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City of Redwood City <br />Management’s Discussion and Analysis <br />For the fiscal year ended June 30, 2017 <br /> <br />18 <br /> <br />ECONOMIC OUTLOOK AND NEXT FISCAL YEAR’S BUDGET <br /> <br />Redwood City, like many cities, relies heavily upon property taxes and sales taxes to finance general <br />governmental activities. In FY 2016-17, these two revenue streams accounted for approximately 40.5% <br />and 17.2% of general fund revenues respectively. In FY 2016-17, the City experienced a significant gain in <br />property tax revenue, with an increase of 9.6% in the general fund. However, general fund sales tax <br />revenue decreased by 2.1%. The increase in property tax revenue is attributed to the turnover of real <br />estate properties and booming housing market. The decrease in sales tax revenue reflects a change in <br />consumer spending habits, where online purchasing is growing and consumers are spending more on non- <br />taxable “experiences” rather than material goods. Moreover, pension costs are escalating and the City <br />has other liabilities and funding commitments to address. As a result, maintaining the long-term fiscal <br />stability of the City remains a top priority. <br /> <br />The adopted FY 2017-18 general fund budget projects a surplus of $2.0 million, and relies on ongoing <br />revenue to fund ongoing expenses, uses one-time revenue for one-time expenses, and maintains a <br />prudent general fund reserve of 15%. For the foreseeable future, the City's pension contributions are <br />estimated to increase annually due to changes in actuarial assumptions and investment methodologies <br />made by the California Public Employees Retirement System. Moreover, it is unknown when another <br />recession will occur, but certain factors point to a slowing of the economy over the next few years. These <br />factors will be taken into consideration when developing the FY 2018-19 budget and Financial <br />Sustainability Plan. <br /> <br /> <br />CONTACTING THE CITY’S FINANCIAL MANAGEMENT <br /> <br />This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and <br />creditors with a general overview of the City’s finances. Questions about this report should be directed <br />to the Finance Division, at 1017 Middlefield Road, Redwood City, CA 94063. <br /> <br /> <br /> <br /> <br /> <br /> <br />6.1.E. - Page 41