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8.B. - Page 10 of 122 also submitted three additional Hazard Mitigation Grant applications totaling approximately $8.5 million, which are currently under review. FY 2018-19 FINANCIAL SUSTAINABILITY PLAN UPDATE The City Council took a forward -thinking and prudent approach to addressing the City's fiscal challenges through adoption of the Financial Sustainability Plan (FSP), which included reducing operating costs and increasing revenue in order to balance the City's budget over the next five years. Operating cost reductions of approximately $3.8 million were included in the FY 2018-19 Adopted Budget, and additional reductions of $2.2 million were planned for FY 2019-20. Additionally, as part of the FSP, the City Council placed two revenue measures on the November 2018 ballot: a half -cent general sales tax increase (Measure RR) and a cannabis excise tax (Measure DD). On November 6, Redwood City voters passed both measures, with 68 percent of voters supporting Measure RR, and 79 percent of voters supporting Measure DD. The increased sales tax is anticipated to produce approximately $8 million in additional revenue annually. The successful passage of these measures provides much-needed revenue to offset projected cost increases, including growing pension contributions, and allows for the restoration of some of the budget and service reductions that were included in the FY 2018-19 Adopted Budget. Funding for Police staffing and Library hours was fully restored. In addition, the recommended reductions of $2.2 million in FY 2019- 20 will not be implemented. On December 3, 2018, the City Council approved the restoration of certain FY 2018-19 budget reductions, totaling $2.7 million. Attachment 1 provides a detailed description of the FY 2018-19 General Fund Budget reductions that were restored, organized by department. Restoration of specific positions will be included in the FY 2019-20 budget. Although the City will need to continue to contain costs through efficiencies, shared services, and innovation, the additional anticipated revenue substantially improves the City's ability to fund services as well as pay down liabilities through FY 2021-22. However, starting in FY 2022-23, a budget deficit is projected to occur and continue beyond FY 2028-29. More detailed information on the projected deficit is provided in the Preliminary Ten -Year General Fund Forecast section below. ECONOMIC UPDATE The economic conditions discussed below help inform the Preliminary Ten -Year General Fund Forecast. Of note is the near -certainty of a recession during the Forecast period. It is unknown when this may occur, but many economists suggest it will occur at some point during FY 2020-21. Staff has received information from a variety of sources, including Dr. Jon Haveman with the National Economic Education Delegation, the California Legislative Analyst's Office, and consultants working for the UCLA Economic Forecast. Federal The economy has been in an upward, or expansion, phase of the business cycle for more than nine years. Should it continue, by mid -2019, it will become the nation's longest ever expansion cycle, based on figures that go back to the 1850's. The consensus among economists is that a recession is coming; many are City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 236