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8.A. - Page 18 of 42 of future revenues. It is expected that in subsequent years the property tax revenue category will have modest growth annually, after another decline in FY 2021-22. This future growth is primarily due to increased assessed valuations on improved properties. Typically, it will take approximately 18 to 24 months for new construction or redevelopment to appear on the tax rolls. As a result, the City will continue to see increases in downtown property tax revenues for several years as these new developments are completed, assessed, and included on the tax rolls. The residential housing market in Redwood City also remains very desirable. Due to this favorable environment, the current median home sales price in the City is over $1.4 million. When a home is sold, property tax is calculated on the new assessed value that is based on the sale price. As home values increase and properties are sold, property tax revenues also increase. The City also receives property tax revenue from the State's Educational Revenue Augmentation Fund (ERAF). ERAF is a mechanism enacted in 1992 by the State Legislature to shift local tax revenues from cities, counties, and special districts to a State-controlled fund. The State uses this fund to reduce its obligation to the schools. The State is now reimbursing local agencies for those prior payments. Budgeted revenue estimates assume a conservative $4.2 million will be received in excess ERAF revenue annually, as the City has long been advised that these funds will not continue long-term. This revenue is at risk in the next few years due to changing school funding formulas. The FY 2020-21 forecasted ERAF revenue is expected to be approximately $7.5 million. ERAF projections for FY 2021-22 and beyond are estimated to be $4.2 million. Projected property tax revenues are included below. $sao $7ao $6ao $sao $ 40-0 $ 30.0 $ 20.0 $10.0 Property Tax (in millions) Sales tax revenues account for approximately 20.8 percent of the City's General Fund budget. The City is currently experiencing a decrease in sales tax revenue as a result of the COVID-19 pandemic. While several of Redwood City's larger generators of sales tax are experiencing reduced revenues, all are currently open. In addition, reductions in sales tax due to the pandemic closures have been offset by an increase in sales tax revenues accrued through resident online purchases. The recent move to more electronic shopping during Page 18 of 28 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org 549