Finance and Management Committee
September 10, 2024
AGENDA REPORT
TO: Jestin D. Johnson FROM: Erin Roseman
City Administrator Director of Finance
SUBJECT: SUPPLEMENTAL 3 – Consolidated
Fiscal Policy Revision 2024
DATE: August 19, 2024
City Administrator Approval Date:
RECOMMENDATION
Staff Recommends That The City Council Receive An Informational Report Regarding Proposed Substantive Changes To The Consolidated Fiscal Policy
REASON FOR SUPPLEMENTAL
At the June 25, 2024, Finance and Management Committee (FMC) meeting, the City Council requested further information from Finance Department staff on proposed updates to the City’s Consolidated Fiscal Policy (CFP). Finance Department staff have included all relevant best practice advisories, notices, and recommendations for each of the proposed policy updates, and have compiled them in the section below.
The following fiscal policy updates and corresponding best practices and recommendations are:
1. Debt Management Policy: The following three updates to the current Debt Management Policy are as follows:
a. Special Limited Obligations: Added to provide additional information on land- secured financing to include the City’s Local Goals and Policies for Special Assessment and Mello- Roos Community Facilities District Financing that was adopted in 2015 by Resolution No. 85664 C.M.S.
b. Other Obligations: This section was added to address special circumstances which will allow the City to finance when other forms of financing are appropriate. c. Conduit Debt Issuance: To provide additional clarification under this section, staff included the City’s current Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) hearing process. Summary - Statement No. 91 (gasb.org) d. California Debt Financing Guide, Debt Management Policy (gfoa.org)
2. Financial Reporting: In accordance with the Government Finance Officers Association (GFOA) ‘Financial Reporting’ best practices sections, a new section titled “Financial Reporting” is added to the proposed CFP. This section outlines the citywide accounting practices and financial reporting requirements. The addition of this section is aimed at ensuring the City’s financial reporting policies align with industry standards. Including a Jestin Johnson (Aug 26, 2024 08:47 PDT)
Aug 26, 2024
Jestin D. Johnson, City Administrator
Subject: SUPPLEMENTAL 3 – Consolidated Fiscal Policy Revision 2024 Date: August 19, 2024 Page 2
Finance and Management Committee
September 10, 2024
dedicated financial reporting section facilitates compliance with regulatory requirements and serves to strengthen stakeholder confidence in the City’s financial reporting processes. Website Posting of Financial Documents (gfoa.org)
3. Other Post Employment Benefits (OPEB) Funding: The OPEB section update remains unchanged but will be incorporated into the CFP as is.
4. Revenue Policies: A new revenue policy section has been proposed to address the following:
a. The use of one-time revenue, specifically the application of one-time revenues to one-time expenses or for the purpose of addressing unfunded liabilities. This section was based upon guidance of GFOA’s ‘Financial Policy Challenge - One- Time Revenues’ and ‘Fund Balance Guidelines for the General Fund’ best practices sections.
b. Implementing and establishing baseline charges and fees for local government services. This section is based on GFOA’s ‘Establishing Government Charges and Fees (gfoa.org),’ best practices section.
c. Accurate forecasting of revenues as needed for the City’s budget. This section is based on GFOA’s ‘Financial Forecasting in the Budget Preparation Process’ best
practices section.
d. Utilizing both time -sensitive trend data and comparative data of similar sized municipalities as a tool for financial analysis. This section is based on GFOA’s ‘The Use of Trend Data and Comparative Data for Financial Analysis’ best practices section.
e. Microsoft Word - 12a_Policies and Processes (bellevuewa.gov) Guidelines to maintain a long- term, structurally balanced budget. This section is based on GFOA’s ‘Achieving a Structurally Balanced Budget’ best practices section.
5. Grant Administration: In accordance with the GFOA ‘Establishing an Effective Grants Management Policy ’, ‘Grants Administration‘ , and ‘ Internal Controls for Grant Administration’ best practices sections, a new section titled “Grant Management Policy” has been added to the proposed CFP. This section establishes comprehensive guidelines for the City’s grant portfolio and management plan which requires alignment with the City’s overall strategic direction.
6. Ballot Measures: A new section titled “Ballot Measures” has been added to the proposed CFP to provide comprehensive guidelines for City sponsored ballot measures and public understanding of the timeline and process for voter -initiated measures. The proposed section encompasses various aspects related to both municipal bond and non- bond measures. It delineates the types of measures, compliance requirements, standard templates, oversight mechanisms, and maintenance of effort considerations and establishes a timeline and process for the development of all future ballot measures. The proposed section will include detailed policies on municipal bonds, non- bond ballot measures, oversight and accountability, maintenance of effort, and the timeline and process for the development of all ballot measures. This policy section is based upon guidance from the Oakland auditor report ‘Measure Q & Financial Conditions Report’.
7. Investment Policy: The two updates to the City’s Investment Policy are:
Jestin D. Johnson, City Administrator
Subject: SUPPLEMENTAL 3 – Consolidated Fiscal Policy Revision 2024 Date: August 19, 2024 Page 3
Finance and Management Committee
September 10, 2024
a. US Treasuries: The proposed changes include allowing the City of Oakland and Successor Agency Pool Portfolios to invest in U.S. Treasuries up to 100% of the portfolio. Currently, the portfolios are mainly invested in Federal Agencies, Local Agency Investment Fund (LAIF), and money market funds. U.S Treasuries are considered the safest assets in the world and investment in U.S. treasuries will further boost liquidity and diversity in the City’s investment portfolios. This section is based upon guidance from the State of California’s Debt and Investment
Advisory Commission local agency investment guidelines. b. Linked Banking Ordinance: The City of Oakland passed the Linked Banking Services Ordinance No. 11607 C.M.S. (the "Ordinance") in 1993 and later amended it in 1998, 2001 and 2017
. Under the Ordinance, an annual survey is
conducted of banks interested in doing business with the City to determine whether each bank has met its "Fair Share Goal" of community credit lending. Banks that meet the “Fair Share Goal” and comply with reporting requirements are deemed "Eligible Depositories" and are eligible to do business with the City. However, the program no longer serves its intended purpose due to the additional reporting requirement of the Ordinance. The financial institutions are not able to complete the survey and comply with the reporting requirements to be on the approved list of Eligible Depositories for the Linked Banking Service Program due to the confidential nature of individual banking relationships. Therefore, staff is requesting to end the
Linked Banking Ordinance No. 12066 C.M.S. and will
introduce separate legislation consistent with this recommendation later this fall.
8. Budgeting Policies: The primary updates to the CFP’s budgeting policies encompass expenditure and revenue controls aimed to enhance and maintain the City’s financial stability, as advised by GFOA’s ‘Strategic Planning’ best practices and the ‘Recommended Budget Practices’ by the National Advisory Council on State and Local Budgeting.
Moreover, the policy incorporates performance measures standards to ensure accountability and foster continuous improvement in the City’s financial management practices, as based off GFOA’s ‘Performance Measures’ best practices section.
9. Capital Plan: A Multi -Year capital plan is an important financial planning resource for agencies that require long- term fiscal and project management administration and transparency. Staff drafted the proposed Capital Plan policy based on GFOA’s ‘Multi-Year Capital Planning’ best practices section.
10. Carryforward funds: The City’s carryforward funding practice currently does not allow for an adequate implementation of key projects and programs. Staff drafted the proposed carryforward funds policy based on the GFOA ‘Budget Controls’ best practices section.
The Finance Committee also requested staff to provide information on the following: 1) Definitions or terms from other cities regarding varying degrees of fiscal distress, specifically adverse fiscal conditions, extreme fiscal necessities, and fiscal crisis or emergency, and 2) Best practices and definitions for Maintenance of Efforts (MOEs) language. Staff reached out to the cities of Berkeley, Fremont, Hayward, San Jose, Long Beach, Sacramento, and Fresno. Responses were received from Berkeley, San Jose, Long Beach, and Sacramento.
Jestin D. Johnson, City Administrator
Subject: SUPPLEMENTAL 3 – Consolidated Fiscal Policy Revision 2024 Date: August 19, 2024 Page 4
Finance and Management Committee
September 10, 2024
In general, the cities did not have explicit definitions for states of fiscal distress or emergencies.
Apart from Berkeley, which provides a definition, other cities lack specific criteria or have generalized descriptions to outline their fiscal conditions.
Berkeley
Provided in Attachment A, City of Berkeley’s General Fund Reserve Policy, Berkeley defines fiscal emergency - which must be approved through a City Council ordinance - when all of the following criteria are met:
• When general revenues increase less than 3% from the prior fiscal year; • When the City needs to mitigate State or Federal budget actions that may reduce revenue or increase expenditures;
• When the City must absorb liability settlements in excess of available resources in the City’s litigation designation.
From the responses received, the cities do not consider the maintenance of effort as a standard practice. Instead, most cities fund services directly through their respective measures, and during economic downtowns, emphasize maintaining consistent funding services by utilizing reserves.
Redlined Document
The Finance Department was asked to provide a full redlined version of the Consolidated Fiscal Policy (Attachment B). In Attachment B, the redlined document contains text from the Amended Consolidated Fiscal Policy adopted on May 15, 2018 (C.M.S. 13487), herein as 2018 CFP, and the proposed revisions to the policy, herein as the Proposed 2024 CFP. Attachment B contains three different colored text whose general meanings can be found below.
• Black text: The black text is language from the 2018 CFP that has not changed. • Green text: The green text is language from the 2018 CFP that has not changed but has been relocated.
• Pink text: The pink text is language that is newly added to the 2018 CFP; inherently creating the Proposed 2024 CFP.
Jestin D. Johnson, City Administrator
Subject: SUPPLEMENTAL 3 – Consolidated Fiscal Policy Revision 2024 Date: August 19, 2024 Page 5
Finance and Management Committee
September 10, 2024
ACTION R EQUESTED OF THE CITY COUNCIL
Staff Recommends That The City Council Receive An Informational Report Regarding Proposed Substantive Changes To The Consolidated Fiscal Policy.
For questions regarding this report, please contact Erin Roseman, Director of Finance, at 510- 238-2026.
Respectfully submitted,
ERIN ROSEMAN
Director of Finance
Finance Department
Prepared by:
Stephen Acker, Principal Budget & Mgmt Anlst.
Brittany Hines, Assistant to the Director
Rina Stabler, Asst. Budget Administrator
Rogers Agaba, Asst. Revenue & Tax Admin.
Dawn Hort, Assistant Treasury Administrator
Pooja Shrestha, Assistant Controller
Reviewed by:
Bradley Johnson, Budget Administrator
Sherry Jackson, Revenue & Tax Administrator
David Jones, Treasury Administrator
Stephen Walsh, Controller
Attachment (1):
A: City of Berkeley General Fund Reserve Policy
B: Redlined Proposed 2024 Consolidated Fiscal Policy
Attachment A
Attachment A
Attachment A
Attachment A
Attachment A
CITY OF OAKLAND
CONSOLIDATED
FISCAL POLICY
Attachment B
Table Of Contents
Introduction ............................................. 1 Revenue Policy ....................................... 2 Ballot Measures ..................................... 7 Grant Management Policy .................... 12
Budget Policy ........................................ 17 Reserve Funds ..................................... 33
Capital Plan .......................................... 36 Investment Policy ................................. 38
Debt Management Policy ..................... 50
Financial Reporting ............................... 68
Other Post-Employment Benefits (OPEB)
Funding ................................................. 71 Glossary of Terms .............................. 170
1 Introduction
The City of Oakland’s (“City”) consolidated fiscal policy (“CFP”) represents a framework to guide sound financial management practices, sets standards for fiscal performanc e and promote long-term fiscal sustainability. In alignment with recommendations fr om the Government Finance Officers Association (GFOA), the policies contained herein encompass a range of crit ical areas including budgeting practices, reserve funds management, funding for Other Post Employment Benefits (OPEB), financial reporting standards, debt and investment policy, and the management of the City’s capital plan.
The City’s CFP will be reviewed annually and shall be in conformance with all state and federal laws and generally accepted accounting principles (GAAP) and standards of the Governmental Accounting Standards Board (GASB).
Mission
The City of Oakland is committed to the delivery of effective, courteous, and responsive services.
Residents and employees shall be treated with fairness, dignity, and respect. Civic and employee pride are accomplished through the pursuit of excellence by a work force that values and reflects the diversity of the Oakland community.
The Finance Department proudly serves as the fiscal steward of the City of Oakland and is committed to ethical, efficient, and responsible financial decision-making and use of the City’s assets and resources.
The Finance Department strives
to foster a culture of respect,
integrity, accountability, and
teamwork while providing quality
governmental financial customer
service.
Consolidated Fiscal Policy Revenue Policy
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Revenue Policy
OBJECTIVE
The purpose of this policy is to establish a revenue structure that meets the City’s immediate and long- term service delivery needs. The City’s revenue pol icy shall be used by the City Council and City Administration, in conjunction with the City’s budgeting and financial planning efforts, to create a diversified, stable revenue base to insulate the City from wide economic swings, creating a consistent revenue growth trend line by blending revenue streams with different economic fluctuations. The policy is designed to ultimately produc e revenue stability and consistency to mitigate service disruption, reduce over reliance on volatile revenue streams, and remove built in use of one-time revenue for ongoing expenses. The policy provides a basis for complete transparency in the City’s revenue.
POLICIES
1) Revenue Diversification
The City shall strive to create diverse revenue streams that vary by taxpayer category (resident vs. business), limit property tax burden, balance revenue for economic cycles, and pursue additional revenue sources to expand the tax base. The divers ification shall have the goal of limiting over reliance upon any one revenue source.
The City shall provide an analysis of all Gener al Purpose Fund (GPF) major revenue streams, indicating the percentage of t he overall revenue budget, analysis of macro and micro economic trends driving the revenue source, and sensitivity analysis of the revenue stream to create a volatility index. This analysis shall be provided annually as revenue forecasts are developed and provide recommendations for the possible creation of caps by revenue category to limit over reliance in a boom economy.
2) Revenue Forecasting
A) General Provisions: City revenue estimates shall be tr ansparent, based on appr opriate trend data, historical data, and economic impact factors, and adjusted for inflation, if appropriate. No less than five years of histor ical data should be considered wh en data is available, and the underlying assumptions shall be disclosed.
Revenues shall be estimated conservatively and shall not be assumed to be collected by more than 98%. Revenue estimates shall differentiate cu rrent collections from historical collections, with penalties and interest estimated separately to the extent allowable by the financial system.
Consolidated Fiscal Policy Revenue Policy
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B) New Revenue Sources: Any new or proposed source of revenue should be fully vetted. The evaluation of the new or pr oposed source of revenue must be reviewed and confirmed for legality, including substantiation to support the calculations, metrics related to collectability, and a framework for administrative processes, prior to inclusion in revenue budgets. In the first year of inclusion in the revenue bud get, there should be minimal reliance on its receipts until a historical trend is developed.
C) Exemptions to Revenue Sources: Any tax-rate reduction or exemption for any General Purpose Fund or special fund revenue source shall only be approved following legal analysis consistent with applicable laws . The exemption criteria shoul d be based upon specific Council Action, be in line with policy goals, and have cons istent guidelines that are legally defensible based upon federal and state law.
D) Multi-year Revenue Forecasting and Estimates: The City shall produce a Five-Year Financial Forecast (“FYFF”) on a biennial basis. The FYFF is a planning tool used to estimate the City's expected revenues and expenditures over five years, based on appropriate financial, economic, and demographic data. FYFF forecasts provide the City additional lead time to react to expected revenue shortfalls, or to strategically manage predicted revenue surges.
i) Timeline: The FYFF shall be produced and presented to the Finance & Management Committee or City Council in March or Apri l preceding the biennial budget adoption. FYFF Fact Sheets shall be distributed to City community centers and FYFF data shall be available on an open data portal.
ii) Requirements:
(a) Each budget cycle, the City Administrator shall prepare a FYFF.
(b) The FYFF shall contain the two-year baseline budget for the forthcoming budget period, clearly reflecting projected expenditures to maintain existing service levels and obligations, plus an additional three-year forecast of revenues and expenditures.
(c) The FYFF shall contain information on the variance between prior forecasts and actuals, including the factors that influenced these variances. Revenue estimates shall be based on the most current data availa ble. At minimum, revenue projections shall consider projected revenue for the current fiscal year, as reflected in the Second Quarter (Q2) Revenue and Expenditure (R&E) Report, with appr opriate trending into future years and an explanation of how the revenue projections were derived including information on the assumptions used.
(d) The report shall include a Five-Year Forecast "Fact Sheet” document, which summarizes the FYFF's key findings with simplified text and graphics to make this important budgetary information more accessible to the general public. Within one month after the FYFF is heard by the City Council, the City Administra tor shall print and distribute the Forecast Fact Sheet to all City libraries, recreatio n centers, and senior c enters, including in languages required by Oakland' s Equal Access Ordinance. The full FYFF shall also be posted on the City of Oakland's website. FY FF data shall be available on the City’s website for Financial Reporting.
Consolidated Fiscal Policy Revenue Policy
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3) Use Of One-Time, Non-Recurring, and Volatile Revenue Streams
A) Use of One-Time Revenues
One-time revenues are defined as resources that the City c annot reasonably expect to receive on an ongoing basis, such as proceeds from asset sales and debt refinancing. This section shall not apply to sections called “Use Of Excess R eal Estate Transfer Tax (RETT) Revenues” or “Use Of Proceeds From Sale Or Lease Of City-Owned Properties.”
Fiscal prudence requires that any unrestricte d one-time revenues be used for one-time expenses. Therefore, one-time revenues shall be used in the following manner, unless they are legally restricted to other purposes:
To fund one-time expenditures.
To fund debt retirement and unfunded long-term obligati ons such as negative fund balances, unfunded vehicle replacements, Police and Fire Retirement System (PFRS) unfunded liabilities, CalPERS pension unf unded liabilities, paid leave unfunded liabilities, and Other Post Employment Benefits (OPEB) unfunded liabilities; or shall remain as fund balance.
Use of one-time revenues for purposes other than those established in this section must be authorized by City Council resolution. The resolution shall explain the need for using one-time revenues for purposes other than t hose established in this section. The resolution shall also include steps the City will take to return to using one-time revenues pursuant to this section.
B) Use Of Excess Real Estate Transfer Tax (RETT) Revenues
To ensure adequate levels of General Purpose Fund reserves and to provide necessary funding for municipal capital improvement projects and one-time expenses, the City shall require that excess Real Estate Transfer Tax revenues be defined and used as follows:
The excess Real Estate Transfer Tax (RETT) revenue is hereby defined as any amount of projected RETT revenues that exceed 10% of General Purpose Fund Tax Revenues (inclusive of RETT).
The excess Real Estate Transfer Tax, as de scribed in this section, shall be used in the following manner and appropriated through the budget process:
50% shall be allocated to the Vital Services Stabilization Fund, until the value in such fund is projected to equal 25% of total General Purpose Fund revenues over the coming fiscal year; and
50% shall be used to fund debt retirement and unfunded long-term obligations such as Consolidated Fiscal Policy Revenue Policy
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negative fund balances, Police and Fire Retirement System (PFRS) unfunded liabilities, CalPERS pension unfunded liabilities, paid l eave unfunded liabilities, and Other Post Employment Benefits (OPEB) unfunded liabili ties or acquisitions of vehicles, technology, equipment, and similar assets needed to support existing services.
