Reso 2020-033 CAFR for Fiscal Year Ended June 30, 2019

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The recession resulting from the global financial and credit market meltdown in late 2008 had a direct and dramatic impact on the City's local revenues. However, current data indicates the City's economy has rebounded with median home prices of $689,000, near the median price at the 2006 peak and an unemployment rate is 3%. The City's General Fund supports basic municipal services, such as public safety, library and parks and recreation. Revenue to this critical fund, generated largely from sales and property taxes, has grown to higher levels due to voter -approved tax measures in 2014 and 2016. Low mortgage rates have spurred investment in housing. The improving housing market, which represents 63% of the City's tax roll, led to a 6.4% growth in taxable assessed value in 2018-19. Sales tax increased 6.7% in the City. With the passage of Measure HH effective April 1, 2015, the half -cent sales tax added $12.3 million sales tax revenue in 2018-19. City operations are also supported by other funds, including major and non -major enterprise (proprietary) funds. Major enterprise funds include the Water Pollution Control Plant and Shoreline Enterprise Funds. Both funds experienced revenues slightly improving over the last year. The Water Pollution Control Plant Enterprise fund was established to account for the City's sewers, which protect public health and preserve water quality through collection, treatment, and disposal of the community's wastewater. Program revenues to this fund in 2018-19 totaled $14.2 million, a 12.6% increase from the prior year. The Shoreline Enterprise Fund was established in 2002-03 by combining the Marina and the Golf Course Funds. Program revenues to this fund in 2018-19 totaled $2.0 million, unchanged from the prior year. While the City has implemented considerable expenditure/service reductions to balance its budget, it continues to face increased operating costs. For example, the City's contribution rates for employee pensions continue to rise due to prior CalPERS portfolio losses and the changes in actuarial assumptions, with additional increases projected in future years. The City has offset some increases with staff reductions in recent years, and continues working with employee groups over the next couple of years to address this growing cost. Partially mitigating the double digit increases in annual CalPERS funding are extra contributions to the pension from employees that can be as much as 12% of salary. Long-term perspective The City adopts a biennial budget employing long-term planning as the framework for fiscal decisions. While San Leandro's underlying economy is viewed as positive in the long-term, today's economic challenges, notably in the General Fund, must be dealt with now to ensure long-term fiscal stability. The City Council has implemented numerous cost cutting measures after staffing peaked in 2008-09 to produce recurring budget savings to address unfunded liabilities. Passage of Measure Z in November 2010, Measure HH in 2014, and Measures 00, PP, and NN in 2016 have improved revenues enough to restore selective services. City Council unrestricted reserves total $42.7 million in the General Fund at June 30, 2019. The restricted reserve balance is $17.2 million. vii