Agenda packet — Berkeley City Council, May 24, 2022 (part 2 of 2)

126

Referral to the Budget and Finance Policy Committee and Budget Referral to Consider General Fund Strategies and Related Fiscal Policies for Funding Capital Improvements, in Particular Street, Sidewalk, Micromobility and Transit Infrastructure

CONSENT CALENDAR
May 24, 2022
pedestrian safety upgrades, and additional community support items. These items were funded in lieu of funding $5 million in the capital budget. While these items were justified, it meant that less funding was available for capital. Planning for these types of expenses should be completed before the adoption of the original budget in June.

This item refers to the Budget and Finance Committee to explore whether it is possible allocate all reasonably-derived revenue estimates ahead of the June 2022 bi-annual budget process rather than wait until the November Annual Appropriation Ordinance and to dedicate a certain amount of funding directly to the CIP for paving maintenance and other critical infrastructure needs. Reconsidering existing policies could result in better budgeting, and ultimately result in a more transparent budget process and conservative AAO process. This could encourage Council to rethink certain existing programs in light of new programs, visions or needs, as well as to encourage the community and Council to seek potential new revenue sources.

This also item encourages the Budget Committee to budget prospectively with respect to new revenues as a result of an ongoing Public Works initiative to charge utilities for their outsized impact on our roads.

Finally, given historic vacancies across the City (a national phenomenon), to the extent that vacancies will likely not be filled in short-term, the Committee should consider allocating a certain percentage to the CIP. While it is the first policy of the Council to support the community with services and to support understaffed workers, the City might not be able to fill some positions immediately. The City Manager’s office reported that as of December 2021 there were 233 FTE vacancies across the city, or a 14% vacancy rate for the city’s approximately 1658 positions. For example, the City Attorney, Finance, Human Resources and Public Works Departments respectively experienced 27%, 20%, 32%, and 14% vacancy rates.3 For some departments, such as Public Works, significant vacancies predate the pandemic.

Departmental Vacancy Rate as of 12/214
3 Includes all funds. Information about General Fund specific vacancies is pending. 4 Budget Committee Vacancy Materials, City Manager’s Office, December 13, 2021, https://www.cityofberkeley.info/uploadedFiles/Clerk/Item%205Attachment%201%20- %20Vacancy%20Report%20Revised.pdf;
https://www.cityofberkeley.info/uploadedFiles/Clerk/Revised%20Vacancy%20Rate%20Chart%2012-13-

21.pdf.

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CONSENT CALENDAR
May 24, 2022
The FY 2022 budget was built on the assumption that there would be a 3% vacancy rate for non-safety operating departments when, in fact, rates are significantly higher than that.
5 In FY 2021, approximately $62 million in General Fund monies were allocated for personal costs outside of public safety.6 A 3% vacancy rate assumed by the City 5 Response to Questions from Budget and Finance Policy Committee, City Manager’s Office, December 13, 2021,
https://www.cityofberkeley.info/uploadedFiles/Clerk/Response%20to%20Questions%20Re%20December %202021%2012-13-21docx.pdf
6 FY 2022 Budget Presentation, City Manager’s Office, May 17, 2021,

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CONSENT CALENDAR
May 24, 2022
Manager approximately equals $1.8 million, whereas a 5% vacancy assumption would be $3.1 million and 7% would be $4.3 million. This item asks that while hiring is being ramped up in the post-COVID period, some of the additional salary savings be allocated to capital expenses, particularly paving.

Given that the City of Berkeley routinely underestimates the amount of property and transfer taxes it will receive, on average understating them by $11 million per year, assuming that one third of these revenues should be allocated, an additional $3 million could be spent on roads – now when we need it. In addition, assuming only 93% of general fund positions are filled at any one-time, as opposed to 97% as is in the current budget, frees up $3 million in one-time revenue. Any adjustment would not apply to police, fire, and other public safety workers. This nearly $7 million could be combined with charging large trucks more for their greater impact on pavement, a potential revenue source estimated at $1-2 million/year starting in 2023 following a successful Proposition 218 process. It is in the public interest to these General Fund monies now to fund paving maintenance operations and stabilize paving condition ahead of a potential revenue measure.

FISCAL IMPACTS OF RECOMMENDATION
Impact on General Fund will be determined by any Committee recommendations and any Council allocations.

ENVIRONMENTAL SUSTAINABILITY
Depending on how funds are spent, a fully capitalized Capital Improvement Program can help further accelerate mode shifts away from fossil fuel vehicles.

CONTACT PERSON
Vice Mayor Kate Harrison, (510) 981-7140
https://www.cityofberkeley.info/uploadedFiles/Clerk/FY%202022%20Proposed%20Budget%20Presentati on.pdf

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Susan Wengraf
Councilmember District 6
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7160 ● TDD: (510) 981-6903 ● Fax: (510) 981-7166 E-Mail: [email protected]

CONSENT CALENDAR
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Councilmember Wengraf (Author), Councilmember Hahn (Co-Sponsor) Subject: Relinquishment of Council Office Budget Funds to the General Fund and Grant of Such Funds to the Actor’s Ensemble Company to Perform a Staged Reading of the play, “Roe” at the Goldman Theatre in the David Brower Center on June 12, 2022

RECOMMENDATION
Adopt a Resolution approving the expenditure of an amount not to exceed $500 per Councilmember, including $500 from Councilmember Wengraf, to the Actor’s Ensemble Company to fund a staged reading of the play, “Roe” at the Goldman Theatre of the David Brower Center on June 12, 2022

FINANCIAL IMPLICATIONS
No General Fund impact; $500 is available from Councilmember Wengraf’s Office Budget discretionary account. Other Councilmembers can contribute as their discretionary accounts permit.

BACKGROUND
In light of the imminent news of the Supreme Court ruling to overturn Roe v. Wade and to end a woman’s right to legal abortion, Commission on the Status of Women Commissioner Carole Marasovic, in collaboration with Jerome Solberg, Executive Director of the Actor’s Ensemble of Berkeley and Susannah Wood, Director, are proposing a staged reading of “Roe”, a play by Lisa Loomer. The play centers around the two women who made Roe v. Wade a reality – Sara Weddington, a 26-year-old attorney and the plaintiff, Norma McCorvey, known under the pseudonym Jane Roe.

The play follows the two young women as they embark on separate journeys that mirror the polarization over the 1973 landmark decision.

Admission to the performance will be free. In addition, the Downtown Berkeley Association has agreed to schedule a free public preview performance in the BART Plaza Soundstage on June 9th.

The budget for the performance includes: $354 purchasing of play rights, $50 stipend for each of 12 actors; $100 stipend for Director; $570 for venue rental; $200 for rehearsals and approximately $650 for promotion and publicity.

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131

Relinquishment of Council Office Budget Funds for “Roe” CONSENT CALENDAR May 24, 2022

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The Actor’s Ensemble of Berkeley, a California non-profit tax-exempt corporation, has been the recipient of two proclamations from the City of Berkeley, in 2007 and in 2019.

They are recognized regionally for their high caliber theatre productions.

ENVIRONMENTAL SUSTAINABILITY
No impact.

CONTACT PERSON
Councilmember Wengraf Council District 6 510-981-7160
Attachments:
1: Resolution

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132

RESOLUTION NO. ##,###-N.S.

AUTHORIZING THE EXPENDITURE OF SURPLUS FUNDS FROM THE OFFICE

EXPENSE ACCOUNTS OF THE MAYOR AND COUNCILMEMBERS FOR A GRANT TO

PROVIDE PUBLIC SERVICES FOR A MUNICIPAL PUBLIC PURPOSE
WHEREAS, Councilmember Susan Wengraf has surplus funds in her office expenditure account; and
WHEREAS, a California non-profit tax-exempt corporation, the Actor’s Ensemble Company seeks funds in the amount of $2,500 to perform a stage reading of the play, “Roe”; and
WHEREAS, the provision of such funds would fulfill the municipal public purpose of allowing Berkeley residents, regardless of their means, to be able to attend this performance.

NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that the $500 relinquished by Councilmember Wengraf from her Council Office Budget and any other Councilmember who wishes to contribute shall be granted to the Actor’s Ensemble company to fund the June 12th performance of the Staged Reading of the play, “Roe”.

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134

ACTION CALENDAR
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Dee Williams-Ridley, City Manager
Submitted by: Donald E. Ellison, Interim Director of Human Resources Subject: Resolution Adopting the Resolution of Intention of Amendment to the Miscellaneous CalPERS Contract Pursuant to California Government Code 20516; Adopt First Ordinance Reading authorizing an amendment to the contract between the City Council of the City of Berkeley and the Board of Administration of the California Public Employees’ Retirement System

RECOMMENDATION

1. Adopt the Resolution of Intention in order to approve the amendment of the contract between the Board of Administration, California Public Employees’ Retirement System and the City Council for the City of Berkeley pursuant to California Government Code 20516 to effectuate changes to the cost sharing agreement between the City and PEPRA members of Service Employee International Union, Local 1021 Maintenance and Clerical (SEIU MC), Public Employees Union Local 1 (Local 1), Community Services & Part- Time Recreation Leaders Associations Local 1021 (SEIU CSU/PTRLA), and the Unrepresented Employees Group.

2. Adopt first reading of an Ordinance amending the City’s contract with CalPERS to effectuate changes to the cost sharing agreement between the City and PEPRA members of Service Employee International Union, Local 1021 Maintenance and Clerical (SEIU MC), Public Employees Union Local 1 (Local 1), Community Services & Part-Time Recreation Leaders Associations Local 1021 (SEIU CSU/PTRLA), and the Unrepresented Employees Group.

Council adopted Resolution #70,156 N.S. at its December 14, 2021, meeting authorizing the FY2021-22 amendment to the City’s CalPERS Miscellaneous contract. Council must now pass another Resolution of Intention to approve the FY2022-23 contract amendment between the City and the Public Employees’ Retirement System Board of Administration.

FISCAL IMPACTS OF RECOMMENDATION
The terms of the new MOU PEPRA ramp down are as follows:

SEIU MC and the Unrepresented Employees Group:

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135

 FY2021-22: 1% reduction of cost share for a total of 7%, (to be effective as soon as administratively possible following adoption of successor contract by the City Council)  FY2022-23: 1% reduction of cost share for a total of 6%, effective July 10, 2022  FY2023-24: 1% reduction of cost share for a total of 5%, effective July 9, 2023  FY2024-25: 2% reduction of cost share for a total of 3%, effective July 7, 2024  FY2025-26: 2% reduction of cost share for a total of 1%, effective July 6, 2025  FY2026-27: 1% reduction of cost share for a total of 0%, effective July 5, 2026 The total cost to approve the ramp down for the SEIU MC PEPRA members is approximately $980,000. There are approximately 204 PEPRA employee affected by this resolution.

The total cost to approve the ramp down for the Unrepresented PEPRA members is approximately $420,000. There are approximately 51 PEPRA employees affected by this resolution.

Funding for the ramp down comes from the General Fund and other special revenue funds. The applicable cost was included in the fiscal year 2022 budget and will be included in the fiscal years through 2027 budgets.

SEIU CSU/PTRLA and Local 1:
 FY2021-22: 3% reduction of cost share for a total of 5%, (to be effective as soon as administratively possible following adoption of successor contract by the City Council)  FY2022-23: 4% reduction of cost share for a total of 1%, effective July 10, 2022  FY2023-24: 1% reduction of cost share for a total of 0%, effective July 9, 2023 The total cost to approve the ramp down for the SEIU CSU/PTRLA PEPRA members is approximately $952,000. There are approximately 178 PEPRA employees affected by this resolution.

The total cost to approve the ramp down for the Local 1 PEPRA members is approximately $448,000. There are approximately 59 PEPRA employees affected by this resolution.

Funding for the ramp down comes from the General Fund and other special revenue funds. This applicable cost was included in the fiscal year 2022 budget and will be included in the fiscal years through 2024 budgets.

CURRENT SITUATION AND ITS EFFECTS
Council adopted Resolution #70,156 N.S. at its December 14, 2021, meeting authorizing the FY2021-22 amendment to the City’s CalPERS Miscellaneous contract. Council must now pass another Resolution of Intention to approve the FY2022-23 contract amendment between the City and the Public Employees’ Retirement System Board of Administration. (See Cal. Gov. Code § 20516.) The contract amendment process includes the following steps:
 The City shall provide CalPERS with the Resolution and a cover letter indicating the exact percentage of change, total cost-share percentage, and who it is applicable to – completed April 18, 2022;

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 CalPERS will contact the City to establish the Anticipated Schedule of Agency Actions and send the required documents;
 Over a time period specified by CalPERS, the City will:
o Conduct an employee election whereby a simple majority of the affected PEPRA members in the Unrepresented Group must vote in favor of the proposed cost-share terms – completed in December 2021;
o The City shall adopt a Resolution of Intention;
o The City shall approve the final reading of an ordinance or final resolution and complete certification forms.
 Once the documents are received and approved, the contract amendment becomes effective and is updated with the effective date in MyCalPERS.
 CalPERS sends a fully executed contract to the City.

ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACT
There are no identifiable environmental effects or opportunities associated with the subject of this report.

RATIONALE FOR RECOMMENDATION
Council adopted Resolution #70,156 N.S. at its December 14, 2021, meeting authorizing an amendment to the City’s CalPERS Miscellaneous contract. Council must now pass another Resolution of Intention to approve the FY2022-23 contract amendment between the City and the Public Employees’ Retirement System Board of Administration.

ALTERNATIVE ACTIONS CONSIDERED
None. The City is obligated under the existing labor agreements to complete the ramp downs in accordance with the MOUs.

CONTACT PERSON
Donald E. Ellison, Interim Director of Human Resources, 981-6807 Attachments:
1: Resolution of Intention to Approve an Amendment to Contract Between the Board of Administration of California Public Employees’ Retirement System and the City Council of the City of Berkeley
Exhibit A: Amendment to Contract Between the Board of Administration California Public Employees’ Retirement System and the City Council of the City of Berkeley
2: Ordinance of the City Council of the City of Berkeley authorizing an amendment to the contract between the City Council of the City of Berkeley and the Board of Administration of the California Public Employees’ Retirement System.

Exhibit A: Amendment to Contract Between the Board of Administration California Public Employees’ Retirement System and the City Council of the City of Berkeley

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137

RESOLUTION NO. XX,XXX

RESOLUTION OF INTENTION TO APPROVE AN AMENDMENT TO CONTRACT

BETWEEN THE BOARD OF ADMINISTRATION CALIFORNIA PUBLIC EMPLOYEES'

RETIREMENT SYSTEM AND THE CITY COUNCIL CITY OF BERKELEY WHEREAS, the Public Employees' Retirement Law permits the participation of public agencies and their employees in the Public Employees' Retirement System by the execution of a contract, and sets forth the procedure by which said public agencies may elect to subject themselves and their employees to amendments to said Law; and
WHEREAS, one of the steps in the procedures to amend this contract is the adoption by the governing body of the public agency of a resolution giving notice of its intention to approve an amendment to said contract, which resolution shall contain a summary of the change proposed in said contract; and
WHEREAS, the following is a statement of the proposed change: To provide Section 20516 (Employees Sharing Additional Cost) for a reduction of 1% for new local miscellaneous members in the Unrepresented Employees group and the Service Employees International Union Local 1021 Maintenance and Clerical Chapters; and, for a reduction of 4% for new local miscellaneous members in the Public Employees Union Local 1 and the Community Services & Part-Time Recreation Leaders Association Local 1021.

NOW, THEREFORE, BE IT RESOLVED that the governing body of the above agency does hereby give notice of intention to approve an amendment to the contract between said public agency and the Board of Administration of the Public Employees' Retirement System, a copy of said amendment being attached hereto, as an "Exhibit" and by this reference made a part hereof.

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138

ORDINANCE NO. #, ### N.S.

AUTHORIZING AN AMENDMENT TO THE CONTRACT BETWEEN THE CITY

COUNCIL OF THE CITY OF BERKELEY AND THE BOARD OF ADMINISTRATION OF THE CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM
BE IT ORDAINED by the Council of the City of Berkeley as follows:

Section 1.

That an amendment to the contract between the City Council of the City of Berkeley and the Board of Administration, California Public Employees’ Retirement System is hereby authorized, a copy of said amendment being attached hereto, marked Exhibit A, and by such reference made a part hereof as though herein set out in full.

Section 2.

The Mayor of the City of Berkeley City Council is hereby authorized, empowered, and directed to execute said amendment for, and on behalf of, said Agency.

Section 3.

This Ordinance shall take effect thirty (30) days after the date of its adoption. Copies of this Ordinance shall be posted for two days prior to adoption in the display case located near the walkway in front of Council Chambers 2134 Martin Luther King Jr. Way. Within 15 days of adoption, copies of this Ordinance shall be filed at each branch of the Berkeley Public Library and the title shall be published in a newspaper of general circulation.

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Office of the City Manager
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099 E-Mail: [email protected] Website: http://www.CityofBerkeley.info/Manager

PUBLIC HEARING
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Dee Williams-Ridley, City Manager
Submitted by: Alene Pearson, Acting Director, Planning and Development Department Subject: Changes to the Land Use Planning Division Fee Schedule / Hourly Rate

RECOMMENDATION
Conduct a public hearing and, upon conclusion, adopt a Resolution amending Resolution No. 67,985-N.S. to adopt revisions to the fee schedule for the Land Use Planning Division of the Planning and Development Department, effective July 1, 2022, to increase the hourly rate for staff time from $200 to $230 per hour, increase related deposits and fixed-rate permit application fees to reflect the new rate and to more accurately reflect the staff time required to process various permit types, adopt new fees for new permit types, and clarify the existing fee descriptions.

FISCAL IMPACTS OF RECOMMENDATION
The recommendations in this report to adopt increased fees and hourly rates will generate funds to cover costs which the City incurs for development permit review activities. All fees collected are deposited into the Permit Service Center (PSC) Fund and are used to pay for personnel and associated costs of operating the Land Use Planning (LUP) Division’s permit services.

The LUP budget is also supported by the General Fund for citywide, policy-oriented programs, which is not the subject of this report. Staff assigned to those activities are not included in the calculations for this fee increase, and overhead expenses are divided proportionally among the permit and policy work to properly account for those expenses.

CURRENT SITUATION AND ITS EFFECTS
Hourly rates for LUP staff were most recently adjusted in 2017, from $180 to $200 per hour. Since then, various measures of inflation indicate that prices for goods and services have risen by 10 to 20 percent1. Most pertinently, average salaries in the LUP 1 California Construction Cost Index increased 11%. Buying power of a US Dollar decreased 15%.

Consumer Price Index (Urban) increased 19%.

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141

Changes to the Land Use Planning Division Fee Schedule / Hourly Rate PUBLIC HEARING MAY 24, 2022

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Division have risen 17 percent. The proposed hourly fee increase is 15%, from $200 to $230 per hour.

The proposed rate has been validated based on the actual staffing levels, salary ranges, benefits, and overhead of the LUP permit division. This rate includes the 20 full-time equivalent (FTE) staff that perform the permit services plus overhead. The average salary and benefits package is $92 per hour. The LUP projects group is also supported by the overall department management, plus non-personnel costs (rent, utilities, and other expenses), which were allocated proportionally. These costs were then divided by an assumed number of billable hours per year for a typical employee providing these services.

Exhibit A to the Resolution shows the proposed amendments to the LUP Division’s section of the Planning Department fee schedule. Attachment 2 to this report presents the proposed new section of the fee schedule, with additions, revisions and clarifications shown in underline/strikethrough format. Most of the fee adjustments were calculated to merely reflect the increased hourly cost of providing the services. Some additional adjustments are proposed for rezoning and General Plan amendments, Variances, certain appeals, and CEQA review, to 1) standardize fees; and 2) better reflect the level of effort expended on these complex projects. Some fees are reestablished as “deposits” rather than “base fees” because, for projects that do not require the number of assumed hours used in setting the fee, applicants may request a refund of any unexpended fee amount. Clarification is also provided regarding the applicability of hearing fees that are incurred by applicants, which were previously listed only for Zoning Adjustments Board (ZAB) hearings, but are equally applicable to Design Review Committee (DRC) and Landmarks Preservation Commission (LPC) hearings. Finally, new fees are established for Accessory Dwelling Units (ADUs) and other new expedited permit types that were not previously listed in the schedule.

These fee adjustments would further the City’s Strategic Plan goal to provide an efficient and financially-healthy City government.

BACKGROUND
The PSC Fund is an enterprise fund established to be self-supporting for functions related to building permits and land use entitlements. From the fund’s inception in 1997 through 2005, the City Council contributed a total of $8.1 million in General Fund subsidy (rather than increasing Planning fees), after which the fund was made wholly self-sustaining. In addition to LUP fees, the PSC Fund includes revenues from the Building and Safety Division, Public Works Inspections and Transportation, and Fire Department plan check and inspection services, for which dedicated staff resources are made available. No changes are recommended to any of those fees.

Permit review fees are charged to project applicants based on the time required to deliver the service or an estimated typical cost based on the average time taken on

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142

Changes to the Land Use Planning Division Fee Schedule / Hourly Rate PUBLIC HEARING MAY 24, 2022

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similar projects. Some nominal fees are set for simple tasks such as business license review, to encourage economic development and simplify the permit intake process.

