Demystifying the Fiscal Year 2020–21 Annual Comprehensive Financial Report (ACFR)

City of Redwood City
8 min readDec 17, 2021

In this Blog post, we will help demystify the Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2021. Learn more about why the ACFR is different than the City’s budget, what revenue we brought in and where we spent money last fiscal year, as well as a summary of major revenues sources and other significant financial planning.

What is the Annual Comprehensive Financial Report?

Unlike the City’s budget, which looks ahead to provide a financial plan for the upcoming fiscal year, the City’s Annual Comprehensive Financial Report (ACFR) looks back over the previous fiscal year to review and account for the City’s financial performance.

This report contains a complete set of audited financial statements, prepared by the City’s Finance Division, in accordance with Generally Accepted Accounting Principles (GAAP), as promulgated by the Government Accounting Standards Board (GASB).

General Fund Highlights

The General Fund balance shows as increased by $28.6 million from $55.8 million on June 30, 2020 to $84.4 million on June 30, 2021; however, this is due to the inclusion of the Section 115 pension trust account balance of $28.3 million as of June 30, 2021, which was previously recorded in a trust fund but is now required to be combined with the General Fund. Below is a comparison table of budget vs. actual and prior year vs. current year for General Fund revenues and expenditures, not including transfers in/out.

Total General Fund Revenues Down From Last Year; Less Than Budgeted

The full economic impacts of the pandemic were felt during Fiscal Year 2020–21. Total General Fund revenues for FY 2020–21 were $157.1 million. This was $8.0 million, or 4.8 percent less, than the revenue received in FY 2019–20, and $5.2 million, or 3.2 percent less, than the final adjusted budget.

The general fund revenue decrease of $8.0 million was primarily comprised of decreases in the following categories:

• Fire service charges decrease of $7.6 million — due to delayed billing of services provided in FY 2020–21 in the amount of $8.2 million, not billed until FY 2021–22

• Fair value of investments decrease of $6.1 million

• Transient occupancy (hotel) tax decrease of $4.2 million

• Recreation program fees decrease of $1.9 million

• Investment earnings decrease of $.4 million

Total Expenditures Also Down from Last Year

Total General Fund expenditures for FY 2020–21 were $135.6 million. This was $6.8 million, or 4.7 percent less, than the amount expended in FY 2019–20, and $18.3 million, or 11.9 percent less than the final adjusted budget.

The general fund expenditure decrease of $6.8 million was primarily comprised of decreases in the following categories:

• Other administrative support services decrease of $14.5 million — primarily due to a reduction in payments to the Section 115 pension trust account of $11.1 million and a reduction in direct payments to CalPERS of $3.0 million

• Parks and recreation expenditure decrease of $1.0 million

As is typical in local government, employee costs continue to represent the highest single source of expenditures, accounting for 71.9 percent of all General Fund expenditures in FY 2020–21. This is up from 70.9 percent for FY 2019–20.

Sources of General Fund Revenue: Property Tax, Sales Tax, Transient Occupancy (Hotel) Tax

Property Tax

Property tax accounts for 43.1 percent of total General Fund revenues and is a key indicator of the City’s economic outlook. Redwood City property values have remained relatively stable during the COVID-19 pandemic. The median sale price of homes in Redwood City is currently almost $1.8 million. While overall property tax revenues have declined slightly in FY 2020–21, from $66.8 million to $65.2 million, secured property tax (the largest component of property tax revenue) increased by $2.9 million, or 7.5 percent, over the previous fiscal year.

In this revenue category, there were two items that saw decreases in revenue: property tax in lieu of vehicle license fees and property taxes in the former redevelopment agency project area. Staff is working with the County of San Mateo to monitor the property tax in lieu of vehicle license fee calculation, and meets regularly to review projections. The City received $6.0 million in FY 2020–21 and has budgeted $7.4 million for FY 2021–22. Property taxes in the former redevelopment agency project area have been negatively impacted by the City of Chula Vista v. Sandoval state appellate court decision, which changed the methodology of calculating distribution amounts of tax increment revenues. The City received $5.8 million in property taxes in the former redevelopment agency project area in FY 2020–21, down $3.6 million from FY 2019–20. The City has budgeted $5.7 million for FY 2021–22.

Sales Tax

Sales tax is an important source of General Fund revenue, as it accounts for 22.1 percent of total General Fund revenues. This is a primary concern during the pandemic and throughout the associated recovery period due to nationwide reductions in consumer spending for fuel, entertainment, dining, new cars, and travel.

