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8.A. - Page 3 of 42 As part of this report, staff seeks City Council direction on the recommended framework for development of the FY 2021-22 budget. ANALYSIS The City Council has a history of taking intentional, proactive, and strategic steps to ensure the long-term fiscal sustainability of Redwood City, including adopting a structurally balanced annual budget, funding long- term needs, and maintaining a 15 percent General Fund reserve level. Each fiscal year, the City prepares a preliminary ten-year General Fund forecast as part of the mid -year budget update to provide an early indication of projected revenue and expenditure trends. A second ten- year General Fund forecast is developed each May and is an integral part of the annual budget process as the City seeks to establish and implement its priorities in a fiscally sustainable manner. The forecast also assists in providing a long-term road map to guide the financial planning of the City as it addresses rising pension costs and unfunded liabilities. The City reviews major cost drivers to anticipate and control expenses to the maximum extent possible and makes fiscal decisions within the framework of the forecast. The City also monitors its revenue sources to identify and plan for trends. Financial planning also takes the form of continuous review and refinement of fiscal policies and forecasts, and an understanding of the citywide initiatives underway. During FY 2017-18, the City began the process of reshaping service delivery for the future in order to fund upcoming costs and long-term liabilities. Strategic elements to this process included: • Addressing unfunded liabilities and preparing for dramatic increases in pension costs • Implementing operating efficiencies through reorganization and best management practices • Seeking outside funding and exploring options for new revenue • Exploring shared services and partnerships with outside agencies to reduce costs • Paving the way for new and innovative service approaches • Continuing to invest in employees and our organizational culture Building on the strategic elements above, the City implemented the following strategies during FY 2018-19: • Developed a ten-year General Fund forecast (formerly a five-year forecast) for the first time • Analyzed and recommended an accelerated payoff timeframe for the City's pension obligations • Continued to focus on cost containment citywide by identifying numerous efficiencies, innovations, and partnerships Streamlined the development of the Capital Improvement Program to provide a more realistic financially viable projection of the City's capital needs and revenue sources Placed two revenue measures on the November 2018 ballot, including a half -cent sales tax increase (Measure RR) and a cannabis excise tax (Measure DD). Both measures passed, with 68 percent of voters supporting Measure RR, and 79 percent of voters supporting Measure DD. Since March 2020, in the face of multiple crises, the City remained true to the fiscal strategies of the past two years while implementing the pandemic recovery strategy of "Respond, Restore, and Reimagine." The City has: Continued, through several emergencies, to fund ongoing services with ongoing revenues and limited one-time revenues to one-time expenses Page 3 of 28 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 534