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8.A. - Page 12 of 72 Net Budget Position The Preliminary Ten -Year General Fund Forecast projects net operating balances in the next two fiscal years, with a budget deficit to begin in FY 2022-23 and increase annually over the Forecast timeframe. This is due to expenditures increasing at a higher rate than revenues, primarily driven by pension obligation costs. As shown in the graph below, without any adjustments to current operating costs or revenue sources, the annual budget deficit is projected to be a nominal $120,000 in FY 2022-23, but grow to approximately $28.0 million in FY 2029-30. Because of the projected deficit, the City will need to continue to explore all possible financial strategies, including operating cost reductions and revenue enhancements. The City Council Finance/Audit Subcommittee continues to discuss opportunities to increase revenues in the future, including a potential restructuring of the business license tax, an increase in the transient occupancy tax (hotel tax) rate, and allowing storefront retail cannabis outlets. Projected General Fund Net Operating Position (in thousands) 0 2019 y0� 10,10:1 0 VI L F� 10��3EV T0751-aFy 2020. 1S0101y a E� 10y6 y1E� 141.1801101 .190 V11130 $6,000 $4,647 $916 $2,093 $(120) � $(2,494) $(6,000) $ (6,271) $(1z,000) $(11,963) $(18,000) $(15,828) $(19,839) ${24,000) $(24,142) $(30,000) $(28,042) Revenue Projections Actual estimated revenues in FY 2019-20 are outpacing the adopted budget revenues. Continued growth is expected, but at a much slower pace over the ten-year period. The City's primary revenue sources are property tax (38.6 percent of revenue) and sales tax (21.4 percent of revenue). Projections for these and other revenue sources are described below. Page 12 of 26 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 247