Recognizing RETT as a volatile source susceptible to fluctuations in the real estate market during periods identified as ec onomic “troughs” characterized by economic downturns or uncertainties, the City Council is advised to exer cise caution in the ut ilization of excess RETT and refrain from the addition of ongoing costs and the expansion of services based solely on RETT revenues. The focus shall be on prioritizi ng one-time expenditures that contribute to the City’s fiscal stability and resilience.
Use of the excess RETT revenues for purposes other than those established in this section must be authorized by City Council resolution. The resolution shall explain the need for using excess RETT revenues for purposes other than th ose established in this section. The resolution shall also include the steps the City will take to re turn to using excess RETT revenues pursuant to this section.
Following the completion of the annual audi t, excess RETT revenues will be analyzed to determine whether the transfers to the Vital Services Stabilization Fund or expenditures to fund debt retirement and unfunded long-term obligations were sufficient. If insufficient funds were transferred, a true-up payment shall be made in the next fiscal year. If the transfers exceed the actual requirement, the amounts in excess may be credited against allocations in the next fiscal year.
C) Use Of Proceeds From Sale Or Lease Of City-Owned Real Properties
Net proceeds from the sale or lease of City-owned properties are to be designated as a possible source for affordable housing developments and shall be deposited to the Capital Improvements Reserve Fund, Fund 5510. Net proceeds are defi ned as “all sales or lease proceeds net of transaction costs.” Net transaction costs do not include any fees paid by developers intended to cover third party expenses related to t he negotiation of Disposit ion and Development Agreements (DDA), Lease Dis position and Development Ag reements (LDDA,) and ground leases or fund needs for interim property maintenance and other administrative costs.
4) Cost Recovery Of Fees Charged For Se rvices Provided (Master Fee Schedule)
The City shall charge fees for services where such an approach is permissible by state and federal law, and where a group of beneficiaries who can pay such fees is identifiable. For the purposes of these provisions, fees for service are those set by the City in am ounts no greater than the reasonable cost of providing the service in accord with
Sufficient fees for service shall be levied based on the reasonable cost of providing the service for which they are charged, incl uding the operating (direct and indi rect), capital, and appropriate projected future costs. All fees for service for the City shall be monitored annually to determine that rates meet, but do not exceed the reasonable cost of providing the service. If a current or proposed Consolidated Fiscal Policy Revenue Policy
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fee is not recovering the reasonable cost of providing the service, the department that administers that service shall consider proposing a new fee that is based on the reasonable cost of the service as part of its annual budget and Master Fee Schedule update submission.
If, upon careful review of policy considerations, the Mayor and City Council determine to set the amount of a fee for service below the level requir ed to recover the reasonable cost of providing that service, the Mayor and City Council must ta ke specific action to appropriate the necessary funds to fully pay for that service. The amount of any such appropriation shall be reported annually through the budget process.
In rare circumstances, when permitted by law and based on a finding of clear public benefit, the City Council may decide to waive fees for service for an individual user. If the fee to be waived is for a service funded through a source of funds generat ed by the collection of that fee, a General Purpose Fund appropriation may be required to pr event other service users from improperly subsidizing such fee.
5) Revenue Manual
The City shall create and maintain a comprehens ive revenue manual that documents all major revenue sources and factors relevant to present and projected revenue collections. The manual shall include at the very least all financia l revenue accounts, the major revenue category and identify the fund in which it is recorded, aut horizing legislation, depar tmental management, five years of collection data, collection trends, and de scriptions of economic volatility. The manual shall be updated biennially, presented to City Council, and available for public inspection.
6) Cost-Effective Collection Practices
City collections shall adhere to Federal, State, and Local laws and the Fa ir Debt Collection Practices Act. The cost of collections shall not exceed the marginal extra revenue obtained and shall not absorb a large percentage of the amount collected. Collect ion efforts shall take into consideration timing, statute of limitations, and method and means, such as liens and special assessments, to ensure outstanding receivables or taxes are worked diligently and expeditiously before they are deemed as bad debt s and written-off. When allowabl e by law, any refunds due shall be offset by any delinquent amounts ow ed. Revenues deemed uncollectible shall be presented to the City Council for consideration of bad debt to write off every three years.
HISTORY
Policy Name
o Resolution No. XXXXX, adopted by City Council on Month Day, Year
Consolidated Fiscal Policy Ballot Measures
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Ballot Measures
OBJECTIVE
The purpose of this policy is to establish guide lines that governs the management of ballot and bond measures.
POLICIES
7) Municipal Bond Ballot Measures
Municipal bond ballot measures ar e proposals or initiatives presented to voters during an election seeking approval of additional spending by providing authorization of bond issuance. The measure requires a two-thirds voter approval to authorize a designated tax for a specific purpose. Bonds are secure and common way for city to finance capita l projects. The issuance and use of municipal bonds requires the approval and participation of the City of Oakland and taxing authority. The public shall not propose municipal bond m easures without the coordinated re view of the City of Oakland Finance Department.
A) Types
i) General Obligation Bonds
General obligation bonds are voter-approved long-term debt instruments which are secured by the legal obligation to levy and collect ad valorem property taxes sufficient to pay annual debt service on the bonds.
ii) Revenue Bonds
Revenue bonds are long-term debt instruments supported by a specific dedicated source of revenues, often revenues generated by a project funded out of bond proceeds.
B) Compliance with Debt Management Policy
General obligation bonds and subsequent issuances must comply with all provisions of the Debt Management Policy; specif ically the section “Capacity for Voter-Approved Indebtedness” (please see the Debt Management Policy below). Treasurer shall provide considerations to ensure that the taxpayer is not over-burdened.
C) Standard Template
Each bond ballot measure proposed must minimall y include required text for legal compliance.
A template will be created by the Finance Department and City Attorney’s office for standardized use that provides guidance on formatting and content.
Consolidated Fiscal Policy Ballot Measures
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D) Oversight and Compliance
Bond ballot measures must be assigned to an existing oversight body for compliance and oversight. An annual independent audit shall be performed by an external entity to ensure accountability and proper disbursement of the bond proceeds in accordance with the bond covenants.
8) Non-Bond Ballot Measures
Non-Bond ballot measures are defined as proposal s or initiatives presented to voters during an election that do not involve the authorization of a bond issuance. Each measure defined in Section 2 (A) must minimally include the information within the ballot measure text as outlined in Section 3 of this policy.
A) Types
i) Parcel Tax Measures
A parcel tax ballot measure is defined as a proposed levy on real estate parcels within the City, which must be paid by the owners of parcels, or units, of real estate. A parcel tax is an assessment based on the characteristics of the parcel. These assessments can include taxing a parcel based on square footage or by dwelling unit, or the tax may be a flat rate per parcel.
ii) Other Tax Measures
Other tax measures, as defined for this policy, are taxes levied on transactions, activities, or businesses with the City, excluding parcel taxes. These may include sales tax, business license tax, transient occupancy tax and utility user tax.
iii) Other Ballot Measures
Other Ballot Measures, as defined for this policy, are proposals that are not related to the imposition or collection of taxes. These measures may include Charter amendments, special district measures and initiatives. Proposed measures, including citizen-proposed initiatives shall be subject to the review process outlined in Section 6 of this policy.
Additionally, these measures should refrain from allocating additional City resources or committing expenditures without identified funding sources.
9) Standard Template
Each measure proposed by the City must minimally include the information within the ballot measure text as outlined in this section. A template will be created by t he Finance Department for standardized use that provides guidance on formatting and content.
Consolidated Fiscal Policy Ballot Measures
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A. Purpose and Intent
The ballot measure should clearly state the purpose of the parcel ta x, providing an overview of the programs of services to be funded, and clearly outline the intended impact that the measure aims to deliver to residents, businesses, and the community.
B. Rate and Duration
The proposed rate of the tax and the duration for which it will be in effect will be specified in the ballot measure text. Provisions for adjusting or extending the duration in the future shall be outlined. Language should include provisions for adjusting the tax rate by the twelve-month (12) annual percentage change in the San Francisco/Bay Area Consumer Price Index (CPI), as published by the Bureau of Labor Statistics (BLS); or the per centage change in California per capita personal income, as determined by the California State Department of Finance and shown in the Price Factor and Population Information report issued each May.
C. Exemptions and Exclusions
Any exemptions or exclusions from the tax, such as exemptions for low-income households, or certain types of properties should be identified. This section should clearly define circumstances under which entities, individual s, or transactions are subject to the tax and under what circumstances the exemptions may apply and the rationale behind them.
D. Use of Funds
The measure language should det ail how the revenue generated fr om the parcel tax will be allocated and used. Specific details regarding t he programs, services, or projects benefitting from the tax revenue should be provided. F unds shall prioritize covering the county administration fee, audit costs, staff expenses related to tax revenue collection, and any other associated costs of tax collection before allocation to other purposes.
10) Oversight and Accountability
Mechanisms for oversight and accountability will be established to ensure that parcel tax funds are used effectively and efficiently. Whenever feasib le, oversight will be delegated to an existing City of Oakland board or commission. The oversight body will serve in an advisory capacity and shall not possess the authority to direct the allocation of funds.
11) Maintenance of Effort
Maintenance of Effort (MOE) is defined as a requirement which m andates that a certain level of funding be maintained for specific programs or services. As a standard practice, the City should refrain from pursuing MOE measures to avoid inefficiencies in f unding allocation. The City shall Consolidated Fiscal Policy Ballot Measures
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instead focus on developing parcel tax measures that directly address identified community needs and provide clear guidelines on t he use of funds. Any inclusio n of MOE language in the ballot measure text should be based on appropriations t hat can be clearly delineated. This approach promotes transparency and mitigates potential ambiguity that could arise from use of percentages or formulas, which could also result in fluctuating targets or unclear calculations.
A provision for exemption shall be included in to the language of the ballot measure to address circumstances of adverse financial condition, extr eme fiscal necessity, or a fiscal emergency. This provision would authorize the suspension of MOE requirements by City Council Resolution.
12) Timeline and Process for Development
All city sponsored ballot measures must comply with Rule 23 of the Council Rules of Procedure and Oakland Municipal Code Section 221. Voter-initia ted ballot measures ar e strongly encouraged to follow the timeline established below. This time line delineates the procedural steps necessary for the consideration and the inclusion of a measure on the ballot of a general election taking place in November. Modifications to the timeline are necessary for special elections or other months when an election might be held, but the timeline should gene rally maintain a similar duration to that of a November election.
A. Review by the Finance Department (by Late-April)
Proposed measures are first subm itted to the City’s Finance Department for a comprehensive fiscal review. This review assesses the financial implications of the proposed measure, including potential costs, revenue impacts and funding availability. Pr oposed measures should refrain from allocating City resources or committing additional expenditures without the identification of funding availability.
B. Review by City Attorney ’s Office (by Late-April)
Simultaneously, proposed measures are submitted to the City Attorney’s Office for through legal review, and to ensure compliance with all applicable laws, regulations and legal standards.
C. Discussion at City Council Meeting (beginning Mid-May)
Following the Finance Department and City Atto rney’s Office review, the proposed ballot measures are discussed at regular meeting of the full City Council. The City Council shall review and deliberate on the merits of the proposal.
D. Late June
Finalization and submissions of all materials to t he Council Registrar of Voters (ROV) to meet deadline for ballot inclusion.
E. November General Election
Ballot measures, having undergone thorough review and adherence to the outlined timeline, are included in the November general election for voter consideration.
Consolidated Fiscal Policy Ballot Measures
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HISTORY
Hearings Required For Certain Ballot Meas ures Proposed By the Council (Measure X) o Resolution No. 89317, adopted by City Council on July 11, 2022
Consolidated Fiscal Policy Grant Policy
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Grant Management Policy
OBJECTIVE
The purpose of this policy is to establish comp rehensive guidelines that governs the management of the City’s grant funding. Grants are awarded by a government departm ent, non-profit or private entity to fund specific projects or programs.
POLICIES
1) Grant Identification a nd Strategic Alignment
The City of Oakland shall seek to obtain funding from external sources including federal, state, and local agencies that align with the citywide priori ties and strategic goals of the City. Prior to the submission of a grant appl ication, the City must assess the gr ant and the extent to which it is consistent with the goals of the City’s mission, and Council, and/or departmental priorities. The City shall avoid applying for, or accepti ng if an application is not required, a grant that is inconsistent with the overall strategic direction of the City as this poses significant fiscal risk beyond the grant period. The City Administrator or designee shall coor dinate grant application efforts and assign a departmental lead to be the responsible party for grant application development and submission.
2) Grant Application and Funding Analysis
Upon successful determination that the grant applicat ion is in strategic alig nment with the City’s goals, and prior to the submission of a grant applicat ion, the City must provide notice to the City Council to accept and appropriate grant funding. Prior to a grant application submittal, or acceptance if an application is not required, all grants shall be reviewed by City Administrator’s Office to ensure compliance with citywide priorities and strategic goals of the City.
The City shall require a funding analysis to be completed prior to the submission of a grant application. The funding analysis must identify and det ermine the effects on the City such as cash flow availability, procurement requirements, financial reporting, or compliance requirements so that the impacts can be reviewed and understood beforehand. The fundi ng analysis must include the financial support required to complete the grant funded project including required current or on- going City matching funds or in-kind contributions , any applicable restrictions exceeding the grant period, options for phased impl ementation, and a timeline with milestones and the corresponding funding needed to accomplish each milestone. The funding requirement must include the estimated amount needed to fund ongoing main tenance or required service levels, programming, and operating needs of the grant funded pr oject following the terminati on of the grant. The City will carefully analyze the need for, and availability of, required financial support of these grant programs beyond the anticipated grant award.
3) Budgeting and Appropriations
Consolidated Fiscal Policy Grant Policy
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The City shall avoid using one-time grant re venues to meet ongoing service delivery needs. The City shall budget expenditures fo r grant-funded programs only after re ceipt of the grant award or letter of commitment or approval from the Budget Bureau. The budget, as adopted by City Council, shall only include appropriations fo r the grant award to be expended within the fiscal year. Grant funding awarded outside the budget process must be appropriated by City Council.
The Administration may appropriate restricted gr ants or gifts up to $50, 000 without City Council approval. City Council reserves the authority to appropriate unrestricted grant funding in any amount
A. Grant Retention Clauses
Prior to the appropriation of re venues from any grant outside of the budget process, the City Council shall be informed of any retention clauses that require the City to retain grant-funded staff, services, programs, or operations beyond the term of the grant. The fiscal impacts of such retention clauses shall be disclosed at the noticing of City Council. During the biennial budget process staff shall report to the Council the ongoi ng projected fiscal impacts of such retention clauses.
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Section 1. Budgeting Practices
4) Part A. Cost Recovery or Reimbursable Grants
The nature of reimbursable grants requires the city to cover the expenditures from cash reserves before the grant funds are reimbursed. This process limits the City’s ability to fund other operations and city services, therefore, City shall submit reimbursements and other periodic reporting to the grantor quarterly or during the sti pulated billing term per the gr antor specified timeline. City departments shall close out reimbursable grants timely and prior to the year-end procedures for the termination grant period.
5) Evaluation Prior To Rene wal or Grant Continuation
Prior to the submission of a grant application, the City shall require departments to develop continuation plans for sustaining grant-funded programs if funding is reduced or terminated. The continuation plans must detail a strategy to rectify the loss of funding and the subsequent loss of grant-funded positions and/or program components. Departments must plan responsibly for either termination or reduction of the program, seek to se cure alternative sources of funding, or indicate that the grant activities will not be continued absent dedicated grant funding.
The City shall evaluate the impacts of grant funded pr ograms prior to the renewal of a grant at the end of the initial grant period. The City shall develop outcome measures prior to the acceptance of the grant to determine if the grant funded program produces the desired results and aligned with the strategic goals of the City. The outcome measures must include a review of the actual costs and detail the general revenues utilized for the grant to determine if the benefits of the cost match produced the desired results.
6) State Subventions, Unfunded Ma ndates, and Pass-Through Grants
State Subventions are Federal and State entitlement programs that are allocated to the City directly from the awarding agency. The City shall oppose state or federal actions that mandate expenditures that the Council considers unnecessary and are unfunded. The City shall pursue intergovernmental funding to support the incremental cost of such mandates.
The City shall make every attemp t to limit pass-throu gh funding directly to specified entities and require the grantor to award the funding to the entity directly. Fu rthermore, the City shall oppose pass-through funding to specified ent ities unless there is a requirem ent for the direct oversight and/or participation of the City. The City sha ll analyze and determine if there is departmental capacity to manage the programmatic and administrative aspects of the grant project and reject the acceptance of the award if the grant binds t he City to expenses beyond the grant period and not within budget.
7) City-Issued Grant (Grant Agreements)
A. Appropriations
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The City Council may appropriate one-time grant funding in the biennial budget for the purposes of supporting non-profit entities serving the residents of Oakland. Grant appropriations shall not be recurring in nature and should not benefit any one entity for more than a continuous two-year period. Grant appropriations are not a requirement of the City’s budget and are contingent upon the availability of funding.
B. Awards
The City Council shall award grant fu nding to qualified and registered 501 (c)(3) organizations.
C. Multiple Awards
The City may limit the number of grant agree ments to any one entity at any time to not exceed three agreements.
The City shall review grantee with additional scrutiny in the event of multiple awards stemming from a variety of programs.
D. Restrictions
The City shall not award grant s to entities to perform profe ssional services on behalf of the City. Such services are not grants and subject to the procurement policy of the City. The City shall not award grant funding solely for operational support but to enhance services to the community and support identified programs with community benefit. to assist agencies in meeting ongoing minimum service delivery needs.
The City shall cap advance payments to no mo re than 15% of the total grant award in any grant agreement. The City shal l require the vendor to subst antiate the advance payment’s expenditures prior to the release of any subsequent payment. The City shall not renew or continue any grant award without a performance measure analysis to determine the efficacy of the program’s goals.
E. Fiscal Sponsorships
The City may establish additiona l criteria for the fiscal sponsor to ensure financial ability, capacity, and rigor. The City shall require fiscal sponsors to disclose the prior and current grant agreements with the City prior to the execution of a new agreement.
F. Reporting
The City Administrator shall provide a report to the City Council on an annual basis detailing both the City’s grantee and grantor efforts. The report shall at minimum detail the grant title or program , managing department, grant ee name, amount of funding available, amount requested, amount rece ived/awarded, amount appropriated, amount expended, expenditure deadline, and funding source.
HISTORY
Grant Award Approval
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o Ordinance No. 13051 C.M.S., adopted by City Council on November 11, 2014
$50,000 or Less Restricted Grant or Gift Appropriation o Ordinance No. 13380 C.M.S., adopted by Ci ty Council on July 19, 2016July 19, 2016
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Budget Policy
OBJECTIVES
The purpose of this policy is to establish comprehensive guidelines that govern the management of the City’s operating funds, with a primary objective of achieving and sustaining a structurally balanced budget. These guidelines encompass expenditure and revenue controls aimed to enhance and maintain the City’s financial stability. Moreover , the policy incorporates performance measures standards to ensure accountability and foster c ontinuous improvement in the City’s financial management practices.
POLICIES
1) General Provisions
The City’s Fiscal Year shall begin on July 1st of each year and end on June 30th of the subsequent year. The City shall adopt a two-year biennial policy budget by June 30th of odd-numbered calendar years. The City shall amend its bienn ial policy budget (midcycle) by June 30 th of even-numbered years. The budget and midcycle amendments shall be adopted by resolution of the City Council as required by the City Charter.
Part B.
