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C I T Y O F O A K L A N D L L OA G E N D A R E P O R T '^ ''"^^ ^ / > u / j i o ' ^ ' " '

TO : Office ofthe City Administrator 2010 APR 15 P H I 0 : 07ATTN: Dan LindheimFRO M: Bud get OfficeDATE : April 29 , 2010RE: SUPPLEMENTAL REPORT TO THE RESOLUTION AMENDING THEGENERA L PURPOSE FUN D BUDGET FOR FY 2009-10 AND FY 2010-11,WHICH THE CITY COUNCIL AMENDED PURSUANT TO RESOLUTIONNUMBERS 82235 C.M.S., 82335 C.M.S., 82519 C.M.S., 82582 C.M.S, 82578C M . S . AND 82646 C.M.S.

SUMMARYAs a follow-up to the General Purpose Fund (GPF) balancing report staff presented at the April1 ' special City Council meeting, this supplemental report has been prepared to: Present a revised proposal for balancing the $10.4 million FY 20 09 -] 0 budget deficit; Reiterate limited choices concern ing balancing of th e S42.6 mil lion deficit projected forFY'2010-11; Establish a timeline for placin g the proposed public safety parcel tax and transactions anduse and/or utility consum ption tax increase on the November 2010 b allo t; and Provide information on Cityw ide funding sources for artist gra nte es, in light of theproposed reduction in FY 2010-11.

The detailed ana lysis of th e FY 2 009-10 and FY 2010-11 deficit drivers - inclu ding an updatedrevenue projection and explanation of expenditure issues- and discussion of proposed balancingmeasures is presented in the April 1, 2010 report, included with this supplemental repot forreference.The attached budget resolution uses one-time measures to deal with the current year's issues;authorizes a combination of one-time and permanent measures for the next fiscal year; andrequires cuts to public safety if ballot measures are not approved for FY 2010-11 . It is importantto emphasize that given one-time measures proposed for FY 2010-11, further reductions toessential Citj' services of at least $14.8 million will be necessary beginning in July 2011.These cuts would be in addition to up to $20.6 million in reductions if none of theNov emb er 2010 ballot m easures are ap prov ed, for a combined total of $35.4 million. Thisdoes not take into account the $43 million gap in the old Police and Fire Retirement System, alsoprojected for July 2011 and for which balancing options are being researched by staffThe table below summarizes actions required on GPF balancing and consequence anticipated ifactions are not implemented:

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D a n L i n d h e i mRE: Supplemental Report and Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Polic>Budiiet for FY 2010-11 Page 2

ShorifaU

r v 2009 -2010S hor l fa! i :S i 0 . 4 m i ! l i o n

Ba lanc ing Measu resActions Required to Avert Anticipated Budget Consequences

Reasons fo rShortfa l lRecessiondepressing localgeneral taxrevenues

Use dedicated pensionfunding lo pay fo: up lo$ 10.4 million in pensioncosts on a one-lime basis

One-TimeM e a s u r e sSI0.4 million

Cou ncil Action Required

FY 2010-201 1 Silorlfail:S42-6 mrliion Recessiondepressing ioca!general laxrevenues .Doubtful collectionofeiilertainmenlsurchargeDepanmeniaioverspending(primarily OPD)

Sale of assets, includingKaiser Convention Center(S12.8 million)Approve pSacemenl ofproposed new taxes onNovember ballot (S20.6million)Position changes, includingeiiminaiions (S2.6 million)New revenue including saleof billboard space (S3.5mill ion)Gram reductions (S1,5mill ion)Program reductions andeliminations (S! mill ion)Use of one-lime funds ($0.7million)

Accept s taffsiccommend aiions; authorizeCity Administrator lonegotiate with the PFRSboard lo amend iin agreemeni"allowing the City 's use orthcDeferred Pension CreditFund to pay for ihe City'spension obligations.$14.8 million 1) Ap prov e selling the KaiseiConvention Center ORadditional cuts

2) Secure new General Fundrevenues through balio!measures OR approveaddilional cuts3) Approve sale of billboardspace OR approve addilionalcuts4) Approve transfers loappropriate funds ORapprove addilional cuts

Staff requests that the City Council take the following actions:1. Ac cep t the al ternat ive proposal for balancing the rema ining $10.4 mil l ion projected FY2009-10 budget defici t as indicated in Exhibi t A-1 REVISED.2a. Authorize the City Administrator to init iate the process to sell the Kaiser Convention

Center .3a. Autho rize the C i ty Administ rator wi th the advice ofth e Ci ty At torney to ini t iate thepro cess to place the proposed publ ic safety parcel tax and t ransact ions and use and/orut i l i ty consumption tax increase/expansions on the No vem ber 2 010 bal lot .

If the City Council does not approve actions 2a and 3a, staff requests City Council action on 2band 3b be low:

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Dan LindheimR E : Supplemental Report and Resolution Amending the Policy Budget for FY 2009-10 and Midcycle PolicyB udge t for F Y 2010-n _ ^ _ _ ^ _ P age 3

2b. Direct the City Administrator to return to the City Council with a plan to reduce theGeneral Purpose Fund budget appropriation by $10 million as expeditiously as possible.3b . Direct the City Administrator return to the City Council with a plan to reduce the GeneralPurpose Fund budget appropriation by up to $20.6 million as expeditiously as possible.

KEY ISSUES AND IMPACT SAlternative Balancing Proposal for Rem aining FY 2009-] 0 Anticipated DeficitInitial Proposal: At the April 1^' special City Council meeting, staff proposed: (1) to generate $5million in revenue by either selling the Medical Hill Garage or bonding against its future revenuestream; and (2) use funding dedicated to pension obligations to help pay for up to $5 million inCi ty's pension costs. The sale ofth e Medical Hill garage was.predicated on receiving bids duringthe property auction on March 31, 2010. Since no bids were received, the facility could not besold, hi addition, the City can not immediately issue bonds against the garage, given legal issuesrelating to its operation.Revised Pro po sal: Staff plans to negotiate with the Police and Fire Retirement System (PFRS) toamend an existing agreement to allow the C ity's use ofthe Deferred P ensio n Credit Fund to payup to $10 million to address the City's pe nsion funding needs. At the April 28, 2010 PFRSBoard meeting, staff plans, to seek PFRS Board approval of an agreement to release monies heldby the trustee on deposit in a Deferred Pension Credit Fund for use to offset the City's pensionobligations.Citywide Fundin g Sources for Artist G rantsTh e Adm inistration is proposing to minim ize cuts to artists grants: the proposal is to reduce theGPF subsidy by $0.24 million to $0.73 miUion (Exhibit A-2), but then backfill with up to $0.2mil lion in hotel tax surcharge (Mea sure C) funding. Combined GPF and Measure C artistsgrants will total up to $0.93 million, virtually leaving City support intact.Timeline for P lacing Prop osed New Taxes on the November 2010 BallotProposed new tax revenues would generate an estimated $20.6 million in FY 2010-11 $18.2millio n from a new public safety p arcel tax and either $2.4 million from an increase to andexpansion ofthe utility users' tax (UUT) or a quarter-cent add-on sales tax, otherwise known astransa ctions and use tax (TUT). This am oun t represents nearly half of the projected $42.7miUion budget gap. Receipt of these new taxes is contingent upon (a) the City Councilapproving legislation to place these measures on the November 2010 ballot and (b) Oaklandvoters approving the new taxes. Approval o ft he public safety parcel tax requ ires a 2/3 majorityvote o ft he electorate; approval of either the UUT or TUT changes requires a simple m ajority"yes" vote oft he electorate. Legislation placin g proposed new taxes on the November 2010

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O a n L i n d h e i mRE : Su pp lem ent a l Repo rt and Reso lut ion Am en

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Dan LindheimRE: Supplemental Report and Resolution Amending the Policy Budget for FY 2009-10 and Midcycle PolicyBudget lor FY lO lO ^ll ' ^ ^ ^ ^ ^ ^ Page 5

Primary Decision2a. Authorize the City Administrator to initiate the process to sell the Kaiser ConventionCenter.

