Redwood City Poised to Allocate One-time Balance of $12.1 Million to Meet Unprecedented Community Needs

On Monday, February 22, 2021, the Redwood City City Council will receive a Fiscal Year 2019–20 Year-End Budget update and Fiscal Year 2020–21 Mid-Year Budget update, as well as a proposed framework for the development of the Fiscal Year 2021–22 budget.

Current Financial Status and Outlook

Fundamentally, all the financial dynamics remain the same as in October 2020, when the City Council adopted the Revised Fiscal Year 2020–21 budget, which included a Ten-Year General Fund Forecast. At that time, we projected an operating balance of approximately $11 million, after allocating $7.1 million in anticipated limited-term funding of City Council priorities. Now that we have closed the books, actual year-end calculations have been completed, resulting in a year-end operating balance of $12.1 million as of June 30, 2020, or $1.1 million more than anticipated. While this is welcome news, we have experienced a 9.7% drop in revenue and yet, at the same time, are striving to meet unprecedented community needs while dramatically shifting operating models. It will take us four more years (Fiscal Year 2024-25) to get back to Fiscal Year 2019-20 revenue levels. This means, we will need to continue to contain costs while reshaping services in the next few years.

“The City Council’s conservative financial practices allow the City to support the community during this unprecedented economic downturn and make progress on long-term goals,” said City Manager Melissa Stevenson Diaz. “Additionally, voter support for Measure RR in 2018 has provided essential ongoing revenue to sustain community services.”

While we ended last fiscal year with a $12.1 million operating balance, or savings available for spending, this is $1.1 million more than we thought in October. The savings resulted from both underspending and higher-than-projected revenue. Under the leadership of the City Council and the direction of the City Manager, we continue efforts to limit City spending.

Use of One-Time Funds

Operating balances are one-time funds and we use them for one-time needs — both paying down long-term obligations and supporting Council priorities with one-time expenditures.

The City Manager is recommending to the City Council that $7.5 million of the $12.1 million operating balance beheld aside to address a projected $7.5 million budget deficit next year. This will help us work toward financially sustainable operating models. It’s also recommended that the remaining $4.6 million be used for pandemic response and recovery, to help us with reimagining City services, and to address long-term community needs. This includes:

• Enabling community vaccinations;
• Employee COVID-19 testing;
• Supporting Citywide pandemic costs;
• A one-time utility bill forgiveness program;
• Additional small business support;
• Funding to enhance communications and diversity, equity and inclusion initiatives; and
• Increased resources for homelessness services.

The recommendation also includes partial funding for planning studies related to improving Redwood Shores levees and the potential creation of a Bayfront Park in the Inner Harbor Area.

Developing Next Year’s Budget

On Monday, the City Council will also provide input on a proposed framework for developing the Fiscal Year 2021–22 Recommended Budget. The framework continues financial best practices and City policies; advances the City’s Strategic Plan and the City Council’s three top priorities of Housing, Transportation, and Children and Youth; and implements the City’s COVID-19 financial and community recovery strategy.

“The City has prioritized support for vulnerable residents and our business community during the pandemic,” noted Stevenson Diaz. “We are responding with urgency, creativity and compassion. At the same time, we are proactively addressing long-term needs, including paying off pension liabilities at an accelerated rate to save taxpayers approximately $38 million.”

Staff is recommending the following timeline for the development of the FY 2021–22 Budget; all dates are public meetings of the full City Council and members of the public may participate:

• April 12, 2021 — Capital Improvement Program Study Session
• April 29, 2021 — Community Development Block Grant/HOME Grant Study Session
• June 14, 2021 — Formal Budget Submittal at City Council Study Session
• June 28, 2021 — Budget Public Hearing and Adoption June 28, 2021

Join the Conversation

To maximize time for live public comment, we encourage members of the public to provide comments by joining the City Council meeting via Zoom.

• For web, visit redwoodcity.zoom.us, select “Join” and enter Meeting ID 994 8182 5639. Use the Raise Hand feature to request to speak. You may rename your profile if you wish to remain anonymous.
• For dial-in comments, call *67 (669) 900–6833 (your phone number will appear on the live broadcast if *67 is not dialed prior to the phone number), enter Meeting ID 994 8182 5639 and press *9 to request to speak.

Written public comment may be submitting by emailing the City Council at mailto:council@redwoodcity.org. Please indicate the corresponding agenda item 8.A. in the subject line of your email.

To view the full staff report with recommendations, click here. To view the City Council agenda, click here.