Category Archives: City Budget

At City Hall, on Wednesday, January 25, at 5:30 p.m., Mayor Quan and City Administrator Santana will present their plan to adjust the budget for lost Redevelopment Agency revenue.  While there are still unanswered questions, we don’t see any smoke, mirrors, accounting tricks or use of one-time revenue sources (if anyone else does see tricks, please let everyone know in the comments).  The plan seems to propose some genuine structural changes, and to mostly avoid wishful thinking. Furthermore, after addressing the immediate balancing needs, the Mayor and City Administrator raise a number of the major, difficult and politically volatile issues the City will have to grapple with to accomplish real budget reform.  The major elements of the plan are as follows:

• The plan eliminates 105 positions. Twenty-three of these are in the Department of Public Works and 6.7 in Parks and Recreation; a reduction of recreation center hours would take place also.  The narrative description says the plan eliminates the head of Information Technology (a vacant position) and the head of the Department of Human Services, although whether this latter elimination will actually take place is not clear from the accompanying spread sheets.
• Reductions of sworn police or fire personnel are not possible under the contracts between the City and the public safety unions, so there are no police or fire layoffs in the proposal.  Parking enforcement apparently gets moved from Finance to the Police Department. There are some consolidations between the two departments, and—as happens in nearly every budget discussion—a proposal to eliminate Neighborhood Safety Coordinators (this time 4 out of 9).
• There are no reductions to Human Services or Library programs.
• The one area of the plan that is largely undefined involves significant reductions to the Mayor’s office, City Council and City Attorney.  In each case, the proposal reduces each of these departments by “40% of Department’s Redevelopment Budget,” but offers no guidance on what the reductions might actually involve.  Unlike recent budget adjustment proposals, this one does not suggest a reduction to the City Auditor’s office.  The City Auditor has, by far, the lowest budget of any elected official.
• KTOP, the City’s television station, faces very significant cuts.  It is not clear how this will affect the station’s ability to broadcast and archive public meetings, an important issue for government transparency.
• The proposal substantially reduces City subsidies in 2012-13 for Children’s Fairyland (a reduction of $54,600) Hacienda Peralta (a reduction of $18,360) and the Oakland Zoo (a reduction of $216,000).
• The Community & Economic Development Agency (CEDA) is dissolved.
• The plan establishes an “Administrative Services Agency” to assume consolidated administrative functions related to the Finance & Management Agency, Department of Human Resources Management, Department of Information Technology, and the City Administrator’s Office.
• The plan establishes a new “Community Services Department,” entirely focused on direct service to residents, which assumes responsibilities of the existing Office of Parks & Recreation and Department of Human Services, along with other services.

To their credit, the Mayor and City Administrator also highlight some very difficult and politically volatile issues the City will have to face to accomplish long-term budget reform. Some examples:

On the impact of voter mandates:

Ballot Measures—The City’s ballot measures that support the library system and youth programs (Kids First) should be evaluated by the City Council to determine if there is a more modem structure that allows for the City to continue to fund library and youth services, but not at the levels envisioned when the City experienced better fiscal conditions. The past budget cycles have been particularly burdened by the requirements to fund the libraries at a certain level ($9M) in order to be eligible for voter approved funds ($14M).  Additionally, the youth services funded by the Kids First measure requires that a certain percent be taken from the General Purpose Fund, but the base year is set at a time when revenues were higher; the The Measure does not allow the baseline or the set-aside percent to fluctuate based on current economic conditions experienced by the City.

On restrictions on contracting out services:

Contracting In and Out—The City Charter, Title 2-Administration and Personnel, Chapter 2.04.020 (E) (Authority of the City Administrator) has the following provision:

(3) Loss of Employment or Salary. Contracts for professional services or service-only shall not result in the loss of employment or salary by any person having permanent status in the competitive service.

This provision does not allow the City to contract out for services offered by the City, yet available in the local market; however, it should be acknowledged that some services are already obtained through this model. Many local govemments have begun the process of outsourcing services traditionally offered through civil service and procuring such services from local and regional markets. The City could look at the whole issue of both contracting in-and out services for the purpose of identifying cost savings and stabilizing services.