3a. Authorize the City Administrator with the advice ofthe City Attorney to initiate theprocess to place the proposed public safety parcel tax and transactions and use and/orutility consumption tax increase/expansions on the November 201 0 ballot.Alternate Decision (failing approval of 2a and 3a)2b . Direct the City Administrator to return to the City Council with a plan to reduce theGeneral Purpose Fund budget appropriation by $10 million as expeditiously as possible.

3b . Direct the City A dm inistrato r retum to the City Council with a plan to reduce the Genera.1Purpose Fund budget appropriation by up to $20.6 miUion as expeditiously as possible.

Failure to generate additional revenues for FY 2010-11 - through ballot measures (permanent)and through the sale of a large asset (one-lime) - would require significant further reductions mthe General Fund, of up to S30.6 million annuallv. The only spending reductions that wouldyield sufficient G PF sav ings wou ld be in Police and Fir e; both w oul d lead to the loss ofMeasure Y funding, hi Fire, reductions are further complicated by the existing mandates forminimum staffing imposed by a union agreement. This leaves no choice but to cut Policestaffing. Sworn reductions in the Police Department would have to be in addition to the 63officers currently funded through Measure Y. Furthermore, the $4 million in Measure Y fundingcurrently directed to the Fire Department for minimum staffing (per the union agreement witliLocal 55) would need to be replaced by General Fund resources.To generate up to an additional $34.6 millioi] in GPF savings (including one time revenueanticipated from a portion of th e proceeds from the sale ofthe Kaiser Con vention Center, $20.6million proposed through ballot measures plus the $4 million shift in Fire costs from Measure Yto the GPF) may lead to the following reductions:

Eliminating the propo sed full Police training academy ($3.13 mi llion); Cancelling the Ci ty's participation in the Alameda County Sh eriffs academy ($0.55million); Reducing Police ove rtime ($0.33 million); and Eliminating Polic e sworn and civilian staff ($30.6 million).tThis level of reduction is necessary if effective on July 1, 2010. If, on the other hand, ballotmeasures are placed by the City Council on the November 2010 ballot but not passed by thevoters, the value of reductions that will be necessary by January 1, 2011 will be significantl)higher.

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Dan Lindheiml i E : Supplemental Report and Resolution Amending the Policy Budget for FY 2009-10 and Midcycle PolicyBudget for FY 2010-11 Page 6

S U S T A I N A B L E O P P O R T U N I T I E SThere are no direct sustainable opportunit ies associated with this report .D I S A B I L I T Y A N D S E N I O R A C C E S SThere are no direct disabil i ty and senior access opportunit ies associated with this report .A C T IO N R E Q U E S T E D O F T H E C IT Y C O U N C I LStaff requests that the City Council take the following actions:

1. .Accept the alternative proposal for balancing the rem aining SI 0.4 mill ion projected FY2009-10 budget deficit as indicated in Exhibit A-1 REVISED.2a. Authorize the City Administrator to init iate the process to sell the Kaiser ConventionC e n t e r3a. Authorize the City Administrator with the advice ofthe City Attorney to init iate theprocess to place the proposed public safety parcel tax and transactions and use and/orut i l i ty consumption tax increase/expansions on the November 2010 bal lot .

If the City Council does not approve actions 2a and 3a, staff requests City Council action on 2band 3b below:2b. Direct the City Administrator to retum to the City Council with a plan to reduce the

General Purpose Fund budget appropriation by $10 mill ion as expeditiously as possible.

3b. Direct the City Administrator retum to the City Council with a plan to reduce the GeneraPurpose Fund budget appropriation by up to $20.6 mill ion as expeditiously as possible.Respectfully submitted.

C H E R Y L L . T A Y LDirector, Budget Office

A P P R O V E D F O R F O R W A R D I N G T O T H EC IT Y C O U N C IL

Office ofthe Cii>>\dmini.->iiatorItem:Special Cily Councii Meeting

April 29, 2010

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Approved as to Form and Legality

OAKLAND CITY COUNCILRESOLUTION NO. C.M.S. ^ ^ r > t ^ m ^ Attorne

RESOLUTION AMENDING TH E GENER AL PURPOSE FUND BUDG ET F OR FY 2009-10AND FY 2010-11, WHICH THE CITY COUNCIL AMENDED PURSUANT TORE SOL UTIO N NUM BER S 82235 C .M.S ., 82335 C.M.S., 82519 C.M .S., 82582 C .M.S., 82578C.M.S. AND 82646 C .M.S.WHEREAS, on June 30, 2009, in accordance with City Charter section 800, the City Counciladopted the bieimial policy budget for FY 2009-201 Iby passing Resolution N o . 82102 C.M.S.; andWH ERE AS, on July 28 , 2009, October 6, 2009, December 17, 2009, Feb ruary 16, 2010, March 2,2010 and March 16, 2010, the City Council approved amendments to the adopted budget, viaResolutions No. 82235 C.M.S., No. 82335, No. 82519 C.M.S., No. 82582 C.M.S., No. 82578C.M.S., and No. 82646 C.M.S. respectively; andWHEREAS, the annual mandatory payments to the Alameda County Local Agency FormationComm ission are critical to preserving th e City of Oakland's property tax rev en ue s; andW HE RE AS , while Citywide Golden Handsh ake early retirement program savin gs were achieved,actual program savings differed from budgeted program savings by agency/departmen t in Fiscal Year2009-10; andW H ER EA S, due to continued w eakness in the local economy and real estate ma rket and additionalpressures in public safety service provision, a $10.4 million shortfall is anticipated in the GeneralPurpo se Fund in Fiscal Year 2009-10 and $4 2.6 milhon shortfall is projected in the General PurposeFund in Fiscal Year 2010-11; andW HE RE A S, the Administration has deve loped budget balancing measures for the General PurposeFund to fully offset the projected Fiscal Year 2009-10 and Fiscal Year 2010-11 shortfalls, asreflected in Exhibits A-1 and A-2 (Revised), respectively; andWHEREAS, the Administration's budget balancing proposal contains a recom men dation to sell amajor asset to generate one-time revenue; andW HE RE A S, the Adm inistration's b udget balancing proposal contains the following new taxes thatrequire a resolution by the Council to be p laced on the November 2010 ballot: (a) a proposed pubhcsafety parcel tax requiring approval by two-thirds (2/3) vote; and either (b) a proposed increase toand expansion ofthe utility users' tax or (c) a proposed YA cent transactions and use tax requiring asimple majority vote ; and

