Recommendations for FY 24-25
Mid-Cycle Budget
Oakland, CA Budget Advisory Commission (BAC)
June 9, 2024
Executive Summary
Recommendation #1
The City and Council should spend the next year
identifying evidence-based adjustments to
structurally balance the budget by: 1) examining
both revenue and expenditures; and 2) learning
from experiences of other similar cities in
California.
Recommendation #2
Structural budget adjustments should come with
clear communication of estimated effect on public
priorities: reducing homelessness and improving
public safety.
Recommendation #3
Oakland should break its habit of waiving limits in
the Consolidated Fiscal Policy, establish more
discipline in replenishing emergency funds, and be
more transparent on the budget’s effect on the
City’s fiscal health 2
BAC Budget Analysis
This budget cycle repeats a pattern we’ve seen for years:
● We start the cycle in a difficult position, using
hard-to-justify assumptions (e.g., carryovers) to
‘balance’ the budget.
● The assumptions do not become reality and we
struggle with shortfalls.
● We rely on one-time ‘windfalls’ as a stopgap.
Oakland now has a structural deficit of over $100M.
Going into the FY 24-25, we have $0 in our “rainy day” Vital Services Stabilization Fund reserve. The proposed FY
24-25 budget of $2.23B assumes $20.5M growth in a
volatile revenue source (RETT) relative to projected FY 23-24 actuals. In addition, balancing the General Purpose Fund depends on $64M in miscellaneous one-time revenue
contributions, $63M from the Coliseum sale – a one-time windfall.
Recommendation #1
The City and Council should spend the next year
identifying evidence-based adjustments to
structurally balance the budget by: 1) examining
both revenue and expenditures; and 2) learning from
experiences of other similar cities in California
3 Adopted
Budget
Adhered to Section 1, Part C?
Excess RETT should be used for reserves, retiring debt, and funding unfunded long-term obligations
Adhered to Section 1, Part D?
Unrestricted one-time revenues should be used for
one-time expenses
FY 17-18 ✅
Replenished reserves, paid down liabilities ✅
Funded one-time expenses, paid down liabilities
FY 18-19 ✅
Replenished reserves, paid down liabilities ✅
Funded one-time expenses, paid down liabilities
FY 19-20 ✅
Replenished reserves, paid down liabilities ❌
Waived for parks and paramedics
FY 20-21 🟡
N/A - no excess RETT ❌
Waived for parks and paramedics
FY 21-22 ❌
Used for ongoing expenses ❌
Waived for libraries, parks, fire, youth, other funds
FY 22-23 ❌
Used for ongoing expenses ❌
Waived for libraries, parks, fire, youth, other funds
FY 23-24 🟡
N/A - no excess RETT ❌
Waived for libraries, parks, fire, youth, other funds
FY 24-25*
proposed
🟡
N/A - no excess RETT ❌
Requesting waiver; “accompanying resolution”
explaining why could not be found on budget website
Since 2019, Oakland has overridden Consolidated Fiscal Policy (CFP) limits on use of one-time revenue or excess RETT for ongoing expenses.
The City has used excess Real Estate Transfer Tax (RETT), Coronavirus Aid, Relief, and Economic Security Act (CARES), and American Rescue Plan Act (ARPA) one-time funds to maintain services post-COVID. CARES funds ended in 2020 and ARPA funds run out Dec 31, 2024.
HOW WE GOT HERE
post-COVID
4 Since FY 21-22*, Oakland has also depended on meaningful amounts of assumed fund transfers and carryforwards to balance the budget.
These unrealized assumptions account for $85M in FY 23-24, which is 55% of the current FY 23-34 General Purpose Fund (GPF) shortfall.
Unrealized assumptions
5 Lower real estate
transfer tax
collections
Overall lower
collections from
other taxes, fees,
grants, etc.
Inability to
transfer from fund
balance
Deferred costs from
project offsets &
carryforwards
Police
department
over-expenditure
Total projected
FY 23-24 GPF
overage
Net
underspending
from other
departments
Projected FY 23-24
General Purpose
Fund (GPF)
over-expenditures
Data source: FY 23-24 Q3 R&E
HOW WE GOT HERE
* Data source: R&E reports
Drivers of FY 23-24 General Purpose Fund Deficit
The proposed FY 24-25 mid-cycle budget continues these unsustainable practices, with miscellaneous one-time funds expected to cover $64M, or 7% of the proposed $898M General Purpose Fund.
