ITEM 15 ATTACHMENT 1 - Laserfiche WebLink

Summary of Forecast Assumptions The purpose of this forecast is to assess the General Fund's ability over the next ten years to do the following: 1. Maintain current service levels. 2. Maintain the City's existing infrastructure and facilities. 3. Preserve the City's long-term fiscal heath by aligning operating revenues and costs and maintaining fund balance at policy levels. Since the Great Recession, which lasted approximately 18 months from the tail end of 2007 to the middle of 2009, the San Francisco Bay Area's economy has experienced a steady growth, coinciding with the trend observed at the national and state levels. However, the regional economy began showing some signs of slowing in 2019, and a recession was being forecasted by a growing number of economists at the time. With the arrival of the COVID-19 pandemic in early 2020, the country went into a short but deep recession, creating a lot of economic uncertainties in the near term. In an effort to keep the economy from tail spinning for a prolonged period of time, the federal government took quick actions, approving a series of fiscal stimulus packages to provide assistance to state and local governments, businesses, and individuals. Combined with the Federal Reserve's fiscal policies, including the quantitative easing program, the country's economy turned around rapidly, and the pandemic -induced recession was very short-lived, lasting just two months. Fueled by the unprecedented level of stimulus funding and business -friendly fiscal policies, the economy grew 5.7% in terms of annual gross domestic product (GDP) in 2021, the fastest since 1984. The City's revenue totals were also aided by the one-time American Rescue Plan Act (ARPA) stimulus funding of approximately $8.6 million. The City spent the APPA funds on essential City services in FY 2021/22 and FY 2022/23. The phase-out of APPA funds and reduced hotel tax revenue have a negative impact on the City's budget. While the City's overall revenue is projected to continue increasing going forward for the baseline scenario, growth is expected to be modest. Given the economic uncertainty, there is an increasing chatter amongst economists forecasting a recession. Staff prepared a second scenario, assuming the regional economy entered a mild recession sometime during FY 2027/28. It should be noted that personnel and non -personnel expenditures were significantly reduced in FY 2025/26 and FY 2026/27 to maintain fiscal sustainability. The adjusted service levels are reflected in the long-term forecast. Below is a set of assumptions used to develop the ten-year General Fund forecast, from FY 2025/26 to FY 2034/35. 268