AgdaPkt 2018-02-26 Joint SA PFA - Laserfiche WebLink

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7.A - Page 2 Attachment 2 to this report provides an update on the status of goals set to implement the City's Strategic Initiatives. Finally, Sections 51 and 51.5 of the Redwood City Charter require that the City Council establish the date of the budget presentation by the City Manager. As part of this Study Session, staff seeks Council approval for process and policy direction for the development of the FY 2018-19 Budget. ANALYSIS FY 2017-18 Mid -Year Budget Update — General Fund Revenue Update FY 2017-18 General Fund revenues are budgeted at $131.6 million, but are now estimated at $140.3 million, resulting in a positive variance of $8.7 million. This variance is primarily attributed to one-time excess Educational Revenue Augmentation Fund (ERAF) payments received, as well as increased fees generated from the new Master Fee Schedule. Property tax, which represents over 36 percent of General Fund revenue, is exceeding budget by $3.6 million, or more than 7.5 percent. This is largely due to the receipt of the excess ERAF funds and to increases in assessed valuation for commercial property, completion of several development projects, and strong demand compared to limited supply for residential property. Sales tax receipts are expected to generate a very modest increase of $149,000 or 0.6 percent over the adopted budget. As has been noted in the past, the growth in online retail sales has cut into sales tax revenue, and a greater proportion of economic activity is dedicated to purchasing services or "experiences," which are not taxed, rather than goods, which are taxed. In addition, residents are spending more of their disposable income on non-taxable items than before, such as housing, medical care, and education. Charges for Services and Licenses and Permits revenues are expected to exceed original budget due to several factors. Because of the implementation of the new Master Fee Schedule approved by the City Council last fiscal year, a number of fees were increased, resulting in increased revenues. These fee increases, combined with several large projects requiring a number of City services, are generating a revenue increase that is estimated to be almost 7.0 percent higher than adopted in Charges for Services and 22.0 percent in Licenses and Permits. Expenditure Update General Fund expenditures are budgeted at $117.8 million, but are now estimated at $120.7 million before contributions and transfers out. In addition to the proposed increase of $2.9 million in operating appropriations, transfers of $6.0 million to the Docktown Fund and $1.0 million to the Workers Comp Fund are also included.