AgdaPkt 2020-04-06 Special - Laserfiche WebLink

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5.A. - Page 4 of 21 1. PRELIMINARY ASSESSMENT OF FINANCIAL IMPACTS ASSOCIATED WITH COVID-19 ON CITY OF REDWOOD CITY OPERATING AND CAPITAL BUDGETS, AND RECOMMENDED APPROACH TO DEVELOPING THE FISCAL YEAR 2020-21 OPERATING BUDGET Operating Revenues The General Fund is the fund of the City that is most affected by positive and negative economic conditions. In the current economic climate it is difficult to confidently predict actual revenue amounts for FY 2019-20 and beyond, but it is important to be informed about the main General Fund revenues and which ones could be impacted by the COVID-19 pandemic. While the particular impact of a recessionary period is unique, when economic declines occur, it is typical for private business activity and revenue to decline first, with public revenue impacts declining later. We can expect that for some City revenue sources the economic impact of the impending recession may trail the experience of the private sector by months or more. The City's experience in the Great Recession illustrates this dynamic. While the 2008 financial crisis began in October 2008, and revenue declines began during Fiscal Year (FY) 2008-09, it was the following year, FY 2009-10, when most major revenue categories were down for the City of Redwood City. As previously stated, sales tax was the most affected revenue at that time, with modest impacts to property tax in 2011. Property tax revenue declines were impacted by the large decrease in building permit activity in 2009 and property value re -assessments. An initial risk assessment for City revenues is summarized in Table 1 and Chart 1, and discussed in following analysis. Staff will provide further analysis with the updated forecast on April 13, 2020. Table 1: Summary of Major Operating Revenue Sources and Potential Impacts from COVID-19 Recession Revenue Source Contribution to Total Revenue Initial Risk Assessment Property tax 40% of operating revenue At risk Sales tax 21% of operating revenue Significantly at risk Transient occupancy tax 5% of operating revenue Significantly at risk Development -related revenues 5% of operating revenue Significantly at risk Revenue for San Carlos Fire Service 5% of operating revenue Not at risk at this time Franchise fees from utility providers 3% of operating revenue At risk Business license tax 2% of operating revenue At risk Recreation class fees 1% of operating revenue Significantly at risk Utility User Tax 6% of operating revenue (capital program administration) with remainder dedicated by policy to capital expenditures Not at risk at this time Page 4 of 21 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 7