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6.C. - Page 51 of 196 City of Redwood City Management's Discussion and Analysis For the fiscal year ended June 30, 2020 PRIVATE PURPOSE TRUST FUND DEBT On February 1, 2012, the Redevelopment Agency of the City of Redwood City was dissolved pursuant to California State law, and as of that date, the long-term debt associated with the former Redevelopment Agency was transferred to a private purpose trust fund for the Successor Agency. At June 30, 2020, the Successor Agency had tax allocation bonds outstanding in the amount of $4S.6 million, including principal and interest. ECONOMIC OUTLOOK AND NEXT FISCAL YEARS BUDGET During FY 2019-20, the local economy was confronted with the COVID-19 pandemic, leading to business closures and job losses. As a result of numerous stay-at-home orders, the City is experiencing losses in most revenue sources, as well as increased expenditures in order to protect residents and staff from COVID-19. Although the City continues to be impacted by the reduction of sales tax and other related revenues associated with the numerous stay-at-home orders due to the worldwide pandemic, the City is committed to the "Three R's": Respond, Restore, and Reimagine. The City is well positioned to continue to proactively manage the financial challenges that lie ahead. By constantly monitoring financial operating results of the City, staff can provide relevant information to management and the City Council to ensure that all financial decisions are made with key financial data that includes actual amounts and financial projections. Redwood City, like many cities, relies heavily upon property taxes and sales taxes to finance general governmental activities. In FY 2019-20 these two revenue streams accounted for approximately 41% and 20% of general fund revenues, respectively. In FY 2019-20, the City continued to experience steady growth in secured property tax revenue, with an increase of 7.0% in the general fund. The increase in property tax revenue is attributed to the turnover of real estate properties and steady housing market. General fund sales tax revenue increased by 25.8%, which is primarily due to the passage of Measure RR, a half - cent sales tax increase that was passed by the voters in November 2018 and became effective on April 1, 2019. In FY 2019-20, the City collected $10.3 million of this new revenue source. The City has budgeted $9.6 million of this new revenue source to be collected in FY 2020-21. This additional annual sales tax revenue will contribute towards the long-term fiscal sustainability of the City, along with other measured steps the City has implemented in the past to address escalating pension costs and other funding commitments. The original recommended FY 2020-21 budget, developed during the early stages of the pandemic, was considered a status -quo budget, with FY 2019-20 budget amounts rolled forward to FY 2020-21, with only minor required changes. A revised budget was proposed in October 2020, and adopted on October 26, 2020. This revised budget included updated assumptions, as more reliable financial information was able to be used to forecast future revenues. Without significant reductions in FY 2020-21, the forecast for the City of Redwood City operating budget, recommended in June, was projected to run a deficit of $10.6 million, with future deficits ranging from $7.0 million to $13.5 million for the coming decade. However, reductions in total expenditures were implemented for the FY 2020-21 revised budget, adopted in October 2020, which now projects a general fund budget deficit of $3.5 million, after the required reserve contribution of $546 thousand. It is anticipated that the deficit will be balanced by a combination of increases to revenues, additional reductions in expenditures, and utilizing a portion of the FY 2019-20 operating surplus. 19 138