of new ideas and
knowledge transfer.
+
+
+
SOLUTIONS
SOLUTIONS
SOLUTIONS
SOLUTIONS
EXHIBIT B
Beacon EconomicsBeacon Economics
§There is opportunity for long term economic strategy in this moment.
Covid-19 has accelerated existing challenges in the Central Coast Region.
§The future of economic development is attracting and retaining talent. The lack
of housing supply severely constrains the region.
§Adaptive reuse of commercial space to support ongoing changes in the
economy will be important.
Local governments may fear the economics of conversation – as retail sales tax revenue
and retail trade jobs may look different in the future.
§Policy choices at all levels of government will either mitigate or reinforce
changes, and either advance or damage the region’s long-term economic
prospects.
Conclusion
EXHIBIT B
Beacon Economics
What can Beacon do for you?
22
Housing, Land
Use, & Real Estate
Advisory
Sustainable
Growth and
Development
Economic &
Revenue
Forecasting
Economic, Fiscal
and Social Impact
Analysis
Regional and Sub-
Regional Analysis
Litigation and
Testimony
For more information, see Slide 2.
Continue the conversation.
Contact Mr.Fowler directly at
adam@beaconecon.com or
310.571.3399
Let’s discuss your goals and
needs.
Beacon has 6 Practice Areas covering
a range of services and products.
To view again or download this
presentation and for further information,
go to: www.BeaconEcon.com
Connect with us.
Our 6 Practice Areas
EXHIBIT B
Beacon Economics
Portfolio Spotlight
23
Housing, Land Use, &
Real Estate Advisory
Economic & revenue
forecasting
Litigation and
testimony
Sustainable Growth &
Development
Impact (Economic,
Fiscal, Social) & EB5
Analysis
Regional and Sub-
Regional Analysis
Beacon conducts analysis at an
international, national, state, county, and
city level --and even down to the zip
code, pending data availability. We
analyze data on Employment, Industry,
Real Estate, and Consumption.
Past Clients:
• City and County of Los Angeles
• City and County of Riverside
• East Bay Economic Dev. Agency
Beacon has evaluated the impact of
entities like universities, music
festivals, infrastructure projects, and
real estate development projects.
Beacon has also conducted impact
analyses that combine more than one of
the above like that of L.A’s Olympic bid.
Past Clients:
• University of Southern California
• Metropolitan Water District
• LA 2024 Olympic Bid Committee
Beacon conducts industry and policy
analysis on topics like green innovation,
tech and workforce development, and
industry sector strategies. Beacon has
strong in-house expertise around housing
policy and economic development
support.
Past Clients:
• California Apartment Association
• Long Beach Downtown Dev. Corp.
• Santa Cruz Workforce Dev. Board
EXHIBIT B
Beacon Economics
Thank You
adam@BeaconEcon.com | beaconecon.com
EXHIBIT B
Beacon EconomicsBeacon Economics | beaconecon.com
Christopher Thornberg, PhD
Founding Partner, Beacon Economics
Director, UCR SoBA Center for Economic Forecasting and
Development
November 2020
The Covid Recession:
Where Next?
Stages of Recovery
EXHIBIT B
Beacon EconomicsBeacon Economics
§Covid-19: A global natural disaster
Over 53 million cases, with over 1.2 million deaths (20% in the US)
Currently in midst of largest surge to date, albeit one offset by falling death rates
Good news on the vaccine front: 2 products shown to have 95% effectiveness
§The Recession
The macro debate, “U”, “V”, or whatever…
A unique business cycle, lessons of the past are not applicable
Beacon: in the ”V” camp—rapid movement back to normality with little LR damage
The recession ended in April, worst quarter in economic history followed by the best
Little sign that current surge is causing a new downturn
§The Path Ahead
Winner / Loser economy with some sectors struggling while others prosper
Remainder of recovery a function of controlling Covid-19
The real risks: inflation and higher interest rates driven by excessive government intervention
The Pandemic and the Economy
Source: American Community Survey
EXHIBIT B
Beacon EconomicsBeacon Economics
Miserabilism and the Pandemic
US Economic Viewpoint | 02 April 2020 3
open the economy with businesses returning and people going back to work. This will unleash pent-up demand which we believe will generate a 30% pop in 4Q GDP. Nonetheless, we think this will be a slow recovery overall as many workers will be displaced and businesses adapt to a period of lost revenue. A quick note on what % qoq saar means When considering our forecasts, it is important to keep in mind that we are reporting the growth rates for GDP on a sequential basis based on seasonally adjusted annualized levels. By looking at data sequentially, you are able to track turning points in the economy more quickly than if you look at things on an annual year-over-year (yoy) basis. Most of the time, sequential means a month-over-month (mom sa) change. In the case of GDP, the data are quarterly and growth rates are additionally annualized (% qoq saar), meaning that the growth rate for the quarter is converted into an annual number (as if it was the growth rate for the year). Again, our forecast for is for a -7% qoq saar decline in 1Q, a -30% qoq saar decline in 2Q and a -1% qoq saar decline in 3Q. On an un-annualized basis, this translates into a -1.8% qoq, -8.5% qoq and -0.2% qoq decline, respectively, to the level of real activity. As referenced earlier, the total cumulative decline would be 10.4%. On a dollar basis, the level of GDP is reported as an annualized figure, and the cumulative loss in our forecast
is roughly $2tn annualized (Chart 2).
The consumer cuts back
The consumer is on the frontline from the shock of the COVID-19 pandemic. Based on
the BAC aggregate credit and debit card data we can track daily spending trends. As we
show in Table 2, in early March, there was a sharp drop in spending on travel with
airlines, cruises and lodging down sharply. By the middle of March, this weakness spread
to recreation services (museum, theaters, etc.) and in a matter of days to restaurants,
clothing and other discretionary good and services. There is a partial offset by greater
spending on necessities such as at grocery stores. By our calculation, about 20% of total
consumer spending was down more than 40% yoy by late March. Even assuming trend
growth for categories such as shelter, utilities and healthcare, it translates to a
substantial decline in overall spending at the end of the month.
There are two other indicators that support this degree of weakness. The first is the
sharp drop in auto sales to 11.4 million saar in March from the trend of almost 17
million saar previously. One of the first places consumers cut back is on big-ticket
durable items, particularly those that require debt financing. We also found that
consumer sentiment collapsed in the second half of the month which was also
highlighted by the daily data released by the University of Michigan survey.
