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MANAGEMENT'S�ISCUSSION AND QNALYSIS 6.1.F. - Page 43 In November 2011 Redwood City voters approved an increase in the transient occupancy tax rate from 10% to 12%. We expect this to produce an additional $600,000 of transient occupancy tax revenue each year going forward. The voters also approved increasing the City's business license tax 50% over three years. This should increase general fund revenues by about$800,000 annually when fully implemented in FY 2014/15. The adopted FY 2012/13 budget projects a deficit of $645,000 or about 0.8% of anticipated revenues. We consider this essentially a balanced budget. Our preliminary forecast is for this deficit to increase to $1.5 million or 1.8% of revenues in FY 2013/14. The primary driver behind this increase is an additional $1 million of retirement contributions being required as a result of the California Public Employees Retirement System reducing their assumed rate of return from 7.75% to 7.50% The organization is currently pursuing several initiatives to address this projected shortfall in FY 2013/14 with the goal of bringing the City Council a balanced FY 2013/14 budget for consideration in June 2013. The elimination of Redevelopment Agencies in California in FY 2011/12 has impacted Redwood City and removes a valuable economic development tool from the City. The reduction of five vacant positions in the Community Development Department along with receiving a portion of the revenues formerly received by the Redevelopment Agency has enabled the City to deal with the short-term impacts of the loss of its Redevelopment Agency. Over the medium to long-term the City will need to find new means of supporting development in certain areas of the City. Earlier this year Governor Brown signed the Public Employee Pension Reform Act into law. Over the long term the changes contained in this law are expected to reduce pension costs, but we do not expect any significant savings in the near future, and accordingly, are not relying on this legislation to help balance the FY 2013/14 budget. CONTACTING THE CITY'S FINANCIAL MANAGEMENT This Comprehensive Annual Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City's finances. Questions about this report should be directed to the Finance Department, at 1017 Middlefield Road, Redwood City, CA 94063 15