City Council holds a special meeting tonight at 5:00 p.m., and it's going to be very long one. Council will be deliberating over the Mayor's Budget Proposal and the additional…
Yesterday, Mayor Schaaf released her proposed budget with a televised press conference and a “Budget Beer Bash” at Oakland’s Linden Street Brewery. The budget will be presented to City Council on Tuesday, May 5 at 5:00 p.m. It must ultimately be passed by Council, and will be the subject of much debate, and almost certainly significant amendment over the next two months. Make Oakland Better Now! will be diving deeply into its almost 400 pages and publishing a good deal of analysis in the coming weeks. But here are some of our first impressions: (more…)
This is the fifth installment in our series on the 2015-17 budget process, and the last one before the mayor’s budget is released today. Once the proposed budget is released, we will start discussing that document, first with a general summary, then a deeper look. For now, we take a brief look at the oft-discussed subject of pensions.
In any budget process there are many competing interests. Resolving these conflicts and arriving at a balanced budget is more art than science, involves trade-offs, and in the end, always involves prioritization. So what are some of the biggest priorities, aside from police, fire and other core city functions? Pension and retiree health care shortfalls have been the subject of much public attention. They were the subject of a City Auditor’s report about a year ago, a detailed report by the administration to Council in January of last year, and State legislation (the Public Employees’ Pension Reform Act of 2013, or “PEPRA”, more discussion here) in 2012.
The general sense of the discussion in Oakland has been that
- The closed police and fire pension plan (“PFRS”) will start requiring very significant annual General Purpose Fund contributions (probably about $34 million and climbing) in 2017-2018,and continuing through 2026;
- The City’s “Other Post Employment Benefits” (“OPEB”), by which the City pays retirees a fairly modest medical benefit reimbursement is paid on a pay as you go basis. It presently runs just over $20 million per year, and is projected to hit over $35 million in ten years and almost $50 million in less than twenty years.
- Much like other California municipalities, Oakland faces hundreds of millions of dollars in underfunded pension liabilities for its active employees, and serious State law constraints on steps that would reduce costs.
This is the third installment in our series on the 2015-17 budget process, and the second concerning revenue projections in the Five-Year Fiscal Forecast. The mayor’s budget is scheduled to be released on Thursday, so we’re covering this to provide some context for the budget decisions to be made over the next two months. As we did in the last post, we summarize the Forecast’s discussion of revenue sources, limitations on those sources and projections for revenue.
It isn’t unusual at citizen budget discussions to hear a proposal that wealthier Oaklanders pay taxes at a higher rate. Although this concept is attractive to many – possibly most – people, the suggestion highlights one of many limitations on the City’s ability to levy taxes. Among those limitations: a California city can’t impose an income tax, or any other tax based on the income or wealth of the people who pay it. Moreover, Proposition 13 limits ad valorem property taxes. The baseline is 1% of assessed value of property. Beyond that, the City can impose an ad valorem property tax to cover obligations incurred before 1978 (as Oakland does to provide an income stream to partly fund its long-closed Police and Fire Retirement System), plus an assessment for certain bond measures authorized by two thirds of the voters. The assessed value starts at the sales price of the property, and cannot grow by more than 2% as long as the same owner holds the property.
And much of the baseline property tax for Oakland properties doesn’t go to the City of Oakland. Although not discussed in the Five Year Financial Forecast, our research has shown that only 26% of the Proposition 13 baseline property tax on Oaklanders goes to the City. Oaklanders’ property tax bills contain a large number of parcel taxes and other special assessments, some supporting police, fire, libraries and other typical city services. Not all of these are city assessments. Nearly all require a 2/3 vote, and they cannot be based on income levels. (more…)
As it has in the past several budget cycles, Make Oakland Better Now! will be providing Oakland residents with tools to help understand the city budget. In the forthcoming “Oakland Budget Bits” series, we will try to present – as concisely as possible—a guide to the process, the challenges, the priorities and the decisions that evolve as Oakland’s mayor, City Administrator and City Council move toward adoption of the 2015-2017 two-year budget. Here, in Bit No. 1, an introduction to the process. (more…)