2) Policy on Balanced Budgets
The City shall adopt a balanced budget that limits appropriations to the total of estimated revenues and unallocated fund balances projected to be available at the close of the current fiscal year. The City Administrator shall be responsible for ensuring that the budget proposed to the City Council by the Mayor, adheres to the balanced budget policy.
This policy entails the following additional definitions and qualifications:
1. The budget must be balanced at an individual fund level.
2. City policies on reserve requirements for individual funds must be taken into accountconsidered. The appropriated expendit ures included in the balanced budget equation must include the appropriations necessary to achieve or maintain reserve targets.
3. Appropriated revenues can include transfers from unallocated fund balance where such fund balance is reasonably expect ed to exist by the end of the fiscal year preceding the year of the adopted budget. Transfers from fund balance are not to be counted as revenue if the fund balance is not reasonably expected to exist by the end of the fiscal year preceding the year of the adopted budget. (Note: The precise definition of 'fund balance' will vary from fund to fund, depending on the fund's characteristics and accounting treatment.) Consolidated Fiscal Policy Budget Policy
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4. Appropriated expenditures can include transfers to fund balance or to reserves.
From time to time the City Council may present changes in policy and consider additional appropriations that were not anticipated in the most recently adopted budget. Amendments by the City Council shall maintain a balanced budget.
Each fiscal year the City Admini strator shall report to the City Council on actual revenues and expenditures in the General Purpose Fund and other funds as deemed necessary.
Part C. Use of Excess Real Estate Transfer Tax (RETT) Revenues
To ensure adequate levels of the General Purpose Fund reserves and to provide necessary funding for municipal capital improvement projects and one-time expenses, the City shall require that excess Real Estate Transfer Tax revenues be defined and used as follows:
1. The excess Real Estate Transfer Tax (RETT) revenue is hereby defined as any amount of projected RETT revenues that exceed 15% of General Purpose Fund Tax Revenues (inclusive of RETT).
2. 3) Compliance with Gann Limitation
The City shall adhere to the spending limits imposed by the Gann Limitation, or Gann Limit, as prescribed by Article XIIIB of the California Constitution.
A. Guidelines for Compliance
i) Calculation Methodology
The Gann Limit will be recalcul ated annually by multiplying the pr evious year’s limit by an adjustment factor for population growth and in flation as published by the California Department of Finance. The Finance Department shall be responsible for conducting Gann Limit calculations using appropriate methodologies and data sources.
ii) The annual budgeting process s hall incorporate Gann Limit considerations to ensure compliance with spending restrictions.
iii) The Finance Department shall oversee Gann Limit compliance and initiate corrective actions as necessary to maintain compliance.
The excess Real Estate Transfer Tax, as de scribed in this section, shall be used in the following manner and appropriated through the budget process:
a. At least 25% shall be allocate d to the Vital Services Stabilization Fund, until the value in such fund is projected to equal to 15% of total General Purpose Fund revenues over the coming fiscal year; and
b. At least 25% shall be used to fund debt retirement and unfunded long-term obligations such as Consolidated Fiscal Policy Budget Policy
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negative fund balances, Police and Fire Retirement System (PFRS) unfunded liabilities, CalPERS pension unfunded liabilities, paid leave unfunded liabilities, and Other Post-Employment Benefits (OPEB) unfunded liabilities; and
c. The remainder shall be used to fund one -time expenses or to augment reserves.
3. Use of the excess RETT revenues for purposes other than those established in this section must be authorized by City Council resolution. The resolution shall explain the need for using excess RETT revenues for purposes other than those established in this section. The resolution shall also include steps the City will take to return to using excess RETT revenues pursuant to this section.
4. Following the completion of the annual audit, excess RETT revenues will be analyzed to determine whether the transfers to the Vital Services Stabilization Fund or expenditures to fund debt retirement and unfunded long-term obligations were sufficient. If insufficient funds were transferred, a true-up payment shall be made in the next fiscal year. If the transfers exceed the actual requirement, the amounts in excess may be credited against allocations in the next fiscal year.
Part D. Use of One-Time Revenues
1. One-time revenues are defined as resources that the City cannot reasonably expect to receive on an ongoing basis, such as proceeds from asset sales and debt refinancing. This part shall not apply to the use of excess RETT revenues pursuant to Section 1. Part C.
2. Fiscal prudence requires that any unrestricted one-time revenues be used for one-time expenses. Therefore, one-time revenues shall be used in the following manner, unless they are legally restricted to other purposes: to fund one-time expenditures, to fund debt retirement and unfunded long-term obligations such as negative fund balances, Police and Fire Retirement System (PFRS) unfunded liabilities, CalPERS pension unfunded liabilities, paid leave unfunded liabilities, and Other Post-Employment Benefits (OPEB) unfunded liabilities; or shall remain as fund balance.
3. Use of one-time revenues for purposes other than those established in in this section must be authorized by City Council resolution. The resolution shall explain the need for using one-time revenues for purposes other than t hose established in this section. The resolution shall also include steps the City will take to return to using one-time revenues pursuant to this section.
4) Part E. Use of Unassigned General Purpose Fund Balance
Any unassigned General Purpose Fund balance, as projected in the 3rd Quarter Revenue and Expenditure Report, and not budgeted for other purposes, shall be used in accordance with Section 1, Part Dthe Use of One-Time Revenues section of this document.
5) Strategic Appropr iation of Ongoing Funds
Ongoing funds are defined as resources that the City reasonably expects to receive on an ongoing basis. This part shall not apply to the use of excess RETT revenues pursuant to Section 1. Part F.
Part C, the use of One-Time revenues pursuant to Section 1. Part D, or the use of unassigned Consolidated Fiscal Policy Budget Policy
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General Purpose Fund Balance pursuant to Section 1 Part E.
There is need for a strategic approach to appropriate unrestricted new ongoing available funds that may become available during the fiscal year. Th is applies to new general taxes approved by the voters. These funds may also result from ot her new revenue sources or expenditure savings achieved due to cost efficiencies, reduced service levels, or other unforeseen factors.
The priority order for the appropria tion of these funds shall adhere to specific crit eria, promoting fiscal prudence and long-term financial stability:
1) Known operating deficits;
2) Negative fund balances;
3) Acquisitions of vehicles, technology, equipment, and similar assets needed to support existing services;
4) Augmented discretionary spending on existing services and programs; 5) New discretionary spending on new programs and pilots
Any deviation from this policy requires a City Council resolution to exempt specific allocations from the established criteria. The City Council holds the responsibility to prepare a resolution that details the reasons for exemption and should include an evaluation of the service and equity impacts of not adhering to the criteria. Council members shall not be precluded from combining other exemptions in order to pass a balanced budget, provided each exemption considered has been published in the City Council agenda packet as a component of one Resolution.
6) Analysis of Funding for Debt or Unfunded Long-Term Obligations From Certain Revenues
When excess RETT or other one-time revenues are used to fund accelerated debt retirement or unfunded long-term obligati ons, the City Administrator sha ll present his or her analysis and recommendations to the Council based on the best long-term financial interest of the City.
Part G.
7) Criteria for Project Carryforwards and Encumbrances
Previously approved but unspent project appropriati ons ("carryforwards") and contingent liability reserves for current purchases or contracts that are paid in the following fiscal year ("encumbrances") are financial obli gations against reserves. Fisca l prudence requires that such obligations be limited.
EachTo limit these obligations, each fiscal year, the Finance Department will submit a list of eligible carryforwards and encumbrances to all department s for evaluation for all funds, including the General Purpose Fund. Departments may request to retain some or all carryforwards and encumbrances when such balances are:
1.1) Deemed essential to the delivery of active city projects, programs and services; or
2.2) If the liquidation of such balances would be in violation of legislative or legal requirements.
A departmental request to retain project carryforwards and/or encumbrances must be submitted to Consolidated Fiscal Policy Budget Policy
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the Finance Department. Departments shall prov ide specific reasons for requested project carryforwards and encumbrance carryforwards, including, but not limited to, those reasons outlined above. Carryforward of project appropriations in f unds with negative balances will only be allowed on an exception basis.
The Finance Department will recommend to the Ci ty Administrator an action on the departmental requests. The City Administrator shall make a final determination on pr oject carryforward and encumbrances, and will direct the Finance Department to make carryforwards available to the appropriate department.
Part H. Grant Retention Clauses
Prior to the appropriation of re venues from any grant outside of the budget process, the City Council shall be informed of any retention clauses that require the City to retain grant-funded staff, services, programs, or operations beyond the term of the grant. The fiscal impacts of such retention clauses shall be disclosed. During the biennial budget process staff shall report to the Council the ongoing projected fiscal impacts of such retention clauses.
Part I. Each year, upon the availability of audited financials, the Finance Department will conduct a true-up of final project carryforward and encumbrance amounts. This process will help to mitigate discrepancies between pre-audit and post-audit actuals and the over-appropriation of carryforward funds.
8) Alterations to the Budget
Substantial or material alterati ons to the adopted budget including shifting the allocation of funds between departments and substantial or material changes to funded service levels, shall be made by resolution of the City Council.
The Finance Department will include departmental expenditure projections for the General Purpose Fund in the Second Quarter Revenue & Expenditure Report. In the event that a department is projected to overspend in the General Purpose Fund by more than one percent (1%), the City Administrator shall bring an informational report to the City Council within 60 days following acceptance of the Revenue & Expenditure report by the City Council. The report shall list the actions the Administration is taking to bring the expenditures into alignment with the budget.
9) Part J. Transfers of Funds between accounts.
The City Administrator shall have the authority to transfer funds between personnel accounts, and between non-personnel accounts within a departm ent. The City Administrator shall have the authority to transfer funds alloca ted to personnel accounts to non- personnel accounts within a department provided that cumulative transfers within one fiscal year do not exceed 5% of the original personnel account allocation of that department. The City Administrator shall have the authority to transfer funds from non-personnel accounts to personnel accounts within a department. The City Administrator shall have the authority to transfe r funds allocated to personnel accounts to non- personnel accounts if the transfer is required to meet the conditi ons of or maximize the funding derived from a grant that has be en approved by the City Council. Fo r the purposes of this section accounts for the provision of temporary personnel services shall be considered personnel accounts.
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Part K. Pay-Go Account Expenditures, Priority Project Fund Expenditures, and Grants
The City Council hereby finds and determines that it is in the public interest to spend Pay-go account fund to facilitate and support programs & services of the City of Oakland, capital improvement projects of the City of Oakland, and programs & capital improvement projects of the public schools and other public entities within the City of Oakland. The Council authorizes Pay-Go account funds to be used for the following purposes:
Capital Improvements:
1. To pay for or augment funding for a City of Oa kland capital improvement project including planning and pre-construction services for projects such as, but not limited to, feasibility studies and design, landscaping, architectural and engineering services and all services and materials needed to construct a capital improvements such as, but not limited to, contractor services, lumber, concrete, gravel, plants and other landscape materials, fountains, benches, banners, signs, affixed artwork and any other design and decorative elements of the project; and
2. To provide a grant to a public school, including a school chartered by the State of California or Oakland Unified School District, or other public entity for use on capital improvement project within the City of Oakland, including planning and pre-construction services for projects such as, but not limited to, feasibility studies and design, landscaping, architectural and engineering services and all services and materials needed to construct a capital improvements such as, but not limited to, contractor services, lumber, concrete, gravel, plants and other landscape materials, fountains, benches, banners, signs, affixed artwork and any other design and decorative elements of the project; and
Furniture & Equipment:
3. To pay for or augment funding for purchase of fu rniture and equipment, including computer equipment and software, to be used by participants in a program operated by the City of Oakland; and
4. To provide a grant to a public school, including a school chartered by the State of California or Oakland Unified School District, or another public entity to be used for furniture and equipment, including computer equipment and software, to be used by participants in a program operated by the public school or public entity.
Pay-go purposes stated above shall operate as restrictions on Pay-go expenditures or Pay-go grants, regardless of the Pay-go account funding source.
Pay-go purposes stated above shall apply to any and all Pay-go expenditures or grants made by the Mayor and each City Councilmember. All Pay-go expenditures and grants shall be administered by the City Administrator on behalf of the city, and grant agreements shall be required for all such grants.
In accord with the City Council's motion approving the initial allocation of Councilmember Priority Project funds on June 8, 2006, the City Councilmembers must obtain City Council approval for all Priority Project expenditures.
All Priority Project fund grants approved by the City Council and shall be administered and executed by the City Administrator on behalf of the city, and grant agreements shall be required for all such grants.
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Section 2. Reserve Funds
Part A. General Purpose Fund Emergency Reserve Policy
1. Council hereby declares that it sha ll be the policy of the shall City of Oakland maintain in each fiscal year a reserve equal to seven and one-half (7.5%) of the General Purpose Fund (Fund 1010) appropriations as adopted in the biennial or midcycle budget, and not including prior year carryforwards, encumbrances, or appropriations to Fund Balance for, such fiscal year (the "General Purpose Fund Emergency Reserve Policy"),
2. Each year, upon completion of the City's financia l audited statements, the City Administrator shall report the status of the General Purpose Funds Emergency Reserve to the City Council and on the adequacy of the of the 7.5% reserve level. If in any fiscal year the General Purpose Fund Reserve Policy is not met, the City Administrator shall present to Council a strategy to meet the General Purpose Funds Emergency Reserve Policy. Each year, the City Administrator shall determine whether the 7.5% reserve level requires adjustment and recommend any changes to the City Council.
3. The amounts identified as the General Purpose Funds Emergency Reserve may be appropriated by Council only to fund unusual, unanticipated and seemingly insurmountable events of hardship of the City, and only upon declaration of fiscal emergency. For the purposes of this Ordinance, "fiscal emergency" may be declared (1) by the Mayor and approved by the majority of the City Council, or (2) by a majority vote of the City Council.
4. Prior to appropriating monies from the General Purpose Funds Emergency Reserve, the City Administrator shall prepare and present such analysis to the City Council. Upon review and approval of the proposed expenditure by the City Council, and appropriate fiscal emergency declaration necessary for the use of GPF reserve, the City Administrator will have the authority to allocate from the reserves.
Part B. Vital Services Stabilization Fund Reserve Policy
1. Council hereby declares that it sha ll be the policy of the City of Oakland to maintain a Vital Services Stabilization Fund (VSSF) with a target funding level of 15% of General Purpose Fund Revenues. The funding of the Vital Services Stabilization Fund shall be made pursuant to Section 1, Part C concerning excess Real Estate Transfer Tax.
2. In years when the City forecasts that total General Purpose Fund revenues will be less than the current year's revenues, or anytime significant service reductions, such as layoffs or furloughs, are contemplated due to adverse financial conditions, use of this fund must be considered to maintain existing services.
3. Use of the VSSF must be authorized by City Council resolution. The resolution shall explain the need for using the VSSF. The resolution shall also include steps the City will take in order to replenish the VSSF in future years.
Part C. Capital Improvements Reserve Fund
1. Council hereby declares that it sh all be the policy of the City of Oakland to maintain a Capital Consolidated Fiscal Policy Budget Policy
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Improvements Reserve Fund.
2. Revenue received from one time activities, includi ng the sale of Real Property, shall be deposited into the Capital Improvements Reserve Fund, unless otherwise directed by a majority vote of the City Council. Interest earnings on monies on deposit in the Capital Improvements Reserve Fund shall accrue to said fund and be maintained therein.
3. Monies on deposit in the Capital Improvements Reserve Fund may be appropriated by Council to fund unexpected emergencies, major capital maintenance, repair costs to City-owned facilities and to fund capital improvement projects through the Five-Year Capital Improvement Program.
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10) Section 3. Performance Measures
All City Departments shall be responsible for developing and documenting performance measures relevant to their programs and services duri ng the budget preparing pr ocess. Performance measures shall be prominently featured in the proposed and adopted biennial budget documents, providing a clear understanding of the expected outcomes and impac ts associated with proposed expenditures.
Performance measures shall in clude a mix of outcome and efficiency measures to provide a comprehensive view of performance.
Performance measures shall be subject to annual evaluation for enhancements and refinement based on changing community needs, technological advancements and emerging best practices.
11) Budget Process, Fiscal Planning,
Transparency, and Public Participation
The City shall endeavor to provide accessib le information and engage residents throughout the budget process. Emphasizing cont inuous improvement, Oakland seeks to refine its practices, promote public trust and strive toward equitable outcomes for all constituents.
Unless otherwise noted all timelines apply only to budget development y ears, normally odd numbered years and not to mid-cycle revisions to an adopted two-year budget.
A. 1. Assessment of Stakeholder Needs, Concerns and Priorities
i) Timeline:
Budget Advisory Committee review prior to survey release. Survey completion byin November and December 5th of even-numbered years. Results publicly available within three weeks of survey's close.
ii) Requirements:
(1) The City Administrator should develop or secure a professional statistically valid survey for assessing the public's concerns, needs and pr iorities prior to the development of the biennial budget. Whenever feasible, the Ci ty should conduct a professional poll administered to a statistically relevant and valid sample of residents that is representative of Oakland's population in term s of race, income, neighborhood, age, profession, family size, homeownership/renter-ship, etc. If that's not possible, then demographic information should be collected and reported out with the survey results.
(2) Prior to release, the survey questions s hall be submitted to the Budget Advisory Committee by September 1st of even numbered years for review of bias, relevance, consistency in administration, inclusion of benchmark questions, and ability to assess concerns, needs and priorities. The survey instrument, method of dissemination, and any instructions for administration shall be publicly available. The survey should be conducted following the November election and before the end of December 5th.
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(3) If the City cannot afford or provide for a professional survey, an informal survey shall be made available for broad dissemination by the Mayor and Councilmembers through community list serves and other communi cation channels. Furthermore, the City Administrator shall take steps to promote participation, such as issuing a Flyer promoting participation in the survey and methods of participation (survey internet link, email, phone number) and posting such Fliers near publicly av ailable computers in all City libraries, Recreation Centers, and Senior Centers. A list of those dissemination channels should be publicly available along with survey results.
(4) Survey results should be publicly available within three weeks of the completion and analysis of the survey. Survey results should be made widely available, shared on social media, and published on the City’s Budget website. In the event that City's If a statistically valid survey has been completed, the Mayor and City Administrator shall include in their proposed budget a summary of the survey data and a statement regarding how the data was or was not incorporated into the final proposed budget. Informal surveys and their results shall be made public but not included in their proposed budget document.
The City Administrator shall development a standardized and diverse means of collecting resident input via other means prior to budget development.
2. B. Council Initial Budget Briefing and Priorities Discussion of Assessment of Stakeholder Needs, Concerns and Priorities
i) Timeline:
February or March (this briefing and discussion may be combined with discussion of the Five- Year Forecast as described below)
ii) Requirements:
The Mayor and City Council will hold a bi-annual budget workshop soon after the commencement of the Council term. The workshop will include meeting that includes briefings on estimated baseline expenditures, revenue projections and an overview of the City's budgeting process.
The workshopmeeting will provide the Mayor and Council with the opportunity to begin discussing priorities for the next budget year based on the Assessm ent of Stakeholder Needs, Concerns and Priorities.
3. Five-Year Forecast
iii) Five-Year Forecast: The City shall produce a Five-Year Financial Forecast (“FYFF”) on a biennial basis. The FYFF is a planning tool us ed to estimate the City's expected revenues and expenditures over five years, bas ed on appropriate financ ial, economic, and demographic data. FYFF forecasts provide the City additional lead time to react to expected revenue shortfalls, or to strategically manage predicted revenue surges.