6 WHERE WE ARE NOW
Data source: FY 24-25 Proposed Policy Budget
As a reference point, in the current FY 23-24 budget year, we are still trying to close a 19% GFP shortfall.
FY 06 – 23 Actuals
Miscellaneous Revenue Over Time
FY 23 – 25 Budgets
The proposed FY 24-25
budget assumes a
historic volume of
miscellaneous funds,
$63M of which from the
anticipated (but not yet
closed) Coliseum sale.
Oakland has also significantly increased ongoing expenses in the last two fiscal years, exceeding approved budgets as a result.
7 WHERE WE ARE NOW
Combined with the revenue shortfalls, Oakland now has a structural deficit of over $100M.
Graph source: FY 23-25 Budget Community Forums PPT
General Purpose Fund
FY 19-22 Actuals and FY 23-28 Forecast ($)
As shared in the FY 23-25 Budget Community Forums
presentations held in June 2023, ongoing General
Purpose Fund expenses jumped in FY 22-23 and again in
FY 23-24. A big driver is city leadership’s choice to open the Oakland Police Officers contract when it was nowhere near expiration, granting wage increases to the police.
BAC Recommendation: City and Council should spend the next year of “bought time” to identify evidence-based adjustments to structurally balance the FY25-27 biennial budget.
The Mayor intends to spend $1M on the City’s performance management and strategic planning efforts to create a structurally balanced budget that is equitable and mitigates impact of service changes. The BAC recommends using that investment and the additional 4-month budget preparation time to examine:
8 Where cost reductions would have no to
minimal service impact
How to grow revenue streams
● How can Oakland attract more businesses,
including local businesses, to increase more
stable revenue streams?
● How can Oakland attract more residents to
increase local consumption?
● Which programs have little to no
evidence suggesting positive impact?
● What business process improvements
can be made to measurably reduce cost
for operations?
RECOMMENDATION
and
BAC Recommendation: Oakland should seek to learn from the experiences of similar cities in California.
The BAC recommends examining practices of and benchmarking against cities with similar population size, diversity, and community priorities (e.g. reducing homelessness, improving public safety). 9 Example benchmarking cities
● Fresno (545K)
● Long Beach (449K)
● Bakersfield (413K)
RECOMMENDATION
● Stockton (319K)
● Fremont (226K)
● Hayward (155K)
Recommendation #2
Structural budget adjustments should come with
clear communication of estimated effect on public
priorities: reducing homelessness and improving
public safety
10 In the 2022 City of Oakland Budget Priorities Survey, the most frequently named issues residents said to prioritize in the budget were reducing homelessness and improving public safety.
11 CONTEXT
Improving Public SafetyReducing Homelessness
● 36% of polled residents named reducing
homelessness as their first priority.
● The proposed FY 24-25 budget adds a
net $21M and 8 FTE for housing security
and homelessness solutions.
● 18% of polled residents indicated
improving public safety as their first
priority.
● The proposed FY 24-25 budget adds 11
FTE to the Department of Violence
Prevention
BAC Recommendation: As the City and Council identify structural fixes to balance the budget from FY 25-26 onward, they should clearly communicate the estimated effect on reducing homelessness and improving public safety.
12 RECOMMENDATION
The current budget lists the Service Output Measures and Equitable Service Delivery Success Standards departments have for each service (example: Department of Violence Prevention information). These measures do not provide insight on the efficacy of the services.
Examples of how service
efficacy can be determined
and communicated →
● Define outcome measures, as appropriate, to enable
accountability in spending public funds wisely
● Analyze effect on key outcome measures through methods such as: randomized control trials (when practical and ethical); difference-in-difference analysis; or regression analysis ● Cite research published by similar programs run in other municipalities
Recommendation #3
Oakland should break its habit of waiving limits in
the Consolidated Fiscal Policy, establish more
discipline in replenishing emergency funds, and be
more transparent on the budget’s effect on the
City’s fiscal health
13 Oakland’s Consolidated Fiscal Policy requires exceptions to use of RETT and one-time funds be authorized by City Council resolution.
