March 8, 2011 County of San Diego Economic Update Donald F. Steuer Chief Financial officer

Overview of Economic Indicators Source: Alan Gin, Burnham-Moores Center for Real Estate, University of San Diego

Southern California Unemployment Unemployment Rates in Southern California Counties January 2011 (Median Rate is 11.1% For the Top 10 Counties in the State) California 12.7% Riverside County 14.3% San Bernardino County 14.1% Los Angeles County 13.1% San Diego County 10.3% Orange County 9.2% Source: California Employment Development Department

Economic Realities Optimism But Continued Uncertainty Retail Sales: Gaining Momentum Prop 172 HHSA Realignment Assessed Value (A/V) Growth: Sluggish Predicting No Growth or Slightly Negative Large Commercial Reassessments; Multi-Year Property Tax Refunds A/V Drives 85% of General Purpose Revenue (GPR)

Assessed Valuation Assumptions The property tax base has increased an average of 7.0% annually since 2001-02. 2010-11 AV declined by 1.56%, less than anticipated. Mitigating current year impact of large multi-year one time commercial refunds. 2011-12 AV is expected to be flat or slightly negative (-0.5%) . The 2011-12 Roll will have a positive CPI adjustment, 0.753% Large one time multi-year refunds anticipated. 8.7% 9.8% 10.3% 13.3% 12.1% 9.4% 4.6% (1.56%) (2.3%)

Historical &Projected SDCERA Funding Status Valuation Date Fiscal Year UAAL (in millions) Employer Contributions Funded Ratio June 30, 2008 FY 2009-10 1,566 206 84.3% June 30, 2009 FY 2010-11 2,292 224 78.5% June 30, 2010 FY 2011-12 3,028 296 73.2% June 30, 2011 FY 2012-13 3,661 372 69.5% June 30, 2012 FY 2013-14 3,606 441 71.7% June 30, 2013 FY 2014-15 3,599 504 73.4% June 30, 2014 FY 2015-16 3,531 519 75.3% The County is obligated to make approximately 91.0% of the annual Employer Contributions and other participating employers are obligated to make approximately 9.0% based on the estimated relative percentage of payroll of the County and the other participating employers. Actual contribution requirements are determined as a percentage of payroll. Data Source: The Segal Group, Inc, November 10, 2010. Projection of Employer Contributions and funded ratios using results from the June 30, 2010 Valuation. Figures above do not include employer offsets.

Potential State Impacts Program Realignment Primarily Public Safety and Heath and Human Services Reliant on Voter Approved Tax Extensions Pivotal to Continued Funding of Probation Programs Elimination of Redevelopment Districts Program Reductions CAL FIRE Staffing CALWORKS Benefits Transportation Suspension of Reimbursements for Mandates

Economic Realities What Does it All Mean? Short and Long Term Challenges: Property Tax Base Retirement Costs State Budget Issues Strategies to Match Expenditures to Revenues: Full Cost Recovery (B-29) Match Program Revenue-Based Services to Available Revenue Continued Analysis of Labor Agreements Evaluation of Future Capital Requirements C.O.R.E