AgdaPkt 2018-12-17 Joint Special

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6.G. - Page 16 of 187 FACTORS AFFECTING FINANCIAL CONDITION Local Economy The local economy continues to exhibit signs of a healthy economy. Local economists are not forecasting an economic downturn during the next fiscal year; however, it is likely that a downturn will occur at some point within the next five years. As of June 2018, the unemployment rate in San Mateo County was 2.5 percent, which is a slight uptick from the May 2018 level of 1.9 percent (lowest level in almost 19 years). The City of Redwood City's unemployment rate as of June 2018 was 2.4 percent. Both San Mateo County and Redwood City unemployment rates are consistently lower than the State's unemployment rate of 4.2 percent and the national rate of 4.0 percent. The number of employed residents in the County increased slightly from 437,500 in June 2017 to 438,700 in June 2018. The Redwood City office market citywide vacancy rate was 5.5 percent, reflecting higher vacancy in the Redwood Shores area. Retail space vacancy in the downtown area remains less than 2.5 percent, but the construction of two new mixed-use projects will add new retail space to the inventory. We believe these indicators paint a positive picture of the local economy and provide a solid underpinning for steady economic growth continuing into the near future. Recognizing that local and regional growth have exacerbated long-term mobility and affordable housing challenges, the City Council has taken numerous steps to address these issues over the past several years. Economic Development Initiatives With the adoption of the Downtown Precise Plan in 2011, Downtown Redwood City has become a vibrant district where Redwood City residents enjoy working, living, and playing. The opening of the Crossing 900 Building, 815 Hamilton, 601 Marshall, and two other office buildings under construction totaling 500,000 new square feet, has made downtown a desirable location for new businesses to locate. The close proximity to a Caltrain station, easy freeway access, and central location to San Francisco and San Jose make Redwood City one of the fastest growing locations for startup businesses to locate. In addition to the new office developments, Redwood City is also seeing a growth in housing. New housing units in and around the Downtown are helping to address regional housing needs and provide housing for the City's growing employment base. Phase I of the Stanford Redwood City project is under construction and consists of 570,000 square feet of office space, a 1,057 space parking structure, a fitness center, a childcare facility, and a 2.4 acre publicly accessible open space. As part of the development, Stanford will provide over $15 million in community benefits for such things as education, sustainability, public transportation studies, affordable housing and more over the course of two phases. Long -Term Financial Planning The City has been assigned an Aa1 issuer rating by Moody's Investor Services. The rating reflects the City's sizeable and primarily residential tax base that is poised for moderate growth, strong wealth indicators, a healthy financial position supported by strong reserve and liquidity levels, and a very modest debt burden. Maintaining a sustainable budget and prudently planning for the City's current and long-term needs is a top priority for the City Council. The City continues to focus strategically on appropriate funding strategies for annual operations, a robust capital improvement program, and future liabilities. Each year, the City prepares a five-year General Fund forecast to project revenue and expenditure trends. Beginning with the FY 2019-20 budget, the City will prepare a ten-year General Fund forecast. These forecasts are an integral part of the annual budget process as the City seeks to establish and implement its priorities in a fiscally sustainable manner. The City reviews major cost drivers to anticipate and control expenses to the full extent possible and makes fiscal decisions within the framework of the forecast. The City also monitors its revenue sources to identify and plan for trends. Financial planning also 195