A ^ ^ f i - 1 S 2 0 1 $

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W H E R E A S , Ci ty Counci l or voter rejection of these proposed balancing measures wil l createS30.6 mill ion deficit in the General Purpose Fund in FY 2010-11 that will call for drastic measures. to resolve; andW H E R E A S , the Ad minist ra t ion 's balancing proposal includes the use of one-t ime reven ues andrequires declaration of a fiscal emergency per the City's financial policy codified in Ordinance 12946C.M.S., now therefore be i tRESOLVED: That the Ci ty ' s Fiscal Year 2009-10 and Fiscal Year 2010-11 Amended Budgets arehereby amended to incorporate balancing implementation measures reflected in Exhibits A-1 and A-2 (REVISED), respectively included with and made a part of this resolution, subject to additionalamendments that may be presented and adopted on the floor by the City Connci]; and be i tF U R T H E R R E SO L V E D : That the City Council hereby ba lances the remain ing $10.4 mi l lion asindicated in Exhibit A-1 REVISED; and be i tFURTHER RESOLVED; That the Ci ty Counci l au thor i zes the Ci ty Admini s t ra tor toinit iate the process lo sell the Kaiser Convention Center; and be i tF U R T H E R R E SO L V E D : That if t he City Counci l does not approve the sa le of theKaiser Con ve ntio n Cen ter, the Council hereby requ ests that the City Adm inistrator returnto the City Council with a plan to reduce the Genera! Purpose Fund budget appropriationaccordingly as expeditiously as possible; and be i tFURTHER RESOLVED: That the Ci ty Counci l hereby au thor i zes the Ci ty Admini s t ra tor wi ththe advice ofthe City Attorney to init iate the process to place the proposed public safety parceltax and t ransact ions and use and/or ut i l i ty consumption tax increase/expansions on the November2010 bal lot ; and be i tF U R T H E R R E S O L V E D : That if t he Ci ty Council does not p l ace the t axes measures descr ibedabove on the Nov emb er 20 10 bal lot or the voters do not approve some or all ofth e recommendecitaxes in November 2010, the Council hereby requests that the City Administrator retum to theCity Council with a plan to reduce the General Purpose Fund budget appropriation by up to $20.6mill ion as expeditiously as possible; and be i tF U R T H E R R E S O L V E D : That the Ci ty Counci l declares a f iscal emergency pursuant to OrdinanceN o. 129 46 C .M .S., to us e one-tim e monies to balanc e the Fiscal Year 2009-10 and Fiscal Yea r 2010 11 projected General Purpose Fund shortfall ; and be i tF U R T H E R R E S O L V E D : That one- time monies used to ba lance the F isca l Year 2009-10 ancFiscal Y ea r 2010 -11 G eneral Pu rpose Fund projected d eficits are restricted reven ues to be used onlyfor the purpose of budget balancing; and be i tF U R T H E R R E SO L V E D : That annual mandator} 'payment s to the Alameda County Local AgencyFormat ion Commission of approximately $60,000 shal l be paid from the Ci tywide Ci ly Councicontingency allocation in the General Purpose Fund; and be i t

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WHEREAS, City Council or voter rejection of these proposed balancing measures will create a$30.6 m illion deficit in the General Purp ose Fund in FY 2010-11 that will call for drastic measuresto resolve; andWHEREAS, the Administration's balancing proposal includes the use of one-time revenues andrequires declaration of a fiscal emergency per the City's financial pohcy codified in Ordinance 12946C.M .S., now therefore be itRE SO LV ED : That the City's Fiscal Year 2009-10 and Fiscal Year 2010-11 Amended B udge ts arehereby amended to incorporate balancing implem entation measures reflected in Exhibits A-I and A-j2 (REVISED), respectively included with and made a part of this.resolution, subject to additionaamendments that may be presented and adopted on the floor by the City Council; and be itFURTHER RESOLVED: That the City Council hereby balances the remaining $10.4 million asindicated in Exhibit A-1 REVISED; and be itFURTHER RESOLVED; That the City Council authorizes the City Administrator toinitiate the process to sell the K aiser C onven tion Center; and be itFU R TH ER RE SO LV ED : That if the City Council does not approve the sale of theKaiser Convention C enter, the Council hereby requests that the City Adm inistrator retumto the City Council with a plan to reduce the General Purpose Fund bud get appropriationaccordingly as expeditiously as possible; and be itFURTHER RESOLVED: That the City Council hereby authorizes the City Administrator withthe advice ofthe City Attomey to initiate the process to place the proposed public safety parceltax and transactions and use and/or utility consumption tax increase/expansions on the November2010 ballot; and be itFURTHER RESOLVED: That if the City Council does not place the taxes measures describedabove on the November 2010 ballot or the voters do not approve some or all of the recommendedtaxes in November 2010, the Council hereby requests that the City Administrator return to theCity Council with a plan to reduce the General Purpose Fund budget appropriation by up to S20.6million as expeditiously as possible; and be itFU R TH ER RE SO LV ED : That the City Council declares a fiscal emergency pursuant to OrdinanceNo. 12946 C.M.S., to use one-time mo nies to balance the Fiscal Year 2009-10 and Fiscal Year 2010-11 projected General Purpose Fund shortfall; and be itFU R TH ER RE SO LV ED : That one-time monies used lo balance the Fiscal Year 2009-10 andFiscal Year 2010-11 General Purpose Fund projected deficits are restricted revenues to be used onlylfor the purpose of budget balancing; and be it

FU R T H E R RE SO LV ED : That annual mandatory payments lo the Alameda County Local AgencyFormation Commission of approximately $60,000 shall be paid from the Citywide City Councicontingency allocation in the General Purpose Fund; and be it

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FU RT HE R R E SO LV E D : That Fiscal Year 2009-10 budgeted General Purpose Fund savings fromthe Golden Han dshake early retirement program shall be re-allocated lo reflect actual retirements byeach agency/department in Fiscal Year 20 10 '! 1; and be itFURTHER RESOLVED: That the City Council directs the City Administrator to implement theaforementioned actions with all deliberate speed.IN COUN CIL, OAK LAND , CALIFORNIA, , 2010PASSED BY THE FOLLOWING VOTE:AYES ' BROOKS. DE LA FUENTE, KAPLAN, KERNIGHAN. NADEL, OUAN, REID, and PRESIDENJrBRUNNERNOES-ABSENT-ABSTENTION - ATTEST:

LaTonda SimmonsCity Clerk and Clerk of the Councilof the City of Oakland, California

Hr'APR 2 0 2010

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EXHIBIT A-1

FY 2009-10 Proposed Ge neral Purpos e Fund Balancing Me asu resin $ mil l ions

:- - : , ; - - ; r - - - . r : ',:Pre-December 17th Budget DeficitBalancing Measures Approved by Council onDecember 17, 2009Post-December 17th Budget DeficitAdditional Anticipated ShortfallsFebruary 16, 2010 Anticipated Budget Deficit

Revenues/Other FinancingSale of AssetsNew revenueSubtotalExpendituresPosition Changes:

ReductionsTransfers

Grant reductionsProgram reductionsUse of One-Time FundsSubtotalTotal Proposed Balancing Measures

FYQDrlO :$$$$$

$

$$

(18.87)8.44(10.43)

(4.83)(15.26)

7.750.508.25

0.260.08

--

1.872.20

10.45Total Surplus/fDef ic i t )Revision of parking citation pass-through payment toAlameda County ~ prior yearRevision of new parking citation contract revenue frombetter collection rate15% Reduction of elected officials' appropriationsAdditional anticipated revenue shortfalls