On benefits:

Convene Labor Management Committee on Healthcare—Staff can convene the Labor Management Committee to explore strategies related to healthcare benefits provided to the workforce. Possible options for evaluation could include: increased cost sharing, reduced benefit level, increased co-payments, reduced health and dental in-lieu payments, and/or eliminate dual coverage. Estimated cost savings could not be determined until analysis has been completed and direction is set by the City Council.

Employee Benefits—Similar to the above effort, cost containment strategies related to the level of employee benefits could be further explored. Possible options for consideration could include:

retirement (e.g., pension and retiree healthcare); sick leave payout structure; premium pays or pay associated with certificates, education levels, etc; and, compensation structure (e.g., step increases, overtime eligibility, salary ranges, etc.). Estimated cost savings could not be determined until analysis has been completed and direction is set by the City Council.

Council member De La Fuente is hosting a program on the budget cuts for constituents Tonight at 6:00 p.m. at St. Jarlath’s Church/School Campus, 2634 Pleasant Street in the school auditorium (at Fruitvale Ave just below I 580) .  Council member Brunner is hosting a similar program, also Tonight, at 7:00 p.m. at North Oakland Senior Center, 5714 Martin Luther King.

When I was mayor of Oakland, I built a lot of good things. I liked redevelopment. Didn’t quite understand it; seemed kind of magical. It was the money that you could spend on stuff that they wouldn’t otherwise let you spend.

— California Governor   (and former Oakland Mayor)  Jerry Brown, quoted on NPR.

Oakland’s operations budget just shrank by $26 million.  What is the City going to do about it?  That’s a big part of what was at stake in the Redevelopment Agencies’ lawsuit against the State, which the State won today.

Here’s what happened:  California has about 400 redevelopment agencies.  Their mission is to clear and replace blight and to provide low and moderate income housing.  The Oakland Redevelopment Agency, like many others, is run by the City Council, whose members are also directors of the agency.  Although  Oakland has not yet published a Redevelopment Agency Budget for 2011-12 (and it isn’t clear to us if the City Council has adopted such a budget), the Oakland Redevelopment Agency Budget for 2010-11 was about $127 million. By law, redevelopment agencies are funded primarily by “tax increment,” the portion of property taxes generated by increasing the assessed value of redeveloped property.  Planned redevelopment projects in Oakland include the Coliseum and MacArthur BART transit villages and Oakland Army Base development.  A new A’s stadium has been discussed as a potential redevelopment project if the A’s do not leave for San Jose, although there is some doubt about whether there could be sufficient funding for any significant portion of a stadium.

But Oakland didn’t just use it’s redevelopment funds for tearing down and building things.  About $26 million per year from the Redevelopment Agency goes toward Oakland’s operational expenses.  RDA funds pay for 17 police officers, large portions of the City Council and Mayor’s offices, more than 10 employees each in the City Administrator’s and City Attorney’s offices and 83 employees in CEDA.  All told, for 2011-12, RDA funds are budgeted to pay for 159 FTE’s outside the Agency.

For years, the legislature would routinely reroute tax increment monies to the State to help balance California’s budget.  So in 2010, the agencies sponsored, and the voters passed, Proposition 22, which amended the State Constitution by prohibiting the State’s  “raiding” of redevelopment funds.

To balance this year’s, and future years’ budgets, the California legislature passed two redevelopment-related bills.  The first (AB 26X1)  abolished redevelopment agencies effective October 1 of this year, stopping new projects and rerouting the tax increment not needed for existing agency debt to schools and other districts.  The second (AB27X1) exempted cities and counties from the dissolution  if they made annual payments to the state to be allocated among schools and districts.  According to the State Department of Finance, Oakland’s payment for 2011-12 would be $39.6 million.  Clearly, AB27X1 was intended to mitigate the impact of AB26X1.  We understand Oakland planned to pay this out of redevelopment funds.

This morning, the California Supreme Court issued its ruling upholding the abolition of the agencies.  But it also invalidated the mitigation measure as a violation of Proposition 22.

