FY 2023-24 Second Quarter (Q2)
Revenue and Expenditure Report
and
FY 2024-25 Midcycle Budget Deficit
Presenter
Erin Roseman,
Director of Finance
March 26, 2024
Finance & Management Committee
General Purpose Fund Overview: FY 2023-24 Quarter 2 (Q2) The current fiscal landscape of the City poses considerable challenges, notably characterized by:
Sustained declines in key revenue categories
Significant projected overspending on Police Services Other Contributing Factors:
• $30.12 million use of fund balance is assumed in the budget however this amount is not anticipated to be available at year-end.
• $55.10 million in approved FY 2022-23 carryforwards: Despite the approval of these funds, current projections indicate the GPF will lack the actual funding support due to the anticipated deficit.
FY 2023-24 General Purpose Fund (GPF) Deficit
The GPF Operating Deficit of $177 million is projected as of Q2 • Revenues are projected to end the year $169.10 million under the Adjusted Budget • Expenditures are projected to end the year $8.01 million over the Adjusted Budget FY 2023-24 General Purpose Fund Second Quarter ($millions) FY 2023-24
Adopted Budget
FY 2023-24
Adjusted Budget
FY 2023-24 Year-
End Projections (Over) / Under
FY2023-24 Revenues 834.12 890.07 720.98 (169.10)
FY 2023-24 Expenditures 834.12 890.07 898.08 (8.01)
Operating
(Shortfall) / Surplus — — (177.10) (177.10)
FY 2023-24 Second Quarter GPF Revenues
FY 2023-24 GPF Budget to Projected Actuals Revenue ($ in millions) Revenue Category FY 2023-24
Adopted Budget
FY 2023-24 Adjusted
Budget
FY 2023-24 Q2
YTD Actuals
FY 2023-24 Q2 Year-
End Estimate
Year-End $ Over /
Under Adjusted
Budget
Year-End % Over /
Under Adjusted
Budget
Property Tax 294.17 294.17 122.53 298.35 4.18 1.4 %
Business License Tax 125.25 125.25 8.22 115.72 (9.52) (7.6) % Real Estate Transfer Tax 110.41 110.41 26.61 53.22 (57.19) (51.8) % Sales Tax 67.69 67.69 21.03 62.72 (4.97) (7.3) %
Utility Consumption Tax 61.90 61.90 30.73 66.32 4.42 7.1 % Service Charges 51.60 52.28 12.15 46.98 (5.30) (10.1) % Fines & Penalties 23.07 23.07 8.92 17.84 (5.23) (22.7) % Transient Occupancy Tax 22.48 22.48 9.95 19.61 (2.87) (12.8) % Miscellaneous Revenue 21.22 21.22 4.58 5.79 (15.43) (72.7) % Interfund Transfers 13.08 13.08 — 13.08 — — %
Parking Tax 11.26 11.26 6.01 12.37 1.11 9.8 %
Licenses & Permits 1.39 1.39 0.59 1.39 — — %
Interest Income 0.48 0.48 (0.26) 5.00 4.52 932.9 %
Grants & Subsidies — 0.03 0.71 2.59 2.56 N / A
Subtotal 804.00 804.71 251.75 720.98 (83.73) (10.4) %
Transfers from Fund Balance 30.12 30.12 — — (30.12) (100.0) % Project Offsets & Carryforwards — 55.24 — — (55.24) (100.0) % Total Revenue 834.12 890.07 251.75 720.98 (169.10) (19.0) % Overall trend for most of
the City’s revenue sources
are trending downward,
with the most significant
impacted Revenue
category being
Real Estate Transfer Tax
Other notable declines:
• Business License Tax
• Sales Tax
Although other categories are
showing upward trends, these
positive movements are not
enough to counteract the
projected declines.
Navigating Turbulence: Real Estate Transfer Tax (RETT)
Through Q2 only 11 properties have sold
valued over $5 Million, compared to 25
properties over the same period last year.
The current decline in RETT collections
is akin to the downturn experienced
during the Great Recession.
