The Proposed Budget and accompanying resolution complies with the legal requirements of the City's Consolidated Fiscal Policy (CFP) Ordinance 13487 C.M.S.. The Proposed Budget does not conform to the prescribed use of one-time revenues, and it access the Vital Services Stabilization fund. Accordingly, appropriate finding will be made in compliance with the CFP.

COMPLIANCE WITH THE CONSOLIDATED FISCAL POLICY

Policy on Balanced Budgets

The Proposed Budget is 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. Appropriated transfers from unallocated fund balance are only included when such fund balance is reasonably expected to exist by the end of the current fiscal year.

Use of One-Time Revenues

The Adopted Budget does include the use of one-time revenues for ongoing purposes. This is a departure from how the City normally balances its budget, and is due to the expiration of one-time Federal subsidies like the American Rescue Plan Act (ARPA) that provided the City with much needed fund allocations to replace revenue losses brought on by the effects of the pandemic and the reduction in revenue generated from the real estate transfer tax (RETT) and transient occupancy tax. This leaves the City facing significant structural imbalances in the GPF in the FY 2023-25 budget. As such, in this biennium, the City is temporarily suspending Part D Section 2 of the CFP so it can use FY 2023 projected savings and the balance accumulated in the Vital Services Stabilization Fund (1020) of $10.3M to maintain basic services. The resolution accompanying the Budget contains the necessary explanations for the need to use one-time revenues for purposes other than those established in the CFP.

Use of Excess Real Estate Transfer Tax (RETT) Revenues

Excess Real Estate Transfer Tax (RETT), defined as any amount of projected RETT revenues that exceed 15% of General Purpose Fund Tax Revenues.

This excess Real Estate Transfer Tax, per the CFP, is to be used in the following manner and appropriated through the budget process:

At least 25% shall be allocated 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

At least 25% shall be used 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; and

The remainder shall be used to fund one-time expenses or to augment reserves.

In this Proposed Budget, due to a reduction in revenue generated from the RETT, there is no excess RETT projected in this cycle.

Reserve Funds

The Proposed Budget is consistent with the General Purpose Fund Emergency Reserve Policy to maintain in each fiscal year a reserve equal to 7.5% of the General Purpose Fund (Fund 1010) appropriations as unobligated fund balance. For the FY 2023-24, the Emergency Reserves would need to have $57,404,123 to meet the 7.5% requirement. The estimated unobligated fund balance at the beginning of FY 2023-24 is $64.78 million. There are no appropriations made from the General Purpose Fund Emergency Reserve in the FY 2023-25 Proposed Budget.

The Proposed Budget temporarily suspends the Vital Services Stabilization Fund (VSSF) policy and does not make additional contributions to the fund. Instead, the entirety of the VSSF, in the amount of $10.3M is proposed for use to balance the FY 2023-25 budget. The legislation accompanying the Budget contains the necessary explanations for the VSSF policy other than those established in the CFP.

The Proposed Budget makes no additions to the Capital Improvements Reserve Fund. Capital needs for the City are being fulfilled through appropriations from Measure KK and Measure U bond proceeds.

COMPLIANCE WITH KEY VOTER APPROVED MEASURES

The 2020 Oakland Parks and Recreation Preservation, Litter Reduction, and Homelessness Support Act (Parks Measure Q – Fund 2244) authorizes a twenty-year annual special parcel tax beginning in fiscal year (FY) 2020-21 through FY 2039-40. Tax revenues* collected (net of any collection and tax levy costs and fees) are limited to the following purposes:

No less than 64% for parks, landscape maintenance, and recreational services;

30% for services to address homelessness and enable unsheltered and unhoused residents to access temporary shelters, transitional and supportive housing, and permanent housing;

5% for services and projects to address water quality and litter reduction, including by maintaining and cleaning stormwater trash collection systems; and

1 % to cover the costs of auditing and evaluating programs, strategies, and services undertaken pursuant to this measure.