Regardless of what one thinks of the redevelopment process or the Oakland RDA, this seems to constitute an enormous hit to the City’s General Purpose fund.  The $26 million loss is more than 2 1/2 times the amount of the recent, failed parcel tax.  Put differently, the total budget for the mayor, city council, city administrator, city clerk and city auditor totals about $24.7 million.  The loss of redevelopment dollars the City planned to use for operational expenses is even more than that.

Throughout 2011, Mayor Quan has repeatedly warned of the dire consequences of having to make the payments required by the now voided   AB27X1.  But the recently released Adopted Policy Budget for the City (warning — large, slow-loading file) does not appear to contain any contingency for losing the RDA altogether.  It has been clear at least since the Supreme Court’s hearing that this was a distinct possibility.  Oakland needs to hear from its leadership what the plan is to fill the void.

Last Friday afternoon, three budget balancing proposals were posted on the City’s web site and placed on the agenda for tonight’s special City Council meeting. One was offered by City Council members Reid, Brooks, and Brunner; one by Council members Nadel, Kernighan, Kaplan, and Schaaf; and a third by Council member De La Fuente. (A good summary of the three proposals appears at A Better Oakland.) Also posted was the budget office’s proposed “technical adjustments” to scenarios A and B.

Yesterday afternoon, the Mayor announced that the City had reached agreements for concessions with all five unions:  fire fighters, police officers, and the three unions representing miscellaneous employees. Although most of the details have not yet been made public, we have been told that through pay reductions, voluntary furloughs or pension contributions, each union has accepted a 9% compensation reduction. The East Bay Express has reported that the total savings from these concessions is $40 million. We understand that about $28 million of this constitutes General Purpose Fund savings, and the balance is from other funds.

The Mayor, City Council, and unions have all worked very hard to arrive at a balanced budget under extremely difficult circumstances, and MOBN! salutes them. If there truly are $40 million in savings, then that fact and the proposals offered by the council members leave us hopeful that Oakland can now:

• hire back 44 laid off police officers,
• lessen the blow to the Public Works department,
• spend the bulk of the Kaiser Center sale proceeds on negative fund reduction, and
• make a significant allocation toward a general purpose fund reserve.

We strongly urge the City to take each of these steps. We also urge the City to promptly assess the impact of the State legislature’s pending elimination or revision of redevelopment agencies and incorporating that liklihood into its budget projections.

We have nothing but praise for the efforts of everyone who contributed to this resolution. And now the truly hard work begins. A large structural deficit remains, and this deficit will only grow as the City continues to face increased employment and benefit costs, the likely loss of Redevelopment Agency funds, and the need to repay about $140 million in negative fund balances. We strongly urge the City to begin major budget reform efforts today.

In the short term, the City should present charter amendments to the voters that provide for a Rainy Day Fund, and that extend the amortization period for its Police and Fire Retirement System plan. This would allow the City to pay that obligation over a reasonable period of time without the need to increase its indebtedness with new pension obligation bonds.  The City should also take a hard look at amending its Sunshine Act to increase citizens’ trust in City government.  This trust will be essential in the difficult times ahead.

Between now and the next budget cycle, Oakland should completely revamp its approach to budgeting and budget presentation, taking the steps to implement performance based budgeting and budgeting for outcomes. Make Oakland Better Now! will continue to publicize and advocate for these new ways of budgeting. Both methods, if adopted, can dramatically increase government efficiency and allow Oakland to provide its citizens with the services they need at a price residents are willing to pay.

In a recent San Francisco Chronicle article by Matthai Kuruvila, Mayor Quan was quoted as saying she “just didn’t have time” to put reforms on the ballot.” In several recent public appearances, Council Member De La Fuente has challenged community groups to bring ballot proposals to the City Council for possible inclusion in a future special election.  We believe one area that needs serious consideration for reform is in the area of voter mandates.

MOBN! believes that reform ballot measures could help Oakland balance its budget.   MOBN! looks at three areas of possible reform:  Measure Y (community policing, fire, violence prevention), Measure Q (libraries) and Measure D (Kid’s First!).  All three measures were originally approved by the voters. All three may serve relatively narrow purposes, and sound wonderful when presented without context.  But all three have played a major roll in hamstringing the city as it tries to address its economic woes.

