Redwood City projects $9.3 million annual funding gap over next decade

While Redwood City is ending this fiscal year with $20.9 million in savings, that money is slated to help fill a projected annual deficit of $9.3 million for the next 10 years.

Budget season is underway in California’s local governments, and ahead of its scheduled June 24 budget vote, Redwood City discussed in a recent meeting how it would cover the funding gaps.

While the city ended this fiscal year with savings, which it will use to close next fiscal year’s deficit, it is still expected to be short another $3.4 million.

So far, city staff is proposing an operating budget of $180 million out of a $360 million total budget, which includes capital improvement projects, according to Redwood City Mayor Jeff Gee.

The budget highlights the following programs as its top three priorities for the next year:

— Housing and homelessness
— Transportation
— Children and youth programs

In March, during its State of the City Address, the City Council also highlighted housing and transportation as among its top priorities.

Gee said in a phone interview that while the city will have to tighten its belt, it would look for additional revenue sources to minimize the impact on public services.

“There are a number of different things that we’ve taken to try to address the structural issues,” Gee said. “One is cost containment. We’re also looking at making sure developers pay 100% of application fees, and updating our business license taxes, which haven’t been touched for about 20 years.”

According to the city’s proposed budget, police, fire, parks and recreation services, library services and city services could be impacted by the budget cuts.

The city also expects a shortfall of $428.3 million over the next five years for its capital improvement projects.

“Of the top five things that residents identified as community priorities, the first two relate to infrastructure needs,” City Manager Melissa Stevenson Diaz said. “We’re going to need to build new buildings, fix potholes, repair streets and sidewalks, as well as reducing flooding, avoiding water pollution and providing green maintenance for our storm drain infrastructure.”

The main reasons for the budget deficit include the economic impact of the pandemic, rising inflation, and increased costs for staffing, pensions and retiree benefits.

Historically, local governments received a significant portion of their funding from vehicle licensing fees from the state. But given the state’s own budget struggles, Gee said the city should not expect it.

Prior to a state law passed in 2004, vehicle licensing fees were paid directly to cities and counties. That law redirected the funds to the state, which became the body responsible for distributing the revenues to local governments. San Mateo County officials have complained that they have not received their share of licensing fees in at least two years.

“The volatility that the state is creating — given their budget deficit — carries on into San Mateo County, into the cities, makes it very, very difficult to predict how much money we’ll get from the state that we’re owed,” he said.