Chart 1: Cumulative decline in real GDP during previous recessions (%)
Source: BofA Global Research, Bureau of Economic Analysis
Chart 2: Real GDP trajectory (2012$ saar, trillions)
Source: BofA Global Research, Bureau of Economic Analysis
-4.0%
-3.6%
-3.1%
-2.6%
-2.5%
-2.2%
-1.7%
-1.4%
-1.3%
-0.7%
-0.4%
-10.4%
-12%-10%-8%-6%-4%-2%0%
2020
2008
1957
1974
1981
1953
1980
1949
1990
1960
1970
2001
16.0
16.5
17.0
17.5
18.0
18.5
19.0
19.5
Mar-18 Sep-18 Mar-19 Sep-19 Mar-20 Sep-20 Mar-21 Sep-21
Real GDP ($tn saar)
BofA forecast
W
CBO Forecast: Gap between actual and potential US output
EXHIBIT B
Beacon EconomicsBeacon Economics
§Subprime Lending Bubble
$15 trillion in borrowing 01-07
Collapse of lending standards
§Caused massive imbalances in economy
Housing and consumer spending bubbles
Record low savings, massive trade deficit,
consumer debt levels
§8 years to recovery
Truly lost jobs, rebuilding incomes, careers
Flow-Stock problems (housing, cars)
Balance sheet issues
Financial markets digging out of bad debt
§The Pandemic Recession
Driven by consumer fear
Very large, rapid, but not sustained
No reason for structural shift
§Harm to economy is building now
Loss of revenue / incomes
Supply chain effects
§Broad range of possible outcomes
1.How healthy the economy?
2.How much of the economy was closed?
3.What has the government done to intervene?
4.How long will the pandemic impact economic
activity?
5.Will there be a major shift in post-pandemic
spending patterns
The Great Recession vs Today
EXHIBIT B
Beacon EconomicsBeacon Economics
§The Recession
Driven by panic / health mandates
Peak in February, trough in April, deepest / shortest cycle ever
§Recovery Stage 1: Learning to Live With Covid-19
Mitigation / adaptation of businesses and consumers
Winners and Losers with shift in spending to less impacted sectors
§Recovery Stage 2: Containing the Disease
Certain sectors impacted by Covid-19; travel, recreation, hospitality
Accepting the Inevitable: moving down the resistance curve
Policies that protect vulnerable / minimize impact on economy
§Recovery Stage 3: Return to Normality
Modest long run damage to economy
Massive government stimulus has supercharged potential demand
Big issues are with Covid-19 response: The federal debt / inflation
Stages of the Pandemic Recession
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: American Community Survey
The Recession Ended in April
-16.0%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
14500
15000
15500
16000
16500
17000
17500
18000
18500
19000
19500
20000
Feb-19Apr-19Jun-19Aug-19Oct-19Dec-19Feb-20Apr-20Jun-20Aug-20Monthly GDP
GDP % OT
2020 Diff from
Q1 Q2 Q3 19Q4
GDP -5 -31.4 33.1 -3.5%
Consumption -4.75 -24.01 25.27 -3.3%
Goods 0.03 -2.06 9.24 6.7%
Services -4.78 -21.95 16.04 -7.7%
Fixed investment -0.23 -5.27 4.96 -2.7%
Structures -0.11 -1.11 -0.43 -14.0%
Equipment -0.91 -2.03 3.34 -1.9%
Intellectual property 0.11 -0.53 -0.03 -2.6%
Residential 0.68 -1.6 2.09 5.1%
Change in inventories -1.34 -3.5 6.62
Net exports 1.13 0.62 -3.09
Exports -1.12 -9.51 4.9 -15.3%
Imports 2.25 10.13 -7.99 -7.1%
Government 0.22 0.77 -0.68 -0.2%
Federal 0.1 1.17 -0.39 2.6%
State and local 0.12 -0.4 -0.3 -1.9%
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: American Community Survey
Sept-Sept Change
Sept YoY Ch
Total 549256 5.4%
Non-store retailers 83781 23.8%
Hardware 37825 19.1%
Sports / Hobbies 7710 14.4%
Motor vehicle & parts 114803 10.9%
Food & beverage stores 70794 10.5%
Health & personal care stores 31425 5.3%
Furniture & home furn. stores 10407 4.6%
General merchandise 62055 4.3%
Clothing 19478 -12.5%
Gasoline 35909 -13.3%
Restaurants / Bars 55595 -14.4%
Consumers Leading the Way
80
85
90
95
100
105
110
115
120
Jan-18Mar-18May-18Jul-18Sep-18Nov-18Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Real Consumer Spending (Indexed)
Goods Services
EXHIBIT B
Beacon EconomicsBeacon Economics
Production Trends
80
85
90
95
100
105
110
115
Jan-04Jan-05Jan-06Jan-07Jan-08Jan-09Jan-10Jan-11Jan-12Jan-13Jan-14Jan-15Jan-16Jan-17Jan-18Jan-19Jan-20Industrial Production Weight YoY
Total industry 100 -7.3
Energy 25.94 -12.1
Consumer products 5.02 -3.7
Commercial products 2.38 -12.5
Oil and gas well drilling 0.55 -68.4
Converted fuel 4.71 -9.1
Primary energy 13.27 -14.1
Non-energy 74.06 -5.6
Selected high-technology 1.83 5.8
Motor vehicles and parts 5.5 0.4
Consumer goods 19.69 -2.7
Business equipment 7.96 -12.7
Construction supplies 5.44 -6.4
Business supplies 6.08 -8.7
Materials 25.21 -6.9
EXHIBIT B
Beacon EconomicsBeacon EconomicsAmerican Community Survey
The Bounce in Trade
60
70
80
90
100
110
120
Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19Jul-19Oct-19Jan-20Apr-20Jul-20Nominal Imports and Exports
(Indexed)
Imports Exports
California Exports SEP
2020
YTD
%2018
-2019
%2019
-2020
TOTAL ALL COMMODITIES 113.16 -2.32 -12.82
Dairy Prods; Birds Eggs; Honey 1.31 2.78 28.05
Pharmaceutical Products 3.39 8.16 8.85
Miscellaneous Edible Preparations 1.63 16.1 5.12
Miscellaneous Chemical Products 2.62 5.79 2.71
Industrial Machinery, Including Computers 18.25 -12.36 -1.59
Edible Vegetables & Certain Roots & Tubers 1.13 3.85 -1.99
Edible Fruit & Nuts; Citrus Fruit Or Melon Peel 7.04 3.43 -4.99
Beverages, Spirits And Vinegar 1.19 -3.78 -6.44
Electric Machinery Etc.; Sound Equip;19.60 -11.42 -7.44
Plastics And Articles Thereof 3.10 -3.34 -9.06
Optic, Photo Etc., Medic Or Surgical Instruments 11.64 0.48 -12.57
Aircraft, Spacecraft, And Parts Thereof 5.10 3.94 -25.07
Vehicles, Except Railway Or Tramway 7.90 28.98 -26.43
Nat Etc Pearls, Prec Etc Stones, Pr Met Etc; Coin 3.90 -9.43 -40.42
Mineral Fuel, Oil Etc.; Bitumin Subst; Mineral Wax 2.56 4.82 -43.42
EXHIBIT B
Beacon EconomicsBeacon Economics
Investment Trends
300
350
400
450
500
550
600
650
2005Q1Q4Q3Q22008Q1Q4Q3Q22011Q1Q4Q3Q22014Q1Q4Q3Q22017Q1Q4Q3Q22020Q1Real Investment in Structures $Bil20192020
Private fixed investment 1.5%-2.7%
Nonresidential 1.4%-4.9%
Structures 1.9%-14.0%
Commercial and health care 2.3%-4.1%
Manufacturing 3.4%-9.1%
Power and communication 20.5%-4.7%
Mining exploration, shafts, wells -11.0%-49.8%
Equipment -1.3%-1.9%
Information processing eq 1.9%14.5%
Industrial equipment -2.6%-3.7%
Transportation equipment -5.1%-21.9%
Intellectual property products 4.6%-2.6%
Software 6.8%1.4%
Research and development 3.6%-4.2%
Entertainment, literary, artistic 1.1%-12.2%
Residential 1.6%5.1%
EXHIBIT B
Beacon EconomicsBeacon Economics
CRE Lending –U.S.