*Central Services Overhead costs may not be recovered from this revenue.

Maintenance of Effort

For so long as the parcel tax is in effect, the City of Oakland must maintain service levels at the equivalent or greater than the service levels as to those provided in the Fiscal Year (FY) 2019-21 Adopted Policy Budget for FY 2019-20. If this maintenance of effort is not met, the City may not expend any revenue attributable to this parcel tax for the service area.

Parks, Landscape Maintenance, and Recreational Services: The maintenance of effort language restricts that the City’s operative fiscal year budget may not appropriate more than 55% of the estimated revenue allocated to the parks, landscape maintenance and recreation services to preserve parks maintenance services. Due to the severe budgetary deficits in City funds, the FY 2023-25 Proposed budget does not meet this requirement. Per the Parks Measure Q language, "The City Council may temporarily suspend the provision of Section 4 by resolution to meet urgent and changing needs in the event of extreme fiscal neccessity". The legislation accompanying the Budget will contain the necessary explanations for the need to suspend this requirement.

Homeless Services: The City's operative fiscal year budget maintenance of effort language excludes any revenue appropriated from the Affordable Housing Trust Fund, Fund 1870.

You may read the full ballot measure language for The 2020 Oakland Parks and Recreation Preservation, Litter Reduction, and Homelessness Support Act here.

The Oakland Vacant Property Tax Act (Fund 2270) is a special parcel tax on vacant property within the City of Oakland where the revenue may be used to provide services and programs to the homeless, to reduce homelessness, and to support the protection of existing and production of new housing affordable to lower income households. Additional uses of revenue include job training, job readiness assistance, and drug treatment programs for homeless people; housing assistance including temporary housing or move-in expenses; sanitation, bathroom, and cleaning services related to homeless encampments; deterring blight and illegal dumping; and code enforcement and cleanup of blighted vacant properties.

Maintenance of Effort

For so long as the parcel tax is in effect, no more than fifteen percent (15%) of the revenue deposited into the Vacant Parcel Tax Act fund in any single year may be used to pay for administrative costs (excluding costs of the Homelessness Commission). The Fiscal Year (FY) 2023-25 Proposed Budget shall allocate no more than $806,758 in FY24 and $802,384 in FY25 towards administrative costs. The adopted budget allocates $0.80M in FY24 and $0.80M in FY23.

In addition, no less than twenty-five percent (25%) of the revenue deposited into the Vacant Parcel Tax Act fund in any single year shall be used to pay for code enforcement and clean-up of blighted vacant properties, blight elimination, remedying illegal dumping, and legal action to address any of the foregoing, as necessary. The FY 2021-23 Proposed Budget shall allocate no less than $ 1,337,307 in FY24 and $1,340,729 in FY25 towards this maintenance of effort. The Proposed Budget allocates $4.3M in FY24 and $4.8M in FY25.

The Kids First Charter Amendment was first established in 1996 to create a separate fund exclusively dedicated to supporting Oakland’s youth and children with programming and services so they can grow to become healthy and productive adults. The Kids First Charter Amendment requires that 3% of the City’s unrestricted General Purpose Fund revenues be set aside in a separate fund (1780) every year.

The law requires that 90% of the Kids First funds to be used for eligible services for youth and children. No more than 10% can be used for administrative overhead, grant management, strategic planning, or third-party evaluation.

As a part of managing the Kids First fund, the City indicates the budget for fund 1780 in the Adopted Budget for the upcoming two fiscal years. Once the General Purpose Fund’s revenues are audited, the City then applies a “true-up” to the Adopted Budget based on what the City received in terms of actuals for its revenue from that prior fiscal year. This “true-up” can either be positive or negative, depending on if the budgeted amount was higher or lower than the actuals in General Purpose Fund Revenue.

For FY 2023-24, the Kids First Budget is $ 24,766,580 (which includes a positive true-up of $2,429,776 from FY 2021-22). For FY 2024-25, the Kids First Budget is $ 23,493,722 . It will be adjusted at Midcycle with the true-up from FY 2022-23.