Use dedicated pension fund s for one-t ime pension $expensesSurplus/(Def ic i t )

(4.81)0.50

(0.30)0.25(6.02)

Post February 16,2010 Ant ic ipa ted Bu dge t Def ic i t $ (10.38)

10.38

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EXHIBIT A-2FY 2010-11 GENERAL PURPOSE FUNDBa lanc ino MeasuresFTEs Already

Appr ov edFi l led Vac Total FY 10-11REVENUBS/OTHER FINANCING

To BeAppr ov edFY 10-11

Sale/Lease of AssetsLease of Scol lan lo ORA/Central Distr ict or Sale of 2.00Olher FacilitiesSale of Grandview Lots 0.15Sale of Silviera property

Sale of Henry J. Kaiser Convention Center

0.60

10.00Sub total - - $ 2.15 S 10.60

New Revenues and Other Financ ingIncrease d parking citation revenue 1.75

Proceeds from sale of bi l lboard space

New grant revenue to offset personnel costsStr icter False Alarm Enforcement Re venueSub total - . . $ 1,75 $

1 00

0 1 90 241.73

Possible Bal lot Measure Al ternat i ves - Requi res Counc i l ac t ion by last meet ing in July (7/20/2010) for the Novembbal lot (deadl ine for Clerk to submi t requi red paperwork to County i s August 8. 2010) .Public Safety parcel tax

Utility Users' Tax - temporary- 0,5% increase andpossible expa nsion to other ut i l i t ies ORTransact ions and Use Tax -- local IM cent add-onlo sales tax

Subtotal S s

=r 201018.19

2 4 3

20.G2TOrA L REVENUES/OTHER FINANCING $ 3.90 s 32.95

TOTALFY 10-11

2 000.150.60

10.00S 12.75

1 75

1 00

0,490,24S 3.48

18 19

2,43

$ 20.62S 36,85

The property is being sold to H)51 Side Homes. The Counci lapproved t f ie Ordinance on Marct i 10.

Reflects ant ic ipated addit ional revenue from the newcontiact due to an increased col lect ion rate.

One-t ime proceeds from sale of bi l lboard space, along withSO. 15 mil l ion per year is ant ic ipated from arrangement withClear Channel Inc.

Special lax levy requires 2/3 vote of electora te. Single familyresidential parcel assessment w ould be approximately S180annual ly, or S15.00 per month. Value ref lects 70% of ful lyear revenue based on consen/at ive TRAN-able est imateGeneral tax requires a majority affirmative ("yes") vote forapproval.

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HlBITA-2

FilledFTEsVac Total

..readyAppr ov edFY 10-11To Be

Appr ov edFY 10-11EXPENDITURESR educ e g r an ts and s ubs i d i es :City Insl i tui ions - 25% reduct ion

Oahfand ZooChatKDt S^ace S Science CenterChi ldren's Fa iry landlArl GrantsSubtotal

----0.^60.120,050.240.57

Related Cify InstHutions - 50% reduct ionAIDS Prevention S Education InitiativeHacienda Peral iaCit_y/County Collab, on Children S Youth

Subtotal

0.050.070,150.27

Non-Prof i t Organizat ions - 50% reduct ionCypress-Mandela Training CenterSymphon_y in the SchoolsWomen's Business Ini t iat iveJack London Aquatic CenterOakland Asian Cultural CenterHuman Services - Academies ProgramDay Laborers Program

Subtoial

------

0.110,040.060.060.040,060,080-20

Other Prio: Grantees - 100% reduct ionOal^land School for the ArtsSL;b(o(a/

-S

0 14$ 1.45

MayorEliminate Mayor's PSE 14Reduce operat ions and maintenance budget.2,00 2,00 0,220.05 --

Subtotal 2.00 - 2.00 $ 0,27 $Ci ty Counc i lC o u n c i / : Eliminate Senior Council Policy Analysts(Legislat ive Analysts)

4.05 4.05 0,49

Subtotal 4.05 - 4.05 $ 0.49 $

TOTALFY 10-11

0.1S0,120,050.240.32

0,050,070,150.27

0,110,04o.oe0.060,040,080,080.20

0,14$ 1.45

0,220,05$ 0,27

0,49

$ 0.49

Imoacts

1

1,95 FTE Legislat ive Analysis funded by the OaklandRedevelopment Agency Projects fund were also approved byCounci l for el iminat ion.

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EXKtBiT A-2

Fi l ledFTEsVac Totaf

Al readyAppr ov edFY 10-11

To BeAppr ov edFY 10-11

City AttorneyEliminate Deputy City Attorney IIIEl iminate ParalegalSavings from paying Deputy City Attorney II lower thanbudqeted amount

2,001.00 .-

2.001.00 0,420,110,02 -

Subtotal 3.00 - 3,00 S 0.55 SCi ty Audi tor

15% reduct ion - detai l to be provided 0,20Sub t o t a l - - S 0.20 s

I nformat ion Tec f inologyDelete Microcomputer Systems Special ist 1

Delete Microcomputer Systems Special ist 1

Delete Microcomputer Systems Special ist I II

1.00

1,00

1 00

1,00

1,00

1,00

0,10

0,10

0,14

Subtotal 3.00 3.00 5 0.34 $Finance and ManagementEl iminate Revenue Assistant 1.00 1,00 0.08

Subtotal 1.00 - 1,00 $ 0.08 sPer sonne l R esour ce ManagementEl iminate Admin Analyst 11 1.00 1.00 0,10

Sub fota f 1,00 1.00 S 0.10 sPol ice Serv icesRest ruc ture Personnel f i ^anagement

Eliminate Adm in Analyst II 1.00 1 00 0,09 -OtherEl iminate RangersTransfer Cadet Program to Asset Forfei ture fund

2,009.00

2.009,00

0,280,27 -

Sub total 11.00 1.00 12,00 $ 0.64 $

TOTALFY 10 - 11 -

0.420 110,02""T 0.55

0.20S 0.20

0,10

0,10

0 14

s 0.340.08

s 0.080.10

$ 0.10

0.090,280.27

S_ 0-64

impactsCiiy Counci l aporoved the red uct ion taraet of SO 55 million ati ts March 16th meeting and ESked elected offices to returnwith specif ic reduct ions for the Apri l is i special meeting.

There will Pe a significant delay in replacing and ortroubleshooting damaged software or hardware for computerequipment CltJ^vide, Documentat ion ot com puter equ ipmentinventory will be affected as wellThere wi l l be a signif icant and severe delay in the responseto fai lures on systems used by the Librar ies and the Muse umwhich wou ld negatively impact downtime. There wi l l also besignif icant delay in computer replacments and ontroubleshootino damaq_ed com puters.There wi l l be a signif icant delay on the resp onse to networkrelated issues. Dai ly logs wi l l not be monitored as frequent astney should be, possibl iy on a weekly rotat ion. Coordinat ionof network services related to relocation of staff and officerearrangements w i l l be delayed signif icant ly as wel l .