Source: FDIC, FRB, Mortgage Bankers Association (MBA) and Wells Fargo Securities
EXHIBIT B
Beacon EconomicsBeacon Economics
Nonresidential Rents and Vacancies
Source: REIS
Office
Cost of Rent Vacancy Rate
Q3-2020 ($)1-Year % Growth Q3-2020 (%)1-Year Change
San Francisco 65.8 2.5 9.9 1.1
East Bay 35.5 2.2 16.4 1.1
South Bay 47.0 0.9 18.3 0.1
Retail
Cost of Rent Vacancy Rate (%)
Q3-2020 ($)1-Year % Growth Q3-2020 (%)1-Year Change
San Jose 37.6 0.3 5.7 0.3
San Francisco 41.3 -0.6 4.8 0.6
South Bay 31.9 -0.7 8.3 0.3
EXHIBIT B
Beacon EconomicsBeacon Economics
Nonresidential Permits
Source: CIRB
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Aug-14Aug-15Aug-16Aug-17Aug-18Aug-19Aug-20Value of Permits ($000s)Nonresidential Permits -Southern
California
Commercial Alterations
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
Aug-14Aug-15Aug-16Aug-17Aug-18Aug-19Aug-20Value of Permits ($000s)Nonresidential Permits -Northern
California
Commercial Alterations
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: National Association of Realtors, S&P Global
Housing –U.S.
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
170
180
190
200
210
220
230
Jul-16Jan-17Jul-17Jan-18Jul-18Jan-19Jul-19Jan-20Jul-20Year-Over-Year % ChangeIndex at Jan-2000 = 100S&P/Case-Shiller National Index
Index Year-Over-Year Change
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Jan-12Aug-12Mar-13Oct-13May-14Dec-14Jul-15Feb-16Sep-16Apr-17Nov-17Jun-18Jan-19Aug-19Mar-20US Single Family Market
Inventory Sales
EXHIBIT B
Beacon EconomicsBeacon Economics
Real Estate Fundamentals
15
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%1994Q41996Q21997Q41999Q22000Q42002Q22003Q42005Q22006Q42008Q22009Q42011Q22012Q42014Q22015Q42017Q22018Q4Equity share of Residential Real
Estate
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0% Q1-85 Q1-87 Q1-89 Q1-91 Q1-93 Q1-95 Q1-97 Q1-99 Q1-01 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11 Q1-13 Q1-15 Q1-17Vacant Units
For Sale / Rent Held Off Market
EXHIBIT B
Beacon Economics
Housing Markets: Great Fundamentals
Source: FRED 16
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%05:Q106:Q107:Q108:Q109:Q110:Q111:Q112:Q113:Q114:Q115:Q116:Q117:Q118:Q119:Q120:Q1Growth Mortgage Debt (Y-o-Y)
500
550
600
650
700
750
800
99:Q200:Q301:Q403:Q104:Q205:Q306:Q408:Q109:Q210:Q311:Q413:Q114:Q215:Q316:Q418:Q119:Q2Credit Score for Mortgage
Originations
Median 25th percentile 10th percentile
EXHIBIT B
Beacon Economics
Owner and Renter Costs?
Source: ACS
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
2005200720092011201320152017Share of Owners by Housing
Cost as % of Income w Mortgage
<20 >35
30.0
32.0
34.0
36.0
38.0
40.0
42.0
44.0
46.0
20052006200720082009201020112012201320142015201620172018Share of Renters by Housing
Cost as % of Income
<25 >35
EXHIBIT B
Beacon EconomicsBeacon Economics
What is going on?
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
1995-01-011997-01-011999-01-012001-01-012003-01-012005-01-012007-01-012009-01-012011-01-012013-01-012015-01-012017-01-012019-01-01US Homeownership Rate
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
2000-01-012001-10-012003-07-012005-04-012007-01-012008-10-012010-07-012012-04-012014-01-012015-10-012017-07-012019-04-01Rental Vacancy Rate
EXHIBIT B
Beacon EconomicsBeacon Economics
Housing Starts
0
200
400
600
800
1000
1200
2015-09-012016-01-012016-05-012016-09-012017-01-012017-05-012017-09-012018-01-012018-05-012018-09-012019-01-012019-05-012019-09-012020-01-012020-05-012020-09-01SF Housing Starts SAAR
0
100
200
300
400
500
600
700
2015-09-012016-01-012016-05-012016-09-012017-01-012017-05-012017-09-012018-01-012018-05-012018-09-012019-01-012019-05-012019-09-012020-01-012020-05-012020-09-01MF Housing Starts
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: American Community Survey
State Sales
30000
50000
70000
90000
110000
130000
Q1-04Q1-05Q1-06Q1-07Q1-08Q1-09Q1-10Q1-11Q1-12Q1-13Q1-14Q1-15Q1-16Q1-17Q1-18Q1-19Q1-20Home Sales
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
Jan-02Mar-03May-04Jul-05Sep-06Nov-07Jan-09Mar-10May-11Jul-12Sep-13Nov-14Jan-16Mar-17May-18Jul-19Months Supply of Inventory
EXHIBIT B
Beacon EconomicsBeacon EconomicsSource: California Association of Realtors
Region
Median SF Home
Prices Home Sales
1-Yr %
ChangeAug-20 1-Yr %
Change
California $706,900 14.5 14.6
SF Bay Area $1,068,000 18.7 10.8
Inland Empire $435,000 14.5 9.0
Los Angeles Metro $615,000 12.8 4.4
California Real Estate
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
Aug-05Aug-06Aug-07Aug-08Aug-09Aug-10Aug-11Aug-12Aug-13Aug-14Aug-15Aug-16Aug-17Aug-18Aug-19Aug-20($, Seasonally Adjusted)Median Prices of Existing Single Family
Homes
California LA Metro SF Bay Inland Empire
EXHIBIT B
Beacon EconomicsBeacon Economics
Apartment Market
Source: REIS
1000
1500
2000
2500
3000
3500
Q3-05Q3-06Q3-07Q3-08Q3-09Q3-10Q3-11Q3-12Q3-13Q3-14Q3-15Q3-16Q3-17Q3-18Q3-19Q3-20Gross Rent per Unit ($)Cost of Rent
San Francisco (MD)East Bay South Bay
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Q3-05Q3-06Q3-07Q3-08Q3-09Q3-10Q3-11Q3-12Q3-13Q3-14Q3-15Q3-16Q3-17Q3-18Q3-19Q3-20Rate (%, MA)Vacancy Rate
San Francisco (MD)East Bay South Bay
Year -Over-Year Chg.