Sales tax revenues paid through resident online purchases have increased both in the number of transactions as well as in the City’s allocation of sales tax from them. Rather than experiencing a complete loss of sales tax from the purchases lost through storefront closures, many of those transactions moved to electronic shopping during the pandemic.

This activity has coincided with a new allocation of sales tax by the purchaser’s point-of-origin resulting from the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., which enabled state and local governments to recoup tax revenue formerly lost to remote sellers. This new influx of formerly lost online sales tax, together with the addition of revenue from the new Measure RR sales tax, has offset some of the reductions in sales tax revenue caused by the 2020 recession, softening the impact of the economic downturn on the City in FY 2020–21.

Transient Occupancy Tax (Hotel Tax)

Transient occupancy tax (TOT) is collected from visitors to Redwood City through a charge on hotel accommodations. TOT revenue accounts for 1.2 percent of total General Fund revenues. Although it is not a primary revenue source, it has been the most severely impacted by the COVID-19 pandemic; occupancy rates for hotels in Redwood City remained down at 59.6 percent for FY 2019–20 and 42.0 percent in FY 2020–21. Average room rates were drastically lower, decreasing from $181.10 for FY 2019–20 to $89.98 in FY 2020–21. TOT revenue in FY 2020–21 decreased by $4.2 million, or 70.0 percent, when compared to the prior fiscal year (from $6.0 million to $1.8 million).

In Redwood City, revenue per available room, which is calculated by multiplying a hotel’s average daily room rate by its occupancy rate, is down from $106.47/night in FY 2019–20 to just $38.09/night in FY 2020–21. In addition to the reduction in tourism due to the pandemic, two Redwood City hotels were sold to San Mateo County in FY 2020–21 for use as affordable housing, thereby permanently removing them from the TOT pool as well as the property tax rolls at an annual loss to the City of over $800,000. To offset the initial revenue loss, the City negotiated a one-time payment of $1.5 million from the County of San Mateo that was received in May 2021. The City has budgeted $2.8 million in TOT to be collected in FY 2021–22. Staff will analyze this unstable revenue on a monthly basis during the fiscal year to determine if a year-end budget amendment is needed.

More than $4.4 Million Committed to Responding the COVID-19 Crisis

The City Council-endorsed financial and community recovery strategy to help the community and organization meet the health, economic, and social challenges due to the COVID-19 pandemic is nicknamed the “Three R’s” for Respond, Restore and Reimagine:

The City has initiated numerous programs to help residents mitigate the economic damage caused by COVID-19, including emergency rental assistance, meal distribution, small business support, and waiving late payment penalties for utility customers. Redwood City committed more than $4.4 million in FY 2020–21 operating funds responding to the COVID-19 crisis — in staff time, purchases, and direct aid to residents — in addition to $4.6 million in FY 2019–20. This includes $1.1 million in overtime and supplies and service expenditures.

How are we Planning for the Future?

The City Council has a history of taking intentional, proactive, and strategic steps to ensure the long-term fiscal sustainability of Redwood City, including adopting a structurally balanced annual budget, funding long-term needs, and maintaining a 15 percent General Fund reserve level. Because of the City’s strong reserve level, the City has been able to maintain essential services during the pandemic. In addition, the City maintained its 15 percent reserve level, which was crucial in case a new emergency materialized.

During FY 2020–21, in the face of multiple crises, the City remained faithful to its established fiscal strategies while responding to the pandemic through its recovery strategy of “Respond, Restore, and Reimagine.”

Specifically, Redwood City:

· Continued, through several emergencies, to fund ongoing services with ongoing revenues and limited the allocation of one-time revenues to one-time expenses;

· Limited the use of reserve funds in response to emergencies so as to maintain the 15 percent General Fund reserve level established in City policy;

· Began reimagining what services are provided, how they are provided, and to whom they are provided, in order to adapt to a rapidly evolving environment with a focus on service sustainability and social equity;

· Launched a Climate Action Plan that includes risk management and long-term forecasting to ensure financial as well as environmental benefits; and

· Leveraged the ten-year forecast not only for financial planning but also to analyze trends over time and reinforce a longer view in a time of crisis, to support thoughtful problem solving and strategic action.

Who Audits the Annual Comprehensive Financial Report?

Maze & Associates, a firm of independent, licensed and Certified Public Accountants, has audited the City’s financial statements for the fiscal year ended June 30, 2021. The objective of the independent audit is to provide reasonable assurance that the financial statements of the City and related entities are free of material misstatement. The auditors concluded, based upon their audit, that there was a reasonable basis for rendering an unmodified opinion on the City’s basic financial statements as of and for the fiscal year ended June 30, 2021.


Read the full Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2021 here.



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