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6.A. - Page 47 of 191 City of Redwood City Management's Discussion and Analysis For the fiscal year ended June 30, 2019 ECONOMIC OUTLOOK AND NEXT FISCAL YEARS BUDGET Redwood City, like many cities, relies heavily upon property taxes and sales taxes to finance general governmental activities. In FY 2018-19 these two revenue streams accounted for approximately 42% and 17% of general fund revenues respectively. In FY 2018-19, the City continued to experience significant gains in property tax revenue, with an increase of 16.1% in the general fund. The increase in property tax revenue is attributed to the turnover of real estate properties and strong housing market. General fund sales tax revenue increased by 16.8%, which is primarily due to the passage of Measure RR, a half -cent sales tax increase that was passed by the voters in November 2018 and became effective on April 1, 2019. The City has budgeted $8.7 million of this new revenue source to be collected in FY 2019-20. This additional annual sales tax revenue will contribute towards the long-term fiscal sustainability of the City, along with other measured steps the City has implemented to address escalating pension costs and other funding commitments. The adopted FY 2019-20 general fund budget projects a surplus of $5.2 million, and relies on ongoing revenue to fund ongoing expenses, uses one-time revenue for one-time expenses, and maintains a prudent general fund reserve of 15%. For the foreseeable future, the City's pension contributions are estimated to increase annually due to changes in actuarial assumptions and investment methodologies made by the California Public Employees Retirement System. Moreover, it is unknown when another recession will occur, but certain factors point to a slowing of the economy over the next few years. These factors will be taken into consideration when developing the FY 2020-21 budget and the 10 -Year General Fund Forecast. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City's finances. Questions about this report should be directed to the Finance Division, at 1017 Middlefield Road, Redwood City, CA 94063. 19 54