San Francisco : -9.6%
South Bay: -5.1%
East Bay: -3.1%
EXHIBIT B
Beacon Economics
0.30
0.35
0.40
0.45
0.50
0.55
0.60
Maine…Vermont…North Dakota…West Virginia…Montana…New Jersey…Texas…Hawaii…California…Utah…Housing Units per Capita (2017) -
Top 5 and Bottom 5 States)
housing units/pop (2017)US Average
California SUPPLY Problems
Source: American Community Survey, U.S. Census Bureau
51 California 8.3%
50 Washington 8.5%
49 Oregon 9.3%
48 Maryland 9.9%
47 Nebraska 9.9%
46 Mass 10.0%
45 Utah 10.1%
44 Ohio 10.3%
43 Colorado 10.3%
42 Connecticut 10.6%
41 DC 10.6%
40 New Jersey 11.0%
2018 Housing
Vacancy
Own Rent
California 2.2%13.4%
Hawaii 3.7%11.9%
Alaska 3.3%9.5%
New York 1.3%8.4%
Utah 1.4%8.2%
Arizona 1.6%8.2%
Texas 1.9%7.4%
New Jersey 0.8%6.7%
Nevada 1.4%6.2%
Washington 1.2%6.1%
Oregon 1.5%5.8%
Florida 1.1%5.7%
2018 Share
Overcrowded Housing
EXHIBIT B
Beacon EconomicsBeacon Economics
Permitting Trends
Source: CIRB
County 2020 YTD
Through Q2
Change from
2019 YTD
Growth from
2019 YTD (%)
Riverside 3,754 834 28.6
San Diego 1,812 373 25.9
Los Angeles 2,537 -44 -1.7
San Bernardino 1,461 -83 -5.4
Orange 1,257 -209 -14.3
County 2020 YTD
Through Q2
Change from
2019 YTD
Growth from
2019 YTD (%)
Riverside 97 -1249 -92.8
San Diego 2,237 182 8.9
Los Angeles 6,759 -683 -9.2
San Bernardino 425 -268 -38.7
Orange 2,271 -481 -17.5
Single-Family Permits Multifamily Permits
EXHIBIT B
Beacon EconomicsBeacon Economics
Credit issues?
0
1
2
3
4
5
6
7
8
9
10
1999:01:002000:01:002001:01:002002:01:002003:01:002004:01:002005:01:002006:01:002007:01:002008:01:002009:01:002010:01:002011:01:002012:01:002013:01:002014:01:002015:01:002016:01:002017:01:002018:01:002019:01:002020:01:00Bank DQ Rates to Q2
Commercial C&I
0
5
10
15
0
5
10
15
03:Q104:Q105:Q106:Q107:Q108:Q109:Q110:Q111:Q112:Q113:Q114:Q115:Q116:Q117:Q118:Q119:Q120:Q1Credit
Card
Mort
gag
e
Auto
Loan
HE
Revolvi
ng
Percent of Balance 90+Days Delinquent
by Loan Type
EXHIBIT B
Beacon EconomicsBeacon Economics
Mortgage Markets
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
03:Q104:Q105:Q106:Q107:Q108:Q109:Q110:Q111:Q112:Q113:Q114:Q115:Q116:Q117:Q118:Q119:Q120:Q1To 30-60
days late
To 90+days
late
Quarterly Transition Rates for Current Mortgage
Accounts
EXHIBIT B
Beacon EconomicsBeacon Economics
Lagging sectors
Opportunity Insights: Consumer Spending HF Data
EXHIBIT B
Beacon EconomicsBeacon Economics
Airports and Hotels
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%3/16/204/16/205/16/206/16/207/16/208/16/209/16/2010/16/20TSA Transits, Y/Y Difference
100
110
120
130
140
150
160
170
180
190
200
11-Jul18-Jul25-Jul1-Aug8-Aug15-Aug22-Aug29-Aug5-Sep12-Sep19-Sep26-SepWeekly ADR
This Year Last Year
EXHIBIT B
Beacon EconomicsBeacon Economics
The Second Surge impact…
EXHIBIT B
Beacon EconomicsBeacon Economics
Surge #3
EXHIBIT B
Beacon EconomicsBeacon Economics
New surge vs second wave
Speed of outbreaks
% of Population with Resistance
Herd Immunity
Control
Achieved
Government Efforts?
• Cost Benefit analysis needed
• Focus on personal behavior not
economic activity
• Protect the population at highest risk
Total deathsCovid Deaths
All ages 198,809 % total
Under 1 year 22 0.00%
1–4 years 15 0.00%
5–14 years 35 0.00%
15–24 years 369 0.20%
25–34 years 1,541 0.80%
35–44 years 4,039 2.00%
45–54 years 10,627 5.30%
55–64 years 25,421 12.80%
65–74 years 42,950 21.60%
75–84 years 52,618 26.50%
85 years and over 61,172 30.80%
EXHIBIT B
Beacon EconomicsBeacon Economics
Winners and Losers
EXHIBIT B
Beacon EconomicsBeacon Economics
The biggest lagging indicator: Jobs
EXHIBIT B
Beacon EconomicsBeacon Economics
CA vs US: Lead / Lag
115.0
120.0
125.0
130.0
135.0
140.0
145.0
2017-01-012017-04-012017-07-012017-10-012018-01-012018-04-012018-07-012018-10-012019-01-012019-04-012019-07-012019-10-012020-01-012020-04-012020-07-01Index of Payroll Employment
US CA
State Employment Sep-20 Sep-19
Total Nonfarm 15982.3 17471.2 -1488.9
Leisure and Hospitality 1454.3 2033.6 -579.3 -28.5%
Government 2476.3 2608.8 -132.5 -5.1%
Other Services 463.4 577.6 -114.2 -19.8%
Retail Trade 1535.9 1648.4 -112.5 -6.8%
Health Care 2339.5 2439.2 -99.7 -4.1%
Manufacturing 1221 1318.1 -97.1 -7.4%
Admin Support 1040 1135.9 -95.9 -8.4%
Information 515.7 567.2 -51.5 -9.1%
NR/Construction 863.3 914.5 -51.2 -5.6%
Wholesale Trade 653.5 692.7 -39.2 -5.7%
Education 345.8 384.7 -38.9 -10.1%
Prof Sci Tech 1307.4 1343.1 -35.7 -2.7%
Logistics 686.2 708.6 -22.4 -3.2%
Management 242.3 254.8 -12.5 -4.9%
Financial Activities 838.3 844.3 -6 -0.7%
EXHIBIT B
Beacon EconomicsBeacon Economics
Labor Market Holes
0
2
4
6
8
10
12
14
Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Unemployment
Temp Layoff Unemployed
56.0
58.0
60.0
62.0
64.0
66.0
68.0
1984-05-011986-11-011989-05-011991-11-011994-05-011996-11-011999-05-012001-11-012004-05-012006-11-012009-05-012011-11-012014-05-012016-11-012019-05-01US Participation Rate
EXHIBIT B
Beacon EconomicsBeacon Economics
More Context
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2000-12-012002-02-012003-04-012004-06-012005-08-012006-10-012007-12-012009-02-012010-04-012011-06-012012-08-012013-10-012014-12-012016-02-012017-04-012018-06-012019-08-01Jobs Opening Rate
84
86
88
90
92
94
96
98
100
102
Jan-19Mar-19May-19Jul-19Sep-19Nov-19Jan-20Mar-20May-20Jul-20Sep-20Index of Earnings and Jobs
Jan 2020 = 100
Payrolls Worker Earnings
EXHIBIT B
Beacon EconomicsBeacon Economics
Small Business?