Slowdown in col lect ions

Loss of bill-paying, payroll, other fiscal functions

- - - ^ ^ , ^ , , ^ ^ ^ , , , , ^

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HIBIT A-2

Fi l ledFTEsVac Total

eadyAppr ov edFY 10-11

To BeAppr ov edFY 10-11T O T AL

FY 10-11 ImpactsMuseum

Reduction through revised publ ic/pr ivate partnershiparrangement between the City and the OaklandMuseum of Cal i fornia Foundation,0,60 0.60

Sub t o t a l 0.60 O.GOLibraryUti lize avai lable Measure Q fund balance 0.54 0 54 ini liat st ialysis shows adequate fund balance remaining forFY 10-11

Subtotal $0,54 $0.54Parks and Recreat ionTransfer revenues to GPF from Golf Fund 0,20 0.20 Added revenue irom Lake Chabot S Montclair Courses,

Subtotal $0.20 $0.20Human Serv icesEl iminate Linkages Grant Match 0,19 0.19 State grant funding of S266k anr^ually is proposed forel iminat ion in FY 10-11 as part of State budget balancing.El iminat ion of the local grant match would terminate baseprogram sen/ices for adults with disabilities, which currentlyserves approxim ately 372 clients With City GF'F funding theprogram could cont inue sending a base number of c l ients.

El iminate Homeless Mobi le Outreach/Cal i fornia Hotelqrant match 0,14 0 14 Redu ces outrea ch efforts by 2 (two) days from the current 5(f ive) days. Current ly part of PATH program to do outreach toencourage and engage homeless people in work act iv i t iesand access to housing. Would n eed 30 days not ice tomodify the contract.

Subtotal $0,00 $0,33 $0.33

TOTAL SOLUTIONS 24.05 2.00 26,05 $ 6 ,57 36.07 4 2 , 6 4Subtotal surplus/(deficit) 0.07

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IG L I T Y O F O A K L A N DO P F l C E O f- TH E C n 'i C I Ef?f'''^^^^^^ A G E N D A R E P O R T

20IOKAR25 P M 8 : 3 2TO: Office ofthe City AdministratorATTN: Dan LindheimFROM : Budg et OfficeDATE: April 1,2010KJE: RES OLU TION AMENDING THE GENE RAL PUR POSE FUND BUDG ETFOR FY 2009-10 AND F\^ 2010-11, W H I C H T H E C I T Y C O U N C I LAM ENDE D PURSUANT TO RESOLU TION NUMBERS 82235 C.M.S., 82335C.M .S., 82519 C.M .S., 82582 C.M .S., 82578 C.M .S. AND C.M .S.

SUMMARYThis report presents amendments to the FY 2009-10 and FY 2010-11 City budget for the GeneralPurpose Fund, to address budgetary shortfalls as well as to approve bud get-ne utral "clean-u p"items. The following key messages are contained in this document.

Context The severity ofth e City 's fiscal crisis is truly unpreceden ted.o Less than four years ago, in FY 2006 -07, the City collected ove r $471 million inGeneral Purpose Fund (GPF) revenues, and by year-end had ne ar ly $56 million inreserves. That year alone, the Real Estate Transfer Tax revenue was at $61.5 million. In FY 2010-] 1, the City is anticipated to have only S10.4 million in GPF reserves byyear-end, and is projected to collect just under $400 million in revenues by year-end.The Real Estate Transfer tax collection is now at a low $28 million. Collectively, thtsmea ns that the City has over $120 million less in resources toda y (between one-timereserve funds and ongoing revenues) than we had just four years ago . During thesame period, while the GPF-funded workforce shrunk by 12.5%, personnel costs inthis fimd have dropped by less than three percent. The City has already implemented $170 million in budget bala ncin g measures sinceJuly 2008, with $18.9 million approved for the current fiscal year as recently asFebruary 16, 2010. Since the February action - which addressed most ofthe current

year's $23.7 million gap - our revenues continued to decline, increasing the budgetshortfall by $6 miUion in FY 2009-10 and $11.2 m illion in FY 2010-11. Current lyestimated financial gaps (net of previous Council actions) are: $10.4 million forF \ ' 2009-10 and $42.6 million for F>' 2010-11. At the same time, means of fiUing the financial gaps have dim inish ed: (a) the City has'already cut a great proportion of spending and programs, and the remaining

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Dil l ) LindheimR E ; Resolut ion Am end ing the Pol icy Budg et for FY 2009-10 and M idcyc le Pol icy Bu dg et for FY 2010-11Puge 2

discretionary budge t is just 8 percent o fth e total GPF ap prop riation; (b) the reserv esare minimal; and (c) "easy" revenue fixes, such as fee increases and uses of one-timeunrestricted funds, have already been exhausted. At this point, balancing the budgetstructurally will require a combination of new taxes and significant cuts to publicsafety departm ents. Publ ic safety acco unts for 66.5 % ofth e Genera l Purpose Fundbudget, and if a 15% (as an example) across-the-board cut were to be applied to non-safety departments only (also excluding debt service), only $15 mill ion in savingswould be generated while decimating key recreation, senior, l ibrary and internalprograms. Moreover, cuts to youth and l ibrary programs would violate localMea sures KJOOfD and Q . At the same time, a 15% cut to pub lic safety de partme ntswould generate an additional S42.6 mill ion in savings, but would violate provisions oMeasure Y.

Proposed Balancing Measures Thi s bu dg et prop ose s new t axes , sa l e and t ransf er of asse t s , use of res t r i c t ed one

t ime funding, and l imi ted reduct ions to spending. Further spending cuts wouldrequire a combination of: (a) policy decisions on shutting down certain key sen' ices;(b) changes to local measures that mandate minimal youth, l ibrary and violenceprevention spending; and (c) negotiations with the unions.F I S C A L I M P A C TThe remaining budget short fal l s ant icipated in the General Purpose Fund (net of previousCouncil actions) are $10.4 mill ion in FY 2009-10 and $42.6 mill ion in FY 2010-11. Theproposed balancing measures are presented in Exhibi t A-1 (for FY 2009-10) and Exhibi t A-2(for FY 2010-11).

Measures to reso lve the remain ing FY 2009-10 budget gap ($10 .4 mi l l ion)Prior special City Council budget sessions were convened to resolve the anticipated FY 2009-10General Purpose Fund (GPF ) defici t . Act ions were taken on Dec emb er 1 7, 2009, February 16,201 0 and March 16, 201 0 to res olve a total projected shortfall of $23.7 mill io n. Balancingmeasures approved by Council resolved all but $4.8 mill ion ofthe current year deficit . Aftertaking into account revised spending projections and additional revenue shortfalls in uti l i tyconsumption tax, hcenses and permits, fines and penalt ies, services charges (primarily parkingmeters) and fund t ransfer revenues, the new defici t amount for FY 2009-10 may increase to$10.4 mil l ion.S taff proposes the fo l lowing m ea su res to ba lan ce the cur ren t yea r sho r t fa l l : res truc tur ingpension obligations ($5.5 mill ion) and sale of or issuance of revenue bonds for the Medical HillGarag e ($5 miUion).