Below is how the Kids First calculation was made:

In 2014, Oakland voters overwhelmingly approved The 2014 Oakland Public Safety and Services Violence Prevention Act (Measure Z) to continue many of the services funded under the City’s Violence Prevention and Intervention Initiative, Measure Y. Measure Z authorized the City to renew for ten years a parcel tax. It also authorized the City to continue to impose a parking tax for ten years. These taxes were accompanied by certain police staffing requirements that, if not met, would compromise the City's authority to levy the taxes.

The projected revenue from these two taxes combined over the ten-year life of Measure Z was estimated by city officials to be $277.2 million. Not counting the 3% required for oversight and evaluation and $2 million for the Oakland Fire Department, the revenue from this tax was designed to be split 60% going to police staffing, programs, and services and 40% going to community violence prevention/intervention programs.

Despite the severe budgetary deficits in the City's General Purpose Fund (GPF), the proposed FY 2023-25 Proposed budget does meet this minimum staffing requirement. However the circumstances required for exemption under Measure Z are met. Per the Measure Z language in section 2. (d) (ii.); "If a severe and unanticipated financial or other event occurs that so adversely impacts the General Purpose Fund as to prevent the City from budgeting for, hiring and maintaining the minimum number of sworn police personnel required by this Ordinance, the numeric requirements for budgeting and maintaining sworn police personnel shall be reduced by the numbers the City is unable to fund as a result of such event. This exception shall apply only if the City Administrator submits a report to the City Council explaining the severe and unanticipated event, the steps that were taken by the City to avoid the need to reduce the number of sworn police personnel and the steps that will be taken by the City in the future to restore sworn police personnel. Such actions must be taken for each fiscal year in which the City fails to meet the minimum staffing requirements of this Ordinance for the reasons described in this sub-section". The resolution accompanying the Budget contains the necessary explanations for the need to suspend this requirement even though it is being met.

On November 8, 2016, Oakland voters approved Measure LL in favor to establish the Police Commission (Commission). The Commission would oversee the Oakland Police Department to ensure that its policies, practices, and customs conforms to national standards of constitutional policing. Measure LL is a Charter amendment which established a Commission to oversee the Oakland Police Department. The Commission and Community Police Review Agency (CPRA) replaced the Citizens’ Police Review Board (CPRB).

On November 3, 2020, Oakland voters approved Measure S1 in favor to amendment City's Charter creating an Office of Inspector General to review and report on the Police Department’s and the CPRA’s practices regarding police misconduct, changing the Commission’s and CPRA’s powers, duties and staffing, and allowing the Commission and the CPRA to hire their own attorneys independent of the City Attorney.

Measure LL & Measure S1 has a requirement that the City must allocate enough money to the Commission and the CPRA so that they can perform their required functions and duties. Specifically, the Measures require the allocation of:

• No fewer than one line investigator for every one hundred (100) sworn officers in the Department, rounded up or down to the nearest one hundred (100). The number of investigators shall be determined at the beginning of each budget cycle based on the number of sworn officers employed by the Department the previous June 1. A City Attorney opinion notes that the classifications of Complaint Investigator II and Complaint Investigator III fulfill the rolls of line investigators.
• 1.0 FTE Attorney or Contract Services for Legal Advice to provide legal services to the Police Commission
• 2.0 FTE Attorneys or Contract Services for Legal Advice to provide legal services to the CPRA

The number of sworn officers employed in June of 2022 was 659. The number of sworn officers projected to be employed in June of 2023 is 714. Both indicate a required number of line investigators greater than or equal to 7. The Proposed Budget contains 8 such positions (7.0 FTE Complaint Investigator IIs and 1.0 FTE Complaint Investigator IIIs).