-
5,000
10,000
15,000
20,000
25,000
Jan-06Oct-06Jul-07Apr-08Jan-09Oct-09Jul-10Apr-11Jan-12Oct-12Jul-13Apr-14Jan-15Oct-15Jul-16Apr-17Jan-18Oct-18Jul-19Apr-20California Business Applications
High-Propensity Business (SSA)
Application
Business Application from Corporations (SA)
-29%
-44%
-33%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
1/29/
2
0
2/28/
2
0
3/29/
2
0
4/28/
2
0
5/28/
2
0
6/27/
2
0
7/27/
2
0
8/26/
2
0
9/25/
2
0% change since JanuaryChange in Small Business Reopenings
California San Jose San Francisco Oakland
EXHIBIT B
Beacon EconomicsBeacon Economics
CARES Act: $3 trillion in a $5.5 trillion
quarter
§Households
$300 billion direct payments
$250 billion unemployment expansion
Potential benefits = median weekly income
§Business
$400-600 billion small business loans
$500 billion economic stabilization for
airlines, national security important
industries etc.
§Local government support
$350 billion, direct payments to
governments, hospitals, airports, transit
§The Fed
Rate cuts
Full QE efforts
§Other Efforts
IRS, states: delaying tax payments
Local government moratorium on
evictions
Large landlords providing rent deferral
Large public mortgage holders allowing
owners to defer mortgages
Food programs expanding
Policy (Over)reaction
EXHIBIT B
Beacon EconomicsBeacon Economics
Stimulus Dry Powder
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
20000
Jan-17Feb-17Mar-17Apr-17May-17Jun-17Jul-17Aug-17Sep-17Oct-17Nov-17Dec-17Jan-18Feb-18Mar-18Apr-18May-18Jun-18Jul-18Aug-18Sep-18Oct-18Nov-18Dec-18Jan-19Feb-19Mar-19Apr-19May-19Jun-19Jul-19Aug-19Sep-19Oct-19Nov-19Dec-19Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20US Disposable Household Income by Source
Earned Dis Inc Govt Bene
EXHIBIT B
Beacon EconomicsBeacon Economics
Dry Powder
0.0
1000.0
2000.0
3000.0
4000.0
5000.0
6000.0
7000.0
2015-08-012015-12-012016-04-012016-08-012016-12-012017-04-012017-08-012017-12-012018-04-012018-08-012018-12-012019-04-012019-08-012019-12-012020-04-012020-08-01Household Savings Billions SAAR
$1.3 Tr Excess
Savings
9000
10000
11000
12000
13000
14000
15000
16000
17000
2015-09-232016-09-232017-09-232018-09-232019-09-232020-09-23Bank Deposits, Billions
$2.5 Tr Excess
Deposits
EXHIBIT B
Beacon EconomicsBeacon Economics
Who is Ahead / Behind?
EXHIBIT B
Beacon EconomicsBeacon Economics
Government Debt
Source: FRED 42
-1000
0
1000
2000
3000
4000
5000
2007-01-012007-10-012008-07-012009-04-012010-01-012010-10-012011-07-012012-04-012013-01-012013-10-012014-07-012015-04-012016-01-012016-10-012017-07-012018-04-012019-01-012019-10-01Total Borrowing (Annual Billions)
Household State Local Federal
Non-Financial Financial
-3500000
-3000000
-2500000
-2000000
-1500000
-1000000
-500000
0
500000
1978-01-011982-01-011986-01-011990-01-011994-01-011998-01-012002-01-012006-01-012010-01-012014-01-012018-01-01FY Federal Deficit
EXHIBIT B
Beacon EconomicsBeacon Economics
Federal Reserve Policy
Source: FRED 43
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2020-01-012020-02-012020-03-012020-04-012020-05-012020-06-01Effective Federal Funds Rate
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
2002-12-182004-12-182006-12-182008-12-182010-12-182012-12-182014-12-182016-12-182018-12-18Fed Balance Sheet
EXHIBIT B
Beacon EconomicsBeacon Economics
Financial Trends
Source: FRED 44
0
500
1000
1500
2000
2500
3000
3500
4000
2015-10-072016-10-072017-10-072018-10-072019-10-072020-10-07S&P 500
300
400
500
600
700
800
900
1988-01-011990-10-011993-07-011996-04-011999-01-012001-10-012004-07-012007-04-012010-01-012012-10-012015-07-012018-04-01Real Average Household Wealth
EXHIBIT B
Beacon EconomicsBeacon Economics
Inflation Warning
0.0
0.5
1.0
1.5
2.0
2.5
2010-07-012011-03-012011-11-012012-07-012013-03-012013-11-012014-07-012015-03-012015-11-012016-07-012017-03-012017-11-012018-07-012019-03-012019-11-012020-07-01Core PCE Inflation
0.0
5.0
10.0
15.0
20.0
25.0
1960-01-011964-01-011968-01-011972-01-011976-01-011980-01-011984-01-011988-01-011992-01-011996-01-012000-01-012004-01-012008-01-012012-01-012016-01-012020-01-01Y-o-Y M2 Growth
EXHIBIT B
Beacon EconomicsBeacon Economics
Personal Behavior
§This is not a “new normal”
Polio, smallpox, plague, etc.
Spanish flu, MERS, SARS
Terrorism episodes
No permanent change in consumer
behavior seen
§Some segments will lag
Older consumers
Global tourism
Business Issues
§Shakeout in stressed sectors
Oversupply of restaurants
Retail shifting to online
§Perhaps a good lesson?
More flexibility for remote work
Some long run impact on business travel
Office is not over, but…
Industrial: Local vs global transport
Long Run Consumer / Business Behavior
EXHIBIT B
Beacon EconomicsBeacon Economics
The election
EXHIBIT B
Beacon EconomicsBeacon Economics
§National Election
Biden, House in Democrat hands
Senate likely to stay with Republicans,
we await GA’s next election
Big issue: uncertainty until transition
§Where do we head?
