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Redwood City is exploring new avenues to offset an ongoing financial deficit by "re-imagining" the city's services.
City Manager Melissa Stevenson Diaz and Assistant Manager Michelle Poché Flaherty unveiled a $334 million budgetary plan for the upcoming year at a council meeting on June 12. The budget poses new fiscal maneuvers and prioritizes hiring new city staff as an avenue to recover from Redwood City's nearly $83 million in pandemic losses between 2019 and 2021.
"While the City has projected deficits for some time, the slowing economy on top of pandemic losses requires immediate action to ensure we have the necessary resources to provide essential services," Stevenson Diaz said.
The $334 million budget for the 2023-24 fiscal year will broadly prioritize housing, children and youth and transportation.
After negotiating benefit reforms, paying down liabilities, managing costs, seeking grants and using reserves set aside to protect services, structural budget deficits are expected to average $9.2 million over the next eight years, according to city staff.
Police and fire department salaries will continue to comprise a significant portion of the budget, amounting to approximately $78.3 million, or 65.5% of all salaries, wages, and benefits in the General Fund, an increase from 64.8% from last year's recommended budget, according to the 2023-24 Recommended Budget.
Losses from the COVID-19 pandemic recession between 2020 and 2021 totaled $82.2 million, and the city expects to face deficits at least through 2031. Stevenson Diaz told council members that the city's operating budget is $160 million annually. She noted that a slowing economy has contributed to those losses and that immediate action is required on the city's part to resolve them.
The General Fund expenditure budget is $169.6 million, which is $4.6 million, or 2.8% more, than last year's adopted General Fund expenditure budget of $165 million, according to the 2023-24 Recommended Budget.
Funding and Taxes
Stevenson Diaz said the finance and audit subcommittee to form a multi-year strategy that will pose new options to generate revenue. Current and potentially new impacts and fees could include increasing existing taxes, such as the business license, property transfer, sales, hotel, and utility user tax.
They are using bonds and convenience fees when big bills are paid to the city. The city is also exploring alternative methods, such as adding a convenience fee when big bills are paid to the city using a credit card.
"We'll be using an equity lens to consider the impacts associated with various options and we'll also look at how our costs compare to other jurisdictions," Stevenson Diaz said.
The majority of Redwood City's expenditures are supported by the General Fund, the City's leading fund to pay for city services, such as police and fire protection, administration, street maintenance, library services and parks, recreation and community services. These activities utilize mostly tax dollars, such as property tax and sales tax, but are also supported by licenses and permits, fees, fines, and investment earnings. Stevenson Diaz said the budget proposals ensure the fund's 15% reserve level remains intact.
Stevenson Diaz noted property taxes primarily support local schools; for every $1,000 in property taxes paid, the city receives approximately $162.
The city has already attracted about $12 million in grant funding. It is seeking out another $40 million in federal, state and regional grants for areas like drought relief, flood mitigation assistance, library services, public safety and more, according to Stevenson Diaz.
Stevenson Diaz said Redwood City is vying for another $40 million in regional, state and federal grants to help mitigate costs such as drought relief, flood mitigation assistance, library services, public safety.
Stevenson Diaz said the city has accrued nearly $12 million in grants due to its "strong performance," as evidenced by its designation as a finalist for the All-American Award.
Another component of the budget is the Capital Improvement Program, which is funds for the cost of acquisition, construction, expansion or rehabilitation of the City's physical facilities. The recommended CIP budget for this year is $54.9 million, which includes 35 projects with funding of $51.7 million plus $3.2 million in dedicated staffing resources for construction administration and project management. Funding for capital projects typically derives from many sources, with the Utility Users' Tax being the primary revenue, as illustrated in the Recommended Budget.
City Staffing
In the presentation, Stevenson Diaz noted that over the past 20 years, Redwood City's staffing has not kept pace with the city's growing population. The recommended budget proposes to continue hiring for city positions to stave off tax increases in the coming years. 
In 2001, 595 employees served the city's then-population of 75,000. This year's budget recommends 590 employees to serve a population of 84,000. Stevenson Diaz noted the population tends to swell with employee commutes and peak events.
"We are proud of the services we provide and we also know that the world is changing. We need the right staff, providing the right services with the right resources," Stevenson Diaz said.
Last year, several of the 17 city positions cut during the COVID-19 pandemic reopened last year. Stevenson Diaz proposed unfreezing the remaining vacant positions for the past two years due to the economic impact of the pandemic to bring back 2019 staffing levels.
Stevenson Diaz said that the city would also add several new positions, funded by enterprise funds that will not make a dent in general funds. Three classes would support Redwood City's new senior center, slated to open this Spring. Other openings would be in the city's public works, parks and recreation, human resources and administrative departments, but many would not open until 2024.
Looking ahead
Council members Elmer Martínez Saballos and Chris Sturken suggested taking a closer look at other departments driving revenue, similar to the City's recent study of its police and fire departments, to see any potential efficiencies.
"I know we're in a budgetary crunch. But I see a potential need for us to we're an opportunity for us to glean what recommendations and improvements we can make to all our departments in a study I think would be instrumental in that process," said Sturken.
Martínez Saballos called for permanent funding for Redwood City's ACE youth outreach program. Approved last year, it aims to foster positive relationships between community leaders, law enforcement, and the "Bike Life" movement in Redwood City and North Fair Oaks., approved last year.
"I don't know what the future looks like but in the event that we have an economic downturn and private dollars philanthropic dollars are drying up," said Martínez Saballos. I would hate to see a program that the city is being recognized for this year, fall to the wayside, especially when we have lots of incidents in our downtown kind of serving as reminders as symptoms of a bigger problem in the community."
The council voted unanimously, Council member Lissette Espinoza-Garnica absent, to advance the recommended budget June 12. It will return to the city on June 27 for a public hearing and final adoption.
