Redwood City Unveils FY 2023–24 Recommended Budget; Focuses on Financial Sustainability While Reimagining City Services to Meet Evolving Needs
On Monday, June 12 the City Council will receive a presentation on the Fiscal Year 2023–24 Recommended Budget, as submitted by City Manager Melissa Stevenson Diaz. Budget adoption is expected during the June 26 City Council meeting. The Recommended Budget continues our important community services and advances City Council priorities, including housing, transportation, children and youth, and equity.
Building on Success: Fiscal Year 2023–24 Recommended Budget for a Reimagined Redwood City
The Recommended Budget builds on significant accomplishments in FY 2022–23. In addition to being good stewards of the funds entrusted to us, the City has received state and national recognition this spring for our efforts to support key City Council priorities.
Redwood City is the first city in San Mateo County to earn State approval for our Housing Element, and is in the top 4% of California cities in being awarded a Prohousing designation and nearly $1 million in additional funding. Additionally, the City is a finalist for an All America City Award as a result of numerous efforts to improve the health and wellbeing of young people.
Because of our strong performance we have attracted over $12 million in grant funds to advance important capital improvements. We continue to leverage local resources, seeking close to $40 million in additional federal, state and regional grants. This includes possible funding for programs such as community drought relief, flood mitigation assistance, library services, and public safety.
The Recommended Budget also continues the City’s transition from its COVID-19 financial and community recovery strategy to a reimagined Redwood City. We are adapting to a changing world, striving to provide the right services with the right resources.
Ensuring Financial Sustainability is Essential
Maintaining the high-quality services our residents depend on requires careful financial planning and proactive measures. While the City uses resources entrusted to us wisely, and we are recognized for our high quality work and innovation, we face significant financial hardship. Like most public agencies, the pandemic has exacerbated long-term financial challenges to adequately fund both operating and capital needs. With a slowing economy, we anticipate nearly a decade of operating deficits absent corrective action.
While the City has projected deficits for some time, the stalled economy on top of pandemic losses requires action to ensure the City can provide essential services.
Addressing Fiscal Challenges: $9.34M Projected Deficit for Fiscal Year 2023–24
Redwood City maintained essential services during the pandemic largely by holding employee positions open, tapping into the City’s strong reserve levels and generous infusions of state and federal assistance.
A combination of economic slowdown, pandemic losses, and growing employee benefit liabilities has contributed to our projected deficits in FY 2023–24 and beyond. Revenue is softening precisely when we must allocate more funds for employee retirement benefits, even after reforming benefits to reduce costs. We project a 3% drop in sales tax revenue for FY 2023–24, followed by an additional 1% reduction in property tax revenues in FY 2024–25. Sales and property taxes provide the majority of funding for most City operations, and the impact of these losses are particularly significant as costs are rising.
Cuts Avoided in FY 2023–24 Through Use of One-time Funds; However, Multi-year Deficits Projected
As planned, the projected $9.34 million deficit for FY 2023–24 will be offset by utilizing designated one-time funds, avoiding the need for immediate cuts. However, even after negotiating benefit reforms, paying down liabilities, managing costs, seeking grants and using reserves set aside to protect services, staff anticipates structural budget deficits averaging $9.2 million over the next eight years.
Managing Costs and Need for New Revenue Streams
Our employees’ valuable support through pension and retiree health program reform, as well as additional payments toward our pension obligations, contribute to the City’s long-term financial stability. We also scrutinize spending, and obtain competitive pricing. However, cost containment alone is insufficient, and we must generate new revenue streams to preserve services and fund needed infrastructure.
We are exploring multiple strategies to increase revenue, including user fee and tax increases, new taxes, revenue generation from digital signs, and convenience fees for credit card payments.
The World Around Us Is Constantly Changing, And So Are We
We are reimagining our services to better meet the evolving needs of our community and workforce. The world around us is constantly changing, and we will change as well. Overall workload remains out of balance with staffing. We must invest in limited, essential additions to staff now, and anticipate additional workforce changes as we implement recommendations from comprehensive studies of major service areas, such as Police, Fire and Community Development and Transportation.
Join the Conversation
In-person, in the City Council Chambers at City Hall, 1017 Middlefield Road
For web, visit www.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 submitted by emailing the City Council at council@redwoodcity.org. Please indicate the corresponding agenda item in the subject line of your email.
To view the Fiscal Year 2023–24 Recommended Budget, click here. To view City Council agenda information, visit www.RedwoodCity.org/CouncilMeetings (the agenda for the June 12 City Council meeting will be posted June 8).