The new LUP Division staff hourly rate would help the City recoup the actual costs of delivering such services.

The proposed changes will increase the cost of development applications that require LUP review, such as Use Permits, Administrative Use Permits, and Variances, as well as Design Review and Landmarks Preservation review. These projects are charged on a “tiered” basis according to the level of complexity and valuation. Fees for routine projects are charged at a fixed cost based on a typical level of effort. Larger projects are charged a deposit, against which staff “bill” their hours and assess monthly invoices for any additional costs for staff time. Consultants are also hired for some large projects, the costs of which are passed through directly to the applicants.

The proposed $230 hourly staff time rate in Berkeley is comparable with rates in other nearby jurisdictions. For example, Albany charges $198 per hour, Richmond charges $231 per hour, and Oakland charges $265 per hour.

ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACTS
Many development project review activities support City goals for energy efficiency, reduced water usage, and sustainable development.

RATIONALE FOR RECOMMENDATION
Increasing hourly rate fees for services provided by the LUP Division staff will allow the City to recoup more of its actual costs spent on staff-intensive services such as review of development proposals.

ALTERNATIVE ACTIONS CONSIDERED
Fees could be adjusted less or more, if justified by an analysis of actual costs. Staff believes the proposed rate is the most reasonable to recoup actual costs.

CONTACT PERSON
Alene Pearson, Acting Director, Planning and Development, (510) 981-7489 Steven Buckley, Land Use Planning Manager, Planning and Development, (510) 981- 7411
Attachments:
1: Resolution
Exhibit A: Proposed new Land Use Planning Division section of Planning Department Fee Schedule
2: Tracked Changes Version of Proposed new Land Use Planning Division section of Planning Department Fee Schedule
3: Public Hearing Notice

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RESOLUTION NO. ##,###-N.S.

FEES: DEVELOPMENT RELATED SERVICES PROVIDED BY THE LAND USE

PLANNING DIVISION OF THE PLANNING AND DEVELOPMENT DEPARTMENT WHEREAS, on May 24, 2017, Resolution No. 67,985-N.S. established fees for development-related services provided by the Planning and Development Department; and
WHEREAS, on July 27, 2021, Resolution No. 69,989-N.S. added certain new fees to the Land Use Planning section of the Department Fee Schedule, but did not change the hourly base rate for staff services; and
WHEREAS, the hourly base rate for staff services provided by the Land Use Planning Division has not been increased since 2017; and
WHEREAS, the current staff time rate for the Land Use Planning Division does not reflect current staff and other departmental costs; and
WHEREAS, the current fee schedule does not accurately reflect the typical amount of staff time required to process certain types of projects; and WHEREAS, clarifying the applicability of certain fee schedule items would provide greater public understanding of City fees and services; and
WHEREAS, new permit types require the establishment of an applicable fee; and WHEREAS, the Council of the City of Berkeley held a public hearing on May 24, 2022 to review the proposed changes to the fee schedule, attached hereto as Exhibit A to this resolution.

NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that Resolution No. 67,985-N.S is amended to incorporate fees for all development-related services provided by the Land Use Planning Division, as set forth in Exhibit A, attached hereto and incorporated herein, with an effective date of July 1, 2022.

BE IT FURTHER RESOLVED that the remainder of the fee schedule of the Planning and Development Department, as set forth in Resolution No. 67,985-N.S., remains in effect with no changes.

Exhibits:

A: New Land Use Planning Division section of Fee Schedule

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ATTACHMENT 1, EXHIBIT A
New Land Use Planning Division Fee Schedule

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CHAPTER B - LAND USE PLANNING

FEE TYPE / DESCRIPTION FEE REMARKS
I. Administrative Use Permit (AUP)

1. Tier 1 - Most complex projects in or adjacent to a Residential district $ 3,680 Assumes 16 hours

2. Tier 2 - Intermediately complex projects in or adjacent to a Residential district $ 2,760 Assumes 12 hours

3. Tier 3 - Least complex projects in or adjacent to a Residential district including Class II Home Occupation Permits $ 1,840 Assumes 8 hours

4. Tier 4 - Other activities (residential or commercial) NOT in or adjacent to a Residential district $ 5,520 Assumes 24 hours II. Use Permit (UP) with public hearing

1. Level 1 - Use Permit (projects not listed below) $ 5,520 Assumes 24 hours

2. Level 2 - Include the following: $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.
a. Non-residential projects in a Residential district
b. Mixed-use buildings creating more than 20,000 gross sq. feet c. New construction or "major" renovation of a Landmarked building or site or Structure of Merit d. Any new main building
e. Master Use Permit or Development Permit required by a Specific Plan f. Class III Home Occupation Permits

3. ZAB Public Hearing (per hearing, in addition to permit fees). Fee already exists; copied here form Section III below
$ 1,025
III. Variance

1. Tier 1 - Yard or Height, Useable Open Space, Lot Coverage, Parking $ 3,680 Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours.

2. Tier 2 - Inadvertent Demolition of Residential Structure $ 9,200 Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours.

3. Tier 3 - All others not in Tier 1 or 2 $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

4. Each Additional AUP, UP or Variance in addition to primary application $ 460 Assumes 2 hours

5. ZAB Public Hearing (per project in addition to permit fees) $ 1,025 IV. Zoning Certificate (ministerial permits)
A. All projects except as noted below $ 230 Assumes 1 hour

1. Business License review - continuation of lawful existing use $ 115

2. Accessory Dwelling Unit review $ 460
Assumes 2 hours for
neighborhood notices
and documentation
(Plan check is billed
separately, with Building
Permit)

3. SB35, SB330, other pre-application review $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours,
plus direct cost for
consultants

4. Additional staff time (work performed beyond the time covered by the fees above) $ 230 Per hour of staff time B. Building Permit review

1. Project with Administrative Use Permit $ 230 Assumes 1 hour

2. Project with Use Permit and/or Variance $ 460 Assumes 2 hours

3. In-kind Repair/Replacement (e.g. window replacement, dry rot repair, etc.) $ 115 Assumes half hour

4. Fourth and subsequent plan check submittal $ 230 per hour of staff time V. Modification / Transfer

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ATTACHMENT 1, EXHIBIT A
New Land Use Planning Division Fee Schedule

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1. Administrative Use Permit Modification $ 1,840 Assumes 8 hours

2. Use Permit Modification (ZAB Review - No Public Hearing ) $ 3,680 Assumes 16 hours

3. Use Permit Modification (ZAB Review - Public Hearing Required) $ 5,520 Assumes 24 hours

4. Transfer of Administrative Use Permit / Use Permit $ 230 Per hour of staff time

5. Public Hearing (per hearing, in addition to permit fees) $ 1,025 VI. Environmental Review
A. California Environmental Quality Act (CEQA) or National Environmental Policy Act (NEPA)

1. Initial Study resulting in a Negative Declaration or Mitigated Negative Declaration $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours,
plus direct cost for
consultants

2. Environmental Impact Report (EIR) $ 9,200
Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours,
plus direct cost for
consultants
B. Mitigation Monitoring $ 3,680
Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours,
plus direct cost for
consultants
C. Notices - NOE, NOD, etc. $ 920
Assumes four hours.

Fee applies when
notices are filed by the
City on behalf of the
applicant / City after all
appeals are heard
VII. Design Review
A. Administrative Design Review

1. Project valued under $50,000 $ 1,840 Assumes 8 hours

2. Project valued at $50,000 to $2,000,000 $ 2,760 Assumes 12 hours

3. Project valued over $2,000,000 $ 3,680
Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours.

4. Signs/Awnings $ 460 Assumes 2 hours
B. Design Review Committee

1. Project valued under $50,000 $ 2,760 Assumes 12 hours

2. Project valued at $50,000 to $2,000,000 $ 3,680 Assumes 16 hours

3. Project valued over $2,000,000 $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

C. Final Review with the DRC

1. Project valued under $50,000 $ 1,250

2. Project valued at $50,000 - $150,000 $ 1,500

3. Project valued over $150,000 $ 4,250
D. Additional Preview (existing fee, relocated from Sec. VII.B above) $ 500 E. Modifications - DRC Projects $ 750
F. DRC Public Hearing (per hearing, in addition to permit fees) $ 1,025

FEE TYPE / DESCRIPTION FEE REMARKS

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146
ATTACHMENT 1, EXHIBIT A
New Land Use Planning Division Fee Schedule

Page 3 ends

VIII. Landmarks Preservation Commission Review
A. Initiation

1. Structure $ 50
As set by the
Landmarks Preservation
Ordinance. BMC

3.24.340.A

2. District $ 100
As set by the
Landmarks Preservation
Ordinance, BMC

3.24.340.B
B. Design Review - Structural Alteration (non-residential only)

1. Project valued under $50,000 $ 2,000

2. Project valued between $50,001 and $1,999,999 $ 3,000

3. Project valued at $2,000,000 or more $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

C. Design Review - Signs and Awnings $ 1,000
D. Demolition Review (non-residential structures 40 or more years old as required under Section 23C.08.050C of the Zoning Ordinance) $ 1,200
E. Mills Act Historical Contract Processing - payable upon application (one-time payment) $ 4,200 F. Mills Act Historical Contract Monitoring

1. Payable upon application to cover 5 contract years $ 2,500

2. Assessed at the beginning of each subsequent 5 years $ 2,500 G. LPC Public Hearing (per hearing, in addition to permit fees) $ 1,025 IX. Appeals
A. Non-Applicant Appeal of AUP $ 500
B.

Reduced Non-Applicant Appeal of AUP: Fee reduced if signed by persons who lease or own at least 35 percent of the parcels or dwelling units within 300 feet of the project site, or at least 20 such persons (not including dependent children), whichever is less
$ 200
C. Non-Applicant Appeals of ZAB or LPC $ 1,500
D.

Reduced Non-Applicant Appeals of ZAB or LPC: Fee reduced if appeal is signed by persons who lease or own at least 50 percent of the parcels or dwelling units within 300 feet of the project site, or at least 25 such persons (not including dependent children), whichever is less $ 500
E. Appeal of AUP by Applicants $ 3,680
F. Appeal of ZAB or LPC by Applicants $ 5,520
G. Appeal of DRSL or DRC by Non-Applicant $ 500
H. Appeal of DRSL or DRC by Applicant $ 3,680
I. Non-Applicant Appeals of all affordable housing projects (defined as projects which provide 50% or more affordable units for households at 80% or less of Area Median Income) $ 500
J. Appeal to address processing error by staff Fee Waived X. Plan Amendments, Reclassification Requests, and Waterfront Master Development Plan permits* A. General Plan Amendment $ 9,200 Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours,
plus direct cost for
consultants
B. Specific Plan Amendment $ 9,200
C. Rezoning / Reclassification Request $ 9,200
D. Waterfront Master Development Plan Permit $ 9,200
XI. Miscellaneous Fees
A. Penalty for Late Filing (When Zoning Permit, Use Permit or Variance is required for work already performed) 100% of applicable fee(s)
B. Zoning Complaint Re-inspection

1. First Re-inspection $ 230

2. Second Re-inspection $ 345

3. Third Re-inspection and all inspections thereafter $ 460 C. Agenda Subscriptions and Mailing Fees
Amount
specified per
A. R. 3.8

FEE TYPE / DESCRIPTION FEE REMARKS

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147
ATTACHMENT 1, EXHIBIT A
New Land Use Planning Division Fee Schedule

Page 4 ends

D. Publications and Duplication of Records
Amount
specified per
A. R. 3.8
E. Maps - large, color $ 36.00
F. Duplication of Zoning Adjustments Board, Landmarks Preservation Commission, and Design Review Commission meeting recordings
Amount
specified per
A. R. 3.8
G. Microfilm Duplication Fee
Amount
specified per
A.R. 3.8
H. Records Management Fee $ 50 per application
I. Letters Regarding Status of Properties $ 230 per hour, 2 hour min.

J. Housing Density Bonus Analysis - if separate from other permits $ 230 per hour of staff time K. Zoning Research $ 230 per hour, 2 hour min.

L. Oak Tree Review $ 230 per hour, 1 hour min.,
plus consultant costs
M. Use Permit Monitoring $ 230 per hour of staff time
N. Pre-application Reviews

1. Staff level review $ 920 Assumes 4 hours

2. Zoning Adjustments Board / Design Review Committee / Landmarks Preservation Commission / Planning Commission Review (at staff discretion in consultation with the applicant) $ 3,680 Assumes 16 hours O.

Dedicated Project Review: In addition to all required fees, applicants may request (or the City may require) dedicated project review in which the applicant pays the City for staff overtime or to contract with a consulting firm with particular relevant expertise to review the application. In such instances, the applicant shall remit a deposit equal to the total amount of the contract, based on the bids received by the City pursuant to its purchasing procedures. Progress billings will be made if charges are expected to exceed deposit; prompt payment of bills will assure continued project review. Failure to remit a progress payment within an appropriate time frame, as determined by the Director of Planning and Development or his/her designee, will be treated as a withdrawal without prejudice to the underlying proposal.

At cost
P. Community Planning Fee for General Plan and Zoning Ordinance Maintenance 15% Surcharge on all
Applications for AUP,
UP, Modification and/or
Variance.

XII. CONDOMINIUM
A. Rent Board Review $ 120 per unit
B. Notice of Local Law Compliance $ 3,680 Assumes 16 hours C. Conversion to Condominiums - one to four units $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

D. Conversion to Condominiums - five or more units $ 9,200 Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours.

E. Appeal of an Administrative Determination on Conversion of a TIC to the Planning Commission by an Applicant $ 3,680 Assumes 16 hours
F. Appeal of Planning Commission Determination on Conversion to the City Council by an Applicant $ 5,520 Assumes 24 hours
G. Appeal of Planning Commission Determination on Conversion to the City Council by a Non- Applicant $ 3,680 Assumes 16 hours
NOTE: The minimum deposits listed are intended to reflect typical project costs. Progress billings will be made during review of a project if charges exceed the deposit: prompt payment of bills will assure continued project review. Failure to remit a progress payment within the appropriate time frame as determined by the Director of Planning and Development or his/her designee, will be treated as a withdrawal without prejudice to the underlying proposal. All fees are required to be paid prior to scheduling the item for Council consideration.

FEE TYPE / DESCRIPTION FEE REMARKS

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148
ATTACHMENT 2,
Proposed New Land Use Planning Division Fee Schedule

Page 1 ends

CHAPTER B - LAND USE PLANNING

FEE TYPE / DESCRIPTION CURRENT
FEE

PROPOSED

FEE REMARKS
I. Administrative Use Permit (AUP)

1. Tier 1 - Most complex projects in or adjacent to a Residential district $ 2,800 $ 3,680 Assumes 16 hours

2. Tier 2 - Intermediately complex projects in or adjacent to a Residential district $ 1,800 $ 2,760 Assumes 12 hours

3. Tier 3 - Least complex projects in or adjacent to a Residential district including Class II Home Occupation Permits $ 800 $ 1,840 Assumes 8 hours

4. Tier 4 - Other activities (residential or commercial) NOT in or adjacent to a Residential district $ 1,600 $ 5,520 Assumes 24 hours --
e.g. "Use Not Listed" in
C District
II. Use Permit (UP) with public hearing

1. Level 1 - Use Permit (projects not listed below) $ 3,600 $ 5,520 Assumes 24 hours

2. Level 2 - Include the following: $ 4,800 $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.
a. Non-residential projects in a Residential district
b. Mixed-use buildings creating more than 20,000 gross sq. feet c. New construction or "major" renovation of a Landmarked building or site or Structure of Merit d. Any new main building
e. Master Use Permit or Development Permit required by a Specific Plan f. Class III Home Occupation Permits

3. ZAB Public Hearing (per hearing, in addition to permit fees). Fee already exists; copied here form Section III below $ 1,025 $ 1,025
Administrative costs
including staff time,
mailings, postings,
hearing room, etc.

III. Variance

1. Tier 1 - Yard or Height, Useable Open Space, Lot Coverage, Parking $ 1,000 $ 3,680 Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours.

2. Tier 2 - Inadvertent Demolition of Residential Structure $ 4,000 $ 9,200 Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours.

3. Tier 3 - All others not in Tier 1 or 2 $ 7,241 $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

4. Each Additional AUP, UP or Variance in addition to primary application $ 400 $ 460 Assumes 2 hours

5. ZAB Public Hearing (per project in addition to permit fees) $ 1,025 $ 1,025 Administrative costs
including staff time,
mailings, postings,
hearing room, etc.

IV. Zoning Certificate (ministerial permits)
A. All projects except as noted below $ 200 $ 230 Assumes 1 hour

1. Business License review - continuation of lawful existing use $ 60 $ 115

2. Accessory Dwelling Unit review -- $ 460
Assumes 2 hours for
neighborhood notices
and documentation
(Plan check is billed
separately, with Building
Permit)

3. SB35, SB330, other pre-application review -- $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours,
plus direct cost for
consultants

4. 2. Additional staff time (work performed beyond the time covered by the fees above) $ 200 $ 230 Per hour of staff time B. Building Permit review

1. Project with Administrative Use Permit $ 200 $ 230 Assumes 1 hour

2. Project with Use Permit and/or Variance $ 400 $ 460 Assumes 2 hours

3. In-kind Repair/Replacement (e.g. window replacement, dry rot repair, etc.) $ 60 $ 115 Assumes half hour

4. Fourth and subsequent plan check submittal $ 200 $ 230 per hour of staff time

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149
ATTACHMENT 2,
Proposed New Land Use Planning Division Fee Schedule

Page 2 ends

V. Modification / Transfer

1. Administrative Use Permit Modification $ 400 $ 1,840 Assumes 8 hours

2. Use Permit Modification (ZAB Review - No Public Hearing ) $ 1,200 $ 3,680 Assumes 16 hours

3. Use Permit Modification (ZAB Review - Public Hearing Required) $ 3,600 $ 5,520 Assumes 24 hours

4. Transfer of Administrative Use Permit / Use Permit $ 200 $ 230 Per hour of staff time

5. Public Hearing (per hearing, in addition to permit fees) $ 1,025 $ 1,025 Administrative costs
including staff time,
mailings, postings,
hearing room, etc.

VI. Environmental Review
A. California Environmental Quality Act (CEQA) or National Environmental Policy Act (NEPA)

1. Initial Study resulting in a Negative Declaration or Mitigated Negative Declaration $ 2,897 $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours,
plus direct cost for
consultants

2. Environmental Impact Report (EIR) $ 5,068 $ 9,200
Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours,
plus direct cost for
consultants
B. Mitigation Monitoring $ 200 $ 3,680
Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours,
plus direct cost for
consultants
C. Notices - NOE, NOD, etc. -- $ 920
Assumes four hours.

Fee applies when
notices are filed by the
City on behalf of the
applicant / City after all
appeals are heard
VII. Design Review
A. Administrative Design Review

1. Project valued under $50,000 $ 1,158 $ 1,840 Assumes 8 hours

2. Project valued at $50,000 to $2,000,000 $ 1,883 $ 2,760 Assumes 12 hours

3. Project valued over $2,000,000 $ 2,160 $ 3,680
Base fee Deposit
assumes 16 hours. Add
$230 per hour for staff
time beyond 16 hours.

4. Signs/Awnings $ 532 $ 460 Assumes 2 hours
B. Design Review Committee

1. Project valued under $50,000 $ 1,738 $ 2,760 Assumes 12 hours

2. Project valued at $50,000 to $2,000,000 $ 2,608 $ 3,680 Assumes 16 hours

3. Project valued over $2,000,000 $ 4,500 $ 5,520
Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

Additional Preview 456
C. Final Review with the DRC

1. Project valued under $50,000 $ 1,103 $ 1,250 Inflationary adjustment

2. Project valued at $50,000 - $150,000 $ 1,286 $ 1,500 Inflationary adjustment

3. Project valued over $150,000 $ 3,684 $ 4,250 Inflationary adjustment D. Additional Preview (existing fee, relocated from Sec. VII.B above) $ 456 $ 500 Inflationary adjustment E. Modifications - DRC Projects $ 547 $ 750 Inflationary adjustment F. DRC Public Hearing (per hearing, in addition to permit fees) $ 1,025 $ 1,025 Administrative costs
including staff time,
mailings, postings,
hearing room, etc.

FEE TYPE / DESCRIPTION CURRENT
FEE

PROPOSED

FEE REMARKS

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150
ATTACHMENT 2,
Proposed New Land Use Planning Division Fee Schedule

Page 3 ends

VIII. Landmarks Preservation Commission Review
A. Initiation

1. Structure $ 50 $ 50
As set by the
Landmarks
Preservation Ordinance.

BMC 3.24.340.A

2. District $ 50 $ 100
As set by the
Landmarks
Preservation Ordinance,
BMC 3.24.340.B
B. Design Review - Structural Alteration (non-residential only)

1. Project valued under $50,000 $ 1,738 $ 2,000 Inflationary adjustment

2. Project valued between $50,001 and $1,999,999 $ 2,608 $ 3,000 Inflationary adjustment

3. Project valued at $2,000,000 or more $ 4,500 $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

C. Design Review - Signs and Awnings $ 818 $ 1,000 Inflationary adjustment D. Demolition Review (non-residential structures 40 or more years old as required under Section 23C.08.050C of the Zoning Ordinance) $ 1,055 $ 1,200 Inflationary adjustment E. Mills Act Historical Contract Processing - payable upon application (one-time payment) $ 3,600 $ 4,200 Inflationary adjustment F. Mills Act Historical Contract Monitoring

1. Payable upon application to cover 5 contract years $ 2,160 $ 2,500 Inflationary adjustment

2. Assessed at the beginning of each subsequent 5 years $ 2,160 $ 2,500 Inflationary adjustment G. LPC Public Hearing (per hearing, in addition to permit fees) $ 1,025 $ 1,025 Administrative costs
including staff time,
mailings, postings,
hearing room, etc.