(a) Timeline: ProducedThe FYFF shall be produced and heard bypresented to the Council's Finance & Management Committee or the full City Council in February or March. Forecast or April preceding the bi ennial budget adoption. FYFF Fact Sheets shouldshall be distributed to City community centers and ForecastFYFF data shouldshall be available on Consolidated Fiscal Policy Budget Policy
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Open Data Portal within two weeks of the Council hearing.an open data portal.
(b) Requirements:
(i) Each Budget Cyclebudget cycle, the City Administrator mustshall prepare a Five- Year ForecastFYFF.
The Five-Year Financial Forecast (“Forecast”) is a planning tool that estimates the City's likely revenues and expenditures over five-years, based on appropriate financial, economic, and demographic data. The purpose of the Forecast is to surface all major financial issues and estimate future financial conditions to support informed long-term decision making. Such planning provides for greater financial stability, signals a prudent approach to financial management, and is consistent with best practices.
(ii) The Forecast The FYFF shall contain the two-year baseline budget for the forthcoming budget period, clearly reflec ting projected expenditures to maintain existing service levels and obligations, pl us an additional three-year forecast of revenues and expenditures. The Baseline Budget shall consist of projected expenditures necessary to maintain existing staffing and service levels, plus an estimate of anticipated revenues for the two-year period.
(iii) The ForecastFYFF shall also contain information on the variance between prior forecasts and actual amounts actuals, including the factors that influenced these variances. Revenue estimates shall be bas ed on the most current data available ; minimally. At minimum, revenue projections shall take into account consider projected revenue for the current fiscal year, as reflected in the 2nd quarterSecond Quarter (Q2) Revenue and Expenditure (R&E) Report, with appropriate trending into future years and an explanation as toof how suchthe revenue projections were derived including information on the assumptions used.
(iv) The report shall include a Five-Year Forecast "Fact Sheet” document, which summarizes the Forecast'sFYFF's key findings with simplified text and graphics to make this important budgetary information more accessible to the general public.
Within two weeksone month after the ForecastFYFF is heard by the City Council, the City Administrator shall print and distribut e the Forecast Fact Sheet to all City libraries, recreation centers , and senior centers, including in languages required by Oakland's Equal Access Ordinance. The full ForecastFYFF shall also be posted on the City of Oakland's website. ForecastFYFF data shall be available in open data format on Oakland's data portal.the City’s website for Financial Reporting.
4. Statement
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C. Council Priorities Workshop and Statements of Councilmember Priorities
i) Timeline: Written submission due by
Held in Late March 15ththrough Mid-April of odd-numbered years.
ii) Requirements:
The Mayor and City Council will hold a bi-annua l budget workshop to discuss priorities for the coming budget. The meeting will provide t he Mayor and Council with the opportunity to adopt collective City priorities for the next budget year.
City Council Members will have the opportunity to advise the Mayor and, City Administrator, and their colleagues publicly of their priorities. Each Councilmember shall be invited to submit up to seven specific expenditure priorities in ranked and/or weighted order for changes to the baseline budget as presented in the Five-Year Forecast.. Councilmember priority statements must be submitted as part of a report to be heard by the City Council and/or in a publicly available writing to the Mayor and City Administrator by March 15 the agenda packet for the Council Priorities Workshop. In addition to the priorities, Councilmembers may also submit other suggestions, including revenue suggestions. The Council President may request additional information regarding the priorities of each Councilmem ber be included in the packet for the Council Priorities Workshop.
5. Collective adopted priorities and Councilmember priority statements shall be published in the Proposed and Adopted Budget
D. Administrator's Budget Outlook Message & Calendar Report
i) Timeline: Heard
Published by City Council before April 15th.
ii) Requirements:
The City Administrator shall bring as a report to the City Council prepare a Budget Outlook Message & Calendar no later than April 15th that provides an overview of the budget development process and lists all key dates and estimated dates of key budget events, including, but not limited to the release of the Mayor and Administrator's Proposed Budget, Community Budget Forums, Council meetings, and formal budget passage dates. This publication shall be posted on the City's website and by other means determined by the City Administrator.
E. 6. Release of Mayor & Administrator's Proposed Budget & Fact Sheet
i) Timeline:
Published and publicly available by May 1st. Heard by City Council and Fact Sheet distributed by May 15th17th.
ii) Requirements:
The Proposed Budget must be released by May 1st and shall clearly indicate any substantive changes from the current baseli ne budget, including all changes to service levels from the current budget. The Proposed Budget shall indicate staffing by listing the number of positions in each classification for each Department, incl uding a listing of each position proposed for Consolidated Fiscal Policy Budget Policy
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addition or deletion. The Council shall hold a public meeting to present the Proposed Budget no later than May 15th17th in budget adoption years. T he full proposed budget document shall be made available online from the City's website, and printed copies shall be available in all City libraries. Addi tionally, the proposed budget data shall be available in open data format on the City's open data portal by May 1st17th. Every effort should be made to thoroughly respond to any public request for departmental budget details, such as line item budgets.detail. The requested information shall also be made available on the City's website and open data portal within a reasonable time following the request.
The Proposed Budget must include a Budget Fact Sheet with easy-to-understand graphics and text explaining the City's overall finances , the Proposed Budget and that year's Budget Calendar. The Fact Sheet shall be published in languages required by Oakland's Equal Access Ordinance. The Fact Sheet shall be printed and made available in all City Recreation Centers and Senior Centers as well as all City libraries by May 15th17th or the presentation to the Council, whichever is sooner.
F. 7. Community Budget Forums
i) Timeline:
During the months of May and June of odd-numbered years
ii) Requirements:
The Administration and Council shall hold at least one (1) Community Budget Forum in each council district. These forums, organized by the City Administrator's Office in partnership with Councilmembers shall be scheduled to maximi ze residents' access. The forums should include sufficient time for a question and answer period in a format that maximizes community participation, as well as a presentation of budget facts by City staff. One or more of the forums must be scheduled in the evening. Another must be scheduled on the weekend. These meetings shall also be scheduled so that Councilmembers have sufficient opportunity to attend a meeting close to their council district. Every member of the City Council shall make their best effort to attend the Community Budget Forum in their council district. Sufficient Fact Sheets in all available languages shall be available at all Forums.
These forums should be publicized in social m edia and via other means in a manner that is linguistically and culturally appropriate. City Council staff shall work with community-based, faith-based, identity based, and district specific organizations to ensure that a representative and broad group of residents is aware and encouraged to attend each forum.
G. 8. Ongoing Public Education
i) Timeline:
During the months of May and JuneSpring of even-numbered years
ii) Requirements:
Beginning with the first even-numbered year following adoption of this ordinance, the Administration and City Council shall hold at least three (3) Community Budget Education Presentations in different neighborhoods throughout the City and outside of City Hall. These presentations shall seek to increase Oakland residents understanding and awareness of the City Budget and Budget process.
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H. 9. Budget Advisory Commission's Report
i) Timeline:
June 1st
ii) Requirements:
The Budget Advisory Committee (BAC) shall be requested to submit published, written report to the full City Council regarding the proposed budget with any suggested amendments no later than June 1 in budget adoption years. If submitted, the statement shall be published as part of the next budget report to the City Council. The BAC is encouraged to provide similar statements during the mid-cycle budget revise and any other significant budget actions.
I. 10. Council President's Proposed Budget
i) Timeline:
June 17th
ii) Requirements:
The City Council President, on behalf of the City Council, shall prepare a proposed budget for Council consideration to be heard at a Special City Council Budget Hearing occurring on or before June 17th. The Council Presid ent may delegate the duty to prepare a budget proposal to another member of the Council. T he Finance Department will provide a costing analysis for proposed amendments. The City C ouncil may schedule additional Special City Council Budget Hearings or Workshops as needed.
J. 11. Council Budget Amendments
i) Timeline:
No later than up to three (3) days prior to final budget adoption for public noticing
ii) Requirements:
In addition to the Council President's propos ed budget, any Councilmember or group of Councilmembers may submit proposed budget amendments at any time during the budget process. However, the adopted budget shall not contain substantive amendments made on the floor by Councilmembers at the final meeting when the budget is adopted. All substantive amendments must have been published in the City Council agenda packet for at least three days prior to the budget's final adoption and post ed on the City’s budget website. This shall not preclude Council members from combini ng elements from various proposals, provided each element considered has been published in the City Council agenda packet as a component of one proposal. This three-day noticing requirement may be waived by a vote of Council upon a finding that (1) new informat ion impacting the budget by at least $1 million dollars came to the attention of the bod y after the publication deadline making it not reasonably possible to meet the additional notice requirement and (2) the need to take immediate action on the item is required to av oid a substantial adverse impact that would occur if the action were deferred to a subs equent special or regular meeting, such as employee layoffs.
Councilmembers will present their pr oposed amendments in an easy to understand, Consolidated Fiscal Policy Budget Policy
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standardized format provided by the City Ad ministrator. The format should allow the proposals to be easily compared to the Mayor’s Proposed Budget and to one another.
Additions and reductions shall be clearly noted in separate sections.
In order to provide sufficient time to evaluate the cost of proposals, Councilmembers should request costing analyses for proposed budget amendments or line-item s within a budget amendment to the City Administrator at least six (6) working days prior to the City Council meeting wherepublication of that amendment will be considered.
12. K. Process Feedback & Continual Improvement
i) Timeline:
September 30th following budget adoption
ii) Requirements:
The Budget Advisory Commission (BAC) shal l be requested to submit an Informational Report to the Council's Finance and Managem ent Committee and City Council containing their analysis of the budget adoption process including, but not limited to: 1)
● the informational quality of the Proposed Budget; 2)
● the City Administration's and City Council 's attention to engaging the public and its impacts on the budget process and product; 3)
● the level of transparency and open dialogue in all public meetings dedicated to the budget; and 4)
● opportunities for improving the process in future years.
In assessing opportunities for continually improv ing public participation in the budget process, the Administration, City Council and BAC shall be requested to consider the following guiding principles:
•
1. Inclusive Design: The design of a public participation process includes input from appropriate local officials as well as from members of intended participant communities. Public participation is an early and integral part of issue and opportunity identification, concept development, design, and implementation of city policies, programs, and projects. •
2. Authentic Intent: A primary purpose of the public participation proc ess is to generate public views and ideas to help shape local government action or policy. •
3. Transparency: Public participation processes are open, honest, and understandable. There is clarity and transparency about public participation process sponsorship, purpose, design, and how decision makers will use the process results.
•
4. Inclusiveness and Equity: Public participation processes identify, reach out to, and encourage participation of the community in its full dive rsity. Processes respect a range of values and interests and the knowledge of those involved. Historically excluded individuals and groups are included authentically in processes, activities, and decision and policymaking. Impacts, including costs and benefits, are identified and distributed fairly.
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•
5. Informed Participation: Participants in the process have information and/or access to expertise consistent with the work that sponsors and c onveners ask them to do. Members of the public receive the information they need, and with enough lead time, to participate effectively. •
6. Accessible Participation: Public participation processes are broadly accessible in terms of location, time, and language, and support t he engagement of community members with disabilities.
•
7. Appropriate Process: The public participation process uses one or more engagement formats that are responsive to the needs of identified participant groups; and encourage full, authentic, effective and equitable participation consistent wi th process purposes. Participation processes and techniques are well- designed to appropriately fit the scope, character, and impact of a policy or project. Processes adapt to changing needs and issues as they move forward. •
8. Use of Information: The ideas, preferences, and/or recommendations contributed by community members are documented and given c onsideration by decision-makers. Local officials communicate decisions back to process participants and the broader public, with a description of how the public input was considered and used. •
9. Building Relationships and Community Capacity: Public participation processes invest in and develop long-term, collaborative working rela tionships and learning opportunities with community partners and stakeholders. This may incl ude relationships with other temporary or ongoing community participation venues.
•
10. Evaluation: Sponsors and participants evaluate each publ ic participation process with the collected feedback and learning shared broadly and applied to future public participation efforts.
HISTORY
Long-Term Financial Planning Policy
o Resolution No. 84264, adopted by City Council on April 2, 2013
Historic Fiscal Accountability Policy
o Resolution No. 80777, adopted by City Council on July 17, 2007
Balanced Budget Policy
o Resolution No.77922, adopted by Ci ty Council on July 15, 2003
Transparency and Public Participation Policy
o Resolution No. 84385, adopted by City Council on May 21, 2013
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Reserve Funds
OBJECTIVES
The General Fund Reserve Policy is intended to pr ovide guidelines on the pur pose, the sizing, the uses, and the restoration requirements of the G eneral Purpose Fund Emergency Reserve (both the Emergency Reserve Account and Contingency Reserve Account) and the Vital Services Stabilization Fund Reserve. Taken together, these two funds co mpose the City’s General Fund reserves. The Government Finance Officers Association (GFOA) recommends that governments establish a formal policy on the level of unrestricted fund balance that should be maintained in the General Fund considering each government’s unique circumstances, such as vulnerability to natural disasters, level of dependence on volatile revenue sources or on stat e and federal funding that are subject to being cut. The GFOA sets a minimum standard of maintaining no less than two months of operating revenues or operating expenditures. The rating agencies that evaluate the City’s capacity to repay its debt have consistently stated that establ ishing and meeting minimum reserve levels is an important component of their review of the City’s fiscal health. Thus, in addition to serving as a contingency for unforeseen challenges that arise during the fiscal year, the level of the City’s reserves is also reviewed by investors that are considering purchasing the City’s debt.
POLICIES
1) General Purpose Fund Emergency Reserve
The City’s General Purpose Fund Emergency Rese rve is established to provide funding for unanticipated expenditures and revenue shortfalls in the City’s General Fund. It shall include two accounts within the fund, the Emergency Reserve Account and the Contingency Reserve Account.
a) Required Funding Level
i) Emergency Reserve Account (Fund 1011)
The City will maintain in each fiscal year a reserve equal to seven and one-half (7.5%) of the General Purpose Fund (Fund 1010) appropr iations as adopted in the biennial or midcycle budget, and not including prior year carryforwards, encumbrances, or appropriations to Fund Balance for, such fiscal year.
ii) Contingency Reserve Account
The Contingency Reserve Account shall in clude all unassigned fund balance in the General Purpose Fund and does not have a minimum balance that it must maintain. The determination of reserve targets is at the discretion of the Finance Director.
b) Uses Of General Purpose Fund Emergency Reserve
The amounts identified as the General Purpose Fund Emergency Reserve (Fund 1011 and Consolidated Fiscal Policy Reserve Funds
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all unassigned fund balance in the General Pu rpose Fund) may be appropriated by Council only to fund unusual, unanticipated, and seemingly insurmountable events of hardship of the City, and only upon declaration of fiscal emergen cy. For the purposes of this Ordinance, "fiscal emergency" may be declared by:
1. by the Mayor and approved by the majority of the City Council, or
2. by a majority vote of the City Council.
Prior to appropriating monies from the General Purpose Funds Emergency Reserve, the City Administrator shall prepare and present such anal ysis to the City Council. Upon review and approval of the proposed expenditure by the City Council, and appropriate fiscal emergency declaration necessary for the use of GPF rese rve, the City Admini strator will have the authority to allocate from the reserves.
c) Restoration Requirements
Each year, upon completion of the City's financial audited statements, the City Administrator shall report the status of the General Purpose Fund Emergency Reserve to the City Council and on the adequacy of the of the 7.5% reserve level. In fiscal years where it becomes necessary for the City to use monies in the General Purpose Fund Emergency Reserve such that the Reserve Fund balance drops below the 7.5% level, the City Administrator shall present to Council a strat egy to meet the General Pu rpose Funds Emergency Reserve Policy. In the event of a catastrophic event which requires use of the Emergency Reserve Account spanning more than one fiscal year, t he City Council may temporarily suspend the restoration requirements. Each year, the City Administrator shall determine whether the 7.5% reserve level requires adjustment and recommend any changes to the City Council.
2) Vital Services Stabilization Fund Reserve
The Vital Services Stabilization Fund (VSSF) is established to provide a method to prevent overspending during prosperous year s and to provide resources to help maintain service levels during lean years.
a) Required Funding Level
While the VSSF (Fund 1020) does not have a mini mum balance that it must maintain, the City will target to maintain a funding level of 15% of General Purpose Fund Revenues.
b) Uses Of Vital Services Stabilization Fund Reserve
In years when the City forecasts that total General Purpose Fund revenues will be less than the current year's revenues, or anytime significant service reductions, such as layoffs or furloughs, are contemplated due to adverse financ ial conditions, use of this fund must be considered to maintain existing services. Use of the VSSF must be authorized by City Council resolution. The resolution shall explain the need for using the VSSF. The resolution shall also include steps the City will take in order to replenish the VSSF in future years.
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c) Restoration Requirements
i) 50% of the excess Real Estate Transfer Ta x, as described in the Revenue Policy shall be allocated to the VSSF, until the value in the said fund is projected to equal to 15% of total General Purpose Fund revenues over the coming fiscal year.
3) Capital Improvements Fund Reserve
The Capital Improvements Reserve Fund is established to deposit revenue received from one time activities, including the sale of Real Property, unl ess otherwise directed by a majority vote of the City Council. Interest earnings on monies on deposit in the Capital Improvements Reserve Fund shall accrue to said fund and be maintained therein.
a) Required Funding Level
The Capital Improvements Fund Reserve does not have a minimum balance that it must maintain,
b) Uses Of Capital Improvements Fund Reserve
Monies on deposit in the Capital Improvem ents Fund Reserve may be appropriated by Council to fund unexpected emergencies, major capital maintenance, r epair costs to City- owned facilities and to fund capital improvement projects through the Ten-Year Capital Plan.
c) Restoration Requirements
There are no restoration requirements for the Capital Improvement Fund Reserve.
HISTORY
Rainy Day Policy
o Ordinance No. 13279, adopted by City Council on December 9, 2014 Amended Consolidated Fiscal Policy
o Ordinance No. 13487, adopted by City Council on May 15, 2018 General Purpose Fund Emergency Reserve Policy
o Resolution No. 88717 C.M.S., adopted by City Council on June 24, 2021 Consolidated Fiscal Policy Capital Plan
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Capital Plan
OJECTIVES
The City of Oakland’s 10 Year Capital Plan will exemplify the City’s commitment and philosophy to utilize all available funds to complete the City’s many Capital needs in a timely and efficient manner.
Adopting and presenting the 10 Year Capital Plan will also provide clarity on how the City is planning to address its sizeable asset m anagement infrastructure upgrade needs for seven years in the future.
Additionally, the Plan will provide data and in sight on how Capital funds have been expended, and which Capital Projects and Programs have been funded or delivered in the previous three years.
In addition to a clearer long term financial forecast of when the City expects to expend capital funds over a longer period of 10 years, a 10-year Capital Plan will improve how and when staff can allocate Capital funding sources over an extended period of time. This is especially critical regarding how Capital Projects are financed from a cash management and debt financed perspective. The 10-year Capital Plan will also provide long term budgeting and expenditure forecast data for all funded Capital projects in an easy-to-understand format for all Oaklanders.
The primary objectives that will be derived from implementing a 10-year Capital Plan are as follows:
Identify the long term need to repair, maintain and increase the City’s Capital Assets.
Accurately forecast the financial needs and proj ect delivery milestones over a 10-year period.
Adopt a specified 10-year financing plan for al l Capital Projects and Programs selected to be funded in the City’s Adopted CIP Program, and for Affordable Housing/Anti-Displacement programs through the City’s Notice of Funding Availability (NoFA) process.
