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8.A. - Page 4 of 72 lower than budget by $600,000. These decreases are offset by $2.9 million in higher than expected Educational Revenue Augmentation Fund (ERAF) payments received. Interest earnings are expected to exceed the adopted budget by $800,000, or 130.7 percent. The City has historically budgeted a minimal amount of interest earnings. However, in recent years, due to an increasing cash and investment balance and an increase in the rate of return on investments, the City has realized higher interest earnings. This trend is expected to continue in the near future, but could partially be offset by lower fair value adjustment calculations at fiscal year-end, due to recent softening in the rate of return in investments. Charges for Services are expected to exceed the adopted budget by $1.5 million, or 8.7 percent. A number of the development -associated fees are estimated to be higher than expected in the Charges for Services category, and include planning and engineering fees and plan check fees. Recreation program fees are expected to exceed the adopted budget by $800,000, or 37.1 percent, primarily due to an increase in recreation fees, an increase in enrollment for classes, and a change in the way participants are charged for various programs. Expenditure Update General Fund expenditures and transfers out are budgeted at $153.5 million, and are now estimated at $164.4 million, an increase of $10.9 million. Given higher -than expected revenues, staff recommends $9.4 million in expenditures to advance City Council priorities. Significant expenditure categories include: • $4.5 million towards unfunded liabilities: o $3.0 million in direct payments to CalPERS to reduce the City's pension liability and continue progress on the second year of the 18 -year pension liability payoff plan o $1.5 million towards necessary improvements identified in the Americans with Disabilities Act (ADA) Transition Plan • $2.0 million towards transportation and roadway projects $1.5 million to support residents' transition from homelessness or vehicle dwelling into permanent housing and cleanup of public streets, sidewalks, and property (Healthy Streets Initiative) • $1.5 million towards mid -year budget amendments (on 2/24/20 City Council consent agenda) • $1.0 million towards climate adaptation initiatives • $350,000 towards operating department innovation initiatives to increase staff capacity Mid -year budget amendment requests for a $1.5 million increase in operating appropriations are included on the consent calendar for City Council approval. Requests include the following: grant spending; appropriations for professional and contract services; salary costs as a result of the increase in the minimum wage rate; and water costs for irrigation related to dry weather conditions. FY 2019-20 Year -End Estimated Operating Balance The FY 2019-20 year-end adopted budget operating balance was projected to be $5.3 million, and the estimated operating balance is now estimated to be approximately $916,000. The City Council adopted Page 4 of 26 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 239