IX. Appeals
A. Non-Applicant Appeal of AUP $ 200 $ 500
B.

Reduced Non-Applicant Appeal of AUP: Fee reduced if signed by persons who lease or own at least 35 percent of the parcels or dwelling units within 300 feet of the project site, or at least 20 such persons (not including dependent children), whichever is less $ 75 $ 200
C. Non-Applicant Appeals of ZAB or LPC $ 500 $ 1,500
D.

Reduced Non-Applicant Appeals of ZAB or LPC: Fee reduced if appeal is signed by persons who lease or own at least 50 percent of the parcels or dwelling units within 300 feet of the project site, or at
least 25 such persons (not including dependent children), whichever is less $ 100 $ 500
E. Appeal of AUP by Applicants $ 2,500 $ 3,680
F. Appeal of ZAB or LPC by Applicants $ 2,500 $ 5,520
G. Appeal of DRSL or DRC by Non-Applicant $ 95 $ 500
H. Appeal of DRSL or DRC by Applicant $ 1,734 $ 3,680
I. Non-Applicant Appeals of all affordable housing projects (defined as projects which provide 50% or more affordable units for households at 80% or less of Area Median Income) $ 500 $ 500
J. Appeal to address processing error by staff Fee Waived Fee Waived X. Plan Amendments, Reclassification Requests, and Waterfront Master Development Plan permits* A. General Plan Amendment $ 2,500 $ 9,200 Base fee Deposit assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours,
plus direct cost for
consultants
B. Specific Plan Amendment $ 10,900 $ 9,200
C. Rezoning / Reclassification Request $ 2,500 $ 9,200
D. Waterfront Master Development Plan Permit $ 10,900 $ 9,200 XI. Miscellaneous Fees
A. Penalty for Late Filing (When Zoning Permit, Use Permit or Variance is required for work already performed) 100% 100% of applicable fee(s)
B. Zoning Complaint Re-inspection

1. First Re-inspection $ 200 $ 230

2. Second Re-inspection $ 300 $ 345

3. Third Re-inspection and all inspections thereafter $ 400 $ 460 C. Agenda Subscriptions and Mailing Fees
Amount
specified per
A. R. 3.8
Amount
specified per
A. R. 3.8
D. Publications and Duplication of Records
Amount
specified per
A. R. 3.8
Amount
specified per
A. R. 3.8
E. Maps - large, color $ 36.00 $ 36.00

FEE TYPE / DESCRIPTION CURRENT
FEE

PROPOSED

FEE REMARKS

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151
ATTACHMENT 2,
Proposed New Land Use Planning Division Fee Schedule

Page 4 ends

F. Cassette Tape Duplication of Zoning Adjustments Board, Landmarks Preservation Commission, and Design Review Commission meeting recordings Amount
specified per
A. R. 3.8
Amount
specified per
A. R. 3.8
G. Microfilm Duplication Fee
Amount
specified per
A.R. 3.8
Amount
specified per
A.R. 3.8
H. Records Management Fee $ 50 $ 50 per application
I. Zoning Burn Letters Regarding Nonconforming Status of Properties $ 200 $ 230 per hour, 2 hour min.

J. Housing Density Bonus Analysis - if separate from other permits $ 200 $ 230 per hour of staff time K. Zoning Research $ 200 $ 230 per hour, 2 hour min.

L. Oak Tree Review $ 200 $ 230 per hour, 1 hour min.,
plus consultant costs
M. Use Permit Monitoring $ 200 $ 230 per hour of staff time N. Pre-application Reviews

1. Staff level review $ 750 $ 920 Assumes 4 hours

Dedicated Project Review: In addition to all required fees, applicants may request (or the City may require) dedicated project review in which the applicant pays the City for staff overtime or to contract with a consulting firm with particular relevant
expertise to review the application. In such instances, the applicant shall remit a deposit equal to the total amount of the contract, based on the bids received by the City pursuant to its purchasing procedures. Progress billings will be made if charges are expected to exceed deposit; prompt payment of bills will assure continued project review. Failure to remit a progress payment within an appropriate time frame, as determined by the Director of Planning and Development or his/her designee, will be treated as a withdrawal without prejudice to the underlying proposal.

At cost
P. Community Planning Fee for General Plan and Zoning Ordinance Maintenance 15% 15% Surcharge on all
Applications for AUP,
UP, Modification and/or
Variance.

XII. CONDOMINIUM
A. Rent Board Review $ 120 $ 120 per unit
B. Notice of Local Law Compliance $ 2,978 $ 3,680 Assumes 16 hours C. Conversion to Condominiums - one to four units $ 6,748 $ 5,520 Base fee Deposit
assumes 24 hours. Add
$230 per hour for staff
time beyond 24 hours.

D. Conversion to Condominiums - five or more units $ 10,121 $ 9,200 Base fee Deposit
assumes 40 hours. Add
$230 per hour for staff
time beyond 40 hours.

E. Appeal of an Administrative Determination on Conversion of a TIC to the Planning Commission by an Applicant $ 842 $ 3,680 Assumes 16 hours
F. Appeal of Planning Commission Determination on Conversion to the City Council by an Applicant $ 842 $ 5,520 Assumes 24 hours
G. Appeal of Planning Commission Determination on Conversion to the City Council by a Non- Applicant $ 102 $ 3,680 Assumes 16 hours
NOTE: The minimum deposits listed are intended to reflect typical project costs. Progress billings will be made during review of a project if charges exceed the deposit: prompt payment of bills will assure continued project review. Failure to remit a progress payment within the appropriate time frame as determined by the Director of Planning and Development or his/her designee, will be treated as a withdrawal without prejudice to the underlying proposal. All fees are required to be paid prior to scheduling the item for Council consideration.

FEE TYPE / DESCRIPTION CURRENT
FEE

PROPOSED

FEE REMARKS

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152

NOTICE OF PUBLIC HEARING

BERKELEY CITY COUNCIL

BERKELEY UNIFIED SCHOOL DISTRICT BOARD ROOM,
1231 ADDISON STREET
The public may participate in this hearing by remote video or in-person.

REVISIONS TO PLANNING DEPARTMENT FEE SCHEDULE
Notice is hereby given by the City Council of the City of Berkeley that a public hearing will be conducted by said city council of the City of Berkeley at which time and place all persons may attend and be heard upon the following:

The Land Use Planning Division of the Department of Planning and Development is proposing the following changes to its fee schedule, to become effective July 1, 2022:

1. Clarifying the applicability of certain existing fees for services.

2. Increase the hourly rate for staff time from $200 per hour to $230 per hour for certain activities invoiced on an hourly basis.

3. Increasing certain deposits and fixed fees to better reflect the new hourly rates and the typical time spent on various permit types.

The hearing will be held on May 24, 2022 at 6:00 p.m. in the School District Board Room, 1231 Addison Street. The public may participate in this hearing by remote video or in- person.

For further information, please contact Steven Buckley, Land Use Planning Manager, at 510-981-7411.

A copy of the agenda material for this hearing will be available on the City’s website at www.CityofBerkeley.info as of MAY 12, 2022. Once posted, the agenda for this meeting will include a link for public participation using Zoom video technology.

Written comments should be mailed to the City Clerk, 2180 Milvia Street, Berkeley, CA 94704 or emailed to [email protected] in order to ensure delivery to all Councilmembers and inclusion in the agenda packet.

Communications to the Berkeley City Council are public record and will become part of the City’s electronic records, which are accessible through the City’s website. Please note: e-mail addresses, names, addresses, and other contact information are not required, but if included in any communication to the City Council, will become part of the public record. If you do not want your e-mail address or any other contact information to be made public, you may deliver communications via U.S. Postal Service or in person to the City Clerk. If you do not want your contact information included in the public record, please do not include that information in your communication. Please contact the City Clerk at 981-6900 or [email protected] for further information.

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153

If you challenge the above in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the City of Berkeley at, or prior to, the public hearing.

Background information concerning this proposal will be available at the City Clerk Department and posted on the City of Berkeley webpage at least 12 days prior to the public hearing.

Published: May 13 and May 20, 2022 – The Berkeley Voice Published pursuant to Government Code Section 6062a
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I hereby certify that the Notice for this Public Hearing of the Berkeley City Council was posted at the display case located near the walkway in front of the Maudelle Shirek Building, 2134 Martin Luther King Jr. Way, as well as on the City’s website, on May 12, 2022.

Mark Numainville, City Clerk

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154
Office of the City Manager
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099 E-mail: [email protected] Website: http://www.CityofBerkeley.info/Manager

PUBLIC HEARING
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Dee Williams-Ridley, City Manager
Submitted by: Sharon Friedrichsen, Budget Manager
Subject: Fiscal Years 2023 and 2024 Proposed Budget and Proposed Budget Public Hearing #1

RECOMMENDATION
Accept the Fiscal Years 2023 and 2024 Proposed Biennial Budget for review and consideration by the City Council and final adoption on June 28, 2022 and conduct Public Hearing #1 on the Fiscal Years 2023 and 2024 Proposed Budget.

FISCAL IMPACTS OF RECOMMENDATION
The Proposed Budget reflects planned citywide expenditures for Fiscal Years 2023 and 2024, including General Fund expenditures, and options to fund expenditures through anticipated new revenues, the continued use of the City’s remaining allocation of the American Rescue Plan Act funding as well as projected Fiscal Year 2022 General Fund excess equity as needed. The fiscal impact is subject to change based on forthcoming Council direction and will be codified with the adoption of the budget on June 28, 2022.

CURRENT SITUATION AND ITS EFFECTS
This report accompanies the Fiscal Years (“FY”) 2023 and 2024 Proposed Budget, which will be presented to Council for review and consideration on May 24, 2022. The Proposed Biennial Budget will include information on proposed revenues and expenditures by funding source; proposed expenditures by City department; proposed staffing levels; an update on the City’s strategic plan priorities and goals; performance measures and the proposed capital improvement program.

Following the presentation on the Proposed Budget, staff requests that the City Council conduct the first public hearing on the budget. Subsequently, the Budget and Finance Policy Committee and City Council will continue discussions regarding the proposed budget prior to adoption on June 28, 2022, as reflected in the attached FY 2023- 2024 Biennial Budget Development Schedule. The FY 2023 and 2024 Proposed Budget is a Strategic Plan Priority Project, advancing our goal to provide an efficient and financially- health City government.

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155

FY 2023 & 2024 Proposed Budget and Proposed Budget Public Hearing #1 ACTION CALENDAR May 24, 2022

ENVIRONMENTAL SUSTAINABILITY AND CLIMATE IMPACTS
Actions included in the budget will be developed and implemented in a manner that is consistent with the City’s environmental sustainability goals and requirements.

RATIONALE FOR RECOMMENDATION
This recommendation presents the Fiscal Years 2023 and 2024 Proposed Budget to City Council and begins the first of several public hearings pertaining to the budget, leading to adoption on June 28, 2022.

ALTERNATIVE ACTIONS CONSIDERED
No alternative actions have been considered.

CONTACT PERSON
Sharon Friedrichsen, Budget Manager, City Manager’s Office, 981-7000 Attachments:

1. Public Hearing Notice

2. Biennial Budget Development Schedule

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156

NOTICE OF PUBLIC HEARING

BERKELEY CITY COUNCIL
FY 2023 AND FY 2024 PROPOSED BUDGET PUBLIC HEARING #1
The public may participate in this hearing by remote video or in-person.

The City Manager’s Office is proposing a public hearing for the Fiscal Years 2023 and 2024 Proposed Budget, which is being presented to the City Council.

The hearing will be held on Tuesday, May 24, 2022 at 6:00 p.m. at the Berkeley Unified School District Board Room located at 1231 Addison Street, Berkeley CA 94702.

A copy of the agenda material for this hearing will be available on the City’s website at www.CityofBerkeley.info as of May 12, 2022. Once posted, the agenda for this meeting will include a link for public participation using Zoom video technology, as well as any health and safety requirements for in-person attendance.

For further information, please contact Sharon Friedrichsen at (510) 981-7000.

Written comments should be mailed to the City Clerk, 2180 Milvia Street, Berkeley, CA 94704, or e-mailed to [email protected] in order to ensure delivery to all Councilmembers and inclusion in the agenda packet.

If you do not want your contact information included in the public record, please do not include that information in your communication. Please contact the City Clerk at (510) 981-6900 or [email protected] for further information. ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I hereby certify that the Notice for this Public Hearing of the Berkeley City Council was posted at the display case located near the walkway in front of the Maudelle Shirek Building, 2134 Martin Luther King Jr. Way, as well as on the City’s website, on May 12, 2022.
__________________________________
Mark Numainville, City Clerk

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157
FY 2023-2024 Biennial Budget Development Schedule
Revised 5/12/22 P a g e | 1
Date Lead Entity Action Item/Deliverable/Topic
January 27 Budget & Finance Committee Review of Budget Development Schedule February 10 Budget & Finance Committee Review of Council Budget and Fiscal Policies February 24 Budget & Finance Committee Homelessness Funding Priorities Discussion February 24 Budget & Finance Committee FY 22 Mid-Year and American Rescue Plan Act Update February 24 Budget & Finance Committee General Fund Expenditures: Discussion on FY 23 & 24 Budget Assumptions on Personnel Costs, Including “Salary Savings” March 10 Budget & Finance Committee Measure P Overview and Fund Forecast March 10 Budget & Finance Committee Legislative Update: Governor's FY 22-23 Proposed Budget, Federal Infrastructure Bill, Introduced Legislation
March 10 Budget & Finance Committee Five-Year Capital Improvement Program and Proposed Projects March 22 Council FY 22 Mid-Year and American Rescue Plan Act Update April 12 Council Five-Year Capital Improvement Program and Proposed Projects April 14 Budget & Finance Committee FY 22 AAO #2 Update April 14 Budget & Finance Committee General Fund Revenue and Expenditures: Five-Year Forecast Special Revenue/Enterprise/Other Funds Forecast
April 14 Budget & Finance Committee Overview of the FY 23 & 24 “Preliminary” Budget April 14 Budget & Finance Committee Capital Improvement Program Recommendations April 14 Budget & Finance Committee Discussion on Budget Engagement Strategies April 22 Council Initial Budget Referrals to City Manager April 26 Council Public Hearing on CDBG & ESG Annual Action Plan April 27 Budget & Finance Committee Department Presentations; Measure P Allocation and Proposed Initial Recommendations
Schedule Continued on Next Page
Dates are tentative and subject to change

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FY 2023-2024 Biennial Budget Development Schedule
Revised 5/12/22 P a g e | 2
Date Lead Entity Action Item/Deliverable/Topic
Department Presentations April 28 Budget & Finance Committee Discuss and develop alternative revenue streams for the Marina Fund including a dedicated reserve
April 29 Budget & Finance Committee Department Presentations May 10 Council Public Hearing to Receive FY 22 AAO#2 Report (1st reading) Receive presentation on FY 23 proposed fees
Discussion on Proposed Biennial Budget & CIP RecommendationsMay 12 Budget & Finance Committee Review of Council Fiscal Policies
To Be Determined
Week of May 16
Budget & Finance Committee Discussion on Proposed Biennial Budget & CIP Recommendations Review of Council Fiscal Policies
May 24 Council Receive AAO#2 Report (2nd reading), Public Hearing on FY 23 Fees, Receive Proposed FY 23 & 24 Budget and Capital Improvement Program and Public Hearing on Proposed Biennial Budget
May 26 Budget & Finance Committee Legislative Update- Governor's FY 22-23 May Revision Budget, Federal and State Legislation Update
May 31 Council Last Council Meeting for Budget Referrals, Receive Council Comments on Proposed Biennial Budget and Capital Improvement Program May 31 Public Budget Inquiry Forms Due to Budget Office (responses included as part of June 14 Council public hearing on the biennial budget) Discussion on Proposed Biennial Budget & CIP RecommendationsJune 9 Budget & Finance Committee Review of Council Fiscal Polices; Discussion on AAO Criteria and Timing June 14 Council Public hearing on Proposed Biennial Budget & CIP Recommendations June 23 Budget & Finance Committee Discussion on Proposed Biennial Budget Recommendations June 28 Council FY 23 & 24 Budget Adoption, including Capital Improvement Program; Approval of FY 23 AAO and Approval of Tax Rate

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2180 Milvia
Street, Berkeley, CA 94704 ● Tel: (510) 981-6750 ● TDD: (510) 981-6903 E-mail: [email protected] ● Website: https://berkeleyca.gov/your-government/city-audits

ACTION CALENDAR
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Jenny Wong, City Auditor
Subject: Berkeley’s Financial Condition (F Y 2012 – FY 2021): Pension Liabilities and Infrastructure Need Attention

RECOMMENDATION
We recommend City Council request that the City Manager report back by November 2022, and every six months thereafter, regarding the status of our audit recommendations until reported fully implemented by the City Manager and Finance Department. They have agreed to our findings and recommendations. Please see our report for their complete response.

FISCAL IMPACTS OF RECOMMENDATION
The audit recommendations are intended to build on the City’s financial strengths and address the risks identified in the report. If the City does not implement the recommendations, unfunded pension liabilities and infrastructure needs will continue to grow and may put pressure on other spending priorities in the future. The City may also be less prepared for unforeseen economic challenges if it does not assess the risk of the reserves, and ensure that enterprise funds can balance and avoid recurring shortfalls. Additionally, the City may overlook important considerations in determining a manageable level of debt if it does not update its debt policy.

CURRENT SITUATION AND ITS EFFECTS
We used various financial indicators to analyze the City’s financial condition between FY 2012 and FY 2021. While the City’s near-term financial outlook was mostly positive, the financial indicators related to the City’s long-term outlook revealed some challenges.

Near-Term
 Revenues and Expenses: The City’s revenues have increased since FY 2012 and outpaced expenses most years. Governmental activities expenses exceeded revenues in FY 2020 due to the economic impacts of COVID-19, but the City took balancing measures to address the revenue shortfall in FY 2021.
 Demographic and Economic Indicators: Indicators related to the economic stability of the Berkeley community, including assessed value of property and personal income per capita, showed sustained strength over the audit period.
 Net Position, Liquidity, and Reserves: The City’s net position has been negative due to unfunded pension and other post-employment benefit (OPEB) liabilities. The City maintained a strong liquidity ratio despite setting aside funds in the Stability and Catastrophic reserves.

While the reserves helped address the shortfall caused by the pandemic, without a risk assessment of the reserves and plan for how to replenish them, the City may be less prepared for unforeseen economic challenges. Most enterprise funds have met the City’s

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161
Berkeley’s
Financial Condition:

Pension Liabilities and Infrastructure Need Attention May 24, 2022 requirement to balance since FY 2016, but the City does not have a policy outlining the target fund balance necessary for the funds to balance and avoid recurring annual shortfalls.

Long-Term
 Long-Term Debt (excluding pension and OPEB): Long-term liabilities have increased, but compared to benchmark cities, Berkeley’s long-term liabilities per resident are in the middle range. Gene
ral obligation bond debt has remained low compared to total taxable assessed property value, but gene
ral obligation debt per resident has increased and the City’s debt policy does
not have robust criteria to assess its debt capacity.
 Pension and OPEB Liabilities: Berkeley’s unfunded liabilities for retiree benefits continue to pose a finan
cial risk to the City. The City established a Section 115 Trust to pre-fund pension obligations,
but has consistently fallen short of the annual contribution goal. Without a plan to ensure sufficient
funding of the Section 115 Trust, the City may not be prepared to make its required Cal
PERS contributions.
 Capital Ass
ets: The City is facing a reported $1.2 billion unfunded capital and deferred maintenance need as of FY 2021. Without a funding plan to r educe these needs, the City
cannot address the current problem or prevent future unfunded capital needs.

BACKG
ROUND
This audit provides Berkeley residents, businesses, city management, and public officials with a high-level overview of the City’s financial condition over 10 fiscal years. By broadening the scope of financial reporting to incorporate long-term financial trends, financial condition analysis can introduce long-term considerations into the budgeting process, clarify the City’s fiscal strengths and weaknesses, and help highlight financial risks that the City needs to address.

ENVIRONMENTAL SUSTAINABILITY
Our office manages and stores audit workpapers and other documents electronically to significantly reduce our use of paper and ink. Our audit recommendation to implement a funding plan to reduce the City’s unfunded capital and deferred maintenance needs could also support more resilient and sustainable infrastructure and help advance the Vision 2050 effort.