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Dan LintlheimRE : Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page;3Measures to address the FY 2010-11 budget gap ($42 .6 mi l l ion)The FY 2010-] 1 bu dg et shortfall is currently estimated at $42 .6 mi ll ion - a n increase of th e$11.2 mill ion reported in the February 16, 2010 staff report . Components of the FY 2010-11 gapare:

- Revenu e shortfall of $25 .6 mill ion, comprised prima rily of Sa les, Pro per ty, Util i tyConsumption, Transient Occupancy and Parking Tax Revenue, as wel l as Fund Transfen.Of this am ou nt , S11.2 mill ion is the proiec ted new rev en ue defici t .- An additional S9 m ill io n of budgeted, but unrealized, inco me from the Co liseum ticketsurcharge. ($4.5 mill ion shortfall was accounted for in the FY 2009-10 budget gap.)" Additional Po lice De par tme nt spending of $5.5 mill ion related to sw orn recruitm ents,extended neg otiate d sett lement contract and anticipated ove rtime over- exp end iture . TheDepartment,of Human Resources will expend an anticipated $1.2 mill ion related tosworn recru i tmen ts. Projected spending for next year assumes that ov ert ime spendingwill continue at the FY 2009-10 level and an increase in police academy costs (a fullversus a lateral academy is planned). The FY 2009-10 projected year-end Policeoverspending is $3.7 mi l l ion; no DH RM spending on pol ice ac ade mie s i s assumed for thecurrent fiscal year.- Sl .8 mill ion in oth er departments, including $0.7 mill ion in anticip ated unrealized centraservices overhead recovery; $0.6 mill ion in additional Self-Insurance Liabihty cost; $0.6milhon in antic ipate d unrealized recoveries and perso nnel serv ices budg eting error. FY2009-10 projected year-end spending assumes al l ofthe foregoing except for theadditional Self-Insurance Liabil i ty cost .- Net benefit (fringe and retirement) rate savings of $0.5 mill i on .

Balan cing pr op os als for FY 2010-1 1 totaling $43.1 mill ion to add ress this projected year-enddeficit , sum marized genQVdMy h e \o ^ . Ex hib its A-1 and ^4-2 pro vid e de tail of the pr opo sedbalancing measures.- Staff reduct ions, inclu ding eliminat ion of Microcomp uter Co mp ute r Specialists 1 and IIIin Informat ion Tec hno logy , administrat ive staff in Finance & Ma nag em ent , Hum anResources and Police, are anticipated to save $2.4 mill ion; transfer of 9.0 PT Cadets tothe Asset Fo rfeitu re F un d from FY 2009-1 0 to FY 2010-11 w ou ld sa ve $0.3 mill ion. Theproposal reflects the el imination of 15.05 ful l- t ime eq uiv ale nt (F T E ) posi t ions, of whichi13.05 F T E s are fi l led (8 .0 FTEs we re approved for elimina tion as of April 1, 20 10 ; of 'these, six posit ions were fi l led).~ Savings from the 1 5 % cuts to elected offices - requested by the City Cou ncil on Feb ruar y16, 2010 - are included in the above estimate. Details on the specific reduction measuresare^ayaiilable forJhe^^|s|||^|i^g^gg?|S^;#^^^ g ^ M ^ ^ ^ g l t W o i ^ C ity C ou nc il (6.0 F TE L eg is la tiv e A jia ly sts w ou ld b eeliminated, including 4.05 FTE in the GPF) and City Attorney's Offices (3.0 FTEseliminated and s avin gs from fil ling a posit ion at a lower rate). Th e City Au dito r's Office

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D a n Lind l i e imR E : R e so lu t ion A m e n d in g the Po l i c y B udge t fo r FY 2009-10 a nd M idc yc le Po li cy B u dg e t fo r FY 2010-11Page 4will have operational savings for FY 2009-10; this office has informed staff of itsintention to seek a City Attomey opinion on minimum staffing levels for chartered Citydepartme nts prior to providing detailed redu ctions.

- Progra m reductions and eliminations, including the Linkages Grant Match and theHom eless M obile Outreach programs in the Departmen t of Human Services ($0.3million).

- Grant reductions of varying levels ($1.9 m illion ), including- 25 % reductions to City institutions, including the Oakland Zo o, Chabot Space &Science Center and Children's Fairyland.- 50% reductions for City-affiliated entities (AIDS Prevention & EducationInitiative, Hacienda Peralta and the City/Coun ty Collaborative on Children &Youth) and non-profit organizations (Family Bridges, Fmitvale Senior Center,Vietnam ese Senior Services, Family Brid ges, Fruitvale Senior Center, Cypress-Mandela Training Center, Symphony in the Schools, Women's Business Initiative,Jack London Aquatic Center, Oakland Asian Cultural Center, OUSD AcademiesProgram , Artists' Grants and the Day Labo rers' Program).- 100% reduction for the Oakland School of th e Arts.

- Prop osed new revenues and other fmancing, including a proposed new public safetyparcel tax and increased and expanded utility consumption tax; an increase in the parkingcitation revenue expected from better collection rates); one-time and ongoing annualproceeds from the sale of billboard space to Clear Channel, Inc. (which is the subject of aseparate staff report included on the April 1, 2010 special City Council agenda);anticipated new grant revenue lo offset firefighter personnel services costs; and stricterenforc eme nt of false alarm fines ($24.1 million ). Proposed new tax es wou ld need to beapproved by the voters; this notion is discussed later in the report.- Sale- of assets ($12.8 million), including lease o fth e G eorge P. Sco tlan ConventionCenter to th e Oakland R edevelopment Ag ency (OR A); sale of t\\'0 properties to privatepar ties; and sale ofthe Henry J. Kaiser Conve ntion Center. Sale o f assets is the subjectof a separate staff report included on the April 1, 2010 special City Council agenda.

Budget Neutral Clean-Up I temsStaff also proposes two "clean-up" items:

The first relates to funding a number of Citywide mandatory pay men ts from the C itywideCity Council contingency allocation in FY 2010-11. Such payments include: thepaym ent to the Alameda County Local Agency Formation Com mission to stem citybou ndary changes for nearly $60,000; and about S20,000 in lease pay men ts forindepe ndent monitors related to the Police Negotiated Settlement Agreem ent.

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Dan Lindheim 'RE : Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Bu dg et for FY 2010-11_ _ _ _ _ ^ Page 51- The second concerns reba lancing the GPF Golden Handshake saving s acrossdepartments. At the t im e the FY 2009 -11 budget was adopted, G ol de n Han dshak esavings were applied to agencies/departments based on eligible retirees' organizational

homes. Eventual ret i rees ' actual organizat ional homes di ffered - in some cases, widely-from hom e locations. This action seeks to re-allocate budgeted sa vi ng s expectationsbased on the agencies/departments in which Golden Handshake ret i rements actual lyoccurred.Both of these actions are budget neutral and are reflected in the attached legislation.