Red senate: lock down for 2 years
Blue senate: ???
Good for CA; better alignment, personal
connections, chance to focus on internal
issues
§State Election
Props 15 (split roll), 16 (affirmative
action), 21 (rent control), 23 (dialysis)
going down
Props 19 (prop tax), 22 (App
subcontractors), 24 (internet) win: what
about AB5?
Shows CA population well to the political
right of state legislative bodies
General issue of taxes
§Big state political shift
The election
EXHIBIT B
Beacon EconomicsBeacon Economics
§It ain’t good, but it ain’t that bad..
The “V” is the only logical outcome
Speed of recovery dictated by pace at
which virus gets under control again
Behavior, not policy at center of issue
§Baseline Forecast
-4.8% Q1, -31%Q2, 33% Q3, 8% Q4
Close to full recovery by Q3-2021
Unemployment below 7% by year end
Moderate upticks in debt distress
Stock market—who knows
Little impact on long run real estate
values
Retail / restaurants / tourism to lag
§Wildcards
True Second round of outbreaks /
shutdowns
Global situation
How long until travel gets going
Government budgets
§The true enemy: Miserabilism
More bad policy driven by a basic lack of
context
Health needs conflated with culture wars
Uncomfortable math: A lot of economic
damage relative to positive health
outcomes
More targeted policies needed
2020: The Long Run Still Matters
EXHIBIT B
Beacon Economics
What can Beacon do for you?
50
Housing, Land
Use, & Real Estate
Advisory
Sustainable
Growth and
Development
Economic &
Revenue
Forecasting
Economic, Fiscal
and Social Impact
Analysis
Regional and Sub-
Regional Analysis
Litigation and
Testimony
For more information, see Slide 2.
Continue the conversation.
Contact Dr. Chris Thornberg directly
at chris@beaconecon.com or
310.571.3399
Let’s discuss your goals and
needs.
Beacon has 6 Practice Areas covering
a range of services and products.
To view again or download this
presentation and for further information,
go to: www.BeaconEcon.com
Connect with us.
Our 6 Practice Areas
EXHIBIT B
Beacon Economics
Portfolio Spotlight
51
Housing, Land Use, &
Real Estate Advisory
Economic & revenue
forecasting
Litigation and
testimony
Sustainable Growth &
Development
Impact (Economic,
Fiscal, Social) & EB5
Analysis
Regional and Sub-
Regional Analysis
Beacon conducts analysis at an
international, national, state, county, and
city level --and even down to the zip
code, pending data availability. We
analyze data on Employment, Industry,
Real Estate, and Consumption.
Past Clients:
• City and County of Los Angeles
• City and County of Riverside
• East Bay Economic Dev. Agency
Beacon has evaluated the impact of
entities like universities, music
festivals, infrastructure projects, and
real estate development projects.
Beacon has also conducted impact
analyses that combine more than one of
the above like that of L.A’s Olympic bid.
Past Clients:
• University of Southern California
• Metropolitan Water District
• LA 2024 Olympic Bid Committee
Beacon conducts industry and policy
analysis on topics like green innovation,
tech and workforce development, and
industry sector strategies. Beacon has
strong in-house expertise around housing
policy and economic development
support.
Past Clients:
• California Apartment Association
• Long Beach Downtown Dev. Corp.
• Santa Cruz Workforce Dev. Board
EXHIBIT B
Beacon Economics
Thank You
Chris@BeaconEcon.com | beaconecon.com
EXHIBIT B
Revenue Update
Preparing for the Coming
Year (and beyond)
As presented by
Poll Question #1 of 6
True of False. My community is impacted by the recent
reduction in tourism? (please choose one)
1.True, mostly domestic tourism.
2.True, mostly international tourism.
3.True, both international and domestic tourism.
4.False. Reduced tourism does not affect my community.
2
Exhibit D
Please Note
3
• If you have trouble with audio, try
switching from computer to
phone or vise versa
• If you have trouble with polls , try
changing the size of the window
with the poll and/or webinar.
• However, if you can’t take the
poll, you will not be eligible for
CPE credits as dictated by
accreditation rules.
Today’s Objectives
1.Provide the latest thinking sales, and hotel taxes in the
near-term and next few years
2.Understand how your community might be impacted by
ongoing COVID-19 revenue related impacts;
3.Provide tools to think about these broad trends and how
they might impact your upcoming budget, public service
delivery and capital project funding
4.Answer any other questions that we can!
4
Exhibit D
Today’s Speakers
5
Michael Coleman
Fiscal Policy Advisor
League of California Cities x
CSMFO
Ken Nordhoff
Principal
HdL Companies
Caroline Beteta
President and CEO
Visit California
KNdhffCarolineBeteta
Dec. 15, 2020
California Society of
Municipal Finance
Officers Webinar
Exhibit D
CC aroline Beteta
President & CEO
Visit California
•Officially formed in 1996
•Nonprofit 501(c)6
•19,000+ assessed businesses
•Mission: Create desire for the
California experience
•37-member board of directors
Exhibit D
BBoard Leadership
EE conomic development ecosystem
CDFA CAL
TRANS Go-BIZ NATURAL
RESOURCES
Governor Gavin Newsom
Lt. Governor’s Interagency Committee on International Affairs & Trade
Assembly Committee on Arts,
Entertainment, Sports, Tourism and Internet
Media
Exhibit D
California is No. 1 Travel Economy in U.S.
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
California Florida New York Texas Nevada Illinois Hawaii
Visitor Spending By State, 2018
($ Billion)
Source: U.S. Travel Association
Statewide updates
Exhibit D
California Tourism’s Record Growth Ends
Source: Dean Runyan Associates, Tourism Economics
$0
$20
$40
$60
$80
$100
$120
$140
$160
1993 2006 2019 2020
$144.9B
TRAVELER SPEND 2019
$66.1B
PROJECTED TRAVELER
SPEND 2020
$12.2B
Tax Revenue
1.2M
Tourism Jobs
CA Travel Spending Forecast
$144.9
$66.1
$102.0
$121.1
$138.1 $146.2
2019 2020 2021 2022 2023 2024
Source: Tourism Economics, Sept. 25 Forecast
54.5%
DECLINE
Exhibit D
Regional Occupancy
77.1%74.3%67.0% 67.0%61.2%60.0%54.3%50.8%50.0%48.8%45.9%44.9%
5%
14%
-7% -7%
-23%-20%-13%
-32%-39%
-21%
-44%-45%
Shasta
Cascade
North Coast Inland
Empire
Central
Valley
Gold CountryCentral Coast High
Sierra
San
Diego
Los Angeles Deserts San
Francisco
Orange
County
October 2020
Occupancy Change YOY
Source: STR Inc.