RATIONALE FOR RECOMMENDATION
Implementing our recommendations will help the City address its unfunded capital and deferred maintenance needs and unfunded pension liabilities. Our recommendations will also help the City prepare for unforeseen economic challenges by assessing the risk of the reserves, and ensure that enterprise funds can balance and avoid recurring shortfalls. Additionally, our recommendation to update the City’s debt policy will strengthen the City’s ability to assess its general obligation debt capacity.

CONTACT PERSON
Jenny Wong, City Auditor, City Auditor’s Office, 510-981-6750 Attachment: Audit Report: Berkeley’s Financial Condition (FY 2012 – FY 2021): Pension Liabilities and Infrastructure Need Attention

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Promoting transparency and accountability in Berkeley government Audit Report
May 5, 2022
Berkeley’s Financial
Condition (FY 2012-
FY 2021): Pension
Liabilities and
Infrastructure Need
Attention

Jenny Wong, City Auditor
Caitlin Palmer, Senior Auditor
Pauline Miller, Auditor I

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163

However, the financial indicators related to the City’s long-term outlook reveal some challenges that need to be addressed.

Near-Term
Revenues and Expenses: Since Fiscal Year (FY) 2012,
revenues have grown and exceeded expenses in eight of the last ten fiscal years. Although expenses exceeded revenues in FY 2020 due to the COVID-19 pandemic, the City took budgetary actions to address the revenue shortfall.

Demographic and Economic Indicators: The Berkeley
community showed sustained economic health overall. The taxable assessed value of property and personal income of Berkeley residents increased since FY 2012.

Net Position, Liquidity, and Reserves: The City has
maintained a strong liquidity ratio, though the City’s net position has been negative due to unfunded pension and other post- employment benefit (OPEB) liabilities. The City established the Stability and Catastrophic Reserves, and used a portion of those reserves to cover the General Fund deficit caused by the COVID- 19 pandemic. All of the City’s enterprise funds have experienced at least one annual shortfall over the past five years.

Long-Term
Long-Term Debt and Liabilities: Berkeley’s long-term
liabilities have increased since FY 2012, but compared to benchmark cities, Berkeley’s long-term liabilities per resident are in the middle range. General obligation bond debt per resident has increased. Berkeley’s general obligation bond debt has remained low compared to total taxable assessed property value, but the City’s debt policy does not have robust criteria to assess debt capacity.

Net Pension and Other Post-Employment Benefits
Liabilities: Like other California cities, Berkeley’s unfunded liabilities for retiree benefits continue to pose a financial risk to the City. The California State Auditor considers Berkeley’s pension funding ratio to be high risk. The City started setting aside resources dedicated to prefunding pension obligations in a Section 115 Trust, but has not met its annual contribution goals.

Continued on next page.

May 5, 2022
Objective
Our objective was to assess
Berkeley’s financial condition using
indicators for the following
categories:

1. Revenues and Expenses

2. Demographic and Economic
Indicators

3. Net Position, Liquidity, and
Reserves

4. Long-Term Debt and Liabilities

5. Net Pension and Other Post-
Employment Benefit (OPEB)
Liabilities

6. Capital Assets

Why This Audit Is Important
Financial condition analysis
simplifies complex financial
information to make it more
accessible. By incorporating long-
term financial trends, financial
condition analysis can introduce long
-term considerations into the
budgeting process, clarify the City’s
fiscal strengths and weaknesses, and
help highlight financial risks that the
City needs to address. This audit is
especially relevant as the COVID-19
pandemic has underscored the
importance of financial flexibility.

During fiscal year 2021, the City
faced a $40 million General Fund
deficit and made difficult decisions to
balance the budget.

Berkeley’s Financial Condition (FY 2012-FY 2021):

Pension Liabilities and Infrastructure Need Attention

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Promoting transparency and accountability in Berkeley government Report Highlights
For the full report, visit:
https://berkeleyca.gov/your-government/city-audits
Themes & Findings
Net Pension Liability Per Plan (in millions, adjusted for inflation)
Source: Department of Finance data
Capital Assets: The City’s underinvestment in infrastructure has led to a reported $1.2 billion unfunded capital and deferred maintenance need. Without sufficient investment now, these liabilities will continue to grow.

Unfunded Capital and Deferred Maintenance Needs
FY 2017 to FY 2021 (adjusted for inflation)
Source: Berkeley’s unfunded liability reports
May 5, 2022
Recommendations
To better prepare the City for unforeseen
economic challenges, we recommend that
the City Manager complete the risk
assessment required by the City’s reserves
policy as scheduled and propose a plan to
City Council to replenish the reserves.

To ensure the City’s enterprise funds can
balance and avoid recurring annual
shortfalls, we recommend the City
Manager assess the appropriate fund
balance for each of the City’s enterprise
funds, report findings to the City Council,
and explore financial policy options to
manage enterprise fund balances.

To strengthen the City’s debt
management, we recommend that the
Finance Department update the Debt
Management Policy.

To maximize the benefit of the Section 115
Trust for prefunding pension obligations,
we recommend that the City Manager
present a plan for adoption by the City
Council to assure sufficient contributions
to the Trust.

To address rising costs for unmet capital
needs, we recommend that the City
Manager collaborate with the Department
of Public Works to implement a funding
plan aimed at reducing the City’s
unfunded capital and deferred
maintenance needs and ensuring regular
maintenance of city assets to prevent
excessive deferred maintenance costs in
the future.

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Introduction Berkeley’s Financial Condition (FY 2012 - FY 2021) 1 Table of Contents
Introduction ............................................................................................ 1 Background ............................................................................................ 3 Revenues and Expenses ......................................................................... 5 Demographic and Economic Indicators ................................................. 11 Net Position, Liquidity, and Reserves ..................................................... 14 Long-Term Debt and Liabilities ............................................................. 21 Net Pension and Other Post-Employment Benefit (OPEB) Liabilities ...... 28 Capital Assets ........................................................................................ 33 Recommendations and Management Response ..................................... 37 Methodology and Statement of Compliance .......................................... 39 Appendix I. Enterprise Funds ................................................................ 44

Introduction
This audit provides Berkeley residents, businesses, city management, and public officials with a high- level overview of the City’s long-term financial condition over 10 fiscal years (FY), from FY 2012 to FY 2021. By broadening the scope of financial reporting to incorporate long-term financial trends, financial condition analysis can introduce long-term considerations into the budgeting process, clarify the City’s fiscal strengths and weaknesses, and help highlight financial risks that the City needs to address. This report is designed to be easy to understand for readers without a background in finance.

Overall, Berkeley’s near-term financial outlook is strong. However, in the long term, Berkeley faces difficult decisions related to future costs for employee pensions, other post-employment benefits (OPEB), and capital assets. Due to Berkeley’s strong near-term financial condition, the City was able to address recent unexpected declines in revenues. In coming years, it will be important for the City to balance its near-term needs and long-term financial obligations.

Throughout the report, we compared some of Berkeley’s financial indicators to other California cities with similar characteristics. Across almost all financial indicators that we benchmarked to peer cities, Berkeley is not an outlier and ranks at or near the middle of the range.

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Introduction Berkeley’s Financial Condition (FY 2012 - FY 2021) 2 Objective, Scope, and Methodology
Our objective was to assess Berkeley’s financial condition using financial indicators for the following categories:

1. Revenues and Expenses

2. Demographic and Economic Indicators

3. Net Position, Liquidity, and Reserves

4. Long-Term Debt and Liabilities

5. Unfunded Pension and Other Post-Employment Benefit (OPEB) Liabilities

6. Capital Assets
To meet our objective, we relied mainly on data from Berkeley’s Annual Comprehensive Financial Reports (ACFRs).1 For some indicators, we also analyzed other sources of city financial data. Where appropriate, we adjusted financial indicators for inflation using the Bay Area Consumer Price Index calculated by the U.S. Bureau of Labor Statistics to express values in 2021 dollars. We note where our findings are adjusted for inflation. We examined Berkeley’s financial data for the past 10 fiscal years, from FY 2012 to FY 2021, except for a few indicators for which data was only available for limited years.

We used financial indicators included in the International City/County Management Association’s (ICMA) Evaluating Financial Condition handbook for local governments. Additionally, we used one indicator developed by the California State Auditor’s Office for their Fiscal Health of California Cities dashboard2 as well as indicators used by peer cities in their financial condition audits. We do not provide an in-depth analysis of causes and impact, but we point out areas of financial risk for the City to evaluate further.

To better understand how some of Berkeley’s financial indicators compared to peer cities, we benchmarked to California cities with some similar economic and social factors such as population, general fund expenditures per resident, services provided, and presence of a large university. We selected Davis, Long Beach, Oakland, Pasadena, Santa Clara, and Santa Monica because these cities are similar to Berkeley across one or more criteria. Due to variation in availability of comparison cities’ FY 2021 ACFRs, we used FY 2020 data for the comparisons.

For more information on our methodology and data reliability assessment, see page 39.

1 Berkeley’s Annual Comprehensive Financial Reports are available on the Department of Finance website:
https://berkeleyca.gov/your-government/financial-information/financial-reports-and-policies 2 Fiscal Health of California Cities: https://www.auditor.ca.gov/local_high_risk/dashboard-csa

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Background Berkeley’s Financial Condition (FY 2012 - FY 2021) 3 Background
According to the ICMA, a government’s financial condition broadly refers to its ability to finance its services on an ongoing basis. Financial condition also refers to a government’s ability to maintain current service levels, withstand unexpected economic downturns, and meet the changing needs of residents.

This audit considers Berkeley’s many unique characteristics. Berkeley has the highest population density of any city in the East Bay. Berkeley’s economy is shaped by the presence of the University of California, Berkeley campus, the high assessed value of property, relatively high personal income per capita, and a diverse tax base. The City provides residents a full range of services beyond those offered by most similarly-sized cities in California. The City offers its own public safety services; sanitation, sewer, and waste management services; parks, recreation, and the Berkeley Marina; health, housing, and community services, including city-funded health clinics and mental health services; animal control; public improvements; planning and zoning; general and administrative services; and library services. Berkeley is also a relatively older city and faces inherent challenges with aging infrastructure.

Financial Reporting Terms
Governmental and Business-Type Activities. Governmental activities are government functions that are supported mostly by taxes and intergovernmental revenues. Governmental activities fund city operations serving all Berkeley residents, including general government, public safety, transportation, community development, and culture and leisure. Business-type activities are the programs that operate like businesses, and are intended to cover all or a significant portion of their costs with user fees and charges for service. Examples of business-type activities include the Berkeley Marina, Zero Waste services, and the Permit Service Center. These services are supported by enterprise funds established to finance and account for the operation and maintenance of business-type activities. This audit report discusses business-type activities but mainly focuses on governmental activities.

Governmental Funds. For financial reporting purposes, most of the City’s basic services are reported in its various governmental funds. The General Fund is the largest of all governmental funds and is the City’s primary operating fund which pays for general services provided by the City. Other governmental funds include the General Grants Fund, the Library Fund, and the Capital Improvement Fund that are designated for specific purposes.

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Background Berkeley’s Financial Condition (FY 2012 - FY 2021) 4 Financial Policies
City Council has developed guidelines to inform the budgeting process, and the Department of Finance has developed citywide financial management policies. An in-depth analysis of the City’s compliance with fiscal policies was outside of the scope of this audit.

Council Guidelines:

1. Focusing on the long-term fiscal health of the City by adopting a two-year budget and conducting multi-year planning;

2. Building a prudent reserve;

3. Developing long-term strategies to reduce unfunded liabilities;

4. Controlling labor costs while minimizing layoffs;

5. Allocating one-time revenue for one-time expenses;

6. Requiring enterprise and grant funds to balance and new programs to pay for themselves;

7. Requiring new revenue or expenditure reductions along with any new expenditure;

8. Using Transfer Tax in excess of $12.5 million as one-time revenue for the City’s capital infrastructure needs;

9. As the General Fund subsidy to the Safety Members Pension Fund declines over the next several years, using the amount of the annual decrease to help fund the new Police Employee Retiree Health Plan; and

10. Allocating short-term rental tax revenues exceeding the amount needed to pay for staffing to the Affordable Housing Trust Fund (66.7 percent) and the Civic Arts Grant Fund (33.3 percent).

Citywide Financial Management Policies:3

1. Investment Policy: Pooled Cash and Investment Policy

2. Investment Policy: Retiree Medical Plan Trust Funds

3. Debt Management and Disclosure Policy

4. General Fund Reserve Policy

5. With regard to spending, the City’s policy is to spend restricted fund balances before spending unrestricted fund balances. This refers to expenditures incurred for which both restricted and unrestricted funds are available, and excludes cases in which a city ordinance or resolution specifies the fund balance.

3 The City’s policies related to investment, Retiree Medical Plan Trust funds, reserves, and debt management are available on the Finance Department’s webpage: https://berkeleyca.gov/your-government/financial- information/financial-reports-and-policies

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 5 Revenues and Expenses
Revenues
Revenues refer to money available for appropriation during the fiscal year, including the money the City receives over the course of the year (new revenues) and balances carried over from prior years.

Revenues determine the City’s capacity to provide services. Ideally, revenues should come from stable and diverse sources, and should grow at the same rate or faster than inflation and expenses.

Where do revenues for Berkeley’s governmental activities come from? Taxes make up the majority of revenues used to fund governmental activities. In FY 2021, the largest source of revenues was property taxes. State and local taxes were the second largest source (Figure 1).

Some of the City’s tax revenues are set by other jurisdictions, which limits the City’s ability to increase those taxes. For example, the City receives only 32.6 percent of Real Property Tax revenues collected by Alameda County. The rest is distributed between the county, schools, and special districts.

Figure 1. Revenues for Governmental Activities by Source, FY 2021

Note: “Other” includes revenues from contributions not restricted to specific programs, revenues (or losses) from the gain or loss on the sale of capital assets, miscellaneous revenues, and revenues from other unrestricted state subventions.

Source: Berkeley FY 2021 ACFR
Of all revenue streams, revenues from property taxes grew the most between FY 2012 and FY 2021, adjusted for inflation (Figure 2). Revenues from charges for services declined the most between FY 2012 and FY 2021.

Charges for Service
7%
Operating/Capital
Grants and
Contributions
16%
Investment Earnings
2%
Other
1%
Property Taxes
51%
State and Local
Taxes
23%

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 6 Figure 2. Revenues for Governmental Activities by Source (in millions, adjusted for inflation)

Source: Berkeley ACFRs
For every dollar of property tax revenue the City received in FY 2021, a portion was designated to general purposes, library services, city parks, debt service for voter-approved bond measures,4 fire department services, and paramedic services (Figure 3).

Figure 3. Breakdown of Berkeley’s Property Tax Revenues, FY 2021

General Purposes
69¢
Library
11¢
Parks
8¢
Debt
Service
7¢
Fire
3¢
Paramedic
2¢
Note: Figure 3 represents the portion of property taxes the City received, and does not account for taxes allocated to other jurisdictions.

Source: Berkeley FY 2021 ACFR

4 Bond measures include Measure FF, Measure M, Measure T1, Measure O, and Refunding Bonds. $125.6
$67.2
$46.0 $38.2
$3.6 $5.0
$183.0
$83.4
$55.7
$25.7
$7.9 $2.4
Property Taxes State and Local
Taxes
Operating/Capital
Grants and
Contributions
Charges for Service Investment
Earnings
Other
FY 2012 (adjusted for inflation) FY 2021

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 7 Governmental activities revenues increased by 25 percent.

When adjusted for inflation, governmental activities revenues increased by 25 percent, from $285.6 million in FY 2012 to $358.0 million in FY 2021. Business-type revenues increased by 23 percent, from $95.8 million to $117.5 million (Figure 4). The City’s total revenues grew by 25 percent.

Figure 4. Revenues (in millions, adjusted for inflation)

Source: Berkeley ACFRs
According to ICMA, as the population of a city increases, revenues should grow proportionately, resulting in near constant revenues per resident over time. A decline in revenues per resident would suggest that the City is unable to maintain service levels using existing revenues, but Berkeley’s governmental activities revenues per resident have increased by 23 percent since FY 2012, adjusted for inflation.

Compared to benchmark cities, Berkeley's governmental activities revenues per resident were in the middle of the range at $2,756 per resident (Figure 5).

Figure 5. Revenues for Governmental Activities per Resident, FY 2020

Source: Cities’ FY 2020 ACFRs

$285.6 $286.7 $297.6 $281.3 $305.7 $317.7 $319.6
$353.5 $348.5 $358.0
$95.8 $97.0 $103.1 $112.2 $111.5 $116.1 $120.0 $125.6 $125.6 $117.5 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Governmental Activities Revenues
Business-Type Activities Revenues
$4,951
$2,879
$2,757
$2,756
$2,262
$1,889
$1,210
Santa Monica
Oakland
Pasadena
Berkeley
Santa Clara
Long Beach
Davis

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 8 UC Berkeley has provided economic stability and revenue.

Berkeley is home to the main campus of the University of California (UC Berkeley), which provides a high degree of economic stability for the City. During the audit period, UC Berkeley brought an average of about 40,000 students to Berkeley each year. It was also one of the City’s largest employers, employing an average of about 14,000 people each year. UC Berkeley students, employees, and visitors contribute to the local economy, though the COVID-19 pandemic caused UC Berkeley to temporarily stop in-person classes. Additionally, UC Berkeley has spurred growth in the technology and biotechnology sectors, which contribute to the diversity of the City’s economy and helped lessen the economic impacts of the pandemic. The university presence also generates expenses for the City of Berkeley. In 2021, UC Berkeley agreed to pay the City $82.6 million over 16 years to support city expenses, including fire and other city services.

Expenses
Expenses refer to money the City records as spent each year. Expenses are a rough measure of the City’s service output. Generally, the more services a city provides, the greater the city’s expenses. Expense growth rates are a critical measurement of a city’s ability to operate within its revenue constraints.

What does Berkeley spend on governmental activities?
In FY 2021, public safety, culture and recreation, and health and welfare represented the City’s largest expenses by function (Figure 6).

Figure 6. Expenses for Governmental Activities by Function, FY 2021

Source: Berkeley FY 2021 ACFR

General Government
11%
Public Safety
44%
Highways and
Streets
5%
Health and Welfare
12%
Culture and Recreation
15%
Community Development and
Housing
10%
Economic Development
2%
Interest on Long-Term Debt
2%

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 9 The largest increase in spending for governmental activities was for public safety.

Between FY 2012 and FY 2021, the city functions with the largest increases in spending were public safety and health and welfare, when adjusted for inflation. Conversely, spending on highways and streets and general government decreased (Figure 7).

Figure 7. Expenses for Governmental Activities by Function (in millions, adjusted for inflation)

Source: Berkeley ACFRs
Governmental activities expenses increased by 20 percent.

Between FY 2012 and FY 2021, governmental activities expenses increased by 20 percent from $284.2 million to $341.4 million, adjusted for inflation. Expenses for business-type activities increased by 10 percent from $94.5 million to $104.2 million (Figure 8). The City’s total expenses grew by 18 percent.

Figure 8. Expenses (in millions, adjusted for inflation)

Source: Berkeley ACFRs
According to ICMA, because personnel costs are a major portion of a local government’s operating budget, tracking changes in the number of employees per capita is a good way to measure changes in costs. Between FY 2012 and FY 2021, the number of full-time equivalent employees per 1,000 residents increased slightly from 13.4 to 13.9, as shown in Figure 9. $121.0
$45.3 $38.6 $25.2 $25.1 $19.0 $4.7 $5.3
$149.2
$52.0 $38.0 $41.6 $32.8 $16.7 $5.6 $5.5
Public Safety Culture and
Recreation
General
Government
Health and
Welfare
Community
Development
and Housing
Highways
and Streets
Economic
Development
Long-Term
Debt Interest
FY 2012 (adjusted for inflation) FY 2021
$284.2 $274.8 $273.2 $284.8 $284.0 $272.5
$317.7 $337.1 $362.3 $341.4
$94.5 $94.5 $92.2 $93.0 $89.3 $98.1 $101.2 $110.4 $111.7 $104.2 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Business-type Activities Expenses
Governmental Activities Expenses

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Revenues and Expenses Berkeley’s Financial Condition (FY 2012 - FY 2021) 10 Figure 9. Full-Time Equivalent City Employees per 1,000 Residents

Source: Berkeley FY 2021 ACFR
The City’s governmental activities revenues generally outpaced expenses.

According to ICMA, it is important to track whether governmental expenses grow faster than revenues to ensure that the City is able to fund all of its programs and services at the current level. Between FY 2012 and FY 2021, revenues for governmental activities exceeded expenses eight out of ten years (Figure 10).

Figure 10. Governmental Activities Revenues and Expenses (in millions, adjusted for inflation)

Source: Berkeley ACFRs
Governmental activities expenses exceeded revenues by the greatest amount in FY 2020, when the City issued the COVID-19 Risk Reduction Order. Expenses related to governmental activities exceeded diminished revenues by $13.7 million, adjusted for inflation. To address the revenue shortfall in FY 2021, the City took a number of actions including a hiring freeze, delaying spending on capital, reducing non-personnel expenditures, drawing on emergency reserves, reducing transfers to internal service funds, and suspending the Council policy to allocate Property Transfer Tax revenues in excess of $12.5 million to the Capital Improvement Fund.