To be clear, MOBN!  isn’t attacking community policing, fire services, violence prevention or libraries  MOBN! supports all of these.  We also understand the importance of kids’ programs, particularly in the parts of our community where privately funded activities for children are minimal or non-existent.

What we have a serious concern about are voter mandates that lock in funding for certain programs in preference to others. When these mandates pass, and the time comes to make tough budget decisions, one of two things happens: the City has to cut the funding for an activity below its “baseline” level, so all the tax revenue for that activity goes away—or all the cuts go to programs whose advocates weren’t savvy enough to seek protected status. Here are Oakland’s most glaring examples and some thoughts about how savings might be realized:

Measure Y:  Amount at Stake =  $3 million

Before last November’s election, Measure Y was a good example of  a voter mandate with baseline funding requirements that the City couldn’t meet. To collect the Measure Y taxes, Oakland was required to fund 740 police officers.  If the city did not “appropriate” the funding for 740 officers, the city could not collect the authorized taxes. But last November, voters passed Measure BB, the “Measure Y Fix 1.0,” which eliminated the baseline funding requirement for 740 officers.  Now Measure Y is an example of a partially unfunded mandate.

Measure Y provides for a parcel tax and a parking tax, which together yield about $20 million per year. The money goes to neighborhood Problem Solving Officers (and a few other officers), fire services, and violence prevention programs.  $4 million is dedicated to fire services, and due to Oakland’s contract with its fire fighters, this amount is locked in.

Measure Y also provides that the tax proceeds shall be used to hire 63 police officers, and that 40% of the proceeds allocated to police and violence prevention (about $16 million) must go toward programs. But police officers cost about $200,000 each. So the cost of the officers ($12.6 million) plus the required program funding ($6.4 million) exceeds the available funding by $3 million.

MOBN! believes we can do better.  A “Measure Y Fix 2.0,” providing that proceeds pay for the a specified number of officers with the balance going toward violence prevention programs, would make Measure Y cost-covering.  MOBN! isn’t targeting violence prevention programs.  But the police department has taken a devastating share of budget hits in the past year (80 police officers were laid off), while Measure Y programs have remained untouched  Crime suppression, community policing, and violence prevention programs are all critical pieces of Oakland’s public safety policy.  But they must also all be part of the budget discussion.

Measure Q:  Amount at State = $9 million

Oakland’s library funding comes primarily from two sources. About $9 million comes from the General Purpose Fund. About $10 million comes from the Measure Q parcel tax. Measure Q requires that in order to collect the parcel tax, the City must appropriate $9 million from the General Purpose Fund for libraries. So if the City concludes it can only appropriate, say,  $8.95 million (or some lesser amount), it loses the ability to collect and spend the parcel tax money. This is the same type of baseline funding requirement the voters changed when they amended Measure Y last November.

Mayor Quan’s current “Budget Scenario A,” the “all cuts budget,” reduces the baseline to less than  $4 million for 2011-12 and foregoes the Measure Q funding. The result is a $15 million reduction in library funding with a budget savings of only about $5 million.

A temporary reduction in, or elimination of, the baseline funding requirement would allow the City Council to consider measured reductions in library funding without causing the kind of devastating service cuts proposed by the all-cuts budget.

Measure D / Kids First!:  Amount at Stake = $11 million

Measure D requires that 3% of general purpose fund appropriations be spent on children’s programs. In the Mayor’s Scenarios “A,” “B” and “C” budgets, this is estimated as $10.9 million.  The question is not whether it is wise to spend this amount of money on children’s programs; ; the question is whether these appropriations should be exempt from the hard decisions that must be considered during budget discussions. MOBN! believes they should not be exempt. In times of economic difficulty, Oakland should be able to maximize its  ability to prioritize city programs.

Conclusion:

The amounts at stake in these three voter mandates total $23 million.  This is about 40% of the budget hole the City is trying to fill for 2011-12. It is almost twice what the Mayor estimates the City will save by furloughing city employees 15 days per year. It is twice the City’s proposed General Purpose Fund spending for Parks and Recreation. It is the cost of 115 police officers. It is the amount budgeted in 2010-11 for the libraries.

Oakland may not achieve savings of $23 million from the three proposed reforms.   The City may decide to fund some kids’ programs and provide General Purpose Fund dollars for libraries even if not required to do so.   But Measures Y, Q and D remove this funding from the budget discussion.  Should an amount this significant be part of the discussion?  We think it should.

