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<br />68 <br />interest on the Bonds as and when due. See “SECURITY FOR THE BONDS – Abatement” and <br />“APPENDIX B – SUMMARY OF PRINCIPAL LEGAL DOCUMENTS.” <br />Certain Risks Associated with Sales Tax and Measure HH Sales and Use Tax Revenues <br />For Fiscal Year 2015–16, sales tax (including Measure HH) revenues were the largest <br />source of revenue to the City. Sales tax revenues are based upon the gross receipts of retail <br />sales of tangible goods and products by retailers with taxable transactions in the City, which <br />could be impacted by a variety of factors. <br /> <br />For example, before final maturity of the Bonds, the City may enter into an economic <br />recession. In times of economic recession, the gross receipts of retailers often decline, and <br />such a decline would cause the sales tax revenues received by the City to also decline. <br /> <br />In addition, changes or amendments in the laws applicable to the City’s receipt of sales <br />tax revenues, whether implemented by State legislative action or voter initiative, could have an <br />adverse effect on sales tax revenues received by the City. For example, many categories of <br />transactions are exempt from the statewide sales tax, and additional categories could be added <br />in the future. Currently, most sales of food products for human consumption are exempt; this <br />exemption, however, does not apply to liquor or to restaurant meals. The rate of sales tax <br />levied on taxable transactions in the City or the fee charged by the State Board of Equalization <br />for administering the City’s sales tax could also be changed. See “– Property Tax Allocation by <br />the State; Change in Law” below for further discussion. <br /> <br />Assessed Value of Taxable Property; Delinquent Payment of Property Taxes <br />Natural and economic forces can affect the assessed value of taxable property within the <br />City. The City is located in a seismically active region, and damage from an earthquake in or <br />near the area could cause moderate to extensive damage to taxable property. Other natural or <br />manmade disasters, such as flood, fire, toxic dumping, coastal erosion or acts of terrorism, <br />could cause a reduction in the assessed value of taxable property within the City. Economic and <br />market forces, such as a downturn in the regional economy generally, can also affect assessed <br />values, particularly as these forces might reverberate in the residential housing and commercial <br />property markets. In addition, the total assessed value can be reduced through the <br />reclassification of taxable property to a class exempt from taxation, whether by ownership or <br />use (such as exemptions for property owned by State and local agencies and property used for <br />qualified educational, hospital, charitable or religious purposes). <br /> <br />Levy and Collection. The City does not have any independent power to levy and <br />collect property taxes. Any reduction in the tax rate or the implementation of any constitutional <br />or legislative property tax decrease could reduce the City’s property tax revenues, and <br />accordingly, could have an adverse impact on the ability of the City to make Lease Payments. <br />Likewise, delinquencies in the payment of property taxes could have an adverse effect on the <br />City’s ability to pay Lease Payments under the Lease when due. <br /> Reduction in Inflationary Rate. Article XIIIA of the California Constitution provides that <br />the full cash value base of real property used in determining assessed value may be adjusted <br />from year to year to reflect the inflationary rate, not to exceed a 2% increase for any given year, <br />or may be reduced to reflect a reduction in the consumer price index or comparable local data. <br />See “CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND <br />APPROPRIATIONS.” Such measure is computed on a calendar year basis. Because Article