13.4 12.8 11.3 11.1 11.1 11.2 11.5 12.6 13.2 13.9
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 $285.6 $286.7 $297.6
$281.3
$305.7 $317.7 $319.6
$353.5
$348.5
$358.0
$284.2 $274.8 $273.2
$284.8
$284.0 $272.5
$317.7 $337.1
$362.3
$341.4
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Governmental revenues exceeded
governmental expenses for all years surveyed
except for FY 2015 and FY 2020.

Revenues
Expenses

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Demographic and Economic Indicators Berkeley’s Financial Condition (FY 2012 - FY 2021) 11 Demographic and Economic Indicators
Demographic and economic factors such as population, personal income, and taxable assessed property values reflect the strength of the City’s tax base and residents’ overall ability to contribute to city revenues through taxes. Similarly, the unemployment rate sheds light on the local economy and the strength of the City’s revenue base. These factors also affect the types of city services the community needs.

Population
For the most part, Berkeley’s population increased during the audit period. However, in fiscal years 2020 and 2021, the population declined (Figure 11). This decrease coincided with the COVID-19 pandemic and may be due to temporary relocation of students or other Berkeley residents.

Figure 11. Population

Source: Berkeley FY 2021 ACFR
The City’s Unemployment rate improved in FY 2021.

The City’s unemployment rate reflects changes in personal income, which affect the community’s ability to generate tax revenues. Berkeley’s unemployment rate declined from 9.0 percent in FY 2012 following the 2007-2009 recession to 3.1 percent in FY 2019. By FY 2020, the City’s unemployment rate increased to 13.5 percent. This spike in unemployment is due to the COVID-19 pandemic beginning in March 2020 and risk reduction orders that limited economic activity. Unemployment is expected to decrease as the economy recovers. According to the California Employment Development Department (EDD), Berkeley’s unemployment rate in June 2021 was 5.5 percent, a sign of economic recovery. For comparison, the Oakland-Hayward-Berkeley metropolitan area unemployment rate as of June 2021 was 6.8 percent.

114,821 115,716 117,372 118,853 119,915 121,238 121,874 123,328 122,580 116,761
100,000
105,000
110,000
115,000
120,000
125,000
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

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Demographic and Economic Indicators Berkeley’s Financial Condition (FY 2012 - FY 2021) 12 Personal income per resident has grown since FY 2012.

Personal income per resident is a key component of a City’s financial condition because it is a measure of a community’s ability to pay taxes. Between FY 2012 and FY 2021, the average personal income of Berkeley residents increased 11 percent from $45,794 per resident to $50,619 per resident, adjusted for inflation.

In FY 2020, Berkeley’s personal income per resident was higher than all but one benchmark city (Figure 12).

Figure 12. Personal Income per Resident, FY 2020

Note: Oakland’s 2020 ACFR uses a personal income figure based on the San Francisco-Oakland-Hayward Metropolitan Statistical Area. We used the most recent census data available to estimate Oakland’s personal income per resident.

Source: Cities’ FY 2020 ACFRs, Santa Monica FY 2021 ACFR, U.S. Census Bureau Property values have been a strong and growing source of city revenues.

Property values are integral to Berkeley’s overall financial health. Growth in taxable assessed property value corresponds to growth in property tax revenues because property taxes are based on a percentage of the assessed value of property.

Berkeley has benefited from growing taxable assessed property values. Between FY 2012 and FY 2021, the assessed value of taxable property in Berkeley increased by 32 percent, from $16.2 billion to $21.3 billion, adjusted for inflation (Figure 13).
$66,684
$48,229
$47,868
$46,407
$44,181
$42,079
$41,828
Santa Monica
Berkeley
Santa Clara
Oakland
Pasadena
Long Beach
Davis

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Demographic and Economic Indicators Berkeley’s Financial Condition (FY 2012 - FY 2021) 13 Figure 13. Total Taxable Assessed Property Value (in billions, adjusted for inflation)

Source: Berkeley FY 2021 ACFR
Berkeley’s taxable assessed property values did not decrease during the 2007-2009 recession nor the COVID-19 pandemic, which suggests that Berkeley’s taxable assessed property values have been generally less affected by economic downturns than some other cities. Additionally, Berkeley has a high collection rate for property taxes. Between FY 2012 and FY 2021, the collection rate for taxes levied on property fluctuated between 97 percent and 99 percent.

$16.2 $16.2 $16.7 $17.0 $17.8 $18.2 $18.8 $19.5 $20.4 $21.3 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 14 Net Position, Liquidity, and Reserves
Net position measures the difference between the City’s assets (what it owns) and its liabilities (what it owes). Net position reflects a government’s financial condition at a point in time, and can be thought of as the City’s remaining resources after its debts are accounted for.

Liquidity measures a government’s ability to balance its budget and pay its bills on time. It generally refers to the City’s cash position, which includes cash on hand and in the bank, as well as other assets that can easily be converted into cash. Liquidity tells us about the City’s ability to pay its short-term obligations, while net position represents a longer-term view of the City’s financial condition because it includes assets not easily converted into cash. These concepts are connected because declining or low liquidity, or a cash shortage, may be the first sign that a government has overextended itself in the long run.

Reserves are funds set aside for future use and are built through the accumulation of operating surpluses. Strong reserves allow cities to weather economic downturns more effectively, manage the consequences of outside agency actions that may result in revenue reductions, and address unexpected emergencies like natural disasters and other catastrophic events such as pandemics.

The City’s net position related to governmental activities has been negative due to unfunded liabilities.

Between FY 2012 and FY 2021, Berkeley’s net position related to governmental activities changed from $311.7 million to -$101.7 million, adjusted for inflation (Figure 14). In FY 2015, a change in Governmental Accounting Standards Board (GASB) standards required government entities to report the total long-term cost of pension benefits as a liability in their annual financial reports. In FY 2018, another change in GASB accounting standards required government entities to also report the total long-term cost of other post-employment benefits (OPEB) as a liability in their annual financial reports.

As a result of these changes in standards, Berkeley's reported net position declined significantly in those years.

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 15 Figure 14. Net Position (in millions, adjusted for inflation)

Source: Berkeley ACFRs
The accounting standards that changed in fiscal years 2015 and 2018 did not materially alter the City’s financial condition. Rather, the City started including its pension and OPEB liabilities in its net position calculations in the ACFR. The City’s net position will likely remain negative in coming years if the City’s unfunded pension and OPEB liabilities continue to grow. Pension and OPEB liabilities are covered in more depth starting on page 28.

Berkeley’s liquidity ratio is strong, but has declined since FY 2018.

The liquidity ratio, otherwise known as cash position, measures the City's ability to pay its short-term obligations. According to ICMA, the ratio is calculated by dividing cash and short-term investments (assets that can be easily converted to cash) by current liabilities (short-term obligations). A liquidity ratio of greater than one would indicate that cash and short-term investments exceed current liabilities.

A ratio of one or less than one would be considered a cause for concern, particularly if this trend persists for more than three years.

Overall, Berkeley's liquidity ratio has remained positive from FY 2012 to FY 2021. Berkeley’s liquidity ratio more than doubled from FY 2012 to FY 2018, then began to decline, from 5.9 in FY 2018 to 1.7 in FY 2021 (Figure 15).
$311.7 $317.2 $333.8
-$140.5 -$115.3 -$70.5
-$132.5 -$108.0
-$120.9
-$101.7
$211.0 $206.4 $209.6
$147.5 $166.0 $176.5 $180.9 $185.3 $201.4 $210.4
-$200
-$100
$0
$100
$200
$300
$400
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Business-Type Activities
Governmental Activities
Changes in 2015 and 2018 net position were largely due
changes in accounting reporting standards.

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 16 Figure 15. Liquidity Ratio of Current Assets to Current Liabilities

Source: Berkeley ACFRs
According to the Department of Finance, the recent decline in the liquidity ratio is partly due to setting aside funds for reserves and a recent influx of federal funding. The City established reserves in FY 2017, which restricted a portion of funds and reduced the amount of available cash. Additionally, in FY 2021, the City received $33.3 million in federal aid through the American Rescue Plan, which was accounted for as an unearned revenue liability.

While the decrease in the liquidity ratio since FY 2017 suggests that Berkeley's capacity to pay its bills in the short-term has declined over time, the liquidity ratio does not capture all of the funds the City has to pay its bills.

The COVID-19 pandemic slowed the City’s progress toward its 2027 reserve funding goal.

In FY 2017, the City created the Catastrophic Reserve and the Stability Reserve following a city audit of the General Fund reserve policy. The Catastrophic Reserve is intended to support General Fund operations in the event of a public emergency defined as extreme, one-time events, such as an earthquake, fire, flood, civil unrest, terrorist attack, public health emergencies, and pandemics. The Stability Reserve is intended to help the City maintain services and reduce financial risks associated with unexpected revenue shortfalls during a single fiscal year or prolonged period of recession.

Based on current trends, the City is not on track to meet the reserve balance goal of 30 percent of General Fund revenues by FY 2027 as set by the City’s reserve policy. As shown in Figure 16, the City was meeting its reserve goals in FY 2017 through FY 2019. However, the City fell off track in FY 2020 because it borrowed from both reserves to balance a General Fund deficit caused by the impact of COVID-19 on city revenues.

2.6 3.5 3.6 4.0 4.5

5.6 5.9

4.8 3.0

1.7 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 17 Figure 16. Actual Reserves Compared to Reserve Goal

Note: The graph does not represent the policy's intermediate goal of 16.7 percent because the purpose is to show a possible path from the start of the reserves to the long-term goal.

Source: Year-End Results and First Quarter Budget Update Reports To cover the General Fund deficit, the City borrowed $6.9 million from the Stability Reserve and $4.5 million from the Catastrophic Reserve. The City repaid $3.3 million dollars in FY 2021. The City does not currently have a plan for how to meet its FY 2027 reserve goal.

The General Fund reserve policy states that City Council may consider increasing or lowering the level of reserves based on a risk assessment to be updated at least every five years. Since the reserves were established in FY 2017, the first risk assessment would be due in FY 2022.

All of the City’s enterprise funds faced at least one annual shortfall between FY 2016 and FY 2021.

Business-type activities include the City’s enterprise funds. Enterprise funds are funds that the City uses to account for the operation and maintenance of facilities and services, and are mainly supported by user charges.

The City’s budgets provide summaries of fund balances for all enterprise funds except for Building Purchases and Management.5 The City Council’s current policy states that enterprise funds are required to balance. Fund balances are the net of expenditures and revenues. For a fund to be considered balanced, revenues should be equal to or greater than expenditures.

5 Ending fund balances for fiscal years 2016 through 2020 reflect actuals, while the ending fund balance for FY 2021 reflects the adopted budget amount from the FY 2022 budget. 0%
5%
10%
15%
20%
25%
30%
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
FY
2022
FY
2023
FY
2024
FY
2025
FY
2026
FY
2027
Actual reserves as percentage of General Fund revenues
Reserve policy goal
FY 2027
Goal: 30%
Reserve funds used to cover budget
shortfall due to COVID-19

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 18 This section presents an overview of summaries from city budgets. A detailed analysis of individual enterprise funds was outside of the scope of this audit. For an overview of the City’s enterprise funds, see Appendix I.

The Permit Service Center Fund has faced annual shortfalls in three of the most recent six years (Table 1). The fund's recovery will depend on economic recovery from the COVID-19 pandemic.

Table 1. Permit Service Center Fund Balance, FY 2016 - FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance $12,617,224 $11,233,859 $11,516,323 $12,777,977 $12,643,651 $15,398,407 Ending Balance $11,233,859 $11,516,329 $12,777,853 $12,643,651 $15,398,407 $12,070,511 Surplus/(Shortfall) ($1,383,365) $282,470 $1,261,530 ($134,326) $2,754,756 ($3,327,896) Source: Berkeley’s budgets
The Sanitary Sewer Fund has faced annual shortfalls in two of the most recent six years (Table 2).

Factors that contribute to depressed revenues include drought conditions and water conservation efforts. Additionally, the upcoming Sanitary Sewer Master Plan will determine if future rate increases are needed.

Table 2. Sanitary Sewer Fund Balance, FY 2016 - FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance $7,897,389 $5,309,962 $9,203,590 $13,203,977 $26,027,896 $25,918,159 Ending Balance $5,309,962 $9,203,575 $13,203,975 $26,027,896 $25,918,159 $29,898,141 Surplus/(Shortfall) ($2,587,427) $3,893,613 $4,000,385 $12,823,919 ($109,737) $3,979,982 Source: Berkeley’s budgets
The Zero Waste Fund faced one annual shortfall in FY 2021 (Table 3). A rate study is in progress to determine if increases are needed moving forward.

Table 3. Zero Waste Fund Balance, FY 2016 - FY 2021
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance $5,566,976 $11,403,226 $13,664,122 $17,677,642 $20,079,053 $24,358,287 Ending Balance $11,403,226 $13,677,397 $17,677,654 $20,079,053 $24,358,287 $22,996,702 Surplus/(Shortfall) $5,836,250 $2,274,171 $4,013,532 $2,401,411 $4,279,234 ($1,361,585) Source: Berkeley’s budgets
The Parking Meter Fund has faced annual shortfalls in two of the most recent six years (Table 4). The pandemic had an immediate and severe impact on parking meter revenues. Fund recovery will depend on the length of the pandemic and economic recovery.

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 19 Table 4. Parking Meter Fund Balance, FY 2016 - FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance $5,241,583 $5,379,078 $5,683,946 $3,270,420 $4,990,946 $3,208,091 Ending Balance $5,379,078 $5,683,942 $3,270,432 $4,990,946 $3,208,091 $4,629,330 Surplus/(Shortfall) $137,495 $304,864 ($2,413,514) $1,720,526 ($1,782,855) $1,421,239 Source: Berkeley’s budgets
The Marina Fund faced annual shortfalls in three of the most recent six years (Table 5). The COVID-19 pandemic significantly worsened the fund's revenue outlook, as lease revenues from hotel, restaurant, and commercial tenants greatly decreased.

Table 5. Marina Fund Balance, FY 2016 - FY 2021
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance $2,709,368 $3,640,031 $3,998,848 $3,058,152 $3,503,847 $3,151,777 Ending Balance $3,640,031 $3,999,406 $3,058,161 $3,503,847 $3,151,777 $2,597,486 Surplus/(Shortfall) $930,663 $359,375 ($940,687) $445,695 ($352,070) ($554,291) Source: Berkeley’s budgets
The Off-Street Parking Fund faced annual shortfalls in two of the three most recent years (Table 6). The Center Street garage reopened in FY 2019 after two years of construction and was subsequently impacted by revenues losses associated with the pandemic. Fund recovery will depend on the length of the pandemic and economic recovery.

Table 6. Off-Street Parking Fund Balance, FY 2016 - FY 2021 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Beginning Balance missing missing missing $9,342,477 $2,235,776 ($1,215,101) Ending Balance missing missing missing $2,235,776 ($1,215,101) ($106,157) Surplus/(Shortfall) missing missing missing ($7,106,701) ($3,450,877) $1,108,944 Source: Berkeley’s budgets
In fiscal years 2020 and 2021, the Off-Street Parking Fund was unable to balance, as reflected in the negative ending fund balance (Table 6). According to the Budget Office, if a shortfall exists, revenues can be supplemented with the existing fund balance, and if funds are unable to balance, they become a General Fund liability. The Budget Office stated that they work with departments that manage enterprise funds during the budget process and throughout the year to ensure the funds do not face recurring shortfalls. However, the City does not have a policy outlining the target fund balance necessary to balance enterprise funds and avoid recurring annual shortfalls. Without targets, it is difficult to assess the financial condition of each enterprise fund.

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Net Position, Liquidity, and Reserves Berkeley’s Financial Condition (FY 2012 - FY 2021) 20 Recommendations

1.1 To better prepare the City for unforeseen economic challenges, we recommend that the City Manager complete the risk assessment required by the City’s reserve policy as scheduled and propose to the City Council a plan to replenish the Stability and Catastrophic Reserves based on the results of the assessment. This may include revising the funding goal for 2027 to align with the City’s financial reality and projected risk level.

1.2 To ensure the City’s enterprise funds can balance and avoid recurring annual shortfalls, we recommend the City Manager assess the appropriate fund balance for each of the City’s enterprise funds, report findings to the City Council and explore financial policy options to manage enterprise fund balances.

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 21 Long-Term Debt and Liabilities
Not Including Pension and Other Post-Employment Benefit Liabilities Why do local governments take on long-term debt?
Debt financing can be a reasonable strategy for local governments, as it allows cities to borrow to pay for large infrastructure initiatives. Additionally, since infrastructure like streets and public buildings are used over multiple decades, borrowing spreads the cost burden over time so that taxpayers who will benefit from the asset now and in the future can help pay for it.

While financing projects through debt spreads costs over time, it commits the City to pay fixed debt service6 costs for many years. Decisions around debt also affect the Berkeley community. Debt impacts homeowners and businesses who pay the cost of debt through taxes on property and renters who may face higher rents passed down as a result of increased taxes on property. Like many financial decisions local governments make, issuing long-term debt requires a careful review of tradeoffs. For Berkeley, unfunded capital and deferred maintenance needs are an important consideration, as deferred investments in infrastructure assets can mean higher costs down the line.

What are long-term liabilities?
An accounting liability is an obligation to make a payment in the future as a result of a past event.

Long-term liabilities include debts, in addition to other long-term obligations like accrued vacation and sick leave, accrued workers’ compensation claims and judgments, and accrued public liability claims and judgments. Long-term liabilities can include unfunded pension and other post-employment benefits (OPEB), but they are not included in this section and instead covered in depth on page 28.

Between FY 2012 and FY 2021, the City’s total long-term liabilities (excluding pension and OPEB) increased from $197.5 million to $270.0 million, adjusted for inflation (Figure 17). 6 Debt service is the set of payments including principal and interest that is required to be made through the life of the debt.

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 22 Figure 17. Governmental Activities Long-Term Liabilities (in millions, adjusted for inflation)
Source: Berkeley ACFRs
Compared to benchmark cities, Berkeley is not an outlier. Cities’ total long-term liabilities for governmental activities ranged from $88 per resident to $3,008 per resident in FY 2020. Berkeley’s long-term liabilities were in the middle of that range at $1,858 per resident (Figure 18).

Figure 18. Governmental Activities Long-Term Liabilities per Resident, FY 2020 Source: Cities’ FY 2020 ACFRs
Debt by Type
The City has a variety of debt instruments used primarily to finance acquisition and construction of capital facilities projects and equipment needs. Ninety-one percent of Berkeley’s debt comes from general obligation bonds (Figure 19). These are bond measures that must have at least two-thirds voter approval to pass. The City’s current general obligation bonds include Measure T1, a loan to fund infrastructure and facilities; Measure M, a loan to fund street paving and greening infrastructure projects; and Measure O, a loan to fund low income housing. The remaining nine percent of Berkeley’s debt comes from revenue bonds, capital leases, and loans payable (Figure 19). $88
$428
$1,772
$1,858
$2,253
$2,627
$3,008
Davis
Santa Clara
Pasadena
Berkeley
Long Beach
Oakland
Santa Monica
$197.5
$187.7
$193.6
$181.2
$181.2
$180.8
$207.4
$199.0
$235.0
$270.0
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 23 Figure 19. Governmental Activities Debt by Type, FY 2021 Source: Berkeley FY 2021 ACFR
Berkeley’s general obligation bond ratings have been consistently favorable and improved in FY 2019.

The City's overall debt standing is reflected in its strong bond ratings. Bond ratings issued by credit agencies are a measure of the certainty that the City will pay all interest and principal owed to investors.

The higher the bond rating, the lower the cost of borrowing; the lower the cost of borrowing, the more savings the City can pass on to taxpayers. The City's general obligation bond ratings from Standard and Poor's remained at its second highest rating of AA+ over the audit period. The City's general obligation bond ratings from Moody's were Aa2, the third highest bond rating offered by Moody's, before they increased to Aa1 in FY 2019 (Table 7).

Table 7. Berkeley’s General Obligation Bond Ratings
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
S&P's Rating AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+ AA+
Moody's Rating Aa2 Aa2 Aa2 Aa2 Aa2 Aa2 Aa2 Aa1 Aa1 Aa1
Source: Berkeley ACFRs
The City’s general obligation bond debt remained under one percent of taxable assessed property value.

In 2017, Berkeley established a debt policy that sets a debt capacity limit for its general obligation bonds at 15 percent of taxable assessed value of property. Over the audit period, the City’s general obligation bond debt has remained below one percent of taxable assessed property value (Figure 20), which is significantly lower than the City’s current threshold of 15 percent.

General
Obligation Bonds
$192.7 (91%)
Revenue Bonds
$8.4 (4%)
Capital Leases
$4.6 (2%)
Loans Payable
$6.2 (3%)

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 24 Figure 20. General Obligation Bond Debt as a Proportion of Taxable Assessed Property Value
Source: Berkeley FY 2021 ACFR
General obligation bond debt per resident has grown but payments for existing debt will peak in FY 2024.

Another way to track the burden of a City’s debt is through the change in debt per resident over time.

Most of Berkeley’s bonded debt comes from general obligation bonds. General obligation bond debt is repaid through taxes on property.

