Los Angeles 4th Regional Investor Conference

March 19-20, 2018

Joseph Kelly, Treasurer and Tax Collector

Hollywood Hills MLK JR Community Hospital LA Financial District

Table of Contents

I. Tax Reform Update – Tax Cuts and Jobs Act (H.R.1)

II. County Economic Overview

III. State of The County

IV. Strategic County Investments

a) Homeless Initiative

b) Vermont Corridor Project

c) LACMA Expansion

d) Future County Financings

V. Closing Remarks

I. Tax Reform Update – Tax Cuts and Jobs Act (H.R.1)

Dodger Stadium Port of LA

Tax Reform and Impacts to the County Although the immediate effect of tax changes are not yet apparent, the impact to assessed valuations and social services for the County appears to be moderate

$10,000 SALT Deduction Cap

1.5 million County residents claim a SALT deduction, averaging $18,649

Of the 2.4 million parcels in LA County, 300,000 (13%) have tax bills greater than $10,000

Limitation on deductibility of mortgage interest

Tax reform could impact property sales in the near term, at the median market value and greater

Reduction of individual tax rates

Property owners could be impacted in other areas, which may offset lost deductions for property taxes or mortgage interest

Key Provisions

1

Tax Reform Dominated Headlines at End of 2017

2

Tax Reform: Year-End Payment Frenzy LA County experienced unprecedented property tax collections in December following the passing of the H.R.1 Tax Cuts and Jobs Act

First installment Secured Property Tax Roll collections of $10 billion (55.6%) through December 10, 2017 were in line with previous years’ rates

Residents rushed to pre-pay the April 2018 installment early in order to get the full SALT deduction prior to the December 31 cut-off

From December 22 to 31, the County collected a record $1.1 billion in property taxes

Combined collections totaled $11.1 billion, or 62% of the fiscal year 2017-18 Secured Property Tax Roll

LA County’s stored value remains strong despite unknown impacts of Tax Reform and a record level of property tax payments at year end

Southern California is a very competitive real estate market with limited housing inventory

While consumer behavior could be impacted in the short term, longer term this may simply be viewed as the new norm and part of the cost of home ownership

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II. County Economic Overview

Griffith Observatory Walt Disney Concert Hall

Strong Real Estate Market Continues to Bolster Economy

For FY 2017-18, the County Assessor reported the largest revenue-producing valuation in the history of the County

– A net assessed value of $1.416 trillion

– An increase in assessed value of 6.0% compared to FY 2016-17

The County has experienced seven consecutive years of assessed value growth (FY 2011-12 to FY 2017-18)

Significant "stored value" as a result of Proposition 13 helped minimize the impact to property tax rolls from falling home values during the economic downturn

914

998

1,068 1,062 1,042 1,056 1,080

1,130

1,192

1,265 $1,336

1,416

$750

$850

$950

$1,050

$1,150

$1,250

$1,350

$1,450

2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Net Assessed Valuation, YoY Growth Rates ($Millions)

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Source: Los Angeles Economic Development Corporation *Projection

Larger economy than 43 states and all but 20 nations

Gross product of $669.9 billion represents 28% of the economic output in California and nearly 4% of US GDP

Population of over 10 million with total personal income of $585 billion

Highly diversified economy with major components in manufacturing, wholesale and retail trade, leisure and hospitality, entertainment, healthcare and education

Ports of LA/Long Beach encompass largest port complex in the U.S. by container volume and annual cargo tonnage

Economic Overview: Los Angeles County The County’s robust economy has been a catalyst for regional economic expansion, job creation, and improving wealth indicators

Select Economic Indicators (2017)*

State of

California

Los Angeles County

County as a % of the

State Gross Domestic Product ($b) 2,379 669.9 28%

Population (000) 39,613 10,278 26%

Personal Income ($m) 2,300 585 25%

Unemployment Rate (%) 4.8% 4.6% -

GDP Growth of Los Angeles County ($ in Billions)

$453 $481

$515 $534

$551 $566

$582 $595

$616 $629

$670

450

500

550

600

650

700

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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County Employment Base is Vibrant and Diverse

Major Firms and Universities Headquartered in LA Average unemployment rate decreased 63.5% from 12.6% in 2010 to 4.6% in 2017

The County is a leading national research center and home to 120 colleges and university campuses including Caltech, UCLA, and USC

Largest manufacturing center in the U.S.

Largest customs district in the U.S.

