AgdaPkt 2007-12-17 - Laserfiche WebLink

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FACTORS AFFECTING FINANCIAL CONDITION Local Econom� The local economy continues to show signs of solid growth with county employment increasing 3.6% from 348,000 j obs as of June 2006 to 360,500 j obs as of June 2007. The county unemployment rate was a healthy 3.9% as of June 2007. Further evidence of a strengthening local economy may be found in the local commercial real estate market. From September 2006 to September 2007 commercial office vacancies declined from 14.2% to 11.2%. This is the lowest vacancy rate since the second quarter of 2001. In the fall of 2006 Pacific Shores Center, a 1.7 million square foot commercial office development that sits on 106 bay front acres, was sold to Starwood Capital Group Global LLC by the Jay Paul Co. for an estimated $829 million. This was the second most expensive real estate transaction in the San Francisco Bay Area in 2006 and reaffirms the desirability of Redwood City as a prime business location. Pacific Shores is home to several leading companies including: PDL Biopharma, DreamWorks Animation, OpenWave Systems, and Eidos Interactive. Costco, a major big box retailer and one of the City's larger sales tax generators, will be replacing their existing 121,400 square foot store with a 160,000 square foot store along with the addition of a gas station with 12 fueling stations. Construction should begin in spring 2008 with completion expected within five months of the commencement of construction. Long-Term Financial Planning While there are inevitably numerous factors that affect a municipality's long-term financial prospects there are several that have been identified that require particularly close attention: Downtown Parking Operations — With the opening of the downtown cinema/retail complex along with the 590 space underground parking garage that is owned and operated by the City, the parking enterprise fund that was formerly financially self-sufficient now requires an annual subsidy from the City. In FY 2007/08 the City expects to transfer $1.2 million from the general fund to the parking fund to support the parking fund's operations. The length of time that this subsidy continues and the extent to which it continues are a function of how quickly paid parking activity in the downtown area increases and whether such increased demand will justify increased parking fees. It is expected that some level of general fund financial support to the parking fund for at least the next five years. Sales Tax—The City continues to rely heavily on sales tax generated by businesses engaged in selling software. A threat to this revenue stream is the progressive migration of businesses delivering software to their customers electronically (via lnternet download or over dedicated phone lines) which then, under regulations adopted by the State of California Board of Equalization,provides that such products are no longer subject to sales tax. Education Revenue Augmentation Fund Refunds — In FY 1992/93 and FY 1993/94, the state shifted property taxes from cities, counties, and special districts to school districts to supplant funding that the state was providing to school districts. The funds shifted from cities, the county, and special districts are placed into the Educational Revenue Augmentation Fund by the county controller. The controller then disburses these funds to school districts based upon the formula prescribed by state law. Any funds remaining in the Educational Revenue Augmentation Fund (after the distribution to the school districts) is returned to the cities, county, and special districts in proportion to the amount they contributed to the Educational Revenue Augmentation Fund. The continued receipt of these funds, which amounted to $2.6 million in FY 2006/07 and $3.4 million in FY 2005/06, depends upon the complicated school financing formula designed by the state and the state legislature not redirecting these revenues elsewhere. iii