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As Redwood City continues to navigate an expected budget deficit over the next few years, the city council discussed measures to address it at a study session held during the June 10 meeting.
The city has been exploring a new business license tax for the November ballot and will tighten its belt, particularly down the road, if the deficits are not addressed soon.
The root cause of the deficit is a volatile Vehicle License Fee revenue, the state’s own projected deficits and a slow recovery from the COVID-19 pandemic, according to a report by the city.
The city reported a $20.9 million surplus for the 2023-24 fiscal year but will have to use that to cover next year’s budget. The move will erase what would have been an anticipated $14.9 million deficit in 2024-25.
The report listed tough cuts, such as a 5% reduction across departments, that may be made in the future if revenue and expenditures are not aligned. These cuts include disbanding the downtown police unit, closing the Red Morton Community Center on weekends, and cutting back on funding for youth and recreational programs.
“That 5% is gonna have an incredible impact,” Council member Dianne Howard said. “No one wants to see that, so let’s do all we can to make sure that we can find the money to do the job that the people of Redwood City want.”
While these cuts will not occur in the next fiscal year due to a surplus in the 2023-24 year, they highlighted the issues the city faces.
The proposed business tax could see small businesses charged up to 0.34%, medium-sized businesses taxed up to 0.31%, and large businesses taxed up to 0.29% on total gross receipts.
“A net increase of $7.2 million in new business license tax revenue would significantly improve the city’s projected financial status but would not eliminate the projected $9.3 million average annual operating deficit over the next 10 years,” the staff report said.
Approving the recommended budget would not implement the tax, but the City Council could add it to the November ballot.
There is expected to be a $428.3 million shortfall for the Capitol Improvement Plan over the next five years.
Several residents gave feedback seeking to support current funding for biking lanes.
“Improved cycling infrastructure can stimulate local economies by increasing foot traffic to businesses and reducing transportation costs for residents,” resident Julie Walling wrote.
The use of one-time funds was also discussed, with $7.1 million likely to be allocated to the Broadway Pedestrian Mall, a security camera program, and flood protection among other safety-related priorities.
The total budget last year was $334 million, whereas this year’s proposed budget would be $360 million.
The budget will have a final discussion at the June 24 council meeting, where the public can comment before approval
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