Since FY 2012, Berkeley voters have passed three general obligation bonds authorizing the City to borrow a total of $265 million. Of that authorized $265 million, the City currently has $117 million in unissued debt for Measure T1 and Measure O that it plans to issue in the coming years, which will be added to the City’s total debt.

Between FY 2012 and FY 2021, the City's general obligation bond debt per resident increased from $893 to $1,559 per resident, adjusted for inflation (Table 8).

0.63% 0.59% 0.65% 0.59% 0.56% 0.56% 0.68% 0.60% 0.72% 0.85% 15%
FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 Debt Limit in
Policy

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 25 Table 8. Outstanding General Obligation Debt per Resident (adjusted for inflation) Fiscal Year
General Obligation
Bonded Debt per
Resident
Debt Issued Bond Measure
2012 $ 893
2013 $ 830
2014 $ 920 $ 15,000,000 Measure M
2015 $ 850
2016 $ 832 $ 15,000,000 Measure M
2017 $ 848 $ 35,000,000 Measure T1
2018 $ 1,043
2019 $ 951
2020 $ 1,203 $ 38,000,000 Measure O
2021 $ 1,559 $ 45,000,000 Measure T1
Note: This figure does not include the $117 million authorized by voters but not yet issued by the City.

Source: Berkeley FY 2021 ACFR, Department of Finance data According to projections in the FY 2021 ACFR, the amount of debt service for existing debt will peak in 2024 and decline until it is paid off in 2052 (Table 9). Residents of Berkeley also face debt obligations from other jurisdictions not administered by the City, including three current general obligation bonds issued by the Berkeley Unified School District.

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 26 Table 9. Remaining Scheduled Debt Service on Outstanding General Obligation Debt (in millions)
Fiscal Year Scheduled Debt
Service Fiscal Year
Scheduled Debt
Service
2022 $10.8 2038 $9.2
2023 $12.5 2039 $8.8
2024 $12.7 2040 $8.8
2025 $11.8 2041 $7.4
2026 $11.8 2042 $7.4
2027 $11.8 2043 $7.5
2028 $11.8 2044 $7.5
2029 $10.9 2045 $6.6
2030 $9.7 2046 $6.6
2031 $9.2 2047 $6.6
2032 $9.2 2048 $5.7
2033 $9.2 2049 $4.0
2034 $9.2 2050 $4.0
2035 $9.2 2051 $4.0
2036 $9.2 2052 $2.0
2037 $9.2
Note: This table represents a snapshot of the City’s debt service payments based on the amount of general obligation bond debt in FY 2021. This table does not include the $117 million in authorized general obligation bonds that the City plans to issue by 2026.

Source: Berkeley FY 2021 ACFR
According to the Finance Director, the City is planning to issue an additional $40 million in Measure O bonds in FY 2022. Once the City has issued this amount, the City will have a remaining balance of $77 million in unissued bond funds from Measure O and Measure T1. The City plans to issue this remaining authorized amount between FY 2024 and FY 2026. This additional debt will affect the amount of general obligation bond debt per resident and the schedule of future debt service payments.

The City’s limit for general obligation bond debt is set at 15 percent of total assessed property value.

As of FY 2021, the estimated total taxable assessed value of property in Berkeley was $21.3 billion. Since the City sets its threshold for general obligation bond debt at 15 percent of assessed property value, the most recent general obligation bond debt limit was $3.2 billion dollars. Based on the current policy, the City is permitted to borrow a remaining $3.0 billion dollars in addition to its current debt.

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Long-Term Debt and Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 27 According to the Government Finance Officers Association (GFOA), appropriate debt limits can have a positive impact on bond ratings, especially if they are adhered to over time. GFOA states that limits on debt can be set according to debt per capita, debt to personal income, debt to taxable property value, and debt service payments as a proportion of general fund revenues or expenditures. In its 2021 general obligation rating report, Standard and Poor’s noted the City has a basic debt policy that includes some quantitative limits but does not include robust quantitative measures or benchmarks. While Berkeley’s policy does consider the ratio of debt to taxable assessed value of property, it does not evaluate any additional factors used by some other cities to assess their debt capacity. For example, the City of Santa Monica’s general obligation debt limit is based on two of GFOA’s measures of affordability: debt per capita and debt as a percentage of assessed property value (Santa Monica sets this threshold at 10 percent). If Berkeley does not consider more robust quantitative metrics to assess its general obligation debt capacity, the City may overlook important considerations in determining a manageable level of debt.

Recommendations

2.1 To strengthen the City’s debt management, we recommend that the Finance Department update the Debt Management Policy. The Finance Department may consider revising its current general obligation bond threshold of 15 percent of assessed property value or building upon the City’s existing general obligation bond debt limit by considering additional debt capacity factors such as debt per capita, debt to personal income, and/or debt service payments as a proportion of General Fund revenues.

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Net Pension and OPEB Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 28 Net Pension and Other Post-Employment
Benefit (OPEB) Liabilities
What is a net pension or OPEB liability?
Berkeley contributes to various employee retirement benefit plans including the California Public Employees Retirement System (CalPERS). These benefits are earned by employees each year to be paid out after they retire. If the estimated cost of benefits exceeds the value of the assets that have been set aside to pay for those benefits, a net pension or net OPEB liability exists. The net pension liability or net OPEB liability as reported in the City’s financial documents is the unfunded portion of the City’s total pension or OPEB liability, also referred to as an unfunded liability.

Pension and OPEB contributions can place significant pressure on a city’s budget. Additionally, some factors, such as yearly required contributions for CalPERS plans are set by CalPERS and are outside the City’s control, posing a widespread challenge for California cities. Cities that do not have substantial funds set aside today will likely face impacts to their credit rating and have to make higher contributions to plans later, which could limit funding for other priorities.

The City’s total unfunded liability for pension and OPEB commitments increased.

In total, the City’s unfunded liability for pension benefits and OPEB grew by 36 percent, from $567.4 million in FY 2012 to $773.1 million in FY 2021, adjusted for inflation (Figure 21).

Figure 21. Combined Net Pension and OPEB Liabilities (in millions, adjusted for inflation)
Source: Department of Finance data
$567.4
$666.2 $723.9
$623.4 $685.8 $723.0 $743.6 $721.6 $787.2 $773.1
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021

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Net Pension and OPEB Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 29 Further, the City’s 2021 report on unfunded liability obligations and unfunded infrastructure needs (unfunded liability report) states that the City will face an estimated $42 million increase in pension costs over the next ten years.

Net Pension Liability
Berkeley has five defined benefit retirement plans. Defined benefit retirement plans include funds set aside over time by employees and their employer, and employees are guaranteed a certain amount of income upon retirement. Berkeley's three plans administered through the CalPERS are the Miscellaneous Plan, the Public Safety Fire Plan, and the Public Safety Police Plan. Berkeley also has two older city-sponsored plans that are closed to new members and being phased out: the Berkeley Retirement Income Benefit Plan7 and Safety Members Pension Plan.8 Between FY 2012 and FY 2021, the City's total net pension liability grew by 30 percent, from $506.9 million to $657.9 million, adjusted for inflation (Figure 22).

Figure 22. Net Pension Liability per Plan (in millions, adjusted for inflation) Source: Department of Finance data
Decisions made by the CalPERS Board between FY 2012 and FY 2021 increased the City’s net pension liability and Berkeley’s required pension contribution amount. These included CalPERS ramping up required pension funding rates to improve cities’ chances of fully funding their plans within 30 years, as well as adopting new assumptions related to longer retiree lifespans and returns on investments. 7 The Berkeley Retirement Income Benefit Plan is a single -employer defined benefit pension plan offered to police employees with CalPERS pensions who retired with at least ten years of service on or after July 1, 1989 and before September 19, 2012. As of June 30, 2021, there were 147 remaining active employees covered by the plan. 8 The Safety Members Pension Fund is a single -employer defined benefit pension plan for fire and police officers that retired before March 1973. As of June 30, 2020, there were eight remainin g participants in the plan. $506.9
$594.0 $628.4
$533.3 $558.0
$609.6 $642.8 $613.5 $643.5 $657.9
$0
$100
$200
$300
$400
$500
$600
$700
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
2021
Safety Members
Pension Plan
Berkeley Retirement
Income Benefit Plan
CalPERS Public
Safety Police Plan
CalPERS Public
Safety Fire Plan
CalPERS
Miscellaneous Plan

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Net Pension and OPEB Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 30 Net OPEB Liability
In addition to pensions, the City has unfunded liabilities related to other post-employment benefits (OPEB), or earned compensation other than pensions provided to employees when they retire. In Berkeley, OPEB refers to retiree healthcare coverage.

Berkeley's net OPEB liability grew 91 percent between FY 2012 and FY 2021, from $60.4 million to $115.1 million, adjusted for inflation (Figure 23). According to the Director of Finance, Berkeley has paid less than its actuarially determined contributions for all of its OPEB plans since FY 2012.

Figure 23. Net OPEB Liability (in millions, adjusted for inflation) Source: Department of Finance data
The California State Auditor considers Berkeley’s pension funded ratio to be high risk.

The pension funded ratio compares the City’s pension plan assets to its accrued pension liabilities. A funded ratio of 100 percent indicates that a city has set aside enough assets to pay for all pension benefits earned by its employees. If a city does not set aside adequate assets to fund its pension liability, its required contributions may become costlier in the future, which could impact its spending priorities down the line.

Based on the California State Auditor’s assessment, Berkeley’s pension funded ratio was considered high risk from FY 2017 to FY 2020, the years for which the California State Auditor has assessed this metric (Table 10).
$60.4
$72.2
$95.5 $90.1
$127.8
$113.5
$100.7 $108.1
$143.7
$115.1
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
FY
2019
FY
2020
FY
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Net Pension and OPEB Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 31 Table 10. Berkeley’s Funded Ratio Risk Level, FY 2017 - FY 2020 Risk
Value of Pension Assets
Compared to Accrued
Pension Liabilities
FY 2017 FY 2018 FY 2019 FY 2020
High 0-70% 67% 67% 67% 66%
Moderate 71-80%
Low 81-100%
Source: California State Auditor’s Financial Health Dashboard The funded ratio of benchmark cities ranged from 63 percent to 78 percent in FY 2020. The funded ratio of Berkeley’s pension plans fell in the middle of that range at 66 percent (Figure 24).

Figure 24. Funded Ratio of Pension Plans, FY 2020
Source: California State Auditor’s Financial Health Dashboard The City has taken steps to increase pension funding.

Following a city audit of unfunded liabilities,9 the City established an IRS Section 115 Trust Fund (Trust) in FY 2018 to help pre-fund its pension obligations. The Trust acts as a rainy-day fund that allows the City to set aside resources restricted for payment of pension obligations and is intended to prepare for and partially offset increases in contributions in the coming years.10 When the City established the Trust in 2018, the City already had some funds set aside for employee retirement benefits, so there was a starting balance of $3.8 million. The City’s actuary indicated that the City should be investing a minimum of $4.0 million in the Trust annually. In FY 2018, the City’s target contribution was $4.0 million. In FY 2019, the target contribution increased to $5.5 million. The City 9 Employee Benefits: Tough Decisions Ahead: https://berkeleyca.gov/sites/default/files/2022-01/2010-11- 16_Item_13_Employee_Benefits_Tough_Decisions_Ahead-Auditor%281%29.pdf 10 According to the 2021 Unfunded Liabilities Report, employer contributions for the City’s three CalPERS pension plans fluctuate from year to year based on an annual actuarial valuation performed by CalPERS. The rate CalPERS comes up with is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. 78%
77%
75%
66%
66%
65%
63%
Long Beach
Santa Monica
Pasadena
Berkeley
Oakland
Davis
Santa Clara

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Net Pension and OPEB Liabilities Berkeley’s Financial Condition (FY 2012 - FY 2021) 32 has made contributions to the Trust on a yearly basis since FY 2018, but has fallen short of its goals (Table 11).

Table 11. Contributions to the Section 115 Trust, FY 2018 - FY 2021 Fiscal Year
Actual
Contribution
Target
Contribution Difference
2018 $150,058 $4,000,000 ($3,849,942)
2019 $5,246,508 $5,500,000 ($253,492)
2020 $1,398,416 $5,500,000 ($4,101,584)
2021 $1,470,134 $5,500,000 ($4,029,866)
Source: Office of Budget and Fiscal Management data, Department of Finance data As of FY 2021, the Section 115 Trust balance was $12.1 million. The City is currently evaluating opportunities to invest more into the Trust, including by raising the Property Transfer Tax baseline by $2.5 million and allocating those funds to the Trust, and allocating savings generated by prefunding CalPERS plans to the Trust.

Recommendations

3.1 To maximize the benefit of the Section 115 Trust, we recommend that the City Manager present a plan for adoption by the City Council to assure sufficient contributions to the Trust. This may include taking the steps proposed by the Budget and Finance Committee to increase contributions to the trust. It may also include a strategy to ensure that the City is able to meet its yearly contribution goals, such as allocating contributions at the beginning of the budget cycle.

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Capital Assets Berkeley’s Financial Condition (FY 2012 - FY 2021) 33 Capital Assets
How do the City’s capital assets impact its financial condition? Capital assets are assets that are used in city operations and have a life that extends beyond a single financial reporting period. Berkeley owns a wide range of capital assets, including public buildings, streets,11 sidewalks, sewers and storm drains, traffic signals, and parking infrastructure. The City’s responsibility for managing capital assets requires considerable resources and ongoing attention. As a relatively older city, Berkeley faces added challenges related to aging infrastructure. The City publishes a Capital Improvement Plan (CIP) that identifies anticipated financial needs over a five-year timeframe.

However, the City’s ability to fund the CIP is limited by its total available resources.12 If a city does not address regular maintenance on its capital assets, it can face deferred maintenance costs down the line. Addressing capital assets once their condition has severely deteriorated is often more expensive than regular preventative care or maintenance. According to the Metropolitan Transportation Commission, regular maintenance of roads is five to ten times cheaper than allowing roads to fail and then paying for the necessary rehabilitation (Figure 25).

Figure 25. Pavement Maintenance Costs
Source: Metropolitan Transportation Commission Pothole Report III 2018 11 This includes streets and roads as defined in the City’s FY 2017-FY 2021 reports on unfunded liability obligations and unfunded infrastructure needs.
12 Funding sources for the Capital Improvement Plan include: the General Fund, special revenue funds, Measure T1, enterprise funds such as Zero Waste, the Marina, Sanitary/Sewer, Clean Storm Water, and Parking Meter; internal service funds such as the Equipment Replacement Fund; and federal, state and local funds and grants.

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Capital Assets Berkeley’s Financial Condition (FY 2012 - FY 2021) 34 One way to track the status of capital assets is to examine growth in unfunded capital needs related to improving the condition of current assets and building or acquiring new assets. Similar to unfunded pension and OPEB liabilities, unfunded capital and deferred maintenance needs refer to the gap between the funding needs and the funds available to address those needs. The City’s level of unfunded capital and deferred maintenance needs reflect the adequacy of the City’s investment in this area over time. Without regular maintenance, the City accumulates large deferred maintenance costs required to improve the condition of its assets.

In FY 2012, the City Council adopted a resolution requiring the City Manager to develop and publish a biennial report of current liabilities and projections of future liabilities. The following section provides an overview of the City’s reporting on unfunded capital and deferred maintenance needs.

The City reported $1.2 billion in unfunded capital and deferred maintenance needs in FY 2021.

Berkeley’s unfunded capital and deferred maintenance needs13 are growing. According to the City’s unfunded liability reports, since FY 2017, these costs have grown from $524 million to $1.2 billion, adjusted for inflation (Figure 26). The Department of Public Works has stated that the estimated $1.2 billion in current capital and deferred maintenance needs is an undercount, as many city priorities are not included in that figure. Since FY 2017, the greatest increase in capital and deferred maintenance needs has been for public buildings, which has increased by nearly 648 percent, from $37.8 million to $282.3 million when adjusted for inflation.
13 Capital and deferred maintenance needs refer to a broad range of necessary activities, including investment in new capital assets, improving existing capital assets, replacing existing capital assets, and repairing existing capital assets.

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Capital Assets Berkeley’s Financial Condition (FY 2012 - FY 2021) 35 Figure 26. Unfunded Capital and Deferred Maintenance Needs, FY 2017 - FY 2021 (adjusted for inflation)
Note: The figure includes data from FY 2017 to FY 2021 because comprehensive data was not available prior to FY 2017. We did not include IT-related assets due to incomplete data, but these costs would not significantly change the capital and deferred maintenance needs outlook. Unfunded needs for sidewalks are included in the figure, but were only included as a separate asset category in the 2019 and 2021 reports. City staf f update these estimates regularly.

Source: Berkeley’s unfunded liability reports
According to the City’s 2021 unfunded liability report, the key drivers of this growth in capital and deferred maintenance needs are aging infrastructure and limited resources allocated toward infrastructure. According to the Director of Public Works, other factors include new state mandates and surging material costs during the pandemic, and the $1.2 billion figure also reflects the City’s efforts to more comprehensively assess all of its assets. More recently, the City deferred some spending on capital to offset the FY 2021 budget shortfall due to COVID-19. Although Berkeley voters have passed a number of infrastructure bonds detailed in the long-term debt section, Measures M, T1, and O were steps in the right direction, yet insufficient to meet the growing risk. As noted in our 2020 streets audit, Measure M funding was lower than the unfunded need previously estimated by the City Auditor. As a result, the condition of Berkeley streets remained at risk, and the funds did not reverse the growing trend of unmet street infrastructure needs.

FY 2017 FY 2019 FY 2021
Traffic Signals
Storm Drains
Sewers
Streets
Sidewalks
Public Buildings
Parks, Park Buildings,
Pools, Waterfront, and
Camps
$524 million
$1.2 billion

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Capital Assets Berkeley’s Financial Condition (FY 2012 - FY 2021) 36 The rapid rise in Berkeley’s unfunded capital asset needs suggests that the City has not allocated enough funding to adequately maintain key capital assets like public buildings, streets, and sidewalks.

This trend presents a serious risk to the City's long-term financial health if these needs continue to grow. The City’s streets in particular are projected to deteriorate further without a significant investment, leading to higher costs later.

In addition to rapid cost escalation, as capital and deferred maintenance needs grow, it may become more difficult for the City to balance providing services and paying for capital assets, especially if important infrastructure cannot function as intended. While a deeper analysis of the condition of the City’s capital assets and the factors that have contributed to the size of capital needs was outside of the scope of this audit, there is more detailed information about the current status, causes, and potential effects related to the City’s streets in our 2020 streets audit.14 The City is planning to take steps towards addressing the unfunded capital needs. One of the City’s Vision 205015 strategies to support more resilient and sustainable infrastructure will focus on addressing inadequate funding of infrastructure by introducing a new revenue source.16 In FY 2022, the City Council provided direction on the development of a significant revenue measure or measures focused on infrastructure, including streets and affordable housing. The Public Works Department is conducting community outreach to explore opportunities for revenue measures to offset the City’s unfunded capital and maintenance needs.17
Recommendations

4.1 To address rising costs for unmet capital needs, we recommend that the City Manager collaborate with the Department of Public Works to implement a funding plan aimed at 1) reducing the City’s unfunded capital and deferred maintenance needs, and 2) ensuring regular maintenance of city assets to prevent excessive deferred maintenance costs in the future. This may include prioritizing capital assets that generate the highest deferred maintenance costs. 14 Rocky Road: Berkeley Streets at Risk and Significantly Underfunded:
https://berkeleyca.gov/sites/default/files/2022-01/Rocky-Road-Berkeley-Streets-at-Risk-and-Significantly- Underfunded.pdf
15 According to the 2018 voter information guide, Vision 2050 is a 30 -year plan to ensure that the City has a long - range plan to achieve a more resilient and sustainable infrastructure system. 16 See the staff report from January 2022: https://berkeleyca.gov/sites/default/files/city-council-meetings/2022- 01-20%20Worksession%20Agenda%20-%20Council.pdf
17 The City is considering an infrastructure bond, a parcel tax, or a sales tax.

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Recommendations and Management Response Berkeley’s Financial Condition (FY 2012 - FY 2021) 37 Recommendations and Management
Response

Management Response: Agree
Proposed Implementation Plan: The result of the assessment should drive the policy change if there is a need for it. Replenishing reserves should always be a top priority of both management and the City Council.

Proposed Implementation Date: January 1, 2023

1.2 To ensure the City’s enterprise funds can balance and avoid recurring annual shortfalls, we recommend the City Manager assess the appropriate fund balance or reserve level for each of the City’s enterprise funds, report findings to the City Council and explore reserve policy options for the enterprise funds.

Management Response: Agree
Proposed Implementation Plan: The City Manager, with collaboration with other departments including Public Works, PRW, Police, Planning, Finance, etc., will research and draft fund balance policies for department-managed enterprise funds.

Departments will also look to operationalize the costing of the services so that the enterprises can recoup the cost of the services provided.

Proposed Implementation Date: September 30, 2022

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Recommendations and Management Response Berkeley’s Financial Condition (FY 2012 - FY 2021) 38 Management Response: Agree
Proposed Implementation Plan: The Finance Department will stress test the City’s debt threshold and come up with a more appropriate yardstick for determining capacity. The City has hired GFOA to review its debt capacity. The result of that study will be instrumental in determining the appropriate debt threshold.