Secondary Objectives of the 10-Year Capital Plan are to:
Define and identify short term and long-term financing plans for all grant funded, bond funded, and City financed Capital projects, including w hen a Capital project should request or expect a project to receive “Seed Funding”.
Confirm that the 10-Year Capita l Plan Expenditures conform with the City’s many Plans: General Plan, ECAP, OSCAR.
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POLICIES
1) Calendar
The 10-year Capital Plan will complement the City ’s biennial Capital Improvement Program (CIP).
It will be brought to Council in a biannual proce ss each 2 years during the City’s Midcycle Budget Adjustment Process (“Midcycle”). Adopting the 10-Year Capital Plan during the Midcycle will allow administrative staff the time needed to provide all updated Capital Expenditures data, without adding additional administrative burden during the bi annual budget process held in even years. The midcycle budget season will also allow staff to adjust in the current two-year budget season and adapt more quickly to changes in CIP project administration.
The 10-year Capital Plan will be referenced and us ed as a guide to the two-year biennial Capital Improvement Program that is adopted with the overall City budget every other odd year.
2) Implementation
a) Finance staff will instruct Fiscal staff, Pr oject Managers or Capital Program Managers from each Department that administers Capital funds on how to submit 10 year forecast expenditures data at least 6 months prior to Midcycle.
b) Finance staff will request and validate all C apital expenditures and encumbrances from each Department and will compile all data into a visual data format (I.e., graphs, charts, and metrics) that is easily understandable for City Council and members of the public. The 10-year capital plan expenditures and forecast data will be pr esented online and in conjunction with the City’s Capital Improvement Program data on or before the passage of the Midcycle.
HISTORY
Capital Improvement Program Prioritization Process
o Resolution No. 87376 C.M.S., adopted by City Council on October 16, 2018 Recommended Fiscal Year (FY) 2019- 21 Capital Improvement Program o Resolution 87759 C.M.S., adopted by City Council on Month XX, 2019
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Investment Policy
OBJECTIVES
The primary objectives, in order of priority, of the City Portfolio are:
1) Preservation of Capital (Safety)
The first and primary goal of the Portfolio is t he preservation of capital. Investment shall be undertaken in a manner to avoid losses due to market value risk, issuer default and broker default.
To attain this objective; investments are diversified.
2) Liquidity
The Portfolio will be structured in a manner that will provide cash as needed to meet anticipated disbursements. Cash flow modeling ensures that investments mature as needed for disbursements.
3) Diversity
The objective is to avoid over-concentration in issuers, instruments, and maturity sectors. No more than 5 percent of the total assets of the inve stments held by the City may be invested in the securities of any one issuer, except the obligations of the United States government or government- sponsored enterprises.
4) Yield
The Portfolio is also managed to maximize its overall market return with consideration of the safety, liquidity, and diversity parameters discussed above. Exception to the prohibition securities issued by, or backed by, the United States government that could result in zero or negative interest accrual if held to maturity, in the event of or duration of negative market interest rates. This exception will sunset on January 1st, 2026.
POLICIES
1) Investment Policy
a) Purpose and Composition
The purpose of this Investment Policy (“Policy ”) is to establish overall guidelines for the management and investment of the City of Oakland (the “City”) public funds.
a) Scope of the Investment Policy
The Investment Policy applies to the operating f unds of the City of Oa kland, and the Port of Consolidated Fiscal Policy Investment Policy
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Oakland (the “City Operating Pool”), which includes the General Fund, Special Revenue Funds, Debt Service Funds and all other funds comprised in City Operating Pool.
i) Proceeds of notes, bonds issues or similar financings including, but not limited to, reserve funds, project funds, debt service funds and capital trust funds derived from such financing, are not governed by this Investment Policy, but rather shall be invested pursuant to their respective bond indentures or the State of California Government Code 53600, as applicable.
ii) Retirement/Pension Funds and Deferred Co mpensation Funds are also not governed by this Investment Policy, but ra ther by the policies and Federal or State statutes explicitly applicable to such funds.
iii) Operating funds available for investm ents exclude funds needed for immediate, day to day needs of the City such as funds in City’ checking accounts.
b) Prudence
i) All investments and evaluation of such investments shall be made with the Prudent Investor Standard as set forth by California Government Code, Section 53600.3 is defined as;
ii) Prudent Investor Standard: Acting with ca re, skill, prudence and diligence under the circumstances then prevailing, which persons of prudence, discretion and intelligence exercise in the professional management of their business affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
c) Delegation of Authority
Management responsibility for the in vestment program is specific ally delegated by the City Administrator or designee to the Director of Finance (“Treasurer”) or designee who shall establish procedures for the inve stment programs, which are cons istent with the Investment Policy. Authorization for investment decisions is limited to the Treasurer or designee. The Treasury Administrator and/or Investment O perations Manager may execute investment transactions in the absence of the Treasurer or designee per the Treasurer’s instructions or prior authorization.
A Treasury Administrator or Investment Oper ations Manager may make decisions only with respect to overnight investments but may implement investment decisions received directly from the Treasurer or designee.
d) Internal Control
The Treasurer or designee shall maintain a sys tem of internal controls designed to ensure compliance with the Investment Policy and to prevent losses due to fraud, employee error, and misrepresentations by third parties or unanticipated changes in financial markets.
e) Ethics and Conflicts of Interest
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All officers and employees involved in the investment process shall not engage in any personal business activity, which could conflict with proper execution of investments subject to this Policy.
Any material financial interests in financial institutions which do business with the City should be disclosed to the City Administra tor. All individuals involved in the investment process are required to report all gifts and income in accordance with California State Law.
f) Safekeeping and Custody
All security transactions, including collateral for repurchase agreements, entered into by the City shall be conducted on a delivery-ve rsus-payment (DVP) basis pur suant to approved custodial safekeeping agreements. All securities owned by the City shall be held in safekeeping by the City’s custodial bank, which acts as agent for the City under the terms of custody agreement.
g) Social Responsibility
When possible, it is the City's policy to invest in companies that promote the use and production of renewable energy resources and any other socially responsible investments, subject to the prudent investment standard.
h) Trading Policies
For sales prior to maturity, "Buy and hold" is not necessarily the strategy to be used in managing the Funds. It is expected that gains will be r ealized when prudent. Losses are acceptable if the proposed swap/trade clearly enhances the portfolio yiel d over the life of the new security on a total return basis.
Sufficient written documentation will be maintain ed to facilitate an audit of the transaction.
Losses, if any, will be recognized and recorded based on the transaction date.
i) Broker/Dealers and Fi nancial Institutions
The purchase of any authorized investment shall be made either directly from the issuer or from any of the following:
Institutions licensed by the State of California as a broker/dealer Members of a federally regulated securities exchange
National or state-chartered banks
Federal or state savings institutions or associations as defined in Finance Code Section 5102
Brokerage firms reporting as a primary government dealer to the Federal Reserve Bank
The Treasurer or designee will maintain a current and eligible list of reputable primary and regional dealers, brokers and financ ial institutions with whom securities trading and placement of funds are authorized. A strong capital base credit worthiness, and, where applicable, a broker/dealer staff experienced in transactions with California local governments are the primary criteria for inclusion on the City of Oakland's approved list.
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Approved dealers and brokers shall be limited to primary dealers or regional dealers that qualify under Securities and Exchange Commission Rule 15C3-1 (uniform net capital rule) and which provide proof of Financial Industry Regulatory Authority (FINRA) certification; proof of California State registration; and a completed City of Oakland broker/dealer questionnaire. In addition, prior to approval and for every two years thereafter, approved dealers and brokers must provide: an audited financial statement; certification of receipt, review of and willingness to comply with the current Investment Policy; and ce rtification of compliance with Rule G-37 of the Municipal Securities Rulemaking Board regarding limitations on political contributions to the Mayor or any member of the City Council or to any candidate for these offices.
The Treasurer may remove a firm from the approved list at any time due to:
any failure to comply with any of the above criteria; any failure to successfully execute a transaction;
any change in broker/dealer staff;
or any other action, event or failure to act which, in the sole discretion of the Treasurer is materially adverse to the best interests of the City.
j) General Credit Quality
Short- term debt shall be rated at least “A-1” by Standard & Poor’s Corporation, “P-1” by Moody’s Investor Service, Inc., “F-1” by Fitch. Long-ter m debt shall be rated in a rating category of at least “A” by Standard & Poor’s Corporation, Moody’s Investors Service, Inc., or Fitch.
The minimum credit requirement for each securi ty is further defined within the Permitted Investments section of the policy. If securities which are purchased for the Fund are downgraded below the credit quality required by the Fund. The Treasurer will determine whether to retain or to sell the security. Evaluation of divestiture of securities will be deter mined on a case-by-case basis.
k) Maximum Maturities
The City’s Investment Policy shall be structured to provide that sufficient funds from investments are available to meet City’s anticipated cash need. No investments will have a maturity of more than 5 years from its settlement date. Purchase of investment s with forward settlement date exceeding 45 days from time of investment is prohibited.
2) Reporting
a) City Council and Council Committees
The City Administrator or designee shall submit the City’s Investment Policy to the City Council for approval each year.
As best practice and sound financial management pr actice, the City Administrator or designee will publish a quarterly cash management report.
The quarterly cash management report will be deemed timely pursuant to this Investment Policy Consolidated Fiscal Policy Investment Policy
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and Government Code Section 53646, so long as within 45 days following the end of the quarter covered by the report, the City Administrator s ubmits the report to the City Clerk for scheduling to a City Council or City Council committee meeting.
Due to the City Council’s summer recess, the quarterly cash management report for the period ending June 30 will be deemed timely so long as the City Administrator submits the report to the City Clerk by the follow ing September for scheduling to a City Council or a City Council committee meeting.
The report will include the information r equired under Government Code Section 53646 including: the type of investment, issuer, date of maturity, par and dollar amount invested (this data may be in the form of a subsidiary ledger of investments); a description of any investments under management of contracted parties, if any; current market values and source of valuation; statement of compliance or m anner of non-compliance with the Investment Policy; and a statement denoting the ability to meet the Fund’s expenditure for the next six months. In addition, the report shall summarize economic conditions, liquidity, diversity, risk characteristics and other features of the portfolio. The report will discl ose the total investment return for the 3-month period. In meeting these require ments, the report shall include an appendix that discloses all transactions during each month and the holdings at the end of each m onth during the period being reported.
b) Annual Audit
Investment Portfolio is priced to market per Government Accounting Standards Board (GASB) and reported in compliance with General Acc epted Accounting Principles. Annual disclosure requirements such as Custodial Credit Risk, Credit Risk, Concentra tion of Credit Risk, Interest Rate Risk and Foreign Currency Risk are reported in the City’s Annual Comprehensive Financial Report (ACFR).
c) Internal Audits
Internal audits of treasury operations may be c onducted periodically to review its procedures and policies and make any recommendations for changes and improvements if needed.
3) Permitted Investments
The following securities are per missible investments pursuant to Section 53601 of the California Government Code as well as this Investment Policy. Any other investment not specified hereunder shall be made only upon prior approval by the City Council.
a) U. S. Treasury Securities
Bills, notes and bonds issued by the U.S. Treasury which are direct obligations of the federal government.
Maximum Maturity: 5 years
Maximum Portfolio Exposure: None
Maximum Issuer Exposure: Prudent person standard applies overall.
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Credit Requirement: N.A.
Exception from the Nuclear Free Zone Ordinance, there is no limitation under the California Government Code.
b) Federal Agencies and Instrumentalities
Notes and bonds of federal agenc ies, government-sponsored enter prises and international institutions. Not all are direct obligations of the U. S. Treasury but may involve federal sponsorship and/or guarantees, in some instances.
Maximum Maturity: 5 years
Maximum Portfolio Exposure: None
Maximum Issuer Exposure: Prudent person standard applies overall Credit Requirement: N.A.
c) Banker’s Acceptances (BA)
Bills of exchange or time drafts drawn on and accepted by a commercial bank, typically created from a letter of credit issued in a foreign trade transaction.
Maximum Maturity: 180 days
Maximum Portfolio Exposure: 40%
Maximum Issuer Exposure: 30% of tota l surplus funds may be in BAs of one commercial bank; maximum 5% per issuer
Credit Requirement: Al, P1, or F1 or bette r by two or the three nationally recognized rating services. No rating may be lower than any of the rating listed above.
d) Commercial Paper
A short-term, unsecured promissory note iss ued by financial and non-financial companies to raise short-term cash. Financial companies iss ue commercial paper to support their consumer and/or business lending; non-financial companies issue for operating funds.
Maximum Maturity: 270 days
Maximum Portfolio Exposure: 40%
Maximum Issuer Exposure: No more than 10% of the total assets of the investments held by the City may be invested in any one issuer’s commercial paper; and maximum 5% per issuer
Credit Requirement: Al, P1, or F1 or bette r by two or the three nationally recognized rating services. No rating may be lower than any of the rating listed above. Eligibility Limited to general corporations organized and operating in the United States with assets in excess of $500 mill ion, and having rating category of "A" or higher ratings for the issuer's debt, other than commercial paper, if any, as provided by NRSRO.
e) Asset-Backed Commercial Paper
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Asset-Backed Commercial Paper (“ABCP”) issued by special purpose corporations (“SPCs”) that is supported by credit enhancem ent facilities (e.g. over-collate ralization, letters of credit, surety bonds, etc.)
Maximum Maturity: 270 days
Maximum Portfolio Exposure: 25% (Not to exceed 25% of total secured and unsecured CP)
Maximum Issuer Exposure: No more than 10% of the total assets of the investments held by the City or Agency may be invested in any one issuer’s commercial paper; and maximum 5% per issuer
Credit Requirement: Al, P1, or F1 or bette r by two or the three nationally recognized rating services. No rating may be lower than any of the rating listed above. Eligibility: Issued by spec ial purpose corporations (“SPC”) organized and operating in the United States with assets exceedi ng $500 million. Restricted to programs sponsored by commercial banks or finance companies organized and operated in the United States.
Program must have credit facility t hat provides at least 100% liquidity Serialized ABCP program s are not eligible
Ratings are to be routinely monitored. The Treasurer is to perform the Treasurer’s own due diligence as to creditworthiness.
f) Local Government Investment Pools
For local agencies (including counties, cities or other local agencies) that pool money in deposits or investments with other local agencies, investments may be made subject to the following:
Maximum Maturity: N/A
Maximum Portfolio Exposure: 20%
NAV Requirement: $1.00
Credit Requirement: Top ranking or highest letter and numerical rating provided by at least two nationally recognized statistical rating organizations Must retain an Investment Advisor
Registered with the SEC with not less than 5 years experience in investing securities as authorized by the Code, and with a ssets under management in excess of $500 million
Fund Composition Comprised of instruments in accordance with the California State Government Code
g) Medium Term Notes
Corporate Bonds, Corporate Notes and Deposit Notes. Issuers are banks and bank holding companies, thrifts, finance companies, insurance companies and industrial corporations. These are debt obligations that are generally unsecured.
Maximum Maturity: 5 years (additional limitations based on credit, below) Maximum Portfolio Exposure: 30%
Maximum Issuer Exposure: No more than 5% of the Portfolio shall be invested in any single institution.
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Credit Requirement: Must be Rated A3, A-, or A- or better by two of the three nationally recognized rating services, Moody’s, S&P, or Fitch, respectively. No Rating may be lower than any of the Rating listed above and should have minimum “A” rating category or its equivalent or better.
Eligibility: Limited to corporations organized and operating within the United States or depository institut ions licensed by the Unit ed States or any state and operating within the United States.
h) Negotiable Certif icates of Deposit
Issued by commercial banks and thrifts, and foreign banks (Yankee CD's).
Maximum Maturity: 5 years
Maximum Portfolio Exposure: 30%
Maximum Issuer Exposure: Prudent pers on standard applies overall; maximum 5% per issuer
Credit Requirement: Top 3 rating categorie s, A, A2 or A (S&P/Moody's/Fitch) being the lowest, if rated by S&P, Moody's or Fitch.
i) Repurchase Agreements
A contractual transaction between the invest or and a bank/dealer to exchange cash for temporary ownership or control of securities/collateral with an agreement by the bank/dealer to repurchase the securities on a future date. Primarily used as an overnight investment vehicle.
Maximum Maturity: 360 days
Maximum Portfolio Exposure: None
Maximum Dealer Exposure: Prudent pers on standard applies overall; maximum 5% per issuer
Collateral Requirements: Co llateral limited to Treasury and Agency securities; must be 102% or greater
Mark-to-market: Daily
Eligibility: Limited to pr imary dealers of the Federal Re serve Bank of New York, for which a current Master Repurchase Agreement has been executed with the City.
j) Reverse Repurchase Agreements
The mirror image of a repurchase agreement. Used as a source of liquidity when there is a mismatch of cash flow requirement and scheduled maturities. A mechanism to avoid liquidating securities for immediate cash needs. Restricted to securities owned for a minimum of 30 days prior to settlement of the repurchase agreement.
This strategy should be used solely for liquidity and not for arbitrage or leverage purposes.
Maximum Maturity: 92 days (unless a wr itten agreement guaranteeing the earnings or spread for the entire period)
Maximum Portfolio Exposure: 20% of the base value of the portfolio Consolidated Fiscal Policy Investment Policy
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Eligibility: Limited to pr imary dealers of the Federal Re serve Bank of New York or nationally or State chartered bank with significant banking relationship with the City.
k) Secured Obligations and Agreements
Obligations, including notes or bonds , collateralized at all times in accordance with Sections 53651 and 53652 of the Government Code.
Maximum Maturity: 2 years
Maximum Portfolio Exposure: 20%
Maximum Issued/Provider Exposure: Prudent person standard applies overall; maximum 5% per issue
Collateral Requirements: Co llateral limited to Treasury and Agency securities; must be 102% or greater
Mark-to-market: Daily
Credit Requirement: Issuer/Provider rated in "AA" category by at least one national rating agency; or agreement guaranteed by an "AA" company Eligibility: Banks, insu rance companies, insurance holding companies and other financial institutions.
l) Certificates of Deposit
Time deposits, which are non-negotiable, are i ssued most commonly by commercial banks, savings and loans and credit unions with federal deposit insurance available for amounts up to $250,000. Deposits in banks, savings and loan associ ations and federal credit unions with a branch office within Oakland will be made (to the extent permissible by State and Federal law or rulings) pursuant to the following conditions:
Maximum Maturity: 360 days
Maximum Portfolio Exposure: Prudent person standard applies. Maximum Issuer Exposure: Prudent person standard applies. Credit Requirement: For deposits over $250,000: Top 3 rating categories - A, A2 or A (S&P/Moody’s/Fitch) being the lowest, if rated by S&P, Moody’s or Fitch. Deposit Limit: For federally insured depos its of $250,000 or less: No minimum credit rating required. City’s deposits cannot exc eed the total shareholder’s equity of the institution. For deposits over $250,000, it must be collateralized. Depository Selection: Highest available rate of interest Institution Requirements: Most recent Annual Report
Pursuant to Government code 53637, the City is prohibited from investing in negotiable certificates of deposit of a state or federal credit union if a member of the legislative body or any person with decision-making authority serves on the board of directors or committee.
m) Money Market Mutual Funds
Regulated by the SEC, these fund s operate under strict maturity a nd diversification guidelines.
These funds have no federal guarantee but are vi ewed as a very safe short-term cash investment.