County Average Unemployment Rate (2004-2017)

6.5%

5.4% 4.8%

5.1%

7.5%

11.6%

12.6% 12.3%

10.9%

9.8%

8.2%

6.6%

5.2% 4.6%

4%

6%

8%

10%

12%

14%

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: State of California Employment Development Department

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Improving Wealth Levels Steady Growth in Consumer Spending

The County has benefited from consistent growth, increased assessed valuations, and higher wealth levels, which have spurred consumer spending

Population Continues to Grow Assessed Valuation Growth

$455 $487 $484

$513 $544 $557 $585 $602

$0

$100

$200

$300

$400

$500

$600

$700

2011 2012 2013 2014 2015 2016 2017* 2018*

Tota

l Per

sona

l Inc

ome

(Bill

ions

) Strong Economic Trends in Los Angeles County

9,897 9,970

10,045 10,109

10,170 10,240

10,278 10,328

9,600

9,700

9,800

9,900

10,000

10,100

10,200

10,300

10,400

2011 2012 2013 2014 2015 2016 2017* 2018*

Thou

sand

s

126 135 140 147 151

160 171

0

20

40

60

80

100

120

140

160

180

2011 2012 2013 2014 2015 2016 2017*

Tota

l Tax

able

Sal

es (B

illio

ns)

1,042

1,056

1,080 1,130

1,192 1,265

1,336 1,416

950

1,050

1,150

1,250

1,350

1,450

2011 2012 2013 2014 2015 2016 2017 2018

Source: Los Angeles Economic Development Corporation *Projection

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III. State of The County

Nokia Plaza LAC + USC Medical Center

Board Priorities:

The Supervisors are united in the development of programmatic priorities aligned with three strategic goals:

− Make Investments That Transform Lives

− Foster Vibrant and Resilient Communities

− Realize Tomorrow’s Government Today

Strong Financial Management:

− Demonstrated fiscal prudence and long term strategic planning

Strategic Investments:

County Action Plan to Prevent and Combat Homelessness: Measure H approved by 69.3% of voters and expected to generate $355 million in annual sales tax revenue

Continued Investment in Infrastructure and Environment: Measure A raises $94 million per year for the County’s local parks, beaches, and open space areas

State of the County The Board of Supervisors is focused on strategically investing capital resources to enhance infrastructure and to improve delivery of social services throughout the County

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IV. Strategic County Investments

LA Museum of Contemporary Art MacArthur Park

Homeless Initiative – The Action Plan The County has engaged stakeholders across the region to implement an action plan of 47 interlocking strategies involving more than 100 community groups, 30 cities, and a diverse group of leaders to effectively combat and prevent homelessness

Case Management and Services

Coordinated System

Affordable Housing

Prevention

Subsidized Housing

Increase Income

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Vermont Corridor Project

State of the art facility accommodates 2,064 County staff from Departments of Mental Health and Workforce Development Aging and Community Services

Employee consolidation improves services for residents

Facility will provide valuable social services to residents

Department of Mental Health Headquarters (Development Site 1)

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LACMA’s Innovative Expansion With the new Permanent Collection building, the LACMA campus will be a world-class destination and an asset to the community

387,500 sq foot building will replace four deteriorating buildings with an environmentally sustainable structure

Design embraces state-of-the art resource management and technology that seamlessly integrates with the existing park

3.5 acres of new public outdoor space

Construction anticipated to begin at end of 2018 and be completed in 2023

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Future County Financings The County expects to be in the market with several financings during 2018

County expects to issue approximately $700 million of 2018-19 Tax and Revenue Anticipation Notes

Future County Lease Revenue Bond Financings Include:

− Lease Revenue Bonds (Vermont Corridor Project)- $300 million Par (Aug 2018)

− LACMA Project- $125 million County contribution (Oct 2018)

− Consolidated Correctional Treatment Facility (Jail Replacement Project) - $1.5 to 2 billion Par (TBD)

Current lease revenue bond ratings are as follows:

− Standard & Poor’s: AA

− Moody’s Aa2 (recently upgraded in 2017)

− Fitch AA-

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Santa Monica Pier

V. Closing Remarks

Beverly Hills

The County’s economy is larger than all but 7 U.S. states and has a $1.40 trillion property tax base

Consistent with the County’s long history of responsible, fiscally conservative practices, Board Priorities and Initiatives are being funded with new revenue streams

The County has developed a robust action plan to tackle homelessness

Targeted revitalization projects (i.e. Vermont Corridor Project)

Investment in art and public space (i.e. LACMA expansion)

Closing Remarks

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