Redwood City’s budget weaker than projected

The city’s revenue sources are weaker than anticipated when the projected budget was adopted in June 2025, and while staff is not anticipating budget reductions, there are limited resources in the coming fiscal years that would limit any additions, Goldberg said. 

The revised budget for Fiscal Year 2025-26 has a $37.1 million deficit and puts the ending unassigned fund balance in the red by $1.2 million, after using $2.8 million in reserves. To address that $1.2 million gap, the city approved drawing down the balance of the city’s Section 115 Trust, which was established to offset future pension costs.

“We have resources to sustain us over the next couple of fiscal years, but we’re digging into our reserves earlier than anticipated, and certainly the out-year numbers are looking more bleak than what we had anticipated,” Goldberg said. 

Councilmembers Marcella Padilla and Jeff Gee noted dipping into reserves and the trust is only a short-term solution. 

“This is something that will help us in the short term but these are still responsibilities that we have,” Padilla said, in reference to pension obligations. “We may kick this can a little bit further down but these responsibilities won’t go away.”

The 10-year plan for fiscal management in the city was to avoid using reserves and the trust to balance budgets for another two years. Now with the escalated plan, those balances will be exhausted much earlier than desired, urging the city to prepare for budget reductions or establish new sources of revenue, Goldberg said. 

Major revenue sources, including property tax and sales tax, are both lower than estimated, Goldberg said, which mirrors what many other municipalities in the region are experiencing due to high costs of living and inflation. 

The property tax outlook is down $4.8 million from what was forecasted, and the sales tax is down $2 million. 

Mayor Elmer Martínez Saballos acknowledged the fiscal landscape many cities are working through, and emphasized the work the city is engaging in to rely on itself. 

“We’ve been here before, we have been in uncertain financial times. We know we can persevere as a community,” Martínez Saballos said. “The difference is we can’t expect or we can’t rely on any extra help from the county, the state or the federal government. Everyone is hemorrhaging to be able to get through their own financial crisis.” 

Making the services offered by the city sustainable and efficient will be key, City Manager Patrick Heisinger said. Modernization and efficiencies are a primary focus to work faster and better, to the benefit of residents. 

City departments will be looking to “do more with equal to or less,” Heisinger said. 

Work is also underway to gain an understanding of the city’s capital and infrastructure needs. In April, a study session will be held on a long-term Capital Improvement Program, which councilmembers agreed would be necessary for long-term fiscal prudence. 

“When it comes to the buildings, we just wait until everything fails and we find a way to pay for it and that’s not the right way to take care of our assets,” Gee said. “Planning for that financially will be critical.”

The city’s Business License Tax was also recently updated to generate more revenue, but the significant increase intended with the change has yet to be realized, Goldberg said. However, efforts to enforce compliance with the updated tax structure is showing a positive trend toward projected revenue outcomes. 

The Fiscal Year 2027-28 budget will be developed in the coming months, taking into consideration the current fiscal year’s midyear adjustments. A study session and final adoption will be held in June.