Proposed Implementation Date: September 30, 2022

3.1 To maximize the benefit of the Section 115 Trust, we recommend that the City Manager present a plan for adoption by the City Council to assure sufficient contributions to the Trust.

This may include taking the steps proposed by the Budget and Finance Committee to increase contributions to the trust. It may also include a strategy to ensure that the City is able to meet its yearly contribution goals, such as allocating contributions at the beginning of the budget cycle.

Management Response: Agree
Proposed Implementation Plan: Complete a long-term funding plan that can be integrated in the City’s budgetary process on an annual basis. The strategies should focus on sustainable funding mechanisms.

Proposed Implementation Date: August 31, 2022

Management Response: Agree
Proposed Implementation Plan: Pursue/pass Vision 2050 revenue measures, commit existing funding resources towards priority capital maintenance needs, request in annual budgets an increase in baseline allocations to capital and deferred maintenance needs from the General Fund.

Proposed Implementation Date: Whether voters get the opportunity, and then approve, a November 2022 ballot measure or measures focused on infrastructure will drive future CIP development. Annual Capital Budgets would be adjusted in the mid- biennial budget adjustment – adopted by June 30, 2023.

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Methodology and Statement of Compliance Berkeley’s Financial Condition (FY 2012 - FY 2021) 39 Methodology and Statement of Compliance
Methodology
We used financial indicators included in the International City/County Management Association’s (ICMA) Evaluating Financial Condition handbook designed for local governments. Additionally, we used indicators developed by the California State Auditor’s Office for their Fiscal Health of California Cities dashboard18 as well as indicators used by peer cities in their financial condition audits.

We compared Berkeley’s financial data to other California cities that are similar across economic and social factors including population, general fund expenditures per resident, services provided, and presence of a large university. We selected Davis, Long Beach, Oakland, Pasadena, Santa Clara, and Santa Monica because these cities are most similar to Berkeley across these criteria. Where appropriate, we adjusted financial indicators for inflation using the Bay Area Consumer Price Index calculated by the U.S. Bureau of Labor Statistics to express values in 2021 dollars.

To meet our objective, we reviewed the following:
• Berkeley’s Annual Comprehensive Financial Reports (ACFRs) • Budget Office reports (Unfunded Liability Obligations and Unfunded Infrastructure Needs reports, city budgets, and Year-End Results and First Quarter Budget Update reports) • City Auditor reports on General Fund reserves, COVID-19, employee benefits, and streets • City policies on reserves and debt management
• Santa Monica’s policy on general obligation bond debt • Council reports and presentations related to the City’s finances and financial reporting • Standard and Poor’s 2021 General Obligation bond rating report • Moody’s 2021 Annual Comment Report

18 Fiscal Health of California Cities: https://www.auditor.ca.gov/local_high_risk/dashboard-csa

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Methodology and Statement of Compliance Berkeley’s Financial Condition (FY 2012 - FY 2021) 40 We also conducted interviews with:
• The Director of Finance
• Staff from the Office of Budget and Fiscal Management responsible for overseeing the City’s budget and spending
• Public Works staff responsible for overseeing city spending on capital assets and financial management of Enterprise funds
• The City of Oakland Auditor’s Office
• The California State Auditor’s Office
• Staff at Standard & Poor’s and Moody’s credit rating agencies that prepared recent rating reports for Berkeley
• Staff at the City’s external financial auditing firm Badawi and Associates We analyzed financial data from the sources below. For all indicators we adjusted for inflation, we used the inflation factor as of June 2021 from the Consumer Price Index: San Francisco-Oakland-Hayward Table, 2011-2021, U.S. Department of Labor, Bureau of Labor Statistics.

Report Sections and Indicators Sources
Revenues and Expenses
• Revenue by Source
• Property Tax Revenues
• Revenues (trends)
• Revenues per Resident
• UC Berkeley Revenues
• Revenues per Resident
(Benchmark)
• Expenses by Function
• Expenses (trends)
• Full-Time Equivalent
Employees per 1,000 residents
• Revenues and Expenses
(trends)

Revenue by Source
• City of Berkeley FY 2012 and FY 2021 ACFRs,
Government-wide Financial Statements, Statement of
Activities
Property Tax Revenues
• City of Berkeley FY 2021 ACFR, Government-wide Financial Statements, Statement of Activities
Revenues (trends)
• City of Berkeley FY 2012 – FY 2021 ACFRs, Government- wide Financial Statements, Statement of Activities
Revenue per Resident
• City of Berkeley FY 2012 – FY 2021 ACFRs, Government- wide Financial Statements, Statement of Activities; City of Berkeley 2021 ACFR, Statistical Section: Demographic and Economic Statistics
UC Berkeley Revenues
• University of California website; University of California Berkeley: Office of the Vice Chancellor website
Revenue per Resident (benchmark)
• City of Berkeley, Davis, Long Beach, Pasadena, Santa
Clara, and Santa Monica FY 2020 ACFRs, Management’s
Discussion and Analysis – Statement of Activities Summary; Statistical Section: Demographic and Economic Statistics Expenses by Function
• City of Berkeley FY 2012 and FY 2021 ACFRs,
Government-wide Financial Statements, Statement of
Activities
Expenses (trends)
• City of Berkeley FY 2012 – FY 2021 ACFRs, Government- wide Financial Statements, Statement of Activities

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Methodology and Statement of Compliance Berkeley’s Financial Condition (FY 2012 - FY 2021) 41 Report Sections and Indicators Sources
Full-Time Equivalent Employees per 1,000 residents
• City of Berkeley FY 2021 ACFR, Statistical Section:

Demographic and Economic Statistic; Statistical Section:

Full-time Equivalent City Governmental Employees by
Function/Program
Revenues and Expenses (trends)
• City of Berkeley FY 2012 – FY 2021 ACFRs, Government- Wide Financial Statements, Statement of Activities
Demographics
• Population
• Unemployment
• Personal Income per Resident
• Personal Income per Resident
(Benchmark)
• Assessed Property Value

Population
• City of Berkeley FY 2021 ACFR, Statistical Section:

Demographic and Economic Statistics
Unemployment
• City of Berkeley FY 2020 ACFR, Statistical Section:

Demographic and Economic Statistics
• State of California Employment Development Department – Local Area Unemployment Statistics
Personal Income per Resident
• City of Berkeley FY 2016, FY 2020, and FY 2021 ACFRs, Statistical Section: Demographic and Economic Statistics Personal Income per Resident (Benchmark)
• City of Berkeley, Davis, Long Beach, Pasadena, and Santa Clara FY 2020 ACFRs, City of Santa Monica FY 2021
ACFR, Statistical Section: Demographic and Economic
Statistics
• U.S. Census Bureau population estimates, July 1, 2019, City of Oakland
Assessed Property Value
• City of Berkeley FY 2021 ACFR, Statistical Section:

Assessed Value and Estimated Values of Taxable Property Financial and Operating Position
• Net Position
• Liquidity Ratio
• General Fund Reserves
• Enterprise Fund Balance
Net Position
• City of Berkeley FY 2012 - FY 2021 ACFRs, Government- Wide Financial Statements: Statement of Net Position
Liquidity Ratio
• City of Berkeley FY 2012 - FY 2021 ACFRs Government-
Wide Financial Statements: Statement of Net Position
General Fund Reserves
• City of Berkeley, Office of Budget and Fiscal Management, Year-End Results and First Quarter Budget Update Reports, FY 2017- FY 2021
Enterprise Fund Balances
• City of Berkeley budgets: FY 2018 and FY 2019, FY 2020 and FY 2021, and proposed FY 2022 budgets
Long-Term Debt
• Governmental Activities Long-
term Liabilities
• Governmental Activities Long-
term Liabilities per Resident
(Benchmark)
• Debt by Type
• Bond Ratings
• General Obligation Bond debt
Governmental Activities Long-Term Liabilities
• City of Berkeley FY 2012 – FY 2021 ACFRs, Notes to Basic Financial Statements: Governmental Activities Long-Term Liabilities Summary
Governmental Activities Long-Term Liabilities per Resident (benchmark)
• City of Berkeley, Davis, Long Beach, Pasadena, Santa
Clara, and Santa Monica FY 2020 ACFRs, Government-
Wide Financial Statements: Statement of Net Position

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Methodology and Statement of Compliance Berkeley’s Financial Condition (FY 2012 - FY 2021) 42 Report Sections and Indicators Sources
as a Proportion of Assessed
Property Value
• General Obligation Bond Debt
per Resident
• General Obligation Debt
Service
Debt by Type
• City of Berkeley FY 2021 ACFR, Notes to Basic Financial Statements: Governmental Activities Long-Term Liabilities Summary
Bond Ratings
• City of Berkeley FY 2012 - FY 2021 ACFRs, Introductory Section
• Standard and Poor’s Ratings Guide; Moody’s Rating
Definitions
General Obligation Bond Debt as a Proportion of Assessed Property Value
• City of Berkeley FY 2021 ACFR, Statistical Section, Ratios of General Bonded Debt Outstanding; Statistical Section:

Assessed Value and Estimated Values of Taxable Property • City of Berkeley Debt Management and Disclosure Policy General Obligation Bond Debt per Resident
• City of Berkeley FY 2021 ACFR, Statistical Section, Ratios of General Bonded Debt Outstanding; Statistical Section:

Demographic and Economic Statistics
• Department of Finance data on General Obligation bond issuance
General Obligation Debt Service
• City of Berkeley FY 2021 ACFR, City of Berkeley General Obligation and General Fund Obligations Continuing
Disclosure Annual Report Information
Unfunded Pension and OPEB
Liabilities
• Combined Unfunded Pension
and OPEB Liability
• Net Pension Liability
• Net OPEB Liability
• Funded Ratio Risk Level
• Funded Ratio Risk Level
(Benchmark)
• Section 115 Trust Fund
Combined Unfunded Pension and OPEB Liability
• Department of Finance data
Net Pension Liability
• Department of Finance Data
Net OPEB Liability
• Department of Finance data
Funded Ratio Risk Level
• California State Auditor Financial Health Dashboard and risk level methodology
Funded Ratio Risk Level (Benchmark)
• California State Auditor Financial Health Dashboard
Section 115 Trust Fund
• City of Berkeley, Office of Budget and Fiscal Management documentation of Section 115 goals; City of Berkeley,
Department of Finance data on Section 115 contributions Capital Assets
• Pavement Maintenance Costs
• Unfunded Capital and
Maintenance Need
Pavement Maintenance Costs
• Metropolitan Transportation Commission, The Pothole
Report: Bay Area Roads at Risk, September 2018
Unfunded Capital and Deferred Maintenance Needs
• City of Berkeley Unfunded Liability Reports (2017, 2019, 2021)

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Methodology and Statement of Compliance Berkeley’s Financial Condition (FY 2012 - FY 2021) 43 Throughout the report, we use the terms expenses and expenditures. Government-wide financial statements (including governmental and business-type activities) use the accrual basis of accounting and refer to expenses. The accrual basis of accounting reports revenues and expenses in the period in which the underlying event occurs, regardless of the timing of cash flows. This means that revenues are recorded when earned and expenses are recorded when the liability is incurred, instead of when cash is actually received or disbursed. Governmental fund financial statements (including the General Fund) use the modified accrual basis of accounting and refer to expenditures. Under the modified accrual basis of accounting, revenues are recorded when measurable and available, and expenditures are recorded when the liability is incurred, except for interest on long-term debt, judgments and claims, workers’ compensation, and compensated absences, which are recorded when paid.

Risk Assessment and Internal Controls
We reviewed information for reasonableness and consistency, and we researched data that needed additional explanation. We did not, however, audit the accuracy of all source documents or the reliability of the data in computer-based systems. As nearly all financial information presented is from the City’s ACFRs, we relied on the work performed by the City’s external financial auditors.

We specifically assessed internal controls significant to the audit objectives. This included a review of selected policies and procedures, interviews with staff in the Department of Finance and the Budget Office, and reports on city finances and budget. In performing our work, we identified concerns that the City does not currently have a plan for how to meet its FY 2027 reserve funding goal, the debt management policy does not have sufficient criteria to assess the City’s debt capacity, the City has not been meeting its Section 115 contribution goals, and the City does not yet have a plan to address its unfunded capital needs.

We performed a risk assessment of the City’s financial condition within the context of our audit objectives. This included a review of selected policies and procedures, as well as interviews with subject matter experts and Department of Finance and the Budget Office staff.

Statement of Compliance
We conducted this performance audit in accordance with Generally Accepted Government Auditing Standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives.

We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

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Appendix 1. Enterprise Funds Berkeley’s Financial Condition (FY 2012 - FY 2021) 44 Appendix I. Enterprise Funds
Most of the City’s Enterprise funds and activities are housed within the Department of Public Works, except for the Marina Fund which falls under the Parks, Recreation and Waterfront Department, and the Permit Service Center, which falls primarily under the Planning Department.

1. The Zero Waste Fund uses fees for disposal of waste at the City’s transfer station and refuse fees charged to Berkeley property owners to provide commercial refuse, recycling and compost collection services, and residential refuse and compost collection services to Berkeley residents.

2. The Marina Fund uses fees generated from vessels that berth at the Marina, commercial building and ground leases, and special events to fund operations at the Berkeley Waterfront.

3. The Sanitary Sewer Fund uses fees charged to the users of the City’s sanitary system to fund the operation, maintenance, rehabilitation, and improvement of the City’s sanitary sewer collection system and comply with Environmental Protection Agency requirements.

4. The Clean Storm Water Fund uses fees from property taxes to fund the maintenance and improvement of the City’s storm water drainage system and reduce pollutants in storm water from entering local creeks and the Bay.

5. The Permit Service Center Fund uses zoning fees, building fees, and plan check fees to fund the processing and issuance of building, electrical, mechanical, plumbing, fire, zoning, and Public Works permits.

6. The Off-Street Parking Fund uses parking fees to support capital, operation, and maintenance of three off-street parking facilities owned by the City: the Center Street Garage, the Oxford Garage, and the Telegraph Channing Garage.

7. The Parking Meter Fund uses payments made by hourly parkers to fund the maintenance, collection, capital, and enforcement of city parking meters.

8. The Building Purchases and Management Fund accounts for the purchase and management of the building at 1947 Center Street. According to the Department of Public Works, although the Building Purchases and Management fund is considered an enterprise fund for the purposes of the City’s financial reporting, it functions more as an internal service fund because most of the fund’s customers are internal city departments.

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Mission Statement
Promoting transparency and accountability in Berkeley government.

Audit Team
Caitlin Palmer, Senior Auditor
Pauline Miller, Auditor I

City Auditor
Jenny Wong

Office of the City Auditor
Phone: (510) 981-6750
Email: [email protected]
Website and reports: https://berkeleyca.gov/your-government/city-audits

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Lori Droste
Councilmember, District 8
Action Calendar
Tuesday, May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Councilmembers Lori Droste and Terry Taplin
Subject: Revisions to Section 311.6 Warrantless Searches of Individuals on Supervised Release Search Conditions of the Berkeley Police Department Law Enforcement Services Manual
Recommendation
Revise Section 311.6 Warrantless Searches of Individuals on Supervised Release Search Conditions of the Berkeley Police Department (BPD) Law Enforcement Services Manual to enable officers of the Berkeley Police Department to conduct detentions and warrantless searches individuals on parole/probation consistent with and supportive of the provisions in the probationer’s/parolee’s release conditions. The proposed revisions are shown in strikethrough and double-underline below:

Policy Committee Recommendation
On April 18, 2022, the Public Safety Committee adopted the following action: M/S/C (Taplin/Wengraf) to send the item with a qualified positive recommendation, as revised by the committee and subject to legal review. Section 311.6 was revised to read: In accordance with

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California law, individuals on probation, parole, Post Release Community Supervision, or other supervised release status may be subject to warrantless search as a condition of their probation. Officers shall only conduct probation or parole searches to further a legitimate law enforcement or rehabilitative purpose. Searches shall not be conducted in an arbitrary, capricious, or harassing fashion. In the conduct of all such detentions and searches, officers shall consciously avoid the application of bias, shall not use such detentions or searches as a means to harass or annoy, and shall not conduct such detentions and searches in a manner that targets or is discriminatory toward any protected class. Vote: All Ayes.

Problem or Summary Statement
Existing provisions of the BPD Law Enforcement Services Manual do not permit BPD officers to conduct warrantless searches and seizures of probationers/parolees in a manner that would be consistent with the conditions of their release. The restrictiveness of these provisions places those on probation/parole on nearly equal footing with respect to Fourth Amendment rights as those not on probation/parole. Not only is this circumstance at odds with the nature and purpose of probation/parole, it also prevents officers from effectively implementing the conditions of release imposed by sentencing judges. This limits officers’ ability to proactively address recidivism and therefore presents a potentially significant risk to public safety.

Background
Probation/parole is a prison/jail sentence that is suspended on the condition that the offender follow certain prescribed rules and commit no further crimes. As part of these terms, individuals released on probation/parole are often required to waive all or a portion of their Fourth Amendment rights (which would otherwise normally guard against unreasonable search and seizure) in order to secure their release.

Fundamentally, these waivers reflect the fact that for a probationer/parolee, the full term of what would otherwise have been an incarceration is not yet complete. More practically, courts often impose these waivers as a condition of probation/parole because they recognize that both in general and for the individual in question, there may be a higher likelihood of recidivism or additional crimes, which must be guarded against.

When determining the extensiveness/intrusiveness of such Fourth Amendment waivers, sentencing justices will usually consider the nature and severity of the crime. Probation is typically issued with terms that allow for an individual’s: 1) person; 2) property; 3) residence; and/or 4) vehicle to be searched at any time. Allowing only for a search of the person only would constitute a “one-way” search clause, whereas allowing for all four would constitute a “four-way” search clause. In extreme cases, an offender’s terms may include these terms and an additional term allowing for the search of any/all of the individual’s electronic devices, resulting in a “five-way” search clause. This is considered the most complete and intrusive of search terms.

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Current Situation and Its Effects
Currently, an individual on probation or parole in Berkeley would be on nearly equal footing as someone who is not on probation or parole when it comes to search and seizure. This would, for example, mean that someone with a history of crimes involving firearms could not have their person or vehicle searched by BPD officers unless there were “articulable facts” that could be given to indicate that the individual had committed, was committing, or would commit a crime. In the case of a crime involving a firearm, such articulable facts would likely come only after a serious threat to public safety had already manifested. Although such risks would rightly not normally be sufficient to justify a search and seizure, in the case of probation and parole, courts typically recognize both a heightened risk and a diminution of Constitutional rights associated with a provisional release.

To give another particularly disturbing example, there is currently a sex offender residing in Berkeley whose crimes were so sever that the judge deemed that a “five-way” search clause was necessary in the offenders probation/parole conditions. Moreover, the court imposed a number of heightened restrictions on the individual in recognition of the seriousness of their offense, including prohibitions on the possession of images of children and on sleeping in any dwelling where children were present. Under current section 311 policies, BPD would generally not be permitted to search the individuals’ electronic devices to ensure that the judge’s order was being followed.

Criteria Considered
Effectiveness
This policy would apply only to searches and seizures involving individuals on probation or parole; the Fourth Amendment rights of others would not be affected. With regard to individuals on probation or parole, however, BPD would be able to more easily and effectively enforce the conditions of those individuals release, and guard against recidivism.

Fiscal Impacts
By potentially averting crimes, this policy change could serve to reduce policing costs since crime prevention is typically less costly than after-the-fact investigation, remediation, etc.

Additionally, by serving to reduce recidivism, this policy could reduce overall costs to the criminal justice system.

Environmental Sustainability
The proposed policy would not result in any appreciable impacts with respect to environmental sustainability.

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Equity
Regardless of whether this policy change is adopted, it will remain incumbent upon the Berkeley Police Department to respect the Fourth Amendment rights of individuals who are not on probation or parole; and for those on probation or parole, to limit such intrusions to those that are explicitly noted in the conditions of their release. BPD will also remain responsible for exercising its authority and responsibilities in a manner free of discrimination or bias. Since the practice of this revised policy would be no more or less likely than the existing policy to suffer from the effects of bias, this proposal is not anticipated to have any appreciable negative impacts on equity as it relates to BPD conduct. Additionally, impacts from crime tend to fall disproportionately on lower-income communities and people of color. If the fuller use of court- ordered avenues for search and seizure succeed in averting crimes, this proposed policy change could have the effect of promoting greater equity with respect to impacts from crime.

Attachments
Current Berkeley Police Department Law Enforcement Services Manual

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Policy Berkeley Police Department
311
Law Enforcement Services Manua l
Search and Seizure
311.1 PURPOSE AND SCOPE
Both the federal and state Constitutions provide every individual with the right to be free from unreasonab le searches and seizures. This policy provides general guidelines for Berkeley Police Department personne l to consider when deali ng with search and seizure issues. 311.2 POLICY
It is the policy of the Berkeley Police Department to respect the fundamenta l privacy rights of individua ls. Members of this department will conduct searches in strict observance of the constitut ional rights of persons being searched . All seizures by this department will comply with relevant federa l and state law governing the seizure of persons and property.