This month, Oakland’s City Council will be considering one or more of the three budget proposals submitted on April 29 by Mayor Jean Quan. Mayor Quan has named the three budget proposals Scenario A (All Cuts Budget) Scenario B (Cuts Plus Savings from Employee Concessions) and Scenario C (Cuts, Plus Employee Savings, Plus Income from a Presumed $80 per Parcel Property Tax).

Make Oakland Better Now! thinks there are many unanswered questions about the budget, and we will continue to pose these here at Oaktalk and in the community.  But we thought it might be useful to look at other, comparably sized cities’ budgets to see how they compare in some key areas.  Today’s post, by MOBN! board member Ron Wolf, does just that.

The City of Oakland is proposing to close libraries, lay off park and tree maintenance staff, enact reductions in Police administrative staff, and reduce overall municipal staffing to a level of about 3500 FTE.

There is no question the City budget is under strain compared to historic funding levels.  Oakland is not unique, nearly every city in the country is under similar pressure.  How does Oakland compare to other cities around the country in their budget outlook?  The below table shows comparative data from cities of comparably sized cities.

A number of caveats apply here.  Different cities present their budgets in different ways, and different cities provide different services, so these comparisons sometimes required assumptions and guesswork.  Oakland’s estimated annual GPF debt service does not appear in its budget documents, so we base this number on a figure provided by Finance Director Joe Yu at a recent Finance and Management Committee Meeting.  Oakland’s number of sworn officers has obviously declined dramatically since October, 2009.  And finally, there are differences in cost of living, although Urban Wage CPI indices don’t vary by much more than 10% between any of the cities surveyed.

Nonetheless, these numbers present enormous food for thought and raise many questions about  what Oaklanders get from city government for their tax dollars.

Update:  Thanks to Lee Aurich for taking this data and showing it with some ratios.  This really helps put the numbers in perspective:

On May 26, and at additional meetings in June, Oakland’s City Council will be considering one or more of the three budget proposals submitted on April 29 by Mayor Jean Quan. Mayor Quan has named the three budget proposals Scenario A (All Cuts Budget) Scenario B (Cuts Plus Savings from Employee Concessions) and Scenario C (Cuts, Plus Employee Savings, Plus Income from a Presumed $80 per Parcel Property Tax).

Make Oakland Better Now! (MOBN!) has combed through these documents, and still has many unanswered questions. The answers may be available, but as far as we can tell, they don’t appear in the budget documents. In our first two posts, here and here, we asked what the budgets told us about City priorities. In the coming days, MOBN! will raise more questions  and try to explain why the answers matter.

A “reserve” consists of money set aside in each year’s budget as protection against unexpected surges in expenses or drops in revenue.  An appropriate reserve is essential to responsible budgeting because not every expense, nor every element of income, can be accurately predicted two years in advance.  Oakland Ordinance No. 12946, Section A.(1), requires that Oakland set aside a reserve of 7.5% of its General Purpose Fund, which may be appropriated by Council “only to fund unusual, unanticipated and seemingly insurmountable events of hardship of the City, and only upon a declaration of fiscal emergency.”

One would expect that in the General Purpose Fund, the required reserve would either be a budget line item, or that the budgeted revenues would exceed expenditures by the required 7.5%.  None of the proposals has a General Purpose Fund reserve line item that we have been able to find.  And here is how revenues and expenditures compare:

Scenario A

Scenario B

Scenario C

At a budget town hall on Tuesday night, Acting City Administrator Ewell stated that we would be unable to know what the reserve amounts would be until the City had closed its books for 2010-11, which would likely be this fall.  In other words, if the City finishes this fiscal year with a positive GPF balance, that balance, plus with the minimal positive balance in Scenarios A and B or less the negative balance in Scenario C would constitute the City’s reserve for 2011-12.  Mr. Ewell acknowledged that this was not likely to amount to the 7.5% required by Ordinance No. 12946.  In fact, it seems likely there will be no reserve – and therefore, no margin of error – at all.

