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7.A - Page 16 Preliminary Five -Year General Fund Forecast The Preliminary Five -Year General Fund Forecast is included as Attachment 1. Major factors contributing towards the forecast are detailed below. It is important to note that the Forecast does not contemplate a recession scenario occurring in the next five fiscal years; however, it is likely that an economic downturn may occur at some point in the Forecast period based on historical patterns. Staff is working closely with the City's revenue consultants on the recessionary factors and is keeping abreast of any changes that may occur. This forecast will be refined by staff over the next few months as more information is known, and an update will be included with the FY 2018-19 Recommended Budget. Revenue Projections Taxes Property tax is expected to grow by $1.4 million in FY 2018-19 when compared to the FY 2017-18 Adopted Budget. In subsequent years, the growth rate is expected to be 3 to 4 percent as completed developments result in increased assessed valuations on improved properties. Although approval of additional development in the downtown area has slowed recently as caps established in the Downtown Precise Plan have been reached, development of this area has been robust in recent years. Typically, it will take approximately 18 to 24 months for new construction or redevelopment to appear on the tax rolls. As a result, the City will continue to see increases in downtown property tax revenues for several years as these new developments are completed, assessed, and included on the tax rolls. Other areas of the City remain attractive to developers, and there are a number of existing projects underway, as described further in the Development Fees section below. The residential housing market in Redwood City also remains very desirable. Due to this favorable environment, the current median home sales price in the City is approximately $1.4 million. When a home is sold, property tax is calculated on the new assessed value that is based on the sale price. As home values increase and properties are sold, property tax revenues also increase. It should be noted that economic experts are expressing concern for state and local government finances because of the new tax reform, H.R. 1 Tax Cuts and Jobs Act of 2017, which became law on January 1, 2018. This law includes capping the state and local tax deductions and the mortgage interest rate deduction, which could have the