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HdL Sales Tax Report for CY2019 Q3 SalesSales Tax Update In Brief Top 25 producers In AlphAbetIcAl Order www.hdlcompanies.com | 888.861.0220 Q32019 Encinitas Encinitas’ receipts from July through September were 16.5% below the third sales period in 2018. However, this comparison is skewed due to the CDTFA’s transi- tion to a new reporting system in the prior year when additional payments were received by the City. Excluding reporting aberrations, actual sales were down 0.2%.Weak summer returns from home furniture vendors and other retail- ers pulled general consumers lower. Slightly lower gas prices compared to the prior year negatively impact- ed fuel-service stations.The recent closeout of a build- ing-construction merchant and a one time allocation in the compar- ison period also hindered revenue growth.Although local point of sale results were down, increased taxes collect- ed for online purchases of items shipped into the region compared to last year, enhanced allocations from the countywide use tax pool, partial- ly offsetting the decline.Net of aberrations, taxable sales for all of San Diego County grew 2.8% over the comparable time pe- riod; the Southern California region was up 2.8%. City of Encinitas Fourth Quarter Receipts for Third Quarter Sales (July - September 2019) Published by HdL Companies in Winter 2020 7 Eleven 76 Best Buy BMW of Encinitas Cardiff Seaside Market Chevron Dick’s Sporting Goods Encinitas Ford Financial Services Vehicle Trust Hansen Surfboards Herman Cook Volkswagen Home Depot Home Goods Pacific Coast Grill Quick Shine Car Wash REI Shell Shell Car Wash At Encinitas Ranch Target TJ Maxx USA Gasoline Valero Vons Vuori Walmart Supercenter $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 SALES TAX BY MAJOR BUSINESS GROUP 3rd Quarter 2018* 3rd Quarter 2019* General Consumer Goods Restaurants and Hotels County and State Pools Autos and Transportation Fuel and Service Stations Food and Drugs Building and Construction Business and Industry *Allocation aberrations have been adjusted to reflect sales activity $3,615,048 $4,330,607 1,237 1,956 533,136 565,688 $3,080,675 $3,762,963 2019-202018-19 Point-of-Sale County Pool State Pool Gross Receipts REVENUE COMPARISON One Quarter – Fiscal Year To Date (Q3) NOTESSales Tax UpdateQ3 2019 City of Encinitas $0 $1,000 $2,000 $3,000 $4,000 SALES PER CAPITA * Encinitas Q3 16 Q3 19 Q3 17 Q3 18 County California *Allocation aberrations have been adjusted to reflect sales activity 25% Cons.Goods 19% Restaurants 15% Pools 13% Autos/Trans. 10% Fuel 8% Food/Drug8% Building4% Bus./Ind. Encinitas This Quarter*REVENUE BY BUSINESS GROUP *Allocation aberrations have been adjusted to reflect sales activity Q3 '19* Encinitas ENCINITAS TOP 15 BUSINESS TYPES** Business Type Change Change Change County HdL State*In thousands of dollars 1.0%4.6%-1.0% 74.9 Auto Lease -4.9%0.2%0.3% 198.2 Building Materials — CONFIDENTIAL — 2.8%2.3%3.3% 316.9 Casual Dining 2.1%1.0%1.2% 72.4 Convenience Stores/Liquor -4.0%2.8%2.1% 208.3 Discount Dept Stores — CONFIDENTIAL — -6.3%-3.1%-4.4% 87.4 Electronics/Appliance Stores -3.7%1.5%2.6% 84.4 Family Apparel 0.0%5.1%3.9% 113.7 Fast-Casual Restaurants -0.4%1.7%2.3% 159.7 Grocery Stores -14.4%-1.0%6.0% 102.9 Home Furnishings 1.6%-7.2%-2.3% 278.8 New Motor Vehicle Dealers — CONFIDENTIAL — 1.8%2.6%0.8% 173.4 Quick-Service Restaurants -6.3%-1.5%-3.7% 347.4 Service Stations -2.9%0.3%-1.0% 62.5 Specialty Stores 2.2%-1.4%0.1% 141.4 Sporting Goods/Bike Stores 0.3%0.6%-1.4% 7.1% -0.2% 2,997.5 511.0 3,508.5 Total All Accounts County & State Pool Allocation Gross Receipts 18.3%14.9% 2.8%2.3% ** Accounting aberrations such as late payments, fund transfers, and audit adjustments have been adjusted to reflect the quarter in which the sales occurred. Statewide Results The local one-cent share of statewide sales and use tax from sales occurring July through September was 2.2% high- er than the summer quarter of 2018 after adjusting for accounting anomalies. The bulk of the increase came from the countywide use tax allocation pools and is due to the acceleration in online shop- ping where a large volume of the orders are shipped from out-of-state. Online shopping also produced gains in the business-industrial group with in-state industrial zoned logistics cen- ters filling orders previously taken by brick and mortar retailers. Purchases to support healthcare, food processing, logistics/warehouse operations and in- formation/data technology also helped offset declines in other business-related categories. With the exception of some discount and value-oriented retail, most categories of general consumer goods were down. New cannabis related start-ups offset declines in the food and drug group while a softening in building-construc- tion receipts was consistent with recent declines in the volume and value of new building permit issuances. Overall growth in restaurant receipts continued to soften with a shift toward lower cost dining establishments and takeout meal options. Reports of labor shortages and the impact of homeless- ness on customer traffic in metropolitan areas were reportedly factors in the de- cline in tax revenues from higher price, fine dining establishments. Despite a slight uptick in used auto and auto lease receipts, the auto related group was significantly down due to a drop in new car and RV sales. Previously propped up by a 23% subprime rated customer base and six- and seven-year financing, loan delinquencies have re- cently surged back to levels last seen in 2009. Additional Tax Districts Approved Voters approved eight of the nine sales tax measures on the November 2019 ballot adding six new districts and ex- tending two others. This brings the total number of lo- cal transactions and use tax districts (TUT’s) to 325 with 62 that are lev- ied countywide and 263 imposed by individual cities. The number of local districts have close to tripled over the last decade as agencies deal with rising costs and service needs. TUT’s have been a favorable option as visitors contribute to the tax and a collection system is already in place that minimizes administrative and monitoring costs. California’s basic rule is that the rate for all local TUT’s combined, shall not exceed 2.0% or a total of 9.25% includ- ing the state levy. However, the state legislature has authorized higher caps in some jurisdictions with the highest voter-approved, combined state/local rate now at 10.5%. Thirty-five or more additional local TUT measures are currently being considered for the March 2020 ballot.