The City Council adopted its reserve policy in 2009 as part of the last two-year budget process, and in response to a situation where Oakland was starting a fiscal year with a reserve of only $9 million.  The ordinance requires a 7.5% reserve in the first instance, and allows that reserve to be appropriated only to meet a need which is “unusual, unanticipated and seemingly insurmountable.”  Certainly the City is having a difficult time balancing its budget.  But is that difficulty “unusual?”  Is it “unanticipated?”  If not, is a no-reserve option even legally an option

Part Two

On May 26, and at additional meetings in June, Oakland’s City Council will be considering one or more of the three budget proposals submitted on April 29 by Mayor Jean Quan. Mayor Quan has named the three budget proposals Scenario A (All Cuts Budget) Scenario B (Cuts Plus Savings from Employee Concessions) and Scenario C (Cuts, Plus Employee Savings, Plus Income from a Presumed $80 per Parcel Property Tax).

Make Oakland Better Now! (MOBN!) has combed through these documents, and still has many unanswered questions. The answers may be available, but as far as we can tell, they don’t appear in the budget documents. Our first post was at A Better Oakland, here. In the coming days, MOBN! will raise more questions here at Oaktalk and try to explain why the answers matter.

As stated in MOBN!’s last post, one way to identify the city’s priorities is to look at how it actually spends its money and where it makes its budget cuts. Interpreting the three scenarios for this purpose; however, presents challenges.

Each budget scenario includes reductions which have not been applied to individual departments or programs. In Scenario A, Mayor Quan proposes a reduction of $13 million in savings from mandatory leave without pay, fewer internal service fund transfers and unspecified reorganizations. In Scenarios B and C, she proposes reductions of $29.8 million in savings, substituting unspecified employee concessions for the mandatory furloughs. But since these reductions are not allocated to departments, there is no way to determine–under any of the scenarios–what will be spent on any department, let alone any program.

Furthermore, although much of the city’s discussion of budget problems focuses on the General Purpose Fund (GPF), this is only about 40 percent of the city’s overall budget. If Oaklanders are to understand how the city is setting its priorities, we need to have a clear understanding of spending from all funds; however, in each of the budget documents, all of the savings from either mandatory furloughs or employee concessions are shown as if they were realized from the GPF–many city employees are paid, in whole or in part, from other funds, many of which are restricted. It seems unlikely that the Mayor plans to furlough only employees paid out of the GPF. So this raises yet another question: How can the city plan balance its GPF with either unilateral or negotiated labor savings that, by their nature, are applied across all funds?

Without denigrating the importance of any city department or program, the police and fire departments, museum, library, parks and recreation, human services, public works and community and economic development are most directly involved in providing services to Oaklanders. Of these departments, the only ones whose overall budgeted expenditures in Scenario A (before the unapplied $13 million reduction) are lower than their final budgeted expenditures for the 2010-11 fiscal year are the museum, library and human services. The museum is being turned over to the Oakland Museum Foundation under an agreement reached a year ago, thus funding from the City is being reduced by 100 percent. Library expenditures are being reduced by 83 percent, with the city giving up its Measure O library fund. Human services expenditures are being reduced by 2.1 percent. Budget increases for other departments (before the unallocated reductions) include fire services (4.2 percent), parks and recreation (4.5 percent), public works (1.8 percent) and community and economic development (5.6 percent).

To be fair, the above percentages don’t include the unallocated furloughs and other savings. The budget documents don’t tell us how these reductions will affect individual departments.  But if we proportionately allocate the reductions across all departments, the effect would be as follows:

Also, to be fair, the police department sustained the largest cuts of all at the beginning of the 2010-11 fiscal year when Oakland reduced the department’s administrative costs by over $100,000 and laid off 80 police officers. So the big picture under Scenario “A” is this: over the years 2010-13, the largest cuts are to police and library services.

What city priorities do these cuts reflect? A cynical Oakland resident might well suspect that the cuts have been chosen to get the unions’ attention during negotiations and the public’s attention in a parcel tax election.

Mayor Quan and the administration will no doubt respond that there was simply nowhere else to make the big cuts. Is that true? In the coming days, MOBN! will be posing questions that need to be answered so we can learn what all of our choices are and choose the route that works best for Oakland.