California Future Room Bookings
Source: Visit California Research, Travelclick, Forwardkeys; Nov. 21, 2020
Exhibit D
States and Cities Have Become More Reliant
on Travel-Generated Tax Revenue
4.0%
4.8%5.0% 5.0%
5.1%5.0%5.2% 5.2% 5.3% 5.3% 5.3%
-0.5%
0.5%
1.5%
2.5%
3.5%
4.5%
5.5%
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Travel-Generated State and Local Tax Revenue ($ Billion)Travel Share of Total U.S. Tax Collection
Source: U.S. Travel Association
TOT Collections Plummet
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
$4,500,000
$5,000,000
$5,500,000
$6,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
TOT payments
Source: Four-star Los Angeles County hotel
Exhibit D
California Local Tax Loss
-$121
-$196
-$218
-$140
-$120
-$132
-$82
-$114
-$94
Mar. Apr. May June July Aug. Sept. Oct. Nov.
Source: Visit California Research/Tourism Economics
The impact of tourism
State level: California
•From 2012- 2019, TOT collections in California cities increased 28%
Local level: Anaheim
•FY18/19, Anaheim collected $163 million in hotel tax – 40% of its General Fund Revenue
•FY20/21, Anaheim Projects that hotel tax will drop to $83.7 million
•Disneyland’s closure alone could cost the region $5 billion this year
Main Street: Visitor spend
•More than one-third of all travel spending is spent at restaurants and retail in your
communities
Exhibit D
U.S. Meetings Size Limitations
Travel Matters
Exhibit D
LLocal Impacts
San Francisco
•Hotel tax revenue down
60%
Long Beach
•Projects a 43% loss in hotel tax
forcing millions of cuts
Santa Monica
•Anticipates a 54%
drop in hotel tax
revenue
Bakersfield
•17% drop in TOT –
nearly $2 million
Palm Springs
•Estimates nearly 60% drop in
hotel tax revenue
WW hen Tourism Marketing Goes Away
Colorado-1993
•Eliminated a $12 Million
marketing budget
San Diego-2013
•Eliminated a $30 Million
marketing budget
•Saw $2.4 Billion economic loss
annually
•Estimated loss of $17 Million
in TOT collections over two
years
Exhibit D
TT he Good News
•Vaccine is rolling out
•Visit Newport Beach hit its annual
revenue goal six months early
•Rancho Cordova occupancy is 70-
plus percent
•Consumers’ expectations for their
spending in 2021 is highest in four
years
iindustry.VisitCalifornia.com/research
Exhibit D
IIndustry
Communications
•industry.VisitCal ifornia.com/Cor
onavirus
•Weekly Industry Emails
al ifornia.com//Cor
y Emails
TTravelMatters.CA.com
Exhibit D
LLess Travel Spending Æ
Fewer Local Services
Poll Question #2 of 6
Are you more or less concerned about the impacts of tourism
on your community than 15 minutes ago? (please choose one)
1.More
2.Less
3.About the Same
30
Exhibit D
C S M F O December 15, 2020
Michael Coleman
coleman@muniwest.com
530.758.3952
December 2020
Utility Fees, utility user taxes, franchises.
32
Exhibit D
December 2020
Utility Fees, utility user taxes, franchises.
COVID19 impacts on property tax, if anything, will not show up for another
year or so.
33
December 2020
Utility Fees, utility user taxes, franchises.
COVID19 impacts on property tax, if anything, will not show up for another
year or so.
Proposition 19 property tax base portability. Implementation is deferred
effects are variable among locations (+/-) – years out.
34
Exhibit D
December 2020
Utility Fees, utility user taxes, franchises.
COVID19 impacts on property tax, if anything, will not show up for another
year or so.
Proposition 19 property tax base portability. Implementation is deferred
effects are variable among locations (+/-) – years out.
Streets and Roads Funds from the State (HUTA, RMRA). Holding st eady …
because rate increases offset lower fuel consumption.
35
December 2020
Utility Fees, utility user taxes, franchises.
COVID19 impacts on property tax, if anything, will not show up for another
year or so.
Proposition 19 property tax base portability. Implementation is deferred
effects are variable among locations (+/-) – years out.
Streets and Roads Funds from the State (HUTA, RMRA). Holding st eady …
because rate increases offset lower fuel consumption.
State shifts/taking/borrowing of property tax or other local revenue
sources. Constitutionally protections.
36
Exhibit D
December 2020
Utility Fees, utility user taxes, franchises.
COVID19 impacts on property tax, if anything, will not show up for another
year or so.
Proposition 19 property tax base portability. Implementation is deferred
effects are variable among locations (+/-) – years out.
Streets and Roads Funds from the State (HUTA, RMRA). Holding st eady …
because rate increases offset lower fuel consumption.
State shifts/taking/borrowing of property tax or other local revenue
sources. Constitutionally protections.
Sales Tax small business deferral programs (90 day, 12 mo.): small utilization
for most, supports business survival, at worst -a cash flow issue.
37
December 2020 38
Exhibit D
December 2020
Sector-specific sales tax, lodging tax, and
business tax impacts.
39
December 2020
Sector-specific sales tax, lodging tax, and
business tax impacts.
Impacts of shifts in economic behavior:
online transactions, shift in purchaser location,
shift in retailer location.
40
Exhibit D
December 2020
Sector-specific sales tax, lodging tax, and
business tax impacts.
Impacts of shifts in economic behavior:
online transactions, shift in purchaser location,
shift in retailer location.
Popping of the pools (use tax =>sales tax).
41
December 2020
Sector-specific sales tax, lodging tax, and
business tax impacts.
Impacts of shifts in economic behavior:
online transactions, shift in purchaser location,
shift in retailer location.
Popping of the pools (use tax =>sales tax).
Absence of federal or state action to provide immediate term
revenue replacement.
42
di
Exhibit D
December 2020
Sector-specific sales tax, lodging tax, and
business tax impacts.
Impacts of shifts in economic behavior:
online transactions, shift in purchaser location,
shift in retailer location.
Popping of the pools (use tax =>sales tax).
Absence of federal or state action to provide immediate term
revenue replacement.
Longer term change / structural damage to the economy: live / work,
virtual vs. in-person, international travel confidence.
43
di
Poll Question #3 of 6
Which of the these are you most concerned ? (please choose
one)
1.Decline in Sales Tax, Lodging Tax, and Business Tax
2.Shifts in Economic Behavior
3.Absence of Federal or State Action
4.Longer Term Damage to the Economy
44
Exhibit D
December 2020
45
December 2020
December 2020
billions
46
Exhibit D
December 2020
47
December 2020 48
-
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
FY12-13 FY13-14 FY14-15 FY15-16 FY16-17 FY17-18 FY18-19 FY19-20 FY20-21 FY21-22 FY22-23Millions §2103
cities&counties
§2104
counties
§2106
§2107
cities
estimated projected >>>>>>>>>>>>
Road
Maintenance
&
Rehabilitation
AccountTCRF loan
repayment
H.U.T.A.
