AGENDAREPORT
TO:
HonorableMayor &CityCouncil FROM: Councilmember Kaplan(At-Large) SUBJECT:
CityAuditor AssistanceOnGrantsToESOVentures
DATE: May11, 2023
RECOMMENDATION
CouncilmemberKaplanRecommendsThat TheCityCouncil:
Adopt a resolution requesting the assistance of the City Auditor to provide clarity on the grantfunding awarded to ESOVentures through City Council resolutions, including but not limitedtothe eight million dollar ($8,000,000) grant in City Resolution No. 88877 C.M.S. (2021) and theseventy-five thousanddollar($75,000) grant awardedinCityResolutionNo. 88780C.M.S. (2021) todeterminehowmuchof thegrant fundshavebeenspent andforwhat uses; howmuchremains; andidentifyingstatusreportsprovidedbyorabout ESOVentures’ funding
EXECUTIVESUMMARY
On October 19, 2021, the Oakland City Council adopted Resolution No. 88877 C.M.S. which acceptedand appropriatedeight milliondollars($8,000,000) fromtheStateof Californiafor fundingESOVenturesCalifornia Capital in the Community. According to ESOVentures, the California Capital in Communitycreates a fund for Black and Brown entrepreneurs managed by ESO Ventures Inc., which stated itsintentiontooffer assistanceanddebt investment productsfor underserved, local entrepreneurs.
Resolution No. 88877 C.M.S. stipulated that ESO Ventures, with input fromthe City’s Economic andWorkforce Development Department, was required to provide a status report by September 2022 as acondition of receiving the second half of grant funds; however, this report was never presented to theCouncil. The City also granted ESOVentures a grant of $75,000 in Resolution No. 88780C.M.S. Giventhat the required report was not received, that there is a great need in the East Oakland community forpositive financial support, and that there is a lack of clarity on whether such intended support wasreceived, it is in the interest of the public to inspect the management and granting of funds as requiredwhentheCouncil approvedtheallocationof fundstoESOVentures.
BACKGROUND/ LEGISLATIVEHISTORY
California Senate Bill No. (SB) 170, the Budget Act of 2021, appropriated eight million dollars($8,000,000) to the City of Oakland for the specific purpose of fundingESOVenturesCaliforniaCapitalin the Community Act. Pursuant to Section 19.56(b) of SB 170, each allocation in 19.56 includes thedesignatedentitythat allocatesthefundstotherecipientsidentifiedinthestatedesignation.
FinanceandManagement CommitteeMay11, 2023
HonorableMayor &CityCouncilSubject: CityAuditor AssistanceOnGrantsToESOVenturesDate: May23, 2023 Page2 Section 19.56(b) outlines that the designated state entity, “shall determine the best method for allocationto ensure the funds are used for the purposes specified,” in the Budget Act of 2021. Accordingly, onOctober 19, 2021, the Oakland City Council adopted Resolution No. 88877 C.M.S., which acceptedandappropriated that $8,000,000 for ESOVentures California Capital in the Community Act, an investmentfundfor BlackandBrownentrepreneursmanagedbyESOVenturesInc.
Resolution No. 88877 C.M.S. stipulated that ESO Ventures, with input fromthe City’s Economic andWorkforce Development Department, was required to provide a status report by September 2022 as acondition of receiving the second half of State grant funds; however, this report was never presented tothe Council. In addition to this larger allocation, the City also granted ESOVentures a second grant of$75,000 in Resolution No. 88780 C.M.S. In that allocation, which included multiple recipients, it wasstated during the discussion of the item that all recipients of grants were non-profits, however, ESOVenturesisafor-profit corporation.
ANALYSISANDPOLICYALTERNATIVES
Given that ESO Ventures did not provide the report to Council on the expending of the previouslyallocated funds, and community concerns about theneedsfor fundstosupport local opportunityfor thosewho have historically been left behind, it is in the interest of the public to seek the information todetermine what has happened with the funds, and what remainstobeused, asrequiredwhentheCouncilapproved the allocation in October 2021. GatheringmoreinformationregardingESO’sfinancial productsand its policies and proceduresfor managingthefundsiskeytoensuringthefundsareusedtobenefit thecommunityasintended.
The most appropriate City department to seek this information is the Office of the City Auditor. TheCharter empowers the City Auditor to conduct surveys, reviews, andauditsastheAuditor deemstobeinthe best public interest or as required by the Council or Mayor, including the public interest toascertaincompliance with Council’s resolutions and policies and the Mayor’s Administrative Instructions andDirectives, aswell asapplicableStateandFederal lawsandregulations.
This request for assistance from the City Auditor speaks directly to compliance with prior CouncilResolution (No. 88877 C.M.S.) and the requirements mandated within that resolution in order toreceivegrant funds, aswell asthebroader needtoensureproper useof publicfundsfor their intendedpurposes.
FISCALIMPACT
This resolution would not require additional funding in order to receive assistancefromtheCityAuditortoobtaintheinformationrequestedintheresolution.
COORDINATION
Councilmember KaplanhascoordinatedwiththeCityAuditor’sOfficeandtheCityAttorney’sOffice.
SUSTAINABLEOPPORTUNITIES
Economic: Akeyelement of theaudit istoascertaintheeconomicimpact of thegrantstheCityapproved,and how those grants are supporting businesses in Oakland, and to ensure that the funds are being OaklandCityCouncilMay11, 2023
HonorableMayor &CityCouncilSubject: CityAuditor AssistanceOnGrantsToESOVenturesDate: May23, 2023 Page3 provided as intended. ESO Ventures’ mission is to provide the confidence, competence, and capital forany Black and Brown person to become an entrepreneur. The City Council seeks tounderstandhowthismission has been realized with the grant funds the City provided in Resolution No. 88877 C.M.S. andResolutionNo. 88780, andtoensurefundsarebeingproperlyused.
Environmental: Nodirect environmental opportunitieshavebeenidentifiedrelatedtothisaudit.
Race &Equity: There is an extensive history of communities of color being excluded fromaccess tocapital, and thus, underserved in being able to build businesses and advance economic opportunity. Byseeking to make sure that funds intended for such purposes are actually distributed in a fair and propermanner, wecanhelpprovideracial equityandremedyhistoricexclusions.
ACTIONREQUESTEDOFTHECITYCOUNCIL
Councilmember KaplanRecommendsThat TheCityCouncil:
Adopt a resolution requesting the assistance of the City Auditor to provide clarity on the grant fundingawarded to ESOVentures through City Council resolutions, includingbut not limitedtotheeight milliondollar ($8,000,000) grant in City Resolution No. 88877 C.M.S. (2021) and the seventy-five thousanddollar ($75,000) grant awarded in City Resolution No. 88780 C.M.S. (2021) to determine howmuch ofthe grant funds have been spent and for what uses; how much remains; and identifying status reportsprovidedbyor about ESOVentures’ funding For questionsregardingthisreport, pleasecontact ChristineMiyashiro, PolicyDirector, [email protected].
Respectfullysubmitted,
Councilmember RebeccaKaplanAt-LargeDistrict
Preparedby:ChristineMiyashiro, PolicyDirectorOfficeof Councilmember At-LargeRebeccaKaplan OaklandCityCouncilMay11, 2023