AgdaPkt 2017-05-08 Special - Laserfiche WebLink

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Redwood City Forecast and Model Considerations This report provides Redwood City with a forecast for the following variables that affect their budget and decision making: 1.Sales Tax Revenues 2.Property Tax Revenues 3.Transient Occupancy Tax Revenue 4.Employment In the sections below, each of these variables is discussed, as well as how the forecast in this report was constructed for each variable. General Issues Forecasts for local areas (cities and counties) depend greatly on the forecast for the state and national economies. Most of the communities in California depend greatly on policy made at the federal or state level that affect employment, income and interest rates. The progression of Califor- nia’s economy and employment opportunities further shape local forecasts as context. Businesses and leisure visitors come to California first, and then to a local area like Redwood City, affecting transient occupancy taxes (TOT). Tax laws changing are a good example of how a state deci- sion in California affects residential and business choice to locate in the state, affecting residential and commercial property values and taxable sales. Business and worker retention may also be affected by state-level policies that affect local area employment. The state-level forecasts from the California Department of Finance helps shape the general context. In December 2016, as one year earlier, the Federal Reserve increased interest rates used by banks to lend to each other to 0.5 percent from 0.25 percent. The Federal Reserve chairperson, Janet Yellen, stated publicly that as many as three more interest rate increases are coming in 2017. Equity markets have rallied in 2016 after a flat 2015; on January 25, 2017, the Dow Jones Industrial Average broke 20,000. This rally likely reflects predicted reductions in recent regulation for both health care and financial markets. If inflation and interest rates rise more quickly than currently forecasted, growth forecasts are likely to be revised downward, including Redwood City’s economic future. Housing market demand is also a function of interest rates and confidence in the overall economy. Three major changes to the national and state economies started or moved toward a start in 2016. The first began in April 2016, where the California legislature agreed that a minimum wage law needed to be established statewide. Senate Bill 3’s legislation went into effect on January 1, 2017. California new minimum wage of $10.50 began wage ascension more quickly than before to help low-income workers, and reduce the detrimental effects of a rising cost of living on lower-income workers. How employers react remains to be seen. The second and third changes began on November 7 as election results. Proposition 64 passed in California, allowing cannabis to be grown, distributed and sold legally for recreational purposes throughout our state starting on January 1, 2018. Proposition 64 has many social and economic implications and uncertainties, from shifts in public safety demands, demand for warehousing 24