§2105
cities&counties
Exhibit D
SALES TAXES
WHAT HAPPENED AND WHAT TO
EXPECT
CA - LAST TWO YEARS
50
Exhibit D
COVID QUARTERS COMPS - CA
51
Pools 33%
surge
mitigated half
of brick and
mortar 13%
decline
TOP 10 SEGMENTS 2020 YTD
52
Decreases -SIP restrictions, shuttered locations, limited operations, lack of
travel
Increases –Essential businesses, spike in online ordering, home
improvements
Rank Business Type Description 2019 YTD 2020 YTD YTD $ Chg YTD % Chg
1 New Motor Vehicle Dealers $481M $453M -$28M -6%
2 Service Stations 403M 286M -117M -29%
3 Discount Dept Stores 279M 278M -1M 0%
4 Building Materials 238M 260M 22M 9%
5 Quick-Service Restaurants 238M 205M -32M -14%
6 Casual Dining 289M 179M -111M -38%
7 Grocery Stores 132M 144M 12M 9%
8 Fulfillment Centers 62M 126M 64M 102%
9 Contractors 131M 124M -7M -5%
10 Medical/Biotech 88M 86M -2M -2%
Exhibit D
8 REGIONS RESULTS
53
AB 147 – ‘WAYFAIR’
•Fully implemented
•$1.9b plus statewide
•Excluding district taxes
•Remote Sellers started
filing April 1, 2019
•Marketplace Facilitators
began October 1
•Added $260m to pools
•Major contributor to growth
last 4 quarters
•Also grew district taxes
54
Exhibit D
POOLS 2020 DNA
County & State Pools
Behavioral Shift
COVID-19 Impacts
Wayfair AB147
Federal Stimulus
55
AB147 – ‘WAYFAIR’ BOOSTS POOLS
56
Exhibit D
Poll Question #4 of 6
What sources of information do you use/consume to help with
your revenue projections? (please choose all that apply)
1.Internal Transactions, Activity (e.g., # of permits sold.)
2.Business/ Trade Journals
3.State/ Federal / Other Government’s Reporting
4.Outside/External Expertise
5.Other (please submit via “Question”)
57
BEHAVIORS, INFLUENCES AND MORE…
58
Exhibit D
SAVINGS AND SPENDING RELATIONSHIP
59
60
Exhibit D
WHAT’S OPEN?
•And what’s not:
Restaurants
Schools
Bars/Nightclubs
Retail Centers
Shopping Malls
Hotels/Lodging
Many categories with
limited access and/or
operational
restrictions
61
MUCH LESS DINING IN…
62
Exhibit D
FUEL PRICES STILL DOWN
63
64
Exhibit D
HOLIDAYS 2020
65
4q20 will see
growth in pools;
not good news for
local merchants in
general retail
sector
TAX DEFERRALS – PART DEUX
•Gov announced November 30
•Highlights:
•Automatic 3 month extension - taxpayers filing less than $1 million sales tax on return
•4q20 – January 31 deadline extended until April 30
•1q21 –April 30 deadline extended until August 2
•Interest & penalty free payment agreements - businesses up to $5 million in taxable sales
•$50k can be rolled into a 12 month deferral program
Impacts:
•Automatic extensions stay within FY 2020-2021
•Biggest issue - defers actual returns/data
•Normal analysis delayed until returns filed
•Missing payments ‘doubled up’ once returns remitted
•Small # 12 month extensions
66
Exhibit D
THIS RUNNING LIST ISN’T FINISHED…..
67
Poll Question #5 of 6
Which of the following do you think will be forever changed by
the COVID era? (please choose all that apply)
1.Movie Theaters/ Entertainment Industry
2.College
3.Live Music or Sporting Events / Concerts
4.Mall Shopping
5.Restaurants
68
Exhibit D
BEHAVIORAL SHIFTS CONTINUE…
•Working from home stays
•Less time/people
in office
•Fewer people in stores, eateries
•More online, delivery
•Household savings weaken
69
HOSPITALITY PAIN
70
•Years to Recover
•Occupancy levels
•Room Rates
•Impacts tax generation at eateries, venues,
stores
Exhibit D
TRAVEL STRUGGLES
71
2021 TRENDS
•Delivery, curbside, in store pickup new normal
•Alternative business models ring up gains
•Lines blurring between rentals, sales and subscriptions
•Refurbished products
•Fulfillment hubs eclipse storefronts
•New store concepts
•Pop ups
•Shared space (e.g. Ulta Beauty in Targets)
•Online get more personal, experiential
72
Exhibit D
2021 OUTLOOK
•Hospitality/travel struggle
•Ecommerce up (again)
•Strong housing market
•No so for office & commercial
centers
•Phase II stimulus
•Expected, targeted, limited
impact
•Vaccine effect to be gradual
•Federal Tax rates going higher
73
74
• FY 2020/2021 –
partial prior year
recovery
• FY 2021/2022 –
real recovery
underway
• Projections will
vary due to:
• Local tax base
• Geography
• Reopening
variances
FORECAST
FY15/16 FY16/17 FY17/18 FY18/19 FY19/20 FY20/21 FY21/22 FY22/23 FY23/24 FY24/25 FY25/26
Pools 6.3% 7.3% 7.1% 9.9% 20.0% 19.3% 3.1% 6.0% 6.0% 6.0% 6.0%
Point-of-Sale 2.6% 2.5% 5.1% 3.4% -8.2% -1.7% 8.7% 3.6% 3.0% 2.7% 2.7%
Combined Total 3.1% 3.1% 5.4% 4.3%-4.1%2.1% 7.5% 4.1% 3.6% 3.4% 3.4%
PROJECTIONACTUAL
Exhibit D
RECOVERY RESOURCES
•CNN Business
•https://www.cnn.com/business/us-economic-recovery-coronavirus
•Tracktherecovery.org
•https://tracktherecovery.org/
75
Next Steps
78
Exhibit D
Poll Question #6 of 6
What was of the greatest value from today’s webinar ?(please click
all that apply)
1.Hearing the latest thinking about sales, and hotel taxes in the near-term
and next few years
2.Learning more about future impacts by ongoing COVID-19 conditions;
3.Ways to think about trends and how they might impact your upcoming
budget, public service delivery and capital project funding
4.All of the Above
79
Contacts for Today
Speakers
x Caroline Beteta x communications@visitcalifornia.com
x Michael Coleman x coleman@muniwest.com
x Ken Nordhoff x knordhoff@hdlcompanies.com
Producer/Moderator
x Craig Lesner, clesner@gfoa.org
80
Exhibit D
Coaching Resources and Feedback
A digital audio recording of this webinar and agenda packet with a PDF of these slides
will be posted in approximately 24 hours. Find it under the “Agenda and Archives” tab
at www.csmfo.org/training/webinars
Other coaching resources, including volunteer one-on-one coaches are available at
www.csmfo.org/training/coaching
Please complete the survey following the conclusion of this webinar!
Look up and view past webinars at www.csmfo.org/training/webinars/audio-archives
81
82
Thank You!
CaliforniaCityFinance.com The California Local Government Finance Almanac
Exhibit D