The Proposed Budget includes $287,393 in contracts services for Legal Advice to provide legal services to the Police Commission. The Proposed Budget includes a CPRA Attorney at a cost of $386,666 for FY 2023-24 and $401,930 for FY 2024-25. The Proposed Budget also includes $287,393 in contracts services for Legal Advice to provide legal services to the CPRA. Thus the Proposed Budget conforms to the requirements of Measures LL and S1.

The Oakland Public Library (Library) is responsible for complying with two voter approved measures that provide supplemental funding for Library services. The measures are the Library Services Retention and Enhancement Act (Measure C) and the 2018 Oakland Public Library Preservation Act (Measure D).

Measure C amends Measure Q, which was an extension of Measure O, the Library Services Retention and Enhancement Act (the “Act”) in 1994. The Act established an annual parcel tax to raise revenue to enhance Library service; the measure was approved through 2024. The Maintenance of Effort Requried by Measure C is:

A. For each year this tax is in effect, the City Council may collect this tax only if the City’s General Purpose Fund appropriation for Library services is at least $14.500.000.

B. Notwithstanding the minimum General Purpose Fund appropriation requirement in subsection (A), the City may levy and collect this tax if:

1. A severe and unanticipated financial or other event occurs that so adversely impacts the General Purpose Fund the City is unable to budget for the Library’s General Purpose Fund appropriation at the required minimum amount of $14.500.000,
2. The City’s reduction to the Library Department’s General Purpose Fund appropriation is no more than the reduction to the City’s net General Purpose Fund budget for non-safety departments (which are all operating departments, except Police and Fire). This exception shall apply only if the City Administrator submits a report to the City Council explaining the severe and unanticipated event, the steps that were taken by the City to avoid the need to reduce the Library’s General Purpose Fund appropriation and the steps the City will take in the future to restore the Library’s General Purpose Fund. Such actions must be taken for each fiscal year in which the City fails to meet the minimum appropriation requirements set forth in subsection (A).

The Maintenance of Effort Threshold for Measure D is similar though the value is lower at $12.99Million

For any year during which this tax is in effect, if the City’s General Fund appropriation to the Library Department shall not be reduced below $12,992,267 unless a severe and unanticipated financial or other event occurs, and the City’s reduction to the Library Department’s General Fund appropriation is no more than the same proportion of reduction that is imposed on the City’s net General Fund budget for non-safety departments.

The Proposed Budget includes General Purpose Library Expenditures of $12,313,900 in FY 2023-24 and $12,621,344 in FY 2024-25. The reduction to the Libraries GPF expenditures from the Measure C threshold is less than the reduction to the City’s net General Purpose Fund budget for non-safety departments, and the reduction to the Libraries GPF expenditures from the Measure D threshold is proportionally less than the reduction to the City’s net General Purpose Fund budget for non-safety departments. The required reporting and findings will be provided in accompanying legislation.

There are no proposed reductions to library services from reduced GPF Funding.

Approved in 2022, the measure amends the Oakland Municipal Code and City Charter to establish resident public financing for candidate election campaigns, increase transparency regarding independent spending in City elections, further restrict former city officials from acting as lobbyists, and provide additional resources to the Public Ethics Commission for implementation.

For the two-year budget cycle beginning July 1, 2023, and each subsequent two-year budget cycle beginning on July 1 of odd-numbered years, the City shall appropriate to the Fund no less than $4,000,000.00 for the purpose of funding the Democracy Dollars Fund. The City shall consider additional appropriations to the Fund as requested by the Commission to ensure sufficient money in the Fund. After July 1, 2023. for every two-year budget cycle beginning on July 1 of odd-numbered years, the required minimum appropriation under this subsection shall be increased by the increase in the consumer price index over the preceding two years.