D I S C U S S I O NAddi t ional Shor t fa ll s Pro iec ted fo r Rem ain de r of FY 2009-10 and FY 2030-1 1Lingering weak ness in the U.S. and C ahfom ia economies cont inues to pl ay out in localgovernment revenues. Christopher T hom berg , principal economist at B ea co n Econom ics andChief Economist for the California Department of Finance, offers a dim outlook for localgover nme nts: recove ry will com e but revenues will be anemic and will n o t l ike ly reach thelevels experienced in the mid-20 00s . Th e Ci ty ' s major GPF revenues - pr op er ty tax, sales tax,real estate transfer tax, business l icense tax, and services charges (parking meters) - are drivenby the real estate market and con sum er spending. Weakness in con sum er sp end ing is l ikely tocont inue. Al though consumer spe ndin g rose, wage growth was stagnant. Jer ry Nickelsburg ofthe UCLA Anderso n Forecast expe cts to see unemploym ent to remain in th e double-digi tsthrough 2012 . Wh ile there is jo b g row th anticipated this year and next th ro ug ho ut the state, realreductions in unemployment are not l ikely as discouraged workers (who'A'e left the workforce)and delayed entrants (recent college graduates who sat out the recession) will rejoin theworkforce upon their realization of improv ed labor mark ets. Real estate h a s sh ow n some signsof recovery, however, the underlying drivers of this recovery- federal and state governmentcredit for first-t ime buy ers, low interes t rates and available credit - may n o t con tinue for muchlonger.As a result , staff is revising some general tax revenue projections downward by an additional $6mil l ion for F\ ' 2009-10 and S11.2 mil l ion for FY 2010-11, from previous project ions inFebruary 2010.The table below summarizes the Ci ty ' s revenues and reserves beginning in FY 2006-07 throughthe FY 2010-11, i l lustrating steep dec hn es in man y categories. Overall , F Y 2010 -11 estimatedrevenues represent a 15% drop from FY 2006-07. Real Estate Transfer Ta x es alone areprojected to fall by 54% next year from four years ago. Rese rves are ina de qu ate . The Cit y'srecently updated fmancial policy (Ordinance No. 12946 C.M.S.) establishes a minimum reservelevel of 7.5%. Even at the lower anticipated revenue level, the expected ending fund balance forFY 2009-10 is th?-ee times lower than the $30 million it should be.

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D a n L i n d h e i mR E : Resolut ion Am en di ng th e Pol icy Bud get for FY 2009-10 and M idc ycl e Pol icy Budg et for FY 201 0-11Page 6

FY 2006-07 th rough FY 2010-11 (projected)GENERAL PURPOSE FUND REVENUESA ctua l

REVENUES FY 06-07 FY 07-08 FY 08-09

Projection

FY 09-10 FY 10-11

Shor t fa l l Ident i f iedthroughFebruary 16, 2010FY 09-10 FY 10-11

Addi t iona l Shor t fa l lEst imated S inceFebruary 16, 2010FY 09-10 FY 10-11

Tota l Shor t fa l l ]

FY 09-10 FY 10-11

Properly TaxSales Tax

116,47""i'e'eg" 131,44"s' i ' io" 134,4746,12 129,34"33,44" 125.1536,14Vehicle License FeeBusiness Tax _Uiiliiy "Consumplion Tax. .2 ,2750'33" 1,61' 5 Z 5 4 ' 1,26'54'29

1,09"sz id" l .n'soVai"50M

(0.36) (0,36) (4,69) (0,36).29J (5,29) . . t ? . - 2 ? . l .

(5.0S)'M M-I(4:vo)"1.43

"eiVso'52.52

"36"20"'52.70 50.50 (1,48) (1.48) (2,47) (2.62)

" ( T . " i " i )(3,95)

"T.T6"eal Estate TransferTax 34.27 26.49 26,49 1,10 (1.11)Transient OccupancyTax 11.82 12,20 10,46 6.44 6.64 (1,66) (1,66) (1,66) (i.66)Patkina TaxLicenses & Permits

e.89T o e " 8,52Fines & P enalliesInteresi Income _25,98""3V18"1.61'22 '00"

7.65""1V28"25> 27.16"l",29"

7,52'i',36 J_0._95i i0.95j_27,99T 6 4 " 29.97"46-53"" T ? 0 '" l ' l ,88 '

(0,15J . iy.5} i:?.P.l(0,15)(1,69)[6,367(0.95}"(o"(sJ

Service Charc|e_sGrants & SubsidiesMiscellaneoLisFund Transfers

45,37J Z 3 8 "28.62"

4,47"44]l"6""'" '"4.6J"' 25"!70""

1,7143,86"" 4""3T"u 'u" i ' i 'M '

_46.03"o.'36^'""'?"78""i6"."46"

(0,36i (0,36J

J0.0BJ io.08J"6.3"6_ '_'""6?34 "-""

(0_76j_ jO.96)

(2.42)6,38. . . . . . .

" ( 6 " , " B " 4 " i "

(0.36J_("2. "70)-I(3,20}'(i:04)ITOTAL

ENDING FUNDBALANCE, June 30(net o f carryforwardsand encumbrances)

$ 471.41 $ 454.94 $ 468.24 S 406.62 $ 401.24 $ 112.83) $ (14.4 6) $ (6.02) $ (11.15) $(18 .85) S (25.61)

$ 55.60 $ 7,10 $ 10.24 $ 10,24

P r o p e r t y T a x(FY 2009-10: $0 .4 miUion to t a l shor t fa l l ; no change f rom Feb 16 '^ pro jec t ionF Y 2 0 1 0 - 1 1 : $4.7 mil l ion new short fal l - total short fal l of $5.1 mi l l ion)Property tax revenue budgeted for FY 2010-11 was S130.2 mill ion. Current projections indicatea drop of $ 5 . 1 million to $125.2 mill ion; of this amount, $4.7 mill ion is the additional declinesince February 16, 2010 and reflects a decrease in the assessed valua tion w ithin the city. Thisprojection is based on the recent March 2010 preliminary estimate from the Alameda CountyAs ses sor 's Office of a 3.2 % decline in property tax revenue. Ad dition ally, a decline of 11percent is projected in the AB-12 90 pass-through revenue from the Oakland Rede velopm entAgency (ORA) as a result ofthe larger than anticipated decline in assessed property values inredevelopment project areas.Although staff is in regular contact with the Alameda County Assessor's Office, the County justreleased i ts revised assesse d property valuation in mid-M arch. Th e Asse sso r's Office is requirecto assess the value of all properties as of January ]^' at their fair m arke t value. Prop erty ow nershav e unti] Febru ary 15"" to file any exem ptions (for example, the ho me ow ne rs' e xem ption ) withthe County that would potentially offset their tax l iabil i ty; if legal and applicable, the Assessor'sOffice applies req ues ted exe mp tions, reducing aggregate tax liabil i ty. On this basis, assessedvalues that would be place d on the following fiscal year's tax roll are generally calcu lated. TheAssessor's Office provides very preliminary calculations to cit ies and other taxing enti t ies inmid-March to assist in budgeting, but continues lo revise calculations unti l surrendering the

