Redwood City budget is strong for now

Despite substantial drops in revenue streams like the city’s hotel tax or sales tax and projections the city would face a $1.2 million deficit at the close of fiscal year 2020-21, Stevenson Diaz revealed during a midyear budget update that the city’s General Fund has a balance of $18.6 million, coming out ahead by $1.6 million.

Most of those dollars have already been allocated toward city initiatives including $7.5 million to address future deficits, $6 million for council priorities and $1 million for emergency tenant assistance. With about $17 million in deficits projected over the next four years, staff has recommended the city retain the surplus funds to help pay down potential deficits, according to the staff report.

In addition to conservative budgeting tactics including a hiring freeze across city departments, about $9.24 million through the federal American Rescue Plan helped buoy the city’s finances, Stevenson Diaz said. An additional $9.24 million of the federal aid is coming to the city but will be paired with $2.52 million of reserve funds to offset a projected deficit of $11 million at the close of this fiscal year.

The funds set aside to cover projected deficits should prevent the city from having to dip into its reserve fund which currently sits at 15% of the general fund amount, through fiscal year 2023-24. But Assistant City Manager Michelle Flaherty said reserve funds may be necessary to cover deficits projected beyond that time frame.

Additional federal assistance is not anticipated at this time, meaning officials will have to consider updating fees and pursuing different revenue streams to return to stable financial footing, Stevenson Diaz said. She suggested that staff should work with the council’s Finance and Audit subcommittee to discuss potential increases that would have a smaller day-to-day impact on the community.

As staff begins to shift toward reimagining city services, part of the city’s three-pronged approach to addressing the pandemic, and pursuing a number of ambitious council initiatives, the additional revenue will be vital, Stevenson Diaz said.

“We need to align our resources with the services most important to our residents,” she said.

Staff anticipates directed $3.6 million toward council priorities in the 2022-23 budget, amounting to a total of more than $20 million of one-time funding over a three-year period. To achieve those initiatives, Stevenson Diaz said strained staffing levels will need to be addressed starting first with the city’s Human Resources department.

Councilmembers were largely in support of staff recommendations while being greatly concerned for the well-being of city employees. Recognizing the number of projects the council has expressed interest in pursuing, including affordable housing initiatives, transportation improvements and homelessness and mental health programs, Councilmember Alicia Aguirre and Mayor Giselle Hale stressed the importance of not overworking staff to the detriment of the council’s intended goal of providing tangible improvements to the community.

Councilmember Jeff Gee said increased staffing and resources should help the city get by but noted officials will have to get used to operating with “finite resources, no matter what.”

“I’m optimistic we’re going to get through this,” Councilmember Diane Howard said. “And thank God we have a healthy reserve because this is what it’s for, to get us through difficult times.”

sierra@smdailyjournal.com

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