Agda Pkt 2025.02.24 Joint SA PFA

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Page 18 of 22 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org immigration; and significant reductions in Federal workforce, that could negatively impact the economy. While many of these early moves have subsequently been paused by the courts or walked back by the Administration, there are numerous indications that we are no longer in a business-as-usual environment and that a cautious economic outlook is warranted. California Economy At the state level, on January 10, Governor Newsom released a budget proposal projecting a modest $363 million positive balance following two years of state budget deficits, reflecting a projection of moderate revenue growth. That said, the California Budget & Policy Center warns that: …federal policies on tariffs, international trade, and immigration would increase inflationary pressure on the economy, which will dampen economic growth and reduce state revenues. In addition, federal cuts to domestic programs – particularly healthcare – threaten the well-being of millions of Californians and would significantly reduce federal support that flows to California. According to the California Budget & Policy Center, Federal funds make up more than one-third of the California State budget. Coinciding with the release of Governor Newsom’s budget, parts of southern California were devastated by a series of tragic wildfires that destroyed 6,800 structures and burned 23,448 acres in and around Pacific Palisades and another 9,400 structures and 14,021 acres in and around Altadena. While it is too early to quantify the impact of these fires on the State budget, they could result in significant hits to the State’s property and income tax coffers in the near-term. Over the longer term, as rebuilding begins, sales tax receipts will likely increase. Traditionally, the Federal government would be instrumental in providing critical funds to support the clean-up, recovery, and rebuilding efforts. However, this is not guaranteed under the Trump administration. Failure to secure typical disaster assistance from the Federal government in the wake of these fires could put pressure on the State to identify State dollars to support these efforts. Moreover, the Trump administration’s position on immigration and trade policy could make rebuilding more difficult and costly as the construction industry relies heavily on immigrants and imports. In the near term (and separate from the wildfires), HdL Companies cites sluggish statewide sales tax results in the 3rd quarter of 2024 and forecasts a 0.8% reduction statewide in sales tax revenue for Fiscal Year 2024- 25, driven by weakness in the autos and transportation, building and construction, business and industry, food and drugs, fuel and service stations, and general consumer goods sectors. 8.A. - Page 18 of 70 183