For the two-year budget cycle beginning July 1, 2023, and each subsequent two-year budget cycle beginning on July 1 of odd-numbered years, the City shall appropriate for the Public Ethics Commission no less than $350,000.00 for the purpose of non-staff costs for administering the Democracy Dollars Program, in addition to staff budgeting required by Oakland City Charter Section 603(g). Upon receiving notice from the Commission under Oakland City Charter Section 603(g)(4), the City shall consider additional appropriations to the Commission to ensure sufficient funds are provided to administer the Democracy Dollars Program. After July 1. 2023, for every two-year budget cycle beginning on July 1 of odd-numbered years, the required minimum appropriations under this subsection shall be increased by the increase in the consumer price index over the preceding two years. For the 2023-24 fiscal year, or earlier, the City shall appropriate an additional amount of no less than $700,000.00 for the purpose of startup costs associated with initiating the Democracy Dollars Program, with any remaining funds to be carried forward into future fiscal years.

The minimum budget set-aside in this section may be reduced, for a fiscal year or a two-year budget cycle, upon a finding in the budget resolution that the City is facing an extreme fiscal necessity, as defined by City Council resolution. A reduction may occur only as a part of a general reduction in expenditures across multiple departments.

Due to the severe budgetary deficits in the City's General Purpose Fund (GPF), the proposed FY 2023-25 Proposed budget does not meet the minimum budget set-aside in this section.

Approved in 2022, the measure amends the Charter to, among other things, establish Councilmember term limits, require two hearings before Council places certain measures on the ballot; count Councilmember abstentions and absences as "no" votes in determining whether Mayor may break a tie; provide Public Ethics Commission discretion in setting Councilmember salaries; authorize the Commission to set City Attorney and Auditor salaries; and add and detail duties and provide minimum staffing for the Auditor.

Effective July 2023, the budget for the Office of the City Auditor shall be sufficient to hire at least fourteen full-time equivalent (“FTE") employees of relevant classifications. The minimum staffing budget set-aside may be suspended, for a fiscal year or a two-year budget cycle, upon a finding in the budget resolution that the City is facing an extreme fiscal necessity, as defined by City Council resolution or ordinance.

The FY 2023-25 Proposed Budget includes the following 12.0 FTE positions: 1.0 FTE City Auditor, 1.0 FTE Administrative Services Manager I, 1.0 FTE City Auditor, Assistant, 1.0 FTE Executive Assistant to the City Auditor, 3.0 FTE Performance Audit Managers, 3.0 FTE Performance Auditors, Sr., and 2.0 FTE Performance Auditors. The legislation accompanying the budget will make the required findings that the City is facing a state of extreme fiscal necessity.

Approved in 2022, the measure amends Oakland's Municipal Code to fund Oakland Zoo operations, staffing, maintenance and capital improvements, including but not limited to animal care and rehabilitation, educational and conservation programs, fire prevention, accessibility, and visitor services, by imposing an annual $68 parcel tax for single-family parcels, and other parcels as specified, for 20 years, raising approximately $12,000,000 annually with exemptions for low-income households and others, and citizen oversight.

All funds collected by the City from the parcel tax imposed by this Ordinance shall be deposited into one or more separate, special funds in the City treasury and appropriated and expended only for the purposes and uses authorized by this Ordinance. This fund, or these funds, shall be known as the "Oakland Zoo Fund."

Funds in the Oakland Zoo Fund shall be distributed to the Zoo Operator for the purposes and uses listed herein as they are deposited into the Fund, after deducting amounts necessary to pay the fees charged by the County of Alameda to collect and remit the special tax.

Funds in the Oakland Zoo Fund shall be used exclusively to pay for the operations, staffing, maintenance and capital improvements ofthe Oakland Zoo and direct and indirect administrative expenses associated with this special tax, as defined herein. If this Ordinance orthe use ofspecial tax funds is legally challenged, special tax funds may be used to reimburse the City. County and the Zoo Operator for their costs of legal defense, including attorneys' fees and other expenses.

The measure requires that amounts allocated from City sources other than the parcel tax shall not be reduced at a greater rate than other than other expenditures as a result of the parcel tax. Non parcel tax expenditures are unchanged from prior Fiscal Years despite reduced GPF revenues.

COMPARISON WITH RECOMMENDATIONS OF ADVISORY BODIES