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Maximum Maturity: N/A
Maximum Portfolio Exposure: 20%
NAV Requirement: $1.00
Credit Requirement: Top ranking or highest letter and numerical rating provided by at least two nationally recognized statistical rating organizations Investment Advisor Alternative to Ratings : Registered with the SEC with not less than 5 years’ experience in investing securities as authorized by the Code, and with assets under management in excess of $500 million
Fund Composition: Comprised of instruments in accordance with the California State Government Code
n) State Investment Pool (Local Agency Investment Fund)
A pooled investment fund overseen by the State Treasurer, which operates like a money market fund, but is for the exclusive benefit of governmental entities within the state. Maximum currently authorized by Local Agency Investm ent Fund (LAIF) is $75 million, which is subject to change.
The LAIF is in trust in the custody of the Stat e Treasurer. The City’s right to withdraw its deposited monies from LAIF is not contingent upon the
State’s failure to adopt a State Budget.
Maximum Maturity: N/A
Maximum Portfolio Exposure None
o) Local City/Agency Bonds
Bonds issued by the City of Oakland, or any department, board, agency or authority of the City.
Maximum Maturity: 5 years
Maximum Portfolio Exposure: None
Maximum Issuer Exposure: Prudent pers on standard applies overall; maximum 5% per issuer
Credit Requirement: Minimum Rati ng Category of “A” or better
p) State of California Obligations and Others
State of California and any ot her of the 49 United St ates registered stat e warrants, treasury notes, or bonds issued by a State.
Maximum Maturity: 5 years
Maximum Portfolio Exposure: None
Maximum Issuer Exposure: Prudent pers on standard applies overall; maximum 5% per issuer
Credit Requirement: Prudent person standard applies
q) Other Local Agency Bonds
Bonds, notes, warrants or other evidences of indebtedness of any local agency with the state.
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Maximum Maturity: 5 years
Maximum Portfolio Exposure: None
Maximum Issuer Exposure: Prudent pers on standard applies overall; maximum 5% per issuer
Credit Requirement: Minimum Rati ng Category of “A” or better
r) Deposits – Private Placement
Prudent to California Government Code Sect ion 53601.8 and 53635.8, local agencies are authorized to invest their surplus funds in deposits, certificates of deposits including negotiable certificate of deposits at a co mmercial or saving bank, saving and loan, or credit union using a private sector deposit placement service.
Maximum Portfolio Exposure: 50%
Maximum Issuer Exposure: Maximum 10% per private sector placement entity Credit Requirement: Prudent person standard applies
Sunset on January 1, 2026
s) Supranationals
U.S dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by any of the supranational institutions such as International Bank of Reconstruction and Development (IBRD), the Inte rnational Finance Corporation (I FC), and the Inter-American Development Bank (IADB). Eligible for purchase and sale within the United States.
Maximum Maturity: 5 years
Maximum Portfolio Exposure: 30%
Credit Requirement: Minimu m Rating Category of “AA” or better by NRSRO
t) Public Bank Obligations
Any commercial paper, debt securities, or other obligations of a public bank as defined in California Government Code Section 57600-57607.
A. Maximum Maturity: 5 year
B. Maximum Portfolio Exposure: N.A
C. Credit Requirement: Prudent Standard Applies
4) Applicable Ordinances
City of Oakland Resolutions and Ordinances relat ed to the investment of City funds and adopted after adoption of this Investment Policy are incorporated herein.
a) Nuclear Free Zone Ordinance
Under the guidelines of a voter-approved M easure, the Oakland City Council approved Ordinance No. 11062 C.M.S effective December 16, 1988, which restricts the City’s investments Consolidated Fiscal Policy Investment Policy
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in U.S Government Treasuries. Exception for investment in U.S. Treasuries as authorized by the Ordinance XXXX will allow the City to invest in U.S Treasuries.
b) Tobacco Divestiture Resolution
On February 17, 1998, Council adopted Reso lution No. 74074 C.M.S., which prohibits investment in businesses derivin g greater than fifteen percent of their revenues from tobacco products. The Treasurer maintains a list of firms excluded from permitted investments due to the tobacco divestiture requirements, updated on annual basis.
c) Fossil Fuel Divestiture Resolution
On June 17, 2014, Council adopted Resolution No. 85053 C.M.S. which prohibits the Investment or ownership stake in any companies that extract, produce, refine, burn or distribute fossil fuels.
The Treasurer is in full compliance with this Resolution.
d) Firearm or Gun Manufactu rer Divestiture Resolution
On March 5, 2013, Council adopted Resolution No. 84242 C.M.S which prohibits investment or ownership stake in any manufacturer of firearms or ammunition.
e) Sanctuary City Investment Ordinance
On June 5, 2019, Council adopted Ordinance No. 13540 C.M.S which prohib its the City from investing in companies that contract with the United States I mmigration and Customs Enforcement, Customs and Border Protection, or the Department of Health and Human Services of Refugee Resettlement to provide services or goods for data collection or immigration detention services.
HISTORY
Investment Policy
Resolution No. 89837 C.M.S., adopted by City Council on July 18, 2023
Fossil Fuel Divestiture Resolution
Resolution No. 85053 C.M.S., adopted by City Council on June 17, 2014
Firearm or Gund Manufacture r Divestiture Resolution
Resolution No. 84242 C.M.S., adopted by City Council on March 5, 2013
Sanctuary City Investment Ordinance
Ordinance No. 13540 C.M.S., adopted by City Council on June 5, 2019
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Debt Management Policy
OBJECTIVE
The Debt Management Policy formally establishes parameters for issuing de bt and managing a debt portfolio, which encompasses the City’s specific capital improvement needs, its ability to repay financial obligations, and the existing legal, economic, financial and debt market conditions. The policies outlined in the Debt Management Poli cy are not goals or a list of rules to be applied toward the City’s debt issuance; rather, these policies should be utilized as tools to ensure informed decision making and that adequate financial resources are avail able to support the City’s long-term capital needs. Specifically, the policies outlined in this document are intended to assist the City in the following:
Evaluating critical debt issuance options
Promoting sound fina ncial management
Providing accurate and timely information on financial conditions Maintaining appropriate capital assets for present and future needs Protecting and enhancing the City's credit rating
Ensuring the legal use of City bonding aut hority through an effective system of financial management and internal controls
Promoting cooperation and coordi nation with other public entiti es and the private sector in the financing and delivery of services
POLICIES
1) Approach to Debt Management
In managing its debt, the City’s greatest priorities are to:
Achieve the lowest cost of capital,
Ensure high credit quality,
Ensure full and timely payment of debt,
Maintain full compliance with financial disclosure and reporting, Maintain a prudent level of financial risk,
Assure access to credit markets,
Preserve financial flexibility, and
Utilize local and disadvantaged banking and financial firms, when possible, in the sale of City debt.
Structure its general obligation bond issuances with the goal of keeping the ad valorem property tax rate levied by the City during each year t he City’s general obligation bonds are outstanding at or below the fiscal year 2022-2023 tax rate of 0.2035%, as projected by the City as of the date each series of bonds is issued.
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A) Capital Plan Integration
A sound debt management program begins with a well-devised capital plan. Therefore, a multi- year capital plan, which integr ates pay-as-you-go projects and the projects to be financed, is critical. The multi-year capital plan (the “Capital Plan”) shall be for a minimum of a 5-year period and shall be updated and presented to the City Council at least once annually. The Capital Plan shall include the following elements:
Qualified capital projects and their projected costs Description of all sources of funds
Availability of current revenues (non-debt s ources for pay-go and debt service), as projected in the City’s multi-year forecast
Timing of capital projects
A financing plan or methodology and debt service requirements
B) Review of Capital Plan
It is anticipated that the Capital Plan will be m odified from time to time . Modifications to the Capital Plan shall be accompani ed by a report from the City ’s Treasurer or designee and Budget Administrator that discusses the im pact of the proposed borrowing on the Capital Plan.
C) Qualified Capital Projects
Generally, the City will not debt finance capital improvements with a cost less than $250,000.
The City shall not construct or acquire a public facility if it is unable to adequately provide for the subsequent annual operation and maintenance costs of the facility throughout its life.
D) Cash Financing of Capital Outlays
To demonstrate the City's co mmitment to a continued capita l program, ensure careful consideration of capital expenditure levels, and enhance the City's overall credit worthiness, the City shall seek to fund at least between two and five percent of the overall capital program from current resources, depending upon the specific projects and annual budgetary constraints.
E) Authorization of Issuance
Debt issuance for capital projects shall not be considered unless such issuance has been incorporated into the Capital Plan.
F) Affordability Targets
The ratios, standards, and limits identified below are primarily intended to restrict the use of debt financing in order to facilitate long-term a ccess to capital while ens uring that financial leveraging decisions do not negatively impact the City’s annual operations.
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i) General Fund Debt Capacity – The City’s approach to its General Funds-secured financings is to ensure its long-term financing commitments are affordable and do not create undue risk or burden and maintain continued market access at the lowest cost of borrowing.
As such, the Debt Policy establishes debt affo rdability for the City, reflecting best practices of other large California cities and the debt ratios used by the rating agencies when evaluating city credits. Debt ratios are defined as annual debt service payment s as a percentage of General Fund and other revenues. Below are the debt capacity ratio ranges, it will be the City’s goal of maintain a “low” debt ratio:
Low debt ratio <5%
Moderate debt ratio 5% - 15%
High debt ratio >15%
ii) Capacity for Voter-Approved Indebtedness – The City will maintain a 10-year forward debt capacity schedule that incorporates assumpti ons of growth in assessed valuation and estimates of new debt issuance and retirement, taking into account the City’s goal of keeping the ad valorem property tax rate levied by the City to service its voter- approved indebtedness during each year the City’s general obligation bonds are outstanding no higher than the Fiscal Year 2022-2023 tax rate of 0.2035%, as such tax rate is projected by the City on the date of each series of bond issuance. To maintain that limit on the tax rate for voter-approved debt, the City will issue new bonds as older bonds are retired and/or as the tax base grows. Such schedule shall be available to any interested parties upon request.
In connection with each proposed issuance by the City of general obligation bonds, the Treasury Bureau shall prepare a projection of the impact of proposed bonds on the ad valorem property tax that is projected to be le vied by the City during each year the City’s general obligation bonds are outstanding. In the event the Director of Finance, based on such projections, determines that a proposed issuance of general obligation bonds will cause the ad valorem property tax that is projected to be levied by the City in any year the City’s general obligation bonds are outstanding to exceed the Fiscal Year 2022-2023 tax rate of 0.2035%, the Director of Finance shall prominently stat e so in the staff report for such bonds and provide a rationale for issuing such bonds notwithstanding such projections. Any approval of general obligation bonds or other bonds by the Council, or the issuance of said bonds by the City, that is not consistent with this Policy shall constitute a waiver hereof.
iii) Self-supporting Debt – In some cases, the City will issue debt for which there is an identified repayment source. For debt to be characterized as self-suppor ting, the repayment source must support the issue through its maturity. Bond issues where interest has been capitalized are not considered to be self-supporting.
iv) Overlapping Debt – An analysis of overlapping debt (taking into consideration the tax- supported debt of the City (primarily general obligation and lease revenue bonds) as well as debt from all other jurisdictions that tax City taxpayers, will be taken into consideration in planning debt issuance.
v) Credit Quality – All City debt management activities will be conducted to in hopes of receiving the highest credit ratings possible fo r each issue that meets the City’s financing objectives, and to maintain the current credit ratings assigned to the City's debt by the major credit rating agencies.
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2) Standards for Use of Debt Financing
The City’s debt management program will promote the use of debt only in those cases where public policy, equity, and economic efficiency favor debt ov er cash (pay-as-you-go) financing. Whenever possible, the debt shall be self-supporting, incl uding general obligation debt supported by a supplemental property tax override; lease revenue bonds that, while secured by the General Fund, are expected to be repaid from an identified source of revenues; or special revenue debt with no recourse to the General Fund.
A) Long-Term Capital Projects. Debt will be used primarily to finance long-term capital projects — paying for the facilities or equipment over some or all of their useful life and concurrent with the stream of benefits from these facilities. The City will consider the debt capacity in determining the use of debt financing.
B) Special Circumstances for Non-Capital-Project Debt Issuance. Debt may be used in special circumstances for projects other than long-term capital projects such as pension obligations, only after careful policy evaluation by the City.
C) Debt Financing Mechanisms. The City will evaluate the us e of all financial alternatives available, including, but not limited to long- term debt, pay-as-you-go, joint financing, reserve fund releases, lease-purchase, authority sponsored debt, special districts, community facility districts, special assessments, Mello-Roos bonds, state and f ederal aid, certificates of participation, tax increment, private placement, master lease programs, and interfund borrowing.
The City will utilize the most cost advantageous financing alternative available while limiting the General Fund’s risk exposure.
3) Financing Criteria
When the City determines that the use of debt is appropriate, the following criteria will be utilized to evaluate the type of debt to be issued.
A) Long-Term Debt. Long-term borrowing may be used to finance the acquisition or improvement of land, facilities, or equipment. The City ma y issue long-term debt (e.g., general obligation bonds, revenue bonds, conduit revenue bonds, tax increment bonds, lease obligations, or variable rate bonds) when required capital im provements cannot be financed from current revenues. The proceeds derived from long-term borrowing will not be used to finance current operations or normal maintenance . Long-term debt will be structur ed such that the obligations do not exceed the expected useful life of the respective projects.
The City shall not use any debt, lease financ ing or other instruments of installment repayments with terms longer than two years to finance its operating costs. Exceptions to the policy may be made on a case-by-case basis by the Council.
B) Short-Term Debt. Short-term borrowing may be utilized for the temporary funding of operational cash flow deficits or anticipat ed revenues (defined as an assure d source with the anticipated amount based on conservative estimates). The City will determine and utilize the least costly Consolidated Fiscal Policy Debt Management Policy
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method for short-term borrowing. The City may issue short-term debt w hen there is a defined repayment source or amortization of principal, subject to the following policies:
i) Bond Anticipation Notes (BANs) may be issued instead of c apitalizing interest to reduce the debt service during the construction period of a project or facility. The BANs shall mature not more than 3 years from the date of issuance. BANs shall mature within 6 months after substantial completion of the financed facility.
ii) Tax and Revenue Anticipation Notes (TRANs) shall be issued only to meet projected cash flow needs to better match t he timing of revenues and expendi tures, including prepayment of the City’s retirement obligations to PERS. Tax-exempt TRANs will be issued only if there is a finding by bond counsel that the sizing of the issue fully conforms to Federal IRS requirements and limitations.
iii) Lines of Credit or other bank credit facilities shall be considered as an alternative to other short- term borrowing options. The lines of credi t shall be structured to limit concerns as to the Internal Revenue Code.
iv) Other Short-Term Debt, including commercial paper notes, may be used.
C) Lease-Purchase Debt. Lease-purchase debt, including certificates of participation, shall be considered as an alternative to long-term vendor leases. Such debt shall be subject to annual appropriation. In order to reduce the cost of lease borrowing and to improve control over leases, the City may adopt a master lease program.
D) Variable Rate Debt. To maintain a predictable debt service burden, the City will typically give preference to debt that ca rries a fixed interest rate. Variable rate debt, which is synthetically fixed, shall be considered fixed rate debt through the maturity of the swap. The City, however, may consider unhedged variable rate debt in certain instances, such as:
i) High Interest Rate Environment. Current in terest rates are above historic average trends, and the benefits of the lower current variable interest rate just ifies the risk of rates rising further. Such debt can be easily refunded once interest rates are lower.
ii) Variable Revenue Stream. The revenue stream for repayment is variable and is anticipated to move in the same direction as market-generated variable interest rates, or the dedication of revenues allows capacity for variability.
iii) Adequate Safeguards Against Risk. Financ ing structure and budgetar y safeguards are in place to prevent adverse impacts from interest rate shifts; such structures could include, but are not limited to, interest rate swaps, intere st rate caps and the matching of assets and liabilities.
iv) As a Component to Synthetic Fixed Rate Debt. Variable rate bonds may be used in conjunction with a financial strategy, which results in synthetic fixed rate debt. Prior to using synthetic fixed rate debt, the City shall certify that the interest rate cost is lower than traditional fixed rate debt.
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v) Variable Rate Debt Capacity. Consistent with rating agency guidelines, the percentage of variable rate debt outstanding (not including debt which has been converted to synthetic fixed rate debt) shall be hedged by cash flow liquidity.
E) Special Limited Obligations. Special limited obligations are issued by the City to make proceeds available to finance the acquisition, construction, and/or improvement of capital assets and/or environmentally sustain able projects. The obligations represent special limited obligations of the City. Formation of a Community Facilities Districts (“CFD”) may be initiated by a petition of one or more property owners or by the City through a resolution adopted by the City Council. On June 17, 2015, the City adopted Resolution No. 85664 C.M.S. the Local Goals and Policies for Special Assessment and Mello-Roos Community Facilities District Financing (the “Local Goals and Policies”). The Local Goals and Policies is intended to provide guidelines for formation and financing.
Mello-Roos community facilities districts (“CFDs”)
The Mello-Roos Community Facilities Act of 1982 (the “Mello-Roos Act”) was enacted by the State to help growing areas finance certain essent ial public facilities that typically accompany major development projects. The Mello-Roos Act permits a public agency to create a defined area within its jurisdiction and, by a two-thirds ma jority vote of the registered voters within the district (or, if there are fewer than 12 registered voters, through a landowner vote), levy a special tax within the district to pay directly for public improvements or services, or pay debt service on bonds issued to finance improvements. Any bonds issued by the CFD are secured by the special tax on the real property within the district.
Assessment District Financing
The Municipal Improvement Act of 1913 provides for a local agency to form an Assessment District to finance certain infrastructure, incl uding roadways, water and sewer facilities, storm drains, and other improvem ents often required in connection with new development.
Assessment Districts formed under this Act may also finance, but in very limited circumstances, maintenance services. Assessment Districts may also be formed to provide for, among other things, the undergrounding of overhead utility li nes or the abatement of hazardous geological conditions, upon a successful petition signed by owners of property who want the improvement.
An Assessment District must include all properties that will benefit directly from the improvements to be constructed, and formation of the district requires an election in which at least 50% of property owners vote in favor of the district. If an Assessment District is formed, the City may levy assessments that can be utilized to directly finance the public improvements, or may be pledged to support debt service on bonds, which may be issued under the Improvement Bond Act of 1915. The assessments that are le vied upon each parcel must be based upon the direct and special benefit received by the property.
F) Other Obligations. There may be special circumstances when other forms of financing are appropriately utilized by the City. The Treasurer will evaluate such proposed transactions on a case-by-case basis. Such other forms include, but are not limited to , pension obligation bonds, long-term concession agreements, and non-enterprise revenue bonds.
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4) Terms and Conditions of Bonds
The City shall establish all terms and conditions re lating to the issuance of bonds, and will control, manage, and invest all bond proceeds. Unless otherwise authorized by the City, the following shall serve as bond requirements:
A) Term. All capital improvements fi nanced through the issuance of debt will be financed for a period not to exceed the useful life of the improvements, but in no event greater than thirty years unless otherwise beneficial.
B) Capitalized Interest. Certain types of financings such as lease-secured financings may require the use of capitalized interest from the is suance date until the City has beneficial use and occupancy of the financed project. Interest shal l not be funded (capitalized) beyond a period of three years, or a shorter period if further rest ricted by statute. The City may require that capitalized interest on the initial series of bonds be funded from t he proceeds of the bonds.
