Required Response Form Page 1 of 2 Grand Jury Report Title: How Tax Dollars Pay For Services Report Dated: June 3, 2020*

SDs are part of the County's method of providing necessary services to the residents The Auditor-Controller partially disagrees with this finding. According to the California Special Districts Association website: "Special districts are local governments created by the people of a community to deliver specialized services essential to their health, safety, economy and well-being. A community forms a special district, which are political subdivisions authorized through a state's statues, to provide specialized services the local city or county do not provide."

Over the past few years, TP difference between projected revenue and actual revenue collected has been increasing. The Auditor-Controller partially disagrees with this finding. It appears that the Grand Jury is referring to "budgeted revenue" when using the term "projected revenue". TP revenues generally go up and down from one year to the next and therefore make the budgeting process difficult to predict. The revenue differences in the past few years have been both increasing and decreasing.

The County is responsible for 100% payment to SDs of the projected revenue despite collected taxes. The Auditor-Controller agrees with this finding. Special Districts in the TP receive 100% of their Property Taxes, Special Assessments, and Fees in three installments during the year (Usually December, May, & June). The County then collects all property taxes usually in two installments (December & April). Any delinquent tax payers must eventually pay back all taxes owed in addition to the interest and penalty charges. The County is usually able to collect approximately 95-97% of all delinquent taxes. Over time the interest and penalty charges collected on the delinquent taxes more than make up for the small amount of delinquent taxes that are not collected.

The County's fiscal responsibility for the TP account could impact law enforcement, labor and County services. The Auditor-Controller agrees with this finding. Depending on the final TP revenues and expenditures, any surplus would increase the overall general fund balance and can be used to help fund public safety, labor and benefits, or any other county services. Any Auditor-Controller Response to 19-20 Grand Jury Report: How Tax Dollars Pay For Services TP deficit would decrease the overall general fund balance and additional funding may be needed to cover the services mentioned above. A TP deficit will usually be made up in future years as payments are made for the delinquent taxes plus penalties and interest. The County maintains a Tax Loss Reserve of $1,262,715 and an Additional Designated Reserve of $648,302 to help cover these possible TP shortfalls to the general fund.

An Investment Review Committee (aka Debt Committee) was established to provide direction on the impact of the TP on the County budget. TP performance was found to be normal and required no specific oversight at this time. The Auditor-Controller partially disagrees with this finding. Policy 48 Titled "Debt Management Policy" created a Debt Advisory Committee made up of County Administrative members and County Financial members who review all county debt decisions and make recommendations to the Board of Supervisors. A plan was put into place by the County and the TP debt was paid off in FY 2016. No further TP discussions have occurred with the Debt Advisory Committee. The impact of the TP on the County's budget would be handled through the normal annual budget process.

The GJ found no current strategic plan to protect County residential services, such as public works, health and human services, law enforcement, should a recession occur. The Auditor-Controller partially disagrees with this finding. The Auditor-Controller is not aware of an existing Countywide Strategic Plan. However, since the last recession the County has taken major steps to reduce outstanding debt and increase General Fund Reserves. Currently, the County maintains approximately $40M in the General Reserve and GF Designated Reserves that could be used if a recession should occur.

In the event of a decrease in income from property assessed taxes, the SD obligation of 100% could create a deficit in the County budget. The Auditor-Controller partially disagrees with this finding. Please refer to F4 above. A decrease in TP revenue in any given year could create a deficit in the TP and a decrease in overall general fund revenue but would not create a County budget deficit. Auditor-Controller Response to 19-20 Grand Jury Report: How Tax Dollars Pay For Services