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8.B. - Page 13 of 122 According to the 2019 Silicon Valley Index, published by Joint Venture Silicon Valley, in the Silicon Valley region, the median household income was $118,357 in 2017 (latest available numbers.) California overall had a median income of $71,805, while the nationwide median household income was $60,336. The per capita income in Silicon Valley was $102,410, compared to $59,796 for California, and $51,640 nationwide. Average annual spending on housing (rent and mortgage) in the San Francisco area is over 41 percent. According to the U.S. Census Bureau, as of 2017, the owner -occupied housing rate was 59.7 percent, compared to the national average of 64.4 percent. The Bay Area lost a net of 45,670 people during 2017; people leaving the area were concentrated in lower -paying sectors. While the San Francisco Bay Area economy remains strong, there is concern that the soaring costs of housing are threatening the area's economic diversity as more and more people leave the State. For these reasons, it is important for the City to take a forward -thinking, long-term approach to mitigating the City's financial liabilities and proactively prepare for future recessionary impacts that loom on the horizon. PRELIMINARY TEN-YEAR GENERAL FUND FORECAST The Preliminary Ten -Year General Fund Forecast is included as Attachment 2. Notably, this is the first time that the City has undertaken a ten-year forecast; in prior years, the forecast was a five-year timeframe. In July 2018, the City received the San Mateo County Civil Grand Jury Report entitled Soaring City Pension Costs — Time for Hard Choices, included as Attachment 5. Included in this report was the recommendation to implement a long-term, ten-year forecast. Staff agrees that a ten-year forecast is prudent and assists in providing a road map to guide the financial planning of the City as it addresses rising pension costs and unfunded liabilities. In addition, staff is also recommending implementing a two-year budget cycle starting with the FY 2020- 21 budget. It is expected that greater efficiencies can be achieved by reducing staff time related to the preparation of the annual budget, and having a two-year budget cycle will serve as a longer-term budgeting and planning tool, much like the new ten-year forecast. Major factors contributing towards the forecast are detailed below. 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 2019-20 Recommended Budget. Net Budget Position The Preliminary Ten -Year General Fund Forecast contemplates an economic downturn occurring within FY 2020-21, and when combined with rising mandated pension contributions, a budget deficit is projected to begin in FY 2022-23 and increase annually over the Forecast timeframe. IAM .1 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 239