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<br />FACTORS AFFECTING FINANCIAL CONDITION
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<br />Local Economy
<br />The City of Redwood City is currently affected by the economic recession that has enveloped the San Francisco
<br />Bay Area and which is having a pronounced impact on the infonnation technology industry. Although Redwood
<br />City's unemployment rate (not seasonally adjusted) as of June 2005 was a respectable 4.5%, this low rate does not
<br />reveal the decline in the number of jobs in the county over the past four years (420,100 jobs as of June 2001 to
<br />350,100 as of June 2005). It is our hope and expectation that the local economy has "bottomed out" and that the
<br />local economy will soon be participating in the nationwide recovery.
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<br />Costco, a major big box retailer and one of the City's larger sales tax generators, has proposed replacing their
<br />existing 121,400 square foot store with a 148,663 square foot store along with the addition of a gas station with 16
<br />fueling stations. An environmental impact report is currently being prepared and is expected to be presented to
<br />the Planning Commission before February 2006. If approved, construction should begin in late spring 2006 with
<br />completion within four months of the commencement of construction.
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<br />The downtown cinema/retail project is expected to open in the spring of 2006. The cinema will include 20 screens
<br />while the retail component of the project will have 80,000 square feet of space. Tenants who have signed leases as
<br />of this date include Century Theatres, Cost Plus World Markets, Shoe Pavilion, San Mateo Credit Union, Pizza
<br />Lisa, Marble Slab, Chipotle, Fatburger, and Tacone.
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<br />Cash Management
<br />The City treasurer invests temporarily idle funds in accordance with the state government code and the investment
<br />policy adopted by the City Council. During the year, funds were invested in certificates of deposits of banks, US.
<br />agency securities, corporate debt securities, U.S. government securities, the Local Agency Investment Fund of the
<br />State of California, and the County of San Mateo investment pool. Total investment earnings during the fiscal year
<br />amounted to $3.2 million. At the end of fiscal year 2004/05, the total investments, including cash with fiscal
<br />agents, cash at banks, and petty cash, stood at $212,572,553.
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<br />Redwood City's investment objectives are to maintain liquidity and to minimize credit and market risks while
<br />maintaining a competitive yield on its portfolio. Accordingly, deposits were either insured by federal depository
<br />insurance or collateralized.
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<br />Risk Management and Self-Insurance Funds
<br />In July 1990, the City joined the Bay Cities Joint Powers Insurance Authority to meet its general liability insurance
<br />needs. Bay Cities is a general liability insurance pool consisting of 17 San Francisco Bay Area public agencies.
<br />The pool provides, through reinsurance, $1,000,000 of coverage in excess of the City's $250,000 self-insurance
<br />retention. Claims administration and loss control support to member agencies are also provided by the insurance
<br />pool. Bay Cities belongs to the California Affiliated Risk Management Authority (CARMA) which is an excess
<br />liability pool comprised of Bay Cities and five other local government insurance pools. CARMA provides
<br />coverage from $1,000,001 to $15,000,000. The layer from $1,000,001 to $4,000,000 is self-insured by CARMA,
<br />the layer from $4,000,001 to $10,000,000 is insured by a commercial insurer, and the layer from $10,000,001 to
<br />$15,000,000 is self-insured by CARMA.
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<br />Appropriation Limit
<br />Article XIIIB of the California State Constitution, which became effective in the 1979/80 fiscal year, and which
<br />was modified (by Proposition 111) in November 1989, establishes, by fonnula, an appropriation limit for
<br />governmental agencies. Using the appropriations of fiscal year 1978/79 as the base year, the limit is modified by
<br />the change in the composite consumer price index, population, and the value of commercial property development
<br />within the City limits during each fiscal year. Article XIIIB also sets the guidelines as to what is to be included in
<br />the appropriation limits.
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