AgdaPkt 2020-10-26 Joint SA PFA - Laserfiche WebLink

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8.A. - Page 15 of 104 we continue to fund ongoing services from ongoing revenue, and use one-time revenues for one-time expenses. City operating revenues are expected to drop 8.1% or $13.1 million compared to FY 2019-20 and we expect it will take at least five years for revenue to return to FY 2019-20 levels. When combined with known increases for unfunded pension liabilities over the next 10 years (see CalPERS pension and retiree health liabilities section), the City must take action to reduce operating costs and seek new revenues. The Revised Budget begins the work to reduce expenditures, generally freezing staffing at current levels and making other reductions. To increase revenues, several strategies may be considered over time. The City has been involved in a multi-year process to allow cannabis sales in Redwood City. Sales by delivery are now allowed, and have begun generating more than $600,000 per year in new revenue. The City Council will also consider moving into the fourth phase of cannabis regulation, allowing for store -front retail sales, on October 26. Staff and consultants estimate this could generate another $1 million in annual revenue. This projection is not included in the General Fund Forecast. The Revised Budget uses ongoing core operating revenues for ongoing core operating expenditures and is structurally balanced for City operations after making reductions in each department. It also taps into $3 million in one-time funds or reserves to fund critical community needs and City Council priorities. FY 2020-21 Revised Budget Summary Core operating revenues and transfers in $151 million Use of one time funds/reserves $ 3 million Total resources $154 million Core operating expenditures and transfers out $149 million One-time expenditures for City Council Priorities $ 5 million Total expenditures $154 million The City's reserve policy requires reserve levels equal to 15% of the following fiscal year's projected operating revenues. Staff are completing the annual year-end reconciliation for FY 2019-20 and estimate an operating balance of $10,986,000, due in part to higher than expected sales tax revenue and also due to significant fourth quarter reductions in expenditures due to the pandemic. As a result, total reserves at the beginning of Fiscal Year 2020-21 would have been $35 million, which is 24% of projected operating revenues. After using $3 million in reserves for priority policy initiatives, the City's reserve level would be 21%. Using a limited number of reserves to support critical initiatives is appropriate; at the same time, maintaining higher—than-minimum reserves is also advantageous as the current recession is unlike any previously experienced. The City Council -endorsed financial and community recovery strategy to help our community and organization meet the health, economic and social challenges presented by the COVID-19 pandemic is nicknamed the Three R's: 1) Respond to immediate community needs resulting from the Covid-10 pandemic, with particular care for vulnerable populations; 2) Restore community cultural, economic and social vitality in partnership with community organizations and businesses; and BUDGET MESSAGE 384