The Department will provide relevant and current training to officers as guidance for the application of current law, local community standards and prosecutor ial considerations regarding specific search and seizure situations, as appropriate .
311 .3 SEARCHES
The U.S. Constitution generally provides that a valid warrant is required in order for a search to be valid. There are, however , severa l exceptions that permit a warrantless search .

Examples of law enforcement activities that are exceptions to the genera l warrant requirement include, but are not limited to, searches pursuant to the following:
• Valid consent
• Incident to a lawful arrest
• Legitimate community caretaking interests
• Vehicle searches under certain circumstances
• Exigent circumstances
Certain other activities are recognized by federal and state courts and by certain statutes as legitimate law enforce ment activities that also do not require a warrant. Such activities may include seizure and examination of abandoned property, and observations of activities and property located on open public areas.

Because case law regarding search and seizure is constant ly changing and subject to interpretation by the courts, each member of this departmen t is expected to act in each situation according to current training and his/her familiarity with clearly established rights as determined by case law.

Wheneve r practicable , officers are encouraged to contact a supervisor to resolve questions regarding search and seizure issues prior to electing a course of action .

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Berkeley Police Department
Law Enforcement Services Manual
Search and Seizure
311.4 SEARCH PROTOCOL
Although conditions will vary and officer safety and other exigencies must be considered in every search situation , the following guidelines should be followed whenever circumstances permit:
(a) Members of this department will strive to conduct searches with dignity and courtesy. (b) Officers should explain to the person being searched the reason for the search. (c) Searches should be carried out with due regard and respect for private property interests and in a manner that minimizes damage. Property should be left in a condition as close as reasonably possible to its pre-search condition. (d) In order to minimize the need for forcible entry, an attempt should be made to obtain keys, combinations or access codes when a search of locked property is anticipated. (e) When the person to be searched is of the opposite sex as the searching officer, a reasonable effort should be made to summon an officer of the same sex as the subject to conduct the search. When it is not practicable to summon an officer of the same sex as the subject, the following guidelines should be followed:

1. Another officer or a supervisor should witness the search .

2. The officer should not search areas of the body covered by tight-fitting clothing, sheer clothing or clothing that could not reasonably conceal a weapon . 311.5 ASKING IF A PERSON IS ON PROBATION OR PAROLE
In an effort to foster community trust, officers should not ask if a person is on probation or parole when a person has satisfactorily identified themselves, either verbally or by presenting identification documents .

Officers may determine probation or parole status through standard records checks conducted in the course of a traffic safety or investigative stop. Officers should only ask when necessary to:
(a) Protect the safety of others, the person detained, or officers; (b) Further a specific law enforcement investigative purpose (for example, sorting out multiple computer returns on a common name);
(c) To confirm probation and parole status subsequent to a records check.

If an officer needs to ask the question, "Are you on probation or parole?" the officer should do so while treating the person with dignity and respect, and being mindful that people may take offense at the question.
311.6 WARRANTLESS SEARCHES OF INDIVIDUALS ON SUPERVISED RELEASE

SEARCH CONDITIONS
In accordance with California law, individuals on probation, parole, Post Release Community Supervision, or other supervised release status may be subject to warrantless search as a condition of their probation. Officers shall only conduct probation or parole searches to further a Copyright Lexipol, LLC 2021102/10, All Rights Reserved.

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Berkeley Police Departme nt
Law Enforcemen t Services Manual
Search and Seizure
legitimate law enforeement purpose. Searches shall not be conducted in an arbitrary, capricious, or harassing fashion.

Officers shall not detain and search a person on probation or parole solely because the officer is aware of that person's probation or parole status. The decision to detain a person and conduct a probation or parole search , or otherwise enforce probation or parole conditions, should be made, at a minimum, in connect ion with articulable facts that create a reasonab le suspicion that a person may have committed a crime, be committing a crime, or be about to commit a crime . 311 .7 DOCUMENTATION
Officers shall document , via MDT disposition, Field Interview, Incident or Case Report, any search of a person , vehicle or location . Officers should consider document ing, as applicable, the following:
• Reason for the search
• Any efforts used to minimize the intrusiveness of any search (e.g., asking for consent or keys)
• What, if any, injuries or damage occurred
• All steps taken to secure property
• The results of the search , including a description of any property or contraband seized • If the person searched is the opposite sex, any efforts to summon an officer of the same sex as the person being searched and the identification of any witness officer Supervisors shall review reports to ensure the reports are accurate, that actions are properly documented and that current legal requirements and department policy have been met.

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Mental Health Commission
2180 Milvia Street, Berkeley, CA 94704 ● Tel: (510) 981-7000 ● TDD: (510) 981-6903 ● Fax: (510) 981-7099 E-Mail: [email protected] Website: http://www.CityofBerkeley.info/Manager

INFORMATION CALENDAR
May 24, 2022
To: Honorable Mayor and Members of the City Council
From: Mental Health Commission
Submitted by: Dr. Margaret Fine, Chair, Mental Health Commission Subject: Mental Health Commission Annual Report 2021-2022

INTRODUCTION
At its March 24, 2022 meeting, the Mental Health Commission adopted its Annual Report 2021-2022.

CURRENT SITUATION AND ITS EFFECTS
The Mental Health Commissioners include: Margaret Fine (Chair), Monica Jones (Vice- Chair), Edward Opton, Andrea Pritchett, Tommy Escarcega, and Councilmember Terry Taplin. On March 24, 2022, the Mental Health Commission adopted its Annual Report during its regular public meeting.

The Annual Report reflects the Mental Health Commission’s work from February 2021 through March 2022, including for people living with serious mental illness and substance use issues and disorders—many of whom are unhoused, people of color, LGBTQIA+ people, people living with disabilities of all ages. It further reflects the public programs held by the Mental Health Commission over the past year to inform the community at-large.

This Annual Report further reflects the Commission’s work on supporting: 1) a whole person care approach that equitably provides well-integrated, coordinated systems of care to diverse people with mental health and substance use challenges, and 2) a diversion approach to reduce interactions with law enforcement and using hospital emergency rooms, inpatient psychiatric hospitalization, and incarceration for service delivery whenever possible.

Overall, the Annual Report shows how the Mental Health Commission’s work supports a comprehensive 365/24/7 mental health and substance use system for Berkeley, including implementing an alternative non-police responder program, the Specialized Care Unit, and establishing a crisis stabilization center in Berkeley for people who seek voluntary urgent care.

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Mental Health Commission Annual Report 2021-22 INFORMATION CALENDAR May 24, 2022

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BACKGROUND
The Commission chose to adopt this Annual Report to inform Council, City staff, and the community about its work.

ENVIRONMENTAL SUSTAINABILITY
There is no identifiable environmental sustainability impact associated with this annual report.

POSSIBLE FUTURE ACTION
None

FISCAL IMPACTS OF POSSIBLE FUTURE ACTION
None

CONTACT PERSON
Jamie Works-Wright, Mental Health Commission Secretary, Health, Housing, and Community Services, Mental Health Division, 510-981-7721 Attachments:
1: FY 2021-2022 Annual Report

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ANNUAL REPORT 2021-2022
Mental Health Commission for the City of Berkeley
Introduction
The Mental Health Commission (MHC) is a state-mandated public advisory body comprised of Berkeley residents with behavioral health and related expertise. This Annual Report is designed to inform community members, City of Berkeley staff, and the Berkeley City Council about the Mental Health Commission’s overall work during this past year.

The Mental Health Commission advises the Division of Mental Health for the City of Berkeley and the Berkeley City Council on behavioral health policy, programming, implementation, evaluation, budget allocations, and expenditures. The Mental Health Commission is further focused on improving wellbeing for people with behavioral health challenges, including for those with serious mental illness (SMI) and substance use disorders (SUD) in Berkeley—many of whom are homeless. This Division of Mental Health serves people with SMI and SUD through primarily intensive outpatient services with an approximate annual budget of $15-17 million.

In addition, the MHC holds behavioral health programs during its public meetings in order to raise awareness and visibility about behavioral health and related issues in Berkeley, and to gather perspectives from community members to inform the Commission’s work.

MHC Membership
Under the Welfare and Institutions Code § 5604, the Mental Health Commission is mandatorily required to comprise its membership of individuals with behavioral health expertise—both lived and acquired through education and occupation. Each community behavioral health board shall consist of at least 10 members. Under this state statute, there are legal requirements for the membership composition of the Mental Health Commission. One member represents the City of Berkeley Mayor’s Office. Under the state statute, 50 percent of the Commission shall be consumers, or families of consumers, who are receiving or have received mental health services. At least 20 percent of the total membership shall be consumers, and at least 20 percent shall be families of consumers, under the same statute.

MHC Powers and Duties
The powers and duties of the Mental Health Commission for the Cities of Berkeley and Albany are aligned with the Welfare and Institutions Code, Section 5604 and accorded in the City of Berkeley Resolution N.S., 65,495 dated November 27, 2012.

MHC General Meetings
The Mental Health Commission holds regular meetings on the last Thursday of each month at 7:00 pm except in August and November. Before the COVID pandemic, the Mental Health Commission’s meetings occurred at an accessible public administration building on Center Street in downtown Berkeley. During COVID, the Mental Health

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Commission has met via Zoom in order to conduct its meetings. The Mental Health Commission, along with other Berkeley boards and commissions, did not meet due to COVID from March until September 2020.

Mental Health Commission Public Hearings and Presentations 3/20—2/22:

1. Results-Based Accountability and Evaluating the Division of Mental Health, 4/21

2. Berkeley City Auditor Report, Data Analysis of City of Berkeley’s Police Response, 5/21

3. Whole Person Care and Well-Integrated, Coordinated Care for People w/SMI & SUD, 6/21

4. Public Hearing: MHSA Annual Report FY 21/22, 7/21

5. Housing, Homelessness and People with SMI & SUD in Berkeley, 9/21

6. Crisis Stabilization Centers at Amber House, Oakland and Deschutes County, OR, 12/21

7. Public Hearing on MHSA INN Homeless Wellness Encampment Project, 1/22

8. Behavioral Health, Substance Use, Harm Reduction & Lifelong Street Medicine Team, 2/22
Further Accomplishments of Mental Health Commission – 3/20-2/22 Building a Comprehensive Behavioral Health System for the City of Berkeley

1. Advancing a Whole Person Care Approach & Framework
The Whole Person Care (WPC) approach refers to providing well-integrated, coordinated systems of care that advance wellbeing for Berkeley people with behavioral health challenges in an equitable, inclusive manner, including for those living with SMI and SUD. The Whole Person Care approach is designed for inclusion and population accountability and for providing tailored, culturally safe, and responsive services to diverse people and groups. The Whole Person Care approach attempts to eliminate interactions with police; involvement with the criminal legal system; and use of hospital emergency rooms, inpatient psychiatric hospitals, and incarceration for people experiencing behavioral health challenges in the community.

2. Diverting People Away from Policing and Towards Wellbeing Services in an Equitable, Inclusive Manner;
Developing a Comprehensive Behavioral Health Crisis System a. Santa Rita Jail Subcommittee
Alameda County Santa Rita Jail, one of the largest jails in the United States, incarcerates more than 3400+ persons. The City of Berkeley is part of Alameda County.

This jail has one of the highest rates of in-custody deaths in California. It has been the subject of numerous lawsuits and class-action cases regarding jail conditions resulting from lack of medical and behavioral health services. The Mental Health Commission established this Subcommittee to study possibilities for diversion of Berkeley residents away from incarceration at Santa Rita Jail and hospitalization at John George Psychiatric Hospital and towards local community-based care.

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Initially the Santa Rita Jail Subcommittee reviewed the lengthy federal Department of Justice investigation showing how this jail institutionalizes people with mental health disabilities in locked facilities with severely inadequate mental health care. This Subcommittee further reviewed the Babu v. Ahern lawsuit, which focuses on use of prolonged solitary confinement under severely inhumane conditions for people with mental health disabilities. The Subcommittee further reviewed how people with mental health disabilities cycle in and out of psychiatric institutions and jails because they lack access to crisis and ongoing services that would allow them to recover and participate in community life in Berkeley.
b. Developing a Specialized Care Unit (SCU)
An Alternative Non-Police Crisis Response Program
In January 2021, the City Manager designated the Director of Health, Housing, and Community Services as the project manager for the Specialized Care Unit program. The Director established an SCU Steering Committee to work with the commissioned consultant, Research Development Associates, on the SCU program including municipal and community stakeholders. The Mental Health Commission is designated as one of the stakeholders. The City of Berkeley further contracted with Research Development Associates to conduct three distinct reports to initiate the process to establish an SCU for Berkeley.

Since then, the SCU Steering Committee met regularly with the commissioned consultant on the reports. This past year the Mental Health Commission participated in the meetings and contributed to the research on non-police crisis response models for the first RDA report. This report, “Crisis Response Models Report,” presents a lengthy report of crisis response programs in the United States and abroad—both non-police and co-responding programs.

The second report, “Mental Health Crisis Response Services and Stakeholder Perspectives Report,” is the result of numerous qualitative interviews and focus groups with stakeholders of the crisis system. These stakeholders included local community- based organizations (CBOs) and utilizers of Berkeley’s crisis response services. The Mental Health Commission contributed to developing the master list of community- based organizations and securing stakeholder involvement from diverse and marginalized organizations and individuals.

Additionally, the third report, “City of Berkeley Specialized Care Unit Crisis Response Recommendations,” proposes the consultant recommendations and a guide to phased- in implementation of the SCU model in Berkeley. Since issuing this report, the Mental Health Commission contributed to developing a summary responding to the recommendations that will be issued shortly by the Department of Health, Housing, and Community Services.

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c. Crisis Stabilization Center for Berkeley
The Mental Health Commission is advocating for a crisis stabilization center in Berkeley.

Crisis stabilization centers can serve as an alternative to using emergency departments and moreover, criminal legal and incarceration systems by providing these types of services to distressed individuals who voluntarily seek this urgent care.

The Commission held a public meeting on December 16, 2021 to create visibility, awareness, and recognition about crisis stabilization services in the community at- large—particularly for considering the key components that may meet the needs of people experiencing mental health and/or substance use crises in the community. The program managers from Amber House located in Oakland, CA and Deschutes County, OR presented and answered numerous questions about their models and the specific nature of their programs.

Specifically the presentation showed how crisis stabilization services can assist with deescalating the severity of a person’s level of distress and with providing 24-hour services to people in distress, including with services that are tailored, culturally safe and responsive.
 Key components include 24/7/365 staffing with a multidisciplinary team of behavioral health specialists, including peers, clinicians, and psychiatrists or nurse practitioners (via telehealth), to address mental health and/or substance use crises.
 Further key components include receiving referrals (including self-referrals), walk-ins, people without insurance, and first responder drop-offs.

It is noteworthy that the questions raised about crisis stabilization highlighted the need for skilled crisis specialists who can address psychosis resulting from mental illness and substance use (e.g. methamphetamine induced). There is a mental health and substance use crisis and epidemic in Berkeley that needs substantially increased resources and attention.
d. Reimagining Public Safety Task Force for the City of Berkeley Since January 2021, three Mental Health Commissioners have participated on the Reimagining Public Safety Task Force for the City of Berkeley. The Mental Health Commission appointed a Commissioner to the Task Force. Two additional members, including the Vice-Chair, were appointed by Councilmembers. The Reimagining Public Safety Task Force has focused on overarching, comprehensive goals to reduce reliance on policing and improve wellbeing for diverse people in an equitable, inclusive manner.

Task Force members have participated for more than one year on multiple subcommittees involving policing and budget allocations, officer-initiated stops and BerkDOT, 911 call processing and dispatching, alternative non-police responder programs, and building capacity for community-based organizations, programs and services citywide.

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Further Task Force members have engaged in extensive community engagement research including holding listening session on gender-equity, disability (people with behavioral health challenges), and LGBTQIA+ and Queer/Trans people—particularly for people of color. The Task Force further has thoroughly reviewed the commissioned consultants’ reports and provided in-depth analysis. Ultimately, the Task Force has prepared an overarching, comprehensive Reimagining Public Safety Task Force Final Report and Recommendations for the Work Session scheduled before the Berkeley City Council in March 10, 2022

3. Providing Equitable, Whole Person Care for People with Behavioral Health Challenges in Berkeley – Some of whom are unhoused – during a COVID Pandemic a. Developing the MHSA INN Homeless Encampment Wellness Project Serving People Living in Berkeley Encampments with Peer-Led Services The City of Berkeley is proposing an encampment-based mobile wellness center with peer-led, customizable services in Berkeley. This project is an innovative model for service delivery that promotes health and wellness for those experiencing homelessness in our communities without requiring engagement with behavioral health services to participate in its offerings.

This year Mental Health Commissioners made multiple contributions to developing the proposal beginning summer 2021. Commissioners participated in the MHSA Advisory Committee meeting in August 2021 to develop the proposed program. The Mental Health Commission had the commissioned consultant present at its September 2021 to review stakeholder input and program development, including having an extensive question/answer session and providing further stakeholder input for developing this program.

Finally, the Mental Health Commission held the public hearing to recommend this program for MHSA funding in the amount of $560,000 to the Berkeley City Council at its January 27, 2022 meeting. Once the Berkeley City Council approves this proposed program, it will be submitted to the Mental Health Services Oversight and Accountability Commission (MHSOAC) and the Department of Health Care Services for the State of California for approval.
b. Developing Support Networks for Families of People with SMI & SUD, Particularly to Address Structural and Individual Racial and Related Barriers The Mental Health Commission hosted the Executive Director of NAMI in Contra Costa County in October 2021. The presentation and discussion focused on families coping with loved ones experiencing serious mental illness and substance use issues and disorders, including addressing disparities in healthcare delivery among people during COVID-19. Specifically, the conversation focused on issues of racial discrimination and

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injustice, the criminalization of African Americans living with mental illness, and tailored cultural safe and responsive services for diverse community members. c. Implementing Whole Person Care and new Medi-Cal Reforms at the Division of Mental Health for the City of Berkeley
Beginning January 2022, the State of California initiated overhauling its Medi-Cal system for people living with serious mental illness (SMI) and substance use disorders (SUD) through its Medi-Cal reforms called CalAIM. For the first time on a state-wide level, this health insurance coverage will adopt the Whole Person Care approach and framework to managing comprehensive client needs across multiple government systems for people with serious mental illness and substance use disorder.

Currently the Division of Mental Health serves a high number of clients with serious mental illness and substance use disorders—many of whom have involvement with multiple systems: health, behavioral health, public benefits, housing, child welfare, youth justice, criminal legal, incarceration. Currently the Division of Mental Health staff have limited access to existing information for serving clients—primarily Medi-Cal health/behavioral health information. The Mental Health Commission has consistently engaged with the Division of Mental Health about providing Whole Person Care to its clients through increasing access to existing client records across multiple systems in coordination with Alameda County.

In June 2021, the Mental Health Commission held a comprehensive program and question/answer session focused on implementing the “Community Health Records” (CHR) system. As part of Alameda County’s Whole Person Care Pilot from 2017-2021, the county developed this comprehensive electronic records system to improve Whole Person Care for people experiencing homelessness or housing instability and living with several complex conditions: physical, behavioral health, housing, social.

For the Mental Health Commission presentation, the Program Director and Director of Strategic Development from Alameda County Care Connect made a presentation about the “Community Health Records.” Mental Health Commissioners and community members through public comments delved into unpacking the existing information available through this system for:
 primary and specialist care, including behavioral health  public benefits and housing
 county crisis response services
 hospital emergency room and hospital admissions
 inpatient psychiatric admission at John George Hospital  incarceration entry and release dates at Santa Rita Jail.

Since the presentation, the City of Berkeley has executed its data sharing agreement with Alameda County for implementing this electronic records system and will be onboarding staff. Access to the Community Health Records is critical to providing

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comprehensive, informed Whole Person Care to people living with serious mental illness and substance use disorder. The Mental Health Commission has further consistently engaged and updated progress through the Mental Health Manager’s Report in order to implement this system.

In addition, this past year Mental Health Commissioners participated on the internal Mental Health Equity Committee of the Division of Mental Health, including prioritizing the current collection of housing data needed to support clients with stable, predictable housing. In addition, the Mental Health Commission has successfully advocated for collecting demographic data that reflects its client population based on race, ethnicity, gender identity and expression, and sexual orientation. Caseload statistics reflect this information in detail.

Conclusion
The Mental Health Commission is pleased to present this Annual Report 2021 to the Berkeley City Council, and thanks the City Council for taking the time to review it.

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Communications

All communications submitted to the City Council are
public record. Communications are not published directly to the City’s website. Copies of individual communications are available for viewing at the City Clerk Department and through Records Online.

City Clerk Department
2180 Milvia Street
Berkeley, CA 94704
(510) 981-6900

Records Online
https://records.cityofberkeley.info/

To search for communications associated with a particular City Council meeting using Records Online:

1. Select Search Type = “Public – Communication Query (Keywords)”

2. From Date: Enter the date of the Council meeting

3. To Date: Enter the date of the Council meeting (this may match the From Date field)

4. Click the “Search” button

5. Communication packets matching the entered criteria will be returned

6. Click the desired file in the Results column to view the document as a PDF

Berkeley City CouncilMay 24, 2022

Berkeley City Council
May 24, 2022