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Major Recurring General Fund Revenue Sources Utility user tax revenues are estimated to represent the largest single source of General Fund revenues to be generated by the Medical Center. Annual utility taxes are anticipated to total approximately $91,000, which accounts for 36% of the Center's General Fund revenues. Gas and electricity usage comprise the largest sources of utility tax revenues. Sales/use tax revenues represent the second largest component of General Fund revenues to be generated by the Medical Center. Totaling $60,000 per year or 24% of Center -generated tax revenues, these taxes reflect a combination of on-site sales at the Center's cafeteria and gift shop, use tax on equipment purchases, and off-site employee purchases in San Leandro. If the Center does not generate use tax, projected revenues would decline by $23,000, resulting in a total sales tax projection of $37,000 per year. The third largest revenue source is anticipated to be business license fees generated by physicians. Based on the legal opinion of the City's legal counsel, it is our understanding that the Permanente Medical Group would be subject to the business license fee under the "services" fee category. It is estimated that business license fees would generate approximately $45,000 of annual revenue to the General Fund. Exhibit B provides a graphic percentage breakdown of revenues to be generated by the Center. As presented in Appendix Table B-3, if the Medical Center were not exempt form property taxes or if Kaiser were to make an equivalent payment in lieu of taxes (pilot), it is estimated that Phase 1 would generate approximately $982,000 of annual property taxes/property taxes in -lieu of VLF to the City's General Fund. The other sources of revenue include franchise fees and fines and forfeitures. Net New Revenues The loss of existing property tax revenues is anticipated to reduce Center -generated General Fund revenues by approximately 45%. After the deduction of existing property tax revenues, it is estimated that Phase 1 of the Center will annually generate approximately $140,000 of General Fund revenues. Keyser Marston Associates, Inc. Page 8 \\Sf-fs1\wp\19\19096\19096.036\003-001.doc; April 2009