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9.A. - Page 4 of 17 This pledge is consistent with staff recommendations related to community engagement and consideration of changes, and staff recommend that the City Council endorse the pledge. Fundamentally, the FY 2020-21 Recommended Budget is an essential document (as required by City Charter) but also one that should be thought of as an interim document. We will need to make significant changes as the economic impacts of COVID-19 become more known, in light of evolving community needs and resources. The City Council and City staff are listening closely to community concerns, which will help shape proposals that are brought forward to the City Council in October. ANALYSIS The FY 2020-21 Recommended Budget reflects prior City Council direction to ensure financial sustainability for the City, including paying down liabilities, and using one time funds for one time needs, however, several elements of the Recommended Budget are likely to change with Mid -Year Budget Amendments anticipated in October. The City's General Fund reserve is intended to support City operations and has a current balance of $23.6 million, which is compliant with the City's reserve policy of 15 percent of the next fiscal year's revenues. Rising employee -related costs, due primarily to escalating payments to fully fund benefits for already -retired employees and previously negotiated cost of living increases for employees effective during FY 2020-21 (with an estimated cost of up to $2.0 million) are the most significant contributors to rising expenditures. City Council Strategic Priorities The Recommended Budget incorporates the financial and community recovery strategy conceptually approved by the City Council at the May 4, 2020 City Council meeting and addresses the City Council's strategic priorities and guiding principles established in the Strategic Plan. A copy of the priorities updated in May is attached to this report (Attachment D: Updated Council Priorities). The Council's top three priorities include housing and homelessness, children and youth, and transportation. Housing To directly support the City Council's strategic priority of meeting our unique community housing needs for people at all income levels, the City is directing approximately $6.5 million in expenditures in FY 2020- 21 to produce, preserve, and protect affordable housing in Redwood City. These include: • $200,000 in federal Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) program funding has been allocated to support housing rehabilitation projects • $2.5 million in CDBG, HOME, and housing in -lieu fees for the Habitat for Humanity project located at 612 Jefferson Street, which includes 20 affordable ownership units • $3.5 million in housing in -lieu, housing impact, and former RDA housing funds for the ROEM project located at 353 Main Street, which includes 125 housing units Page 4 of 9 .AL . City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.ore 439