CONTEXT
14 Oakland’s budgets have not clearly
distinguished one-time vs. ongoing
revenues and expenses since FY 20-21
budget. Furthermore, the detailed budget data
are not available on Oakland’s open data portal
and CSV exports from the budget book only
provide aggregate summaries. As a result, it is
difficult and time-consuming to discern the
dependency of the proposed budget on
one-time revenue streams and other uncertain
assumptions.
This requirement is inadequate, leaving much room for improvement on budget transparency.
For example, the proposed FY 24-25 budget
states “The resolution accompanying the
Budget contains the necessary explanations
for the need to use one-time revenues for
purposes other than those established in the
CFP.” This resolution is not linked to in the
budget and the Budget Advisory Council
was not able to find the resolution when
searching any of the recent or future
agendas for City Council or the Finance &
Management Committee on Legistar.
CONTEXT
15 Reason #2: One-time revenue streams are
not clearly identified in the budget
Reason #1: “Accompanying” resolutions
are difficult to find
BAC Recommendation: Oakland should break its habit of waiving limits in the Consolidated Fiscal Policy, establish more discipline in replenishing emergency funds, and be more transparent on the budget’s effect on the City’s fiscal health.
For example, the budget could come with a “nutrition facts” label. Illustrative design:
16 RECOMMENDATION
GFP budget
Amount added to reserves
Number of major assumptions
% ongoing expenses funded by
one-time sources
$ from offsets and carryforwards
CFP RETT limit waived?
CFP one-time use limits waived?
Reserves used?
Total budget$X.XXB
Budgets should clearly distinguish one-time vs. ongoing revenue sources and expenditures. For each case City Council overrides CFP policy of not using one-time funding to support continuing cost commitments, the budget should include a clear statement of the reasons for doing so, describe where the ongoing funding is expected to come from, and what the contingency plan is if that funding source does not come through.
Reasons for waivers / suspensions of Consolidated Fiscal Policy terms should be summarized directly within proposed and adopted budget books, with hyperlinks to accompanying resolutions.
High-impact assumptions affecting the budget should be outlined in a single page within the budget book for easy reference and scrutiny. These assumptions include asset sales, policy changes, balance fund use, and growth in volatile revenue sources like RETT.
The thought process for how much funding is being allocated to reserves should be explained in the budget, including a trade-off analysis of (re)building a rainy-day fund, deferring maintenance, and continuing services.
Appendix A
BAC FY24-25 Ad Hoc Workgroup Focus Areas
17 Ad Hoc Committee Key Actions
Community engagement Explore strategies to strengthen community engagement and promote trust by residents in the city's budget processes
Houselessness 1. Identify which programs designed to prevent and reduce houselessness have the highest return on investment
2. Identify potential funding sources and partnerships with community organizations, non-profits, state and federal government funding, and private donors that are invested in addressing the houselessness crisis
Over the next fiscal year, the BAC will take the following actions to prepare targeted recommendations to City Council (1/3)
18 Ad Hoc
Committee
Key Actions
Economic and
workforce
development
1. Work with Oakland Economic Development staff to identify and support initiatives to promote revenue growth through growing businesses and jobs in Oakland.
2. Work with Oakland Chamber of Commerce to identify and support initiatives to promote revenue growth through growing businesses and jobs in Oakland.
3. Promote a positive image of Oakland as a great place to eat, stay and play, for example to increase hotel occupancy tax revenues.
4. Focus on collections for the new Oakland business tax, especially for large businesses, to gather the estimated $50 million in outstanding annual revenue.
Over the next fiscal year, the BAC will take the following actions to prepare targeted recommendations to City Council (2/3)
19 Ad Hoc Committee Key Actions
Public safety 1. Promote fiscal and overtime management as factors for selection of the Oakland Police Department Chief and assessment of their performance.
2. Gather objective data on what investments, policies, and conditions have the strongest correlation with crime reduction in Oakland, including:
● Public Safety Ambassadors
● Ceasefire program
● Employment/unemployment rate
● Economic development
● Income disparity
● Number of OPD officers
● Impact of “Patrol Draw” policy on effectively assigning resources to the shifts and locations w the most crime
3. Examine long-term approaches to consolidate county ambulance services with Oakland’s Fire Department’s non-fire emergency response as other cities have effectively done.
Over the next fiscal year, the BAC will take the following actions to prepare targeted recommendations to City Council (3/3)
20