Factors that contribute to the current
decline:
High Interest Rates that reduce the
sales value of properties
A very low number of property sales
(transactions)
Particularly low number of high-value
property transfers
Navigating Turbulence: Real Estate Transfer Tax (RETT)
The City faces the implications of dwindling RETT Revenue:
• FY 2021-22 marked the record high collection of $138 million in RETT • FY 2023-25 Adopted Budget projects RETT to be 25% lower from FY 2021-22 just two fiscal years later • As of Q2 in the current fiscal year, the City has collected only $26.61 million in RETT for a period that normally accounts for more than 50% of the annual collection.
Based on this second quarter data and economic trends, the RETT projection has been revised to end the year at only $53.22 million, which is $57.19 million or 51.8% lower than the initial Budget of $110.41 million.
The anticipated shortfall in the RETT accounts for 68.3% of the overall projected GPF shortfall.
FY 2023-24 Second Quarter Sales Tax
• Sales tax is projected to come in below the FY 2023-24 Adjusted Budget of $67.69 million by approximately by $4.97 million and is now estimated to end the year at $62.72 million. • Sales Tax collection lags other categories. Data is available through the First Quarter (Q1) of FY 2023-24. Per data provided by the City's Sales Tax consultant HDL, Oakland’s receipts from July through September (Q1) were 6.0% below the Q1 period in 2022. Excluding reporting aberrations, actual sales were down 6.1%.
Sales Tax Comparison by Major Categories FY2022-23 and FY 2023-24 ($ in millions) Category Thru Q1
FY 2022-23
Thru Q1
FY 2023-24
Percentage Increase
/ (Decrease)
Autos & Transportation $2.65 $2.54 -4.00%
Building & Construction $1.69 $1.61 -4.50%
Business & Industry $1.45 $1.32 -9.40%
Food & Drugs $1.38 $1.21 -12.10%
Fuel & Service Stations $2.29 $1.77 -22.90%
General Consumer Goods $1.40 $1.25 -10.30%
Restaurants & Hotels $2.76 $2.68 -2.90%
State/County Pools & Transfers $2.89 $3.09 7.00%
Average $2.07 $1.94 -6.20%
Business License Tax (BLT): Collection Trends and Measure T This is the second fiscal year that Business License Tax is operating under the new progressive tiered tax structure that was approved by the passage of Measure T. In FY 2022-23, the first year that Measure T took effect, an increase of $17.64 million in BLT collected was attributed to Measure T.
As of Q2, BLT is expected to end the year at $115.72 million, which is $9.53 million or 7.6% under compared to Adjusted Budget of $125.25 million.
While the year-end estimate is comparable to the prior year total of $115.38 million, the collection of BLT has been declining in recent years, apart from Measure T:
Without the passage of Measure T, the FY 2023-24 BLT projection would have been just $98.08 million, which would have effectively increased the GPF deficit by $17.84 million.
Fiscal Year Base BLT Amount Measure T Increase Total BLT FY 2020-21 Actual 104.23 NA 104.23
FY 2021-22 Actual 101.29 NA 101.29
FY 2022-23 Actual 97.73 17.64 115.37
FY 2023-24 Projected 98.08 17.84 115.92
FY 2023-24 Second Quarter GPF Expenditures
FY 2023-24 GPF Budget to Projected Actuals Expenditures ($ in millions) Department
FY 2023-24
Adopted
Budget
FY 2023-24
Adjusted Budget
FY 2023-24 Q2
YTD Actuals
FY 2023-24 Q2
Year-End
Estimate
Year-End $ Over
/ Under Adjusted
Budget
Year-End %
Over / Under
Adjusted Budget
Capital Improvement Projects 0.55 1.96 0.07 1.96 — — %
City Administrator 9.81 10.89 3.97 10.43 0.46 4.30%
City Attorney 21.75 23.4 8.98 22.98 0.42 1.80%
City Auditor 3.31 3.6 1.26 3.17 0.43 11.80%
City Clerk 7.85 10.8 1.42 10.58 0.22 2.10%
City Council 7.12 7.68 3.26 7.37 0.31 4.10%
Department of Transportation 20.54 23.01 7.41 21.9 1.11 4.80% Department of Violence Prevention 10.79 13.08 2.5 12.41 0.66 5.10% Department of Workplace and
Employment Standard 4.31 5.67 2.49 5.44 0.23 4.00%
Economic and Workforce Development
Department 11.19 17.01 5.7 16.87 0.15 0.90%
Finance Department 30 33.33 11.78 31.55 1.78 5.30%
Fire Department 199.87 212.29 91.46 205.26 7.03 3.30%
Housing and Community Development
Department 0.24 2.91 1.05 2.91 — — %
Human Resources Management
Department 9.5 9.79 4.31 9.63 0.16 1.60%
• Savings are primarily attributable
to high vacancies across
departments
• Adopted budget assumes a
vacancy factor of 8.0% across
most departments
• The actual vacancy rate as of Q2
in the GPF is significantly higher
at 16.6%
Expenditures are projected to end
the year $8.01 million over the
Adjusted Budget, however, most
Departments are projected to end
the fiscal year within budget.
