City Council
December 9, 2024
AGENDA REPORT
TO:
Honorable
Mayor and
members of
the City
Council and
the Public
Honorable Mayor and members of the
City Council and the Public FROM: Councilmember Rebecca Kaplan. At-Large Office.
Council President Nikki
Fortunato Bas, District 2
SUBJECT:
General
Purpose
Fund
Reserve
General Purpose Fund Reserve DATE: December 9, 2024
RECOMMENDATION
Councilmember Rebecca Kaplan and Council President Nikki Fortunato Bas recommend that the City Council adopt the following:
TO AMEND THE FY2023-2024 BUDGET TO ALLOCATE UP TO $30
MILLION IN FUND 1100 (SELF-INSURANCE LIABILITY FUND) AND
TRANSFER THOSE FUNDS TO THE GENERAL PURPOSE FUND
RESERVE (FUND 1011)
Executive Summary
The Consolidated Fiscal Policy of the City of Oakland states it shall be the policy of the Oakland City Council to maintain in each fiscal year a reserve equal to seven and one-half percent (7.5%) of the General Purpose Fund (Fund 1010) appropriations as adopted in budget (the "General Purpose Fund Emergency Reserve Policy"). Per policy1, Each year, upon completion of the City's financial 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 7.5% reserve level.
The policy states that, if in any fiscal year, the General-Purpose Fund Reserve Policy is not met, the City Administrator shall present to the City Council a strategy to meet the General-Purpose Fund
1 https://cao-94612.s3.amazonaws.com/documents/FY-2017-18-Consolidated-Fiscal-Policy-Exhibit-1_Clean.pdf
Honorable Mayor & City Council
Subject:
Date: Page 2
City Council
December 9, 2024
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.
The Q1 Revenue and Expenditure Report2, released on November 8, 2024, recommended fiscal action that will create unnecessary issues regarding Oakland’s fiscal state; for example, the report stated,
“Revised estimates regarding the City’s fiscal condition at the end of FY 2023-24 show the City has already tapped into its emergency reserve. Given there is no possibility of replenishing the reserve this Fiscal Year, following the conclusion of the Audit and publication of Annual Comprehensive Financial Report, the City Council will be required to declare a Fiscal Emergency per the Consolidated Fiscal Policy (CFP.)”
This recommendation, which lacks any proposed options for replenishing the GPF Reserve, and lacks any recommendations regarding reserve levels, is contrary to the Consolidated Fiscal Policy, which requires that such options be provided to Council prior to considering taking a further step of a declaration of fiscal emergency. It is also contrary to past practice. Such an action would be contrary to the best interests of the city of Oakland and the people of Oakland. Rather than move first to a declaration which could cause additional problems, we should undertake the steps as described in the policy, to first look to options for the GPF Reserve.
The finance department is recommending adding many millions of extra dollars to the Liability Fund (fund 1100) for the FY 2024-2025 year by carrying forward into the Self Insurance Liability Fund for 2024-2025 the extra available fund balance that is available as of the end of the FY 2023-2024 Fiscal year. The office of the Oakland City Attorney has advised that they do not anticipate any extraordinary increase in litigation-related costs during FY 24-25.
The finance recommendation would leave insufficient funds in the general fund reserve to comply with the consolidated fiscal policy, triggering their further recommendation to declare a fiscal emergency. If the city returned excess unused funds to support the GPF Reserve, the city would be behaving in a more fiscally responsible manner aligned with our policies.
Thus, amending the FY2023-2025 budget to allocate up to $30 million in Fund 1100 (Self Insurance Liability Fund) and transfer those funds to the General-Purpose Fund Reserve (Fund 1011). By
2 https://oakland.legistar.com/LegislationDetail.aspx?ID=7022768&GUID=1254DA5C-2607-42B4-907C-C5C316CCADE9&Options=&Search=
Honorable Mayor & City Council
Subject:
Date: Page 3
City Council
December 9, 2024
restoring funds to the GPF reserve, such a declaration and the impacts of such declaration can be averted.
The Adopted FY 2024-2025 two-year budget shows the projected expenditures from the Self Insurance Liability Fund for each of the two years. In both cases, the projected expenditure is just below $60 million. In the first year of the two-year budget, we learned the Fund has more money in it than projected.
Adopted Budget showing projected ending fund balance of $14 million:
Excerpt from FY 2023-24 Q4 R&E Report showing $31.81 million in available excess ending fund balance in fund 1100:
Honorable Mayor & City Council
Subject:
Date: Page 4
City Council
December 9, 2024
FISCAL IMPACT
To enhance our financial stability, we propose amending the FY2023-2025 budget to allocate up to $30 million from Fund 1100 (Self Insurance Liability Fund) to the General-Purpose Fund Reserve (Fund 1011). By restoring these funds to the GPF Reserve, we can proactively address potential challenges and mitigate any negative impacts associated with financial emergency, and maintain the recommended level of GPF Reserve, strengthening the City’s ability to weather challenges. This approach aligns with our fiscal policy and ensures that we maintain a healthy reserve, ultimately fostering a more secure financial future for our organization.
COORDINATION
This report was prepared in coordination between the City Administrator’s Office and various departments, the Office of District 2, The At-Large Office, and The Office of the City Attorney.
ACTION REQUESTED OF THE CITY COUNCIL
TO AMEND THE FY2023-2024 BUDGET TO ALLOCATE UP TO $30
MILLION IN FUND 1100 (SELF-INSURANCE LIABILITY FUND) AND
TRANSFER THOSE FUNDS TO THE GENERAL PURPOSE FUND
RESERVE (FUND 1011)
For questions regarding this report, please contact Michael Alvarenga, Legislative Analyst, at [email protected]
Respectfully submitted,
Councilmember Kaplan
At-Large District
Council President Bas
District 2
Prepared by:
Michael Alvarenga, Legislative Analyst
Office of Councilmember Rebecca Kaplan
Reviewed by:
Kimberly Jones, Chief of Staff
Office of Councilmember Rebecca Kaplan