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8.A. - Page 9 of 42 Sales tax, which represents 20.8 percent of General Fund revenue, is exceeding budget by $900,000, or approximately 3.0 percent. This is largely due to higher than expected district sales tax receipts because of the half -cent cent sales tax increase passed by the voters in November 2018 (Measure RR). Other taxes are expected to decrease by $2.2 million, or 22.8 percent. This is primarily due to a decrease of over $3.0 million in transient occupancy tax (TOT), partially offset by an increase of $800,000 in business license taxes. The City's motel/hotels have seen dramatic decreases in occupancy rates since the COVID-19 pandemic started. In addition, two motels have been recently purchased by the County of San Mateo for affordable housing. This purchase has resulted in a permanent loss of TOT revenue to the City, and has been considered in the estimated revenue amount for FY 2020-21. License and permit revenue is expected to increase by $1.2 million, or 21.8 percent. Staff is projecting increases in building permit revenue and cannabis related business tax revenue due to higher than expected activity for the first six months of FY 2020-21. Interest earnings are expected to exceed the adopted budget by $800,000, or 204.4 percent. The City has historically budgeted a minimal amount of interest earnings. However, in recent years, due to an increasing cash and investment balance and an increase in the rate of return on investments, the City has realized higher interest earnings. This trend is expected to continue in the near future, but could partially be offset by lower fair value adjustment calculations at fiscal year-end, due to softening in the rate of return in investments. Future budget projections will be refined to reflect current market conditions. Revenue from other agencies is expected to exceed the adopted budget by $800,000, or 29.1 percent. This increase is due to the expectation that recreation program grants will be higher than expected. Other revenue categories are projected to meet budget estimates. Expenditure Update General Fund expenditures and transfers out are budgeted at $149.9 million, and are now estimated at $147.2 million, a decrease of $2.7 million. The estimated amount is calculated using year-to-date actual expenditures as of December 31, 2020 and estimating the amount of expenditures by department for the next six months based on spending rates as of December 31, 2018, June 30, 2019, December 31, 2019, and June 30, 2020. Summary of Expenditure Changes by Department from Revised Adopted FY 2020-21 Budget Department Change Since Percentage Change Reason for Change October 2020 Since October 2020 Fire $900,000 2.7% Higher than expected expenditures in the Fire Operations and Emergency Operations Center programs Community $800,000 7.4% Higher than expected Development & expenditures in the General and Transportation Subdivision Engineering programs Library $300,000 3.0% Higher than expected expenditures in the Literacy Page 9 of 28 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 540