FY 2023-24 Second Quarter GPF Expenditures (continued)
FY 2023-24 GPF Budget to Projected Actuals Expenditures ($ in millions) Department
FY 2023-24
Adopted
Budget
FY 2023-24
Adjusted Budget
FY 2023-24 Q2
YTD Actuals
FY 2023-24 Q2
Year-End
Estimate
Year-End $
Over / Under
Adjusted
Budget
Year-End %
Over / Under
Adjusted
Budget
Human Services Department 44.76 44.32 9.23 44.32 — — %
Information Technology Department 16.97 18.63 6.78 17.92 0.71 3.80% Mayor 4.6 4.66 2.07 4.39 0.27 5.80%
Non-Departmental and Port 55.6 60.8 9.35 59.1 1.7 2.80% Oakland Animal Services 6.49 6.54 2.83 6.25 0.29 4.40%
Oakland Parks and Recreation Department 18.3 19.23 10.47 18.57 0.65 3.40% Oakland Public Library Department 12.31 12.32 7.91 12.32 — — % Oakland Public Works Department 1.36 2.06 1.22 2.05 — 0.10% Planning and Building Department — — — — — N / A
Police Commission 7.96 8.94 2.53 8.12 0.81 9.10%
Police Department 325.39 333.34 174.2 358.98 (25.64) (7.70) % Public Ethics Commission 2.25 2.35 0.73 2.16 0.18 7.90% Race and Equity Department 1.29 1.48 0.53 1.43 0.05 3.40% Total 834.12 890.07 373.53 898.08 (8.01) (0.90) %
The Police Department is
projected to overspend by
$25.64 million, or 8% of
their budget, due to
overtime overspending.
Top five areas of OPD
overtime spending:
Special Operations
Division
Training Unit
Area 1
Area 3
Area 5
FY 2023-24 Second Quarter GPF Fund Balance
The City’s projected estimated available fund balance in the GPF at the end of FY 2023-24 is negative $117.66 million.