Interest earnings may, at t he City's discretion, be applied to extend the term of capitalized interest but in no event beyond the term statutorily authorized.
C) Debt Service Structure. Debt issuance shall be planned to achieve relatively rapid repayment of debt while still matching debt service to the useful life of facilities. The City shall avoid the use of bullet or balloon maturities except in those instances where these maturities serve to levelize total debt service when considering existing debt.
D) Call Provisions. In general, the City’s securities will include a call feature, which is no later than 10 years from the date of delivery of the bonds. The City will avoid the sale of non-callable bonds absent careful evaluation by the City of the value of the call option.
E) Original Issue Discount. An original issue discount will be permitted only if the City determines that such discount results in a lower true interest cost on the bonds and that the use of an original issue discount will not adversely affect the project identified by the bond documents.
F) Deep Discount Bonds. Deep discount bonds may provide a lower cost of borrowing in certain markets. The City will carefull y consider their value and effect on any future refinancings as a result of the lower-than-market coupon.
G) Derivative Structures. When appropriate, the City will consider the use of derivative structures as a hedge against future interest rate risk and as a means for increasing financial flexibility. The City will avoid the use of derivative structures for speculative purposes. The City will consider the use of derivative structures when it is able to gain a comparative borrowing advantage of ten or more basis points and is able to reasonably quantify and understand potential risks.
The City shall not use derivative structures for the sole purpose of generating operating or capital proceeds, without a determination that such stru cture will accrue interest rate and borrowing costs benefits for the City. Aside from the current outstanding 1998 Swap, the City has placed a moratorium on any future use of Swaps in connection with debt financing.
H) Multiple Series. In instances where multiple series of bonds are to be issued, the City shall make a final determination as to which facilities are of the highest priority and those facilities Consolidated Fiscal Policy Debt Management Policy
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which will be financed first, pursuant to funding av ailability and the proposed timing of facilities development, and which will generally be subject to the earliest or most senior lien.
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5) Credit Enhancements
The City will consider the use of credit enhanc ement on a case-by-case basis, evaluating the economic benefit versus cost for each case. On ly when a clearly demonstrable savings can be shown shall enhancement be considered. The City will consider each of the following enhancements as alternatives by evaluating the cost and benefit of such enhancement.
A) Bond Insurance. The City shall have the authority to purchase bond insurance when such purchase is deemed prudent and advantageous. The predominant determination shall be based on such insurance being less cost ly than the present value of t he difference in the interest on insured bonds versus uninsured bonds.
i) Provider Selection. The Treasurer or designee will so licit quotes for bond insurance from interested providers, or in the case of a co mpetitive sale submit an application for pre- qualification on insurance. In a negotiated sale, the City Administrator or designee and/or the Treasurer or designee shall have the authority to select a provider whose bid is most cost effective and whose terms and conditions gover ning the guarantee are satisfactory to the City. The winning bidder in a competitive sale will determine whether it chooses to purchase bond insurance for the issue.
B) Debt Service Reserves. When required to secure the lowest net cost of funds, a reserve fund equal to no greater than the least of ten percent (10%) of the original principal amount of the bonds, one hundred percent (100%) of the maximum annual debt service, and one hundred and twenty five percent (125%) of average annual debt service, or, if permitted, 10 percent (10%) of par value of bonds outstanding (the "Reserve Requirement") shall be funded from the proceeds of each series of bonds, subject to federa l tax regulations and in accordance with the requirements of credit enhancement providers and/or rating agencies.
The City may purchase reserve equivalents (i.e., the use of a reserve fund surety) when such purchase is deemed prudent and advantageous. Such equivalents shall be evaluated in comparison to cash funding of reserves on a net present value basis.
C) Letters of Credit. The City may enter into a letter-o f-credit (“LOC”) agreement when such an agreement is deemed pr udent and advantageous, such as to pr ovide liquidity when the City issue variable rate bonds and commercial paper. The City Administrator or designee and/or the Treasurer or designee shall prepare (or cause to be prepared) and distribute to qualified financial institutions as described in paragraph 2 below, a request for qualifications or proposal which includes terms and conditions that are acceptable to the City.
i) Provider Selection. Only those financial institutions wi th long-term ratings greater than or equal to that of the City or short-term ratings of VMIG 1/A-1/F1, by Moody’s Investors Service, Standard & Poor’s Ratings Services or Fitch Ratings, respectively, may be solicited.
ii) Selection Criteria. The selection of LOC providers will be based on responses to a City- issued request for qualifications; criteria will include, but not be limited to, the following:
Ratings at least equal to or better than the City’s
Evidence of ratings (including “Outlook”)
Trading value relative to ot her financial institutions Consolidated Fiscal Policy Debt Management Policy
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Terms and conditions acceptable to the City; the City may provide a term sheet along with the request for qualifications to wh ich the financial institution may make modifications
Representative list of clients for whom t he bank has provided liquidity facilities Fees, specifically, cost of LOC, draw s, financial institut ion counsel and other administrative charges
6) Refinancing Outstanding Debt
The Treasurer or designee shall have the res ponsibility to analyze outstanding bond issues for refunding opportunities that may be presented by underwriting and/or municipal advisory firms.
In most cases, the goal of re funding or restructuring the debt portfolio is to reduce the City’s annual debt service obligations. The Treasurer or designee will consider the following issues when analyzing possible refunding opportunities:
A) Debt Service Savings. The City establishes a minimum savings threshold goal of three percent (3%) of the refunded bond principal amount or at least $500,000, wh ichever is less, in present value savings (including foregone interest earnings on invested reserves) unless there are legal or restructuring reasons for defeasance. Ref undings which produce a net savings of less than three percent (3%) will be considered on a case- by-case basis. The present value savings will be net of all costs related to the refinancing. The decision to take savings on an upfront or deferred basis must be explicitly approved by the City Administrator or designee, or the Treasurer or designee.
B) Restructuring. The City will refund debt when in its best interest to do so. Refundings may include restructuring to meet unanticipated revenue expectations, terminate swaps, achieve cost savings, mitigate irregular debt service payment s, release reserve funds, or remove unduly restrictive bond covenants.
C) Term of Refunding Issues. The City may refund bonds within the term of the originally issued debt. However, the City may consider maturity extension, when necessary to achieve a desired outcome, provided that such extension is legally permissible. The City may also consider shortening the term of the originally issued debt to realize greater savings. The remaining useful life of the financed facility and the concept of inter-generational equity should guide this decision.
D) Escrow Structuring. The City shall utilize the least costly securities available in structuring refunding escrows. The City will examine the viability of an economic versus legal defeasance on a net present value basis. A ce rtificate will be required from a third-party agent who is not a broker-dealer, stating that the securities were procured through an arms-length, competitive bid process (in the case of open market securities), t hat such securities were more cost effective than State and Local Government Obligations (“SLGS”), and that the price paid for the securities was reasonable within Federal guidelines. Under no circumstances shall an underwriter, agent or municipal advisor sell escrow securities to the City from its own account.
E) Arbitrage. Arbitrage regulations apply to all of the City’s tax-exempt financings. The City shall take all necessary steps to optimize escrows and to avoid negative arbitrage in its refundings.
Any resulting positive arbitrage will be rebated as necessary according to Federal guidelines.
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7) Methods of Issuance
The City will determine, on a case-by-case basis , whether to sell its bonds competitively or through negotiation. General Obligation Bonds and Tax and Revenue Anticipation Notes will be issued on a competitive basis unless otherwise determined on a case-by-case basis that a negotiated sale is the most advantageous.
A) Competitive Sale. In a competitive sale, the City’s bonds shall be awarded to the bidder providing the lowest bid as long as the bid adheres to the requirements set forth in the published official notice of sale.
B) Negotiated Sale. In a negotiated sale, the terms and pr ice are negotiated by the City and the selected underwriter(s). The City recognizes t hat some securities are best sold through negotiation. In its consideration of a negotiat ed sale, the City shal l assess the following circumstances:
Bonds issued as variable rate demand obligations
A complex structure which may requi re a strong pre-marketing effort Size of the issue which may li mit the number of potential bidders Market volatility is such that the City would be better served by fl exibility in timing its sale in changing interest rate environments
C) Private Placement. From time to time the City may el ect to privately place its debt. Such placement shall only be considered if this method is demonstrated to result in a cost savings to the City relative to other methods of debt issuance.
D) Conduit Debt Issuance. The City's may assist non-profit organizations in securing conduit financing through agencies such as California St atewide Community Deve lopment Authority, the California Municipal Finance Authority, or various authorities created by the State. Conduit Debt limitations may reflect t he right of the issuing Govern ment to approve the borrower’s creditworthiness, including a mi nimum credit rating, and the purpo se of the borrowing issue.
Such limitations reflect sound public policy, particu larly if there is a c ontingent impact on the general revenues of the Government or marketability of the Government’s own direct debt.
The City may issue conduit revenue bonds that are not a debt or obligation of the City itself but are obligations of a private borro wer. No funds of the City will be pledged to or made available for the repayment of any conduit bonds; Conduit debt is not a liability of the City. This arrangement is typically used for a qualified non- profit organization and multi-family housing projects. Notwithstanding other credit requirements of the City, such conduit revenue bonds may be issued and sold with or without a credit rating, provided that for any bond with a rating lower than “A”, the following conditions shall be met:
Bonds shall be issued only in denominations of not less than two-hundred and fifty thousand dollars;
Bonds shall be eligible for purchase only by “qual ified institutional buyers” as defined in Rule 144A of the Securities Act of 1933;
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Bonds shall be sold only to buyers who execute a standard form investor letter containing, among other things, representations of the buyer as sophisticat ion as an investor and its familiarity with the transaction.
The role of the City in these instances is to hold a Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) hearing. This Act requires the local legislative body of the local agency in which the project is located to notice and conduct a publ ic hearing. Request fo r a TEFRA hearing is made to the Treasury Bureau, who will schedule the matter. The Treasury Bureau holds this hearing to allow for the public to voice any objections to the proposed project financing. If no objection received during the hearing, the Mayo r may approve the financing by executing the TEFRA Approval Certificate.
E) Issuance Method Analysis. The City shall evaluate each method of issuance on a net present value basis.
F) Feasibility Analysis. Issuance of self-supporting revenue bonds will be accompanied by a finding that demonstrates the projected revenue st ream's ability to meet future debt service payments.
G) Reporting to California Debt and Invest ment Advisory Commission (CDIAC). State law requires any state or local government debt iss uer to provide to CDIAC (1) a report of the proposed issuance no later than 30 days prior to the sa le of any debt issue, (2) a report of final sale no later than 21 days after the sale, and (3) an annual report for any issue of debt for which the issuer has submitted a report of final sale.
8) Market Relationships Debt Administration
A) Rating Agencies and Investors. The City Administrator or designee and/or the Treasurer or designee shall be responsible for maintaining t he City’s relationships with the rating agencies rating its bonds. The City may, from time to time, choose to deal with only one or two of these agencies as circumstances dictate. In addition to general communication, the City Administrator or designee, the Treasurer or designee and the Budget Administrator shall: (1) meet with credit analysts when requested, and (2) prior to each competitive or negotiated sale of bonds for which the City seeks a rating, offer conference calls with agency analysts in connection with the planned sale.
B) Continuing Disclosure. The City shall remain in compli ance with Rule 15c2-12 by filing its annual financial statements and ot her financial and operating data for the benefit of its bondholders within nine (9) months of the close of the fiscal year. The inability to make timely filings must be disclosed and would be a negative re flection on the City. While also relying on timely audit and preparation of the City’s annual report, the Treasurer or designee will ensure the City’s timely filing with the Municipal Securities Rulema king Board’s (“MSRB”) Electronic Municipal Market Access (“EMMA ”) repository or the designated repository at the time of reporting.
C) Rebate Reporting. The use of bond proceeds and their in vestments must be monitored to ensure compliance with arbitrage restrictions. Existing regulations require that issuers calculate Consolidated Fiscal Policy Debt Management Policy
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annual rebates, if any, related to each bond issue, with rebate, if due, paid every five years.
Therefore, the Treasurer or designee shall ensure that proceeds and investments are tracked in a manner that facilitates accurate calculation, calculations are completed, and rebates, if any, are made in a timely manner.
D) Other Jurisdictions. From time to time, the City will issue bonds on behalf of other public or private entities (“conduit” issues). While the City will make every effort to facilitate the desires of these entities, the Treasurer or designee will ensure that the highest quality financings are done, and that the City is insulated from all risks.
E) Record-Keeping. All debt related records shall be maintained within the Treasury Bureau. At a minimum, this repository will include all official statement s, bid documents, ordinances, indentures, trustee reports, leases, etc., for all City debt. To the extent that official transcripts incorporate these documents, possession of a transcript will suffice (transcripts may be in hard copy or stored on CD- ROM). The Treasury Bureau will maintain all available documentation for outstanding debt and will develop a standard proc edure for archiving transcripts for any new debt.
F) Internal Control Procedures. The City shall implement internal control procedures to ensure that the proceeds of bonds and debt issuance are directed to the intended use. When issuing debt, in addition to complying with the terms of this Debt Policy, the City shall comply with any other applicable policies regarding initial bond disclosure, cont inuing disclosure, post-issuance compliance, and investment of bond proceeds.
The Treasury Bureau will periodically review the requirements of and will remain in compliance with the following:
Any continuing disclosure underta kings under SEC Rule 15c2-12, Any federal tax compliance requirements, in cluding without limitati on arbitrage and rebate compliance, related to any prior bond issues, and
The Issuer’s investment policies as they relate to the investment of bond proceeds.
Proceeds of debt will be held eit her (a) by a third-party trust ee, fiscal agent, or escrow agent which will disburse such proceeds to or upon the submission of one or more written requisitions by the Director of Finance or hi s/her designee, or (b) in those cases where it is not reasonably possible for the proceeds of debt to be held by a third-party trustee, proceeds shall be held and accounted for in a separate fund or account. The City shall retain records of expenditures of proceeds through the final payment date for the debt.
G) Rebate Policy and System. The City will accurately account for all interest earnings in debt- related funds. These records will be designed to ens ure that the City is in compliance with all debt covenants, and with State and Federal laws. T he City will maximize the interest earnings on all funds within the investm ent parameters set forth in each respective indenture. The City will calculate and report interest earnings that relate to Internal Revenue Code rebate, yield limits, and arbitrage.
9) Fees
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The City will charge an administrative fee equal to di rect costs plus indirect costs as calculated by the City’s OMB A87 model to reimburse its administrative costs incurred in debt issuance on behalf of other governmental entities.
10) Consultants
The City shall select its prim ary consultant(s) by competit ive process through a Request for Proposals (RFP), however, if t here are unforeseen events that nec essitate immediate action including but not limited to rede mption, defeasance, or restructur ing to prevent the City from experiencing further losses, the City Administrator or design ee and/or the Treasurer or designee can select a consultant without using the RFP process. In addition, the City should be encouraged to use local and disadvantaged banks and financial firms, when possible.
A) Selection of Financ ing Team Members. Final approval of financi ng team members will be provided by the City Council.
i) Selection of Underwriter: For any issue of debt, financing or debt instrument issued through negotiated sale, the City shall select the underwriter through a request for proposal process, when appropriate. The request for proposal will be distributed to qual ified candidates to determine the level of experience as well as fees in the proposed type of financing.
(a) Senior Manager Selection. The Treasurer or designee shall recommend to the City Administrator or designee the selection of a senior manager for a proposed negotiated sale. Solicited or unsolicited proposals or st atements of qualificati ons will be used to determine the selection and appointment of the seni or managers and co-managers on the debt issuances. The criteria for selection as reflected in the RFP or RFQ shall include but not be limited to the following:
The firm’s ability and experience in managing similar transactions Prior knowledge and experience with the City
The firm’s willingness to risk capi tal and demonstration of such risk The firm’s ability to sell bonds
Quality and experience of personnel assigned to the City’s engagement Financing plan presented
(b) Co-Manager Selection. Co-managers will be selected on the same basis as the senior manager. In addition to t heir qualifications, co-ma nagers appointed to specific transactions will be a function of transaction size and the necessity to ensure maximum distribution of the City’s bonds.
(c) Selling Groups. The City may establish selling groups in certain transactions. To the extent that selling groups are used, the Ci ty Administrator or designee and/or the Treasurer or designee at his or her discretion, may make appointments to selling groups from within the pool of underwriters or from outside the pool, as the transaction dictates.
(d) Underwriter’s Discount. All fees and allocation of the management fee will be determined prior to the sale date; a cap on management fee, expenses and underwriter’s counsel will be established and communicat ed to all parties by the Treasurer or designee. The senior manager shall submit an itemized li st of expenses charged to members of the underwriting group. Any additional expenses must be substantiated.
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(e) Evaluation. The City and/or Municipal Advisor will evaluate each bond sale after its completion to assess the following: co sts of issuance incl uding underwriters’ compensation, pricing of the bonds in terms of the overall interest cost and on a maturity- by-maturity basis, and the distribution of bonds and sales credits.
(f) Syndicate Policies. For each negotiated transaction, syndicate policies will be prepared that will describe the designa tion policies governing the upcoming sale. The Treasurer or designee or Municipal Advisor shal l ensure receipt of each member’s acknowledgement of the syndicate policies for the upcoming sale prior to the sale date.
(g) Designation Policies. To encourage the pre-marketing e fforts of each member of the underwriting team, orders for t he City’s bonds will be net designated, unless otherwise expressly stated. The City shall require the senior manager to:
Equitably allocate bonds to other managers and the selling group Comply with MSRB regulations governing the priority of orders and allocations Within ten working days after the sale dat e, submit to the Treasurer or designee a detail of orders, allocations and other relevant information pertaining to the City’s sale
(h) Selection of Underwriter’s Counsel. In any negotiated sale of City debt in which legal counsel is required to represent the underwr iter, the appointment will be made by the lead underwriter.
ii) Selection of Municipal Advisor: The City shall conduct a request for qualifications from potential candidates every three years to establish a pool of qualified municipal advisors for each of the following areas:
The City Administrator or designee and/or the Treasurer or designee will make recommendations for municipal adv isors and the City shall utiliz e the services of qualified applicants in the pool on a rotational basis, as applicable, for any issue of debt, financing or debt instrument.
Selection of the City’s municipal advisor(s) and municipal advisor pool shall be based on, but not limited to, the following criteria:
Experience in providing consulting services to complex issuers Knowledge and experience in structur ing and analyzing complex issues Experience and reputati on of assigned personnel
Fees and expenses
B) Municipal Advisory Services. Municipal advisory services provided to the City shall include, but shall not be limited to the following:
Evaluation of risks and opportunities associated with debt issuance Monitoring marketing opportunities
Evaluation of proposals s ubmitted to the City by investment banking firms Structuring and pricing
Preparation of request for proposals for other financial services (trustee and paying agent Consolidated Fiscal Policy Debt Management Policy
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services, printing, credit facilities, remarketing agent services, etc.) Advice, assistance and preparation for pres entations with rating agencies and investors Assist in the preparation and review of l egal and financing documents in coordination with the financing team in connection with the financing
C) Bond Counsel Services. City debt will include a written opinion by legal counsel affirming that the City is authorized to issue the proposed debt, that the City has met all constitutional and statutory requirements necessary for issuanc e, and a determination of the proposed debt’s federal income tax status. The approving opinion and other documents relating to the issuance of debt will be prepared by counsel with extens ive experience in public finance and tax issues.