FY 2023-24 General Purpose Fund Projected Fiscal Year-End ($ in millions) GENERAL PURPOSE FUND (1010) FY 2023-24 Q2
Projected FYE
FY 2023-24 Beginning Audited Fund Balance 93.28
FY2023-24 Q2 Performance
Revenue 720.98
Expenditures 898.08
FY 2023-24 Projected Operating Surplus / Deficit (177.10) Unaudited Projected Ending Fund Balance (83.82)
Obligations Against Ending Fund Balance
Use of Fund Balance in FY 2024-25 (33.84)
Estimated FY 2023-24 Ending Available Fund Balance (117.66) FY 2023-24 Second Quarter Reserve Balances
FY 2023-24 Reserve Balances ($ in millions)
Description
FY 2023-24
Beginning
Balances
FYE
Estimated
2023-2024
Balances
Balance
Assumed
in FY 2023-24
Adopted
Budget
FYE
2023-2024
Balances
Mandated Emergency Reserves FY 2022-23 65.41 65.41 — 65.41 Vital Services Stabilization Fund 10.27 — 10.27 —
OMERS Reserves (Reso. No. 85098 C.M.S.) 2.36 2.36 — 2.36 FY 2023-24 Second Quarter Select Non-GPF Funds
FY 2023-24 Available Fund Balance and Appropriations for Select Non-GPF Funds FUND
FY 2023-24
Audited
Beginning
Balance
FY 2023-24
Revenue Year-
End
Projections
FY 2023-24
Expenditure
Year-End
Projections
FY 2023-24
Estimated
Available Ending
Balance
Measure HH - Sugar Sweetened Beverage Distribution
Tax (SSBT) Fund (1030) 10.76 7.12 14.35 3.52
Measure BB and Measure F Funds (2215, 2216, 2217,
2218, 2219, 2220) 54.39 38.48 69.45 23.41
State Transportation (Gas Tax) Funds (2230, 2232) 11.56 24.17 27.02 8.72 Measure Q - OPR Preservation, Litter Reduction,
Homelessness Support Act Fund (2244) 21.13 31.27 40.32 12.09 Vacant Property Tax Fund (2270) 1.01 6.08 6.01 1.08
Landscaping & Lighting Assess. District Fund (LLAD)
(2310) — 19.45 19.35 0.09
False Alarm Reduction Program Fund (2411) (3.66) 1.11 1.2 (3.75)
Development Service Fund (2415) 122.38 46.47 108.3 60.55 Measure C - Transient Occupancy Tax (TOT) Surcharge
Fund (2419) 1.32 6 6.49 0.82
City Facilities Fund (4400)* 1.02 50.01 54.66 (3.64)
*Reported on a cash basis
Two funds out of the
select Non-GPF
Funds are projected
to end the year in
deficit:
• False Alarm
Fund (2411) –
Program revenue
is insufficient to
cover expenses.
• Facilities Fund
(4400) –
Overspending is
anticipated due
to increased
security costs.
FY 2024-25 Midcycle Budget GPF Deficit
• Initially when budget instructions were sent out in Mid-February, the Finance Department had projected a GPF deficit of $115,000,000 for FY 2024-25.
• With the most recent updates to revenues and expenditures, the Finance Department is now projecting a GPF deficit of $175,000,000 for FY 2024-25.
-115,000,000
-175,000,000
-$200
-$150
-$100
-$50
$0
Initial Projected Deficit Current Projected Deficit
Dollars (in Millions)
Increase of $60 M
FY 2024-25 Midcycle Budget GPF Deficit
Reduced Ongoing
Revenues
(Primarily RETT)
Lack of Fund
Balance
Increased Internal
Service Costs
(i.e. utilities & security)
Increased
Insurance Costs
The primary drivers for the larger deficit number:
Q2 R&E & FY 2024-25 Midcycle Report Concluding Points
GPF available Fund
Balance is projected to
end FY 2023-24 at
negative $118 million.
For FY 2024-25 staff
projects a GPF deficit
of $175 million and
restricted funds deficit
of $45 million .
The City’s structural
budget issues will
continue into future
years unless corrective
action is taken in the
coming months.
Staff projects a GPF
operating shortfall of
$177 million for FY
2023-24.
Q2 R&E & FY 2024-25 Midcycle Report Next Steps
Current Year Next Steps
Monitoring Revenues
Hiring Freeze
Slowing/Reducing Expenditures
Mid-Cycle Budget Next Steps
Consolidation of Budget Proposals from Departments
Providing Recommendations to Mayor
Centering on Key Principles
Delivering Services for a Clean and Safe City
Revenue Generation and Enhanced Collections
Creating Efficiencies for Cost Savings
Focus on Basic/Critical Services of City Government
o Divesting from expanded federal services during
COVID –19 Pandemic
o Engaging County Partners to Provide County
Government Services
Engaging Labor Partners for Collaboration on
Savings/Reductions
Balanced Proposed Budget Presented to City Council
Questions?