The City will then make recommendations to the Ci ty Attorney’s Office where they will review the recommendations. Compensation will vary based on the complexity of the transaction.
D) Disclosure Counsel Services. For all public sales of debt, the City will retain the services of disclosure counsel to prepare the official statem ent. The Finance Director/T reasurer will also determine whether to select another law firm to provide the services of disclosure counsel, or to assign such duties to bond counsel.
E) Disclosure by Financing Team Members. All financing team mem bers will be required to provide full and complete disclosure, relative to agreements with other financing team members and outside parties. The extent of disclos ure may vary depending on the nature of the transaction. However, in general terms, no agreements shall be permitted which could compromise the firm’s ability to provide independent advice which is solely in the City’s best interests, or which could reasonably be perceived as a conflict of interest.
F) Conflicts of Interest. The City also expects that its municipal advisor will provide the City with objective advice and analysis, maintain the conf identiality of City fi nancial plans, and be free from any conflicts of interest.
HISTORY
Debt Policy
Resolution No. 89833 C.M.S., adopted by City Council on July 18, 2023
Local Goals and Policies for Land-Secured Financing Resolution No. 85664 C.M.S., adopted by City Council on June 17, 2015
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Rating Scale:
Moody's S&P Fitch
Rating description
Long-term Short-term Long-term Short-term Long-term Short-term Aaa
P-1
AAA
A-1+
AAA
F1+
Prime
Investment-
grade
Aa1 AA+ AA+
High grade Aa2 AA AA
Aa3 AA− AA−
A1 A+
A-1
A+
F1 Upper medium
grade A2 A A
A3
P-2
A−
A-2
A−
F2
Baa1 BBB+ BBB+
Lower medium
grade Baa2
P-3
BBB
A-3
BBB
F3
Baa3 BBB− BBB−
Ba1
Not prime
BB+
B
BB+
B
Non-
investment
grade
speculative
Non-
investment
grade aka
high-yield
bonds aka
junk bonds
Ba2 BB BB
Ba3 BB− BB−
B1 B+ B+
Highly
speculative B2 B B
B3 B− B−
Caa1 CCC+
C CCC C
Substantial
risks
Caa2 CCC Extremely
speculative
Caa3 CCC− Default
imminent with
little prospect
for recovery
Ca
CC
C
C
D /
DDD
/ In default
/
DD
D
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Consolidated Fiscal Policy Financial Reporting
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Financial Reporting
OBJECTIVE
The City shall maintain clear, accurate, and understandable financial reporting that provides accountability and transparency for all components of the City’s financial affairs and ensures compliance with applicable statutory and other regulat ory requirements. The Ci ty’s financial reports must meet requirements established by applicable governmental regulatory organizations. The GFOA recommends establishment of a financial reporting policy that endorses key accounting principles and that ensures external audits are property performed.
POLICIES
1) Accounting Practices
The City shall establish and maintain Citywide a ccounting practices that conform to Generally Accepted Accounting Principles (GAAP) as pr omulgated by the Gove rnmental Accounting Standards Board (GASB).
2) Financial Reporting
A) Annual Comprehensive Financial Report (ACFR)
The City shall prepare an Annual Comprehensive Financial Report (ACFR) each fiscal year in accordance with GAAP, GASB and state and federal regulations. The report must also meet the requirements of the Governmental Finance Officers’ Association’s Certificate of Achievement of Excellence in Financial Reporting. The City shall strive to present financial reports following best practices.
B) Annual Financial A udit (Single Audits)
The City shall contract with a qualified independe nt certified public acco unting firm to perform an annual financial and compliance audit of the City ’s financial statements. The firm’s opinions must be presented in the City’s ACFR and the Single Audit Report.
C) Revenue and Expenditure Reports
The City shall prepare quarterly Revenue and Expen diture (R&E) reports detailing the City’s year-to-date actuals and year-end projected revenues and expenditures for the General Purpose Fund (GPF) and may include select Non-General Purpose funds. The values are presented on a combination of cash and modified accrual basis. These reports should include a comprehensive analysis of revenue by categor y and expenditures by City department for the Consolidated Fiscal Policy Financial Reporting
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GPF, as well as fund balance projections for the GPF and select Non-GPF funds.
The R&E reports are to be presented as i ndependent reports to the Finance and Management Committee (FMC) and published no later than 75 da ys following the finan cial close of each quarter, with the exception of the Fourth Q uarter report, which shall be consolidated and presented concurrently with the following year’s first quarter report.
D) Cash Management Report
The City shall prepare quarterly Cash Management Report summarizing the characteristics of the investment portfolios for the quarter. T he Cash Management Report is to be presented to the Finance and Management Committee (FMC) and scheduled within 45 days following the end of the quarter covered by the report, with t he exception of City Council’s summer recess, the quarterly cash management report for the period ending June 30 will be deemed timely so long as the City Administrator submits the repor t to the City Clerk by the following September for scheduling to a City Council or a City Council committee meeting.
E) Annual Continuing Disclosure Report
The City shall remain in compliance with Rule 15c2-12 by filing an annual continuing disclosure report with its annual financial statements and other financial and operating data for the benefit of its bondholders within nine (9) months of the close of the fiscal year to the Municipal Securities Rulemaking Board’s (“MSRB”) Electronic Municipal Market Access (“EMMA”) repository.
F) Retirement Plans Reports
i) Police and Fire Retirem ent Systems (PFRS) Report
The City shall prepare quarterly Investment Performance Report provided by the Oakland Police and Fire Retirement Sy stem (PFRS) Investment Cons ultant that summarizes the performance of PFRS investment portfolio. In addition, on an annual basis an Actuarial Valuation Report is presented to provide the actuarial funding status and projected City’s contribution to PFRS.
ii) CalPERS
The City shall prepare an informational report summarizing the liability to the CalPERS retirement system within 75 days of publishing from CalPERS.
G) Grants Report
The City shall prepare an annual informational report detailing the grant awards that are appropriated midyear, and the status of pending grant applications.
H) Contracts Authority Report
The City shall prepare an annual informationa l report listing all purchases and contracts Consolidated Fiscal Policy Financial Reporting
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authorized by the City Administrator, within the City Administrators’ contract authority.
I) Status of Negative Funds
The City shall prepare an annual informational r eport on the status of citywide negative funds.
3) Availability of Reports to the Public
The City’s financial reports will be posted on the City’s website and m ade available for public inspection.
HISTORY
None.
Consolidated Fiscal Policy OPEB Policy
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Other Post-Employment Benefits
(OPEB) Funding
OBJECTIVE
The purpose of the City’s Other Post-Employment Benefits (OPEB) F unding Policy is to set forth the City’s overall OPEB funding and benefit goals, the benchmarks that will be used to measure progress, and the methods and assumptions that will be used to develop and maintain these benchmarks.
POLICIES
1) OPEB Program Goals
The primary objectives of the City’s overall OPEB program goals are to provide benefits that are:
Affordable in the near-term, without crowding out the City’s capacity to deliver quality services to the public or to provide reasonable salary increases to active employees; Sustainable over the long-term , ensuring that benefits will be secure and reliable for career employees throughout retirement, with subst antial intergenerational equity for taxpayers regarding the funding of benefit costs; and
Competitive, to support effect ive recruitment and retention of a strong municipal workforce.
The specific elements of this funding policy are intended to provide a balanced approach for addressing these goals within the parameters of the City’s resources.
2) OPEB Funding Goals
The City of Oakland funds OPEB in two primary ways.
A) Explicit Subsidy
First, the City provides a benefit pay ment to eligible City retirees that is used to offset some or all of the cost of participation in health coverage. Prior to attaining Medicare eligibility, City retirees participate in the same health plans offered to active employees, and parallel plans integrated with Medicare are provided for re tirees who have reached the age of Medicare eligibility. The City’s benefit payment toward coverage in these plans is referred to in accounting terms as an explicit subsidy because it is structured as a contribution toward the stated premium costs for these plans.
To fund the explicit subsidy, the City participates in an irrevocable Section 115 Trust (hereinafter “OPEB Trust”). The objective in providing employer contributions to this OPEB Trust is to accumulate sufficient assets during a member’s period of active employment to fully finance the Consolidated Fiscal Policy OPEB Policy
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benefits the member receives throughout retirement. Toward this objective, the City establishes the following OPEB Trust funding and related goals:
Maintain a stable or increasing ratio of trust assets to accrued liabilities, with the goal of reaching a 100% funded ratio (full funding) for all explicit subsidy benefits. For this purpose, the funded ratio is defined as the actuarial value of trust assets divided by the trust’s actuarial accrued liability for explicit subsidy benefits.
Develop a pattern of stable and regular cont ribution rates when expressed as a percentage of member payroll as measured by valuations prepared in accordance with the principles of practice prescribed by the Actuarial Standar ds Board, ultimately reaching a minimum employer contribution level at least equal to the Actuarially Determined Contribution (ADC) associated with explicit subsidy benefits.
Manage the cost of benefits through labor-managem ent partnership and collective bargaining to reach and maintain an affordable and sustainable level of coverage.
B) Implicit Subsidy
Second, the City also provides an implicit subsidy toward retiree medical coverage. This cost to the City results from the pooled approach to the health plans in which the City participates administered by the California Public Employees’ Retirement System (CalPERS) pursuant to the Public Employees’ Medical & Hospital Care Act (PEMHCA). Un der these PEMHCA plans, the same rates are charged for active and retired employee participants on a blended basis. In turn, because the underlying cost for retirees, on average, will be higher than the underlying costs for active employees, this blended CalPERS rate effectively leads to a subsidy of the true costs for retirees in the aggregate. This implicit subsidy takes the form of the higher payments by the City for active employee premiums than would otherwise be required if retirees were not covered under the same PEMHCA pool with blended rates. As of the initial 2 adoption of this OPEB Funding Policy, PEMHCA does not offer the option of using separate rates for active employees and retirees, such that this implicit subsidy is unavoidable under the PEMHCA program.
For any implicit subsidy, the City’s objective will be to ensure that combined employer and employee/retiree contributions are made in full for annual premiums, such that this funding requirement will consistently be met on a yearly basis.
3) Benefit Program
The City’s goal is to provide an affordable, sustainable, and competitive level of retiree healthcare benefits for career employees.
A) Labor-Management Partnership
Specific benefit structures are subject to co llective bargaining for r epresented employees, and the City respects the negotiation process and values its labor-management partnerships.
In parallel with each biennial OPEB actuarial valuation, and in advanc e of any rounds of Consolidated Fiscal Policy OPEB Policy
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collective bargaining, the City should seek to revi ew its retiree healthcare benefits relative to offerings among other Bay Area governments and large California cities.
As retiree healthcare benefits are periodically reviewed and renegotiated, the following principles will serve as guidelines for pursuit of any adjustments:
Until the City’s OPEB Trust is fully funded, the affordability and sustainability of the City’s retiree medical benefits offerings will be evaluated on the basis of whether the City’s ADC for explicit subsidy benefits can be fully funded with a combination of full Pay-Go Funding (“pay- go”) plus a supplemental employer contribution of no higher than 2.5% of payroll.
Periodic adjustments to benef its will be pursued as required to ensure full funding and plan sustainability under the terms of this policy. If the ADC for explicit subsidy benefits exceeds pay-go costs plus a supplemental City payment of 2.5% of payroll, then the City will seek to negotiate approaches to modify benefits to close this sustainability gap. Among the potential approaches for closing this gap, the City may pursue retiree benefit modifications and/or contributions toward future OPEB coverage from active employees.
The City will also seek to negotiate reopener s for retiree health care benefits in any year during which the trigger outlined in Section 4(c) below is met for waiving or deferring supplemental City OPEB contributions beyond pay-go.
Any proposed OPEB changes shall be accompanied by an actuarial valuation projecting the impact on the ADC, funded ratio, and overall OPEB actuarial liability.
B) CalPERS Policies and Practices
The City will also partner with its employee groups’ representatives to explore and potentially advocate for appropriate policy changes by CalPERS, to the extent the City continues to provide retiree healthcare benefits through the CalPERS system. Such policy changes may include but are not limited to the development of plan design changes that do not incur penalty costs under the Affordable Care Act, and the separation of ra tes for active and retir ee healthcare plans to eliminate the implicit subsidy.
4) Funding Policy for Sustainable Benefits
A) Pay-Go Funding
At a minimum, the City will fully fund its pay-go commitments to eligible retirees and beneficiaries for the benefits they receive each year, inclusive of any implicit subsidy resulting from the blending of active and retiree healthcare rates.
B) OPEB Trust Funding
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The City will continue to ma ke contributions to its OPEB Tr ust. Once full funding has been achieved on an actuarially sound basis, and as fu ll funding is sustained thereafter, all explicit subsidy payments on behalf of retirees and beneficiaries shall be made from the Trust, with the City also contributing the full ADC associated with explicit subsidy payments each year to ensure the continued health and sustainability of the Trust. Once full funding of t he explicit subsidy is achieved, the annual City contribution will repres ent the actuarial normal cost for the explicit subsidy benefits, reflecting the dollars required to be set aside on a current basis so that active members’ benefits will be fully funded upon retirement.
Until the Trust is 100% funded for explicit subsidy benefits, the City will make contributions in excess of the annual pay-go cost for current reti rees and beneficiaries toward achieving full funding, under the policy outlined below.
i) Beginning in FY2020, the City will contribut e an additional 2.5% of payroll above pay-go into the OPEB Trust on an annual basis until the liabilit y associated with the explicit subsidy is fully funded.
ii) Consistent with Section 3(a) of this pol icy, If the sum of annual pay-go costs plus the supplemental contribution as outlined above is less than the ADC for explicit subsidy payments in that same year, then the City will seek to negotiate benefit and/or employee contributions sufficient to close this sustainability gap.
For the purposes of the above calculations, the ADC will be calculated with regard to retiree benefits exclusive of future implicit subsidy pay ments, as the City is committed to funding the implicit subsidy component of the OPEB liability on an ongo ing basis through its general employee healthcare rates.
C) OPEB Trust Funding Adjustments
In addition to the above annual contributions, the City will continue to make further one-time contributions to the OPEB Trust when Excess Real Estate Transfer Tax (RETT) thresholds are met as provided in the City of Oakland Consol idated Fiscal Policy. This approach will help to build OPEB funding more rapidly, thereby improving plan stability and reducing future contribution requirements.
In the event of a severe economic downturn, t he City will seek to continue the above payment structure in full, but, if authorized via Council Resolution, may temporarily reduce or defer its supplemental payments above pay-go until the City’s revenues have recovered.
For the purpose of this provision: a severe down turn shall be defined as a fiscal year in which aggregate General Purpose revenues are projec ted to be negative and/or less than 50% of forecast growth in the Consumer Price Index for the ensuring fiscal year; and recovery shall be defined as the next fiscal year following a fi scal year when General Purpose revenues are estimated to have again been positive and exceeded 50% of forecast growth in the Consumer Price Index. In no event shall t he City draw down from its OPEB Trust to meet pay-go costs if Consolidated Fiscal Policy OPEB Policy
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the ADC is not made in full for that same fiscal year.
5) Actuarial Approach
A) Biennial Valuations
An OPEB actuarial valuation will be performed at least biennially.
B) Actuarial Method and Assumptions
The actuarial funding method used to devel op the benchmarks will be the entry age normal actuarial cost method. Any unfu nded liability will be amortized over a closed 30-year period.
Other actuarial assumptions used will be those adopted by the City Finance Department based on the advice and recommendation of the OPEB actuary. The act uary shall investigate each system’s experience at least every five (5) years and use the results of the investigation to form the basis for those recommendations, consistent with Actuarial Standards of Practice (ASOP) and Government Finance Officers Association (GFOA) guidance.
6) Transparency and Reporting
Funding of the City’s OPEB program should be tr ansparent to all stakeholders, including City employees, retirees, employee organizations, elected officials, and Oakland residents and taxpayers. In support of this transparency, the following information shall be available:
A) Report to City Council
When each actuarial valuation for the City’s O PEB plan is completed, typically on a biennial basis, a copy shall be transmitted to City Council along with a Finance Department report regarding progress toward full funding of the pl an and ADC, and overall advancement of this policy’s OPEB plan goals of affordability, sustainability, and competitiveness.
B) Website Publication
These OPEB actuarial valuations and the Ci ty’s Annual Comprehensive Financial Report (ACFR) shall be published on the Ci ty’s website. The ACFR includes information regarding the City’s OPEB plan, contributions to the OPEB Trust, and the funded status of the plan.
C) Budget Transparency
The City’s annual operating b udget shall include clear and specific appropriations for contributions to the OPEB Trust and pay-go costs.
7) Review of Funding Policy
Sustainable OPEB funding requires a long-term commitment. To ensure that adequate resources Consolidated Fiscal Policy OPEB Policy
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are being accumulated to meet the City’s OPEB goals, the City will review this policy biennially in conjunction with completion of its OPEB actuarial valuations.
HISTORY
OPEB Funding Policy
o Resolution No. 87551 C.M.S., adopted by City Council on February 26, 2019 Attachment AConsolidated Fiscal Policy
Glossary
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Glossary of Terms
Adverse Financial Condition - The first stage of financial uncertai nty, when there is an actual or projected deficit that exceeds 5% (but less than 10%) of the current fiscal year’s adopted budget, or in years when the City forecasts significant service r eductions to existing service levels such that the implementation of a hiring freeze, or the enforcement of cost savings measures to prevent a significant decrease in essential services, are contemplated due to adverse financial co nditions, and the use of the Vital Services Stabilization Fund "Rainy Day Fund" must be considered to maintain existing services. A significant decrease in essential services is defined as a level of reduction that may result in adjustments to service delivery methods, increased wait times, or minor disruptions to non-essential services, but essential services remain largely operational.
Extreme Fiscal Necessity - An intervening step of fiscal austeri ty, such as when total projected General Purpose Fund revenues will be less than the current year's revenues, where there is an actual or projected reduction in total General Pur pose Fund revenues, or when expenditure growth dramatically outpaces revenue growth, or when there is an actual or project ed deficit exceeding 10% of the current fiscal year’s adopted budget. It is the lessor of a catastr ophic situation, the City entity would need to suspend provisions of local laws related to enhanced public services, such as Maintenance of Effort provisions or to prevent a dramatic decrease in essential services, relating to health, safety, and welfare; in addition to the use of the Vital Services Stabi lization Fund "Rainy Day Funds" , may include the suspension of Use of One- time Revenues policy, suspension of accelerated liability repayments, or layoffs to achieve cost savings must be cons idered, in order to sustain City Services, but short of accessing emergency reserve monies. A dramatic reduction is defined as more a pronounced decrease in City services characterized substantial disruptions or limitation in service availability which may result in layoffs, and service closures to essential services that lead to noticeable hardships for residents and businesses.
Fiscal Crisis or Fiscal Emergency - Generally, the last and most se vere stage of a governmental entity's financial solvency problems an unusual, unanticipated and seemingly insurmountable event or hardship of the City, one such as a natural disast er, acts of god or war, public emergency, or other unforeseen catastrophic event requiring the use of Emergency Reserves to sustain the most basic operations of the General Purpos e Fund and maintain basic public health and safety. The City may need to develop a financial plan to alleviate the financial crisis.
HISTORY
Creating Definitions For The Increasingly Severe States Of “Adverse Financial Condition,” “Extreme Fiscal Necessity,” And “Fiscal Crisis Or Fiscal Emergency” o Resolution No. 89803 C.M.S., adopted by City Council on June 26, 2023