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Dan LindheimR E : Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11_____ _ _ ^ ^ Page 7pro perty tax roll to the County Au ditor -Co ntrolle rs' Office in July. Lasi year, the tola! decline inAlam eda Co unty valuatio n was $4.5 bil l ion. This year, due to incom plete data, they areestima ting the de cli ne to be $4 billion, abou t the sam e level of dec line as last fiscal year. Staffwill report any revisions to this projection in the Third Quarter Revenue and ExpenditureAnalysis to be scheduled for late M ay 2 030,Sales Tax(FY 2009-10: $8 .3 mi l l ion to t a l shor t fa l l : no chanse f rom Feb 16 ' ' ' p ro jec t ionF Y 2010-11: $5.3 mi l l ion to t a l shor t fa l l ; no chans e f rom Feb 16 ' p ro jec t io n)Sales Tax revenue is projected to be $36.1 mill ion in FY 2010-11 , reflecting a decrease of S5.3mill ion from the ado pted b udget. The projection is based on the large dec lines in receiptsreported in FY 200 9-1 0 due to the weak ecouo my and slowing consum er expen di tures. BeaconEconom ics forecasted in March 2010 that consum er spend ing would be posi t ive only in 2010,partially due lo the federal tax cuts, but will be flat in 2011. However, key drivers of consumerspend ing do not supp ort co ntinued strength in consume r spen ding . It is imp orta nt to note thatsales tax revenue received by the City lags actual activity by three to six months; therefore,consu mer spend ing increase s will not imm ediately materialize in City coffers. Slow recovery ofemployment, a closely related indicator of consumer spending, is also forecasted.Ut il it y Co nsu mp t ion Tax(FY 2009-10; $2 .5 mi l l ion new sho rt fal l - $4 mil l ion tot al sh ort fa l lF Y 2010-11 : $2.6 mil l ion new shor t fal l - $4.1 mi l l ion tota l sho rt fal l )Util i ty Consumption Tax (UCT) revenue is projected to be $50.8 miUion for FY 2010-11 , a totaldecre ase of $4.1 milh on from the adopted FY 2010-11 bu dget. The latest collection data througliFebruar>' indicated a decline in UCT in the current fiscal year; fall ing natural gas prices, reduceddemand among conunercial users and weak telecommunicat ions growth were ci ted as causes.R e a l E s t a t e T r a n s f e r T a x(FY 2009-10: $1 .1 mi l l ion surp lus ; no change f rom Feb 16" ' p ro jec t ionF Y 2010-11 : new $1 .1 miUion shor t fa l l )Real Estate Transfer Tax revenue is projected to be $28.49 mill ion in FY 2 0 1 0 - 1 1 . This reflectsa decrease of $1.11 million from'the adopted FY 2010-11 budge t. The proje ction assu mes nogrow th from the cur ren t fiscal year FY 200 9-10 projection. W hile the ho us ing market hasstabil ized over the past few months, the outlook for next fiscal year is nonetheless flat due to therisk of increased interest rates, end of first-t ime home-buyer credits, and homebuyer uncertaintyrelated to continued high unem ploym ent.T r a n s i e n t O c c u p a n c y T a x ( T O T )(FY 2009-10: $1.7 mi l l ion total sho rt fa l l ; no chan ge from Feb 16" ' yro jec t ionF Y 2 0 1 0 - 1 1 : $1.7 mi l l ion to t a l shor t fa l l ; no ch an se f rom Fe b 16" ' p ro jec t io n) ,Transient Occupancy Tax revenue is projected to be $8.64 miUion in FY 2 0 1 0 - 1 1 , reflecting adecrease of $1.66 mil l ion from the adopted FY 2010-11 budget . The economic slowdown has

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Dan LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11" Pagesdirectly affected the hotel industry. Wh ile repor ts are that occupancy is up , aver age daily roomrates are dow n. Acco rding to the 200 9 Smith Tra vel S ervices, Inc. report pu bh sh ed byCalifornia Tourism, average daily room rates in Oakland dropped by 12,5 percent in January2010 from same period last year, while occupancy increased by 9.3 percent. The OaklandConvention Visitors Bureau projects the decHne in hotel uti l ization/occupancy rate will continueinto the second quarter of 2010 (April-June), but staff is conservatively not counting on thisuptick in FY 2010-1 1 revenues. Oa klan d's hotel indu stry is largely drive n by bus ines s travelersThomburg (Beacon Economics) suggests that any st rength in Oakland's hotel indust ry indicatorswill po rte nd a rebound in employ ment. 'P a r k i n s T a x(FY 20 09 -10 ; $0 .95 mi l lion to t a l shor t fa l l ; no ch an ge f rom Feb 16" ' p r o je c t i onF Y 2 0 1 0 - 1 1 : $0.95 mi l lion to t a l shor t fa l l ; no ch an se f rom Feb 16" ' p r o j ec t io n)Parking Tax revenue is projected to be $7.5 miUion in FY 2010-11, a decrease of SO.95 mill ionfrom the adopted budget. The decline in Parking tax revenue is due to continuing weakness intravel and airport parking. Airport parkin g co mp rise s about 50% of total pa rk in g tax reven ue.Oakland A irport passenger t raffic general ly decl ined through January 20 10 . Th e weak m rponparking traffic, weak spending and business employment forecast , is forecasted to depressparking tax in FY 2010-11.L i c e n s e s & P e r m i t s(FY 20 09 -1 0: new shor t faU of $0 .15 mi l lionFY 2 0 1 0 - 1 1 : new short faU of $0.15 mil l ion)Licenses & Permits revenue is projected to be $1.4 miUion in FY 2010-11 , a drop of $0.15mill ion from the adopted budget. The decrease reflects flat growth from th e curre nt yearproject ion and is dragged down by the sluggish economy.F i nes & P ena l t i e s(F Y 200 9-10 : new sho r t f a U o f$ l . 7m i l l ionF Y 2 0 1 0 - 1 1 : no shor t faU expected)Parking ci tat ions com prise the major port ion (93% ) oft he Fines & Pena l t ies revenu e category;the total adopted budget is $29,7 mill ion m each year of FY 2009-11. FY 2009-10 ci tat ionreven ue is anticipated to decline by $1.7 million from the adopted bud get. Sev eral factors affectth i s revenue:

- N um be r of citations issued is down 10 per cen t from the prior year.- Cita tion revenu e assumed violations wo uld be cited during the ex ten de d meter hours 6-9P M . Rollbac k of hours has impacted actual citation revenue co m pa red to budget.- R ov in g patrol beg an July 2009 but was not fully staffed until Jan uar y 201 0.- T he Payloc k vehicle boot progr am started later than anticipated.

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Dan Lindheim IRE : Resolution Am ending the Policy Budget for FY 2009-10 and Midcycle Policy Budge t for FY 2010-11Pagei9For FY 2010-11 no shortfall is anticipated b ecau se the (a) roving patrol is expe cted to be hil ly 'staffed for the entire fiscal year and (b) Paylock vehicle boot program will be hil ly operational.I n t e r e s t I n c o m e(FY 2009-10: $0 .36 miUion to t a l shor t faU; no cha ns e from Feb 16" ' p ro jec t io nF Y 2 0 1 0 - 1 1 : $0.36 mi l l ion to t a l sho r t fa l l ; no ch an se f rom Feb 16 ' p r o je c t i on )Interest Income is projected to decrease from $2 miUion to $1.6 mill ion in FY 2010-11. Interestearnings depend on a variety of factors, including ftinds available for inv es tm en ts, the level ofinterest rates, and cash flow status of all the City's fimds. Although some economists beUevethat interest rates will increase in the nea r future, staff does not project th is u ps ide due to thes epotentially offsett ing factors.S e r v i c e C h a r s e s(FY 2009-1 0: $1.7 mi l l ion new short faU - $2.4 mi l l ion total short faUF Y 2 0 1 0 - 1 1 : $1.6 mil l ion new sh ort fa U - $2.7 miUion total short faU)Ser^nce Charges revenue is projected to be $46.5 mill ion in FY 2010-11, a decrease of S2.7mill ion from the adopted budget.Parking Meter revenue nearly one-thfrd ofthe Service Charges category is projected to be$12.5 m iUion in FY 2010-11 , a decreas e of $1.5 miUion from the adopted B ud get . Severalfactors contribute to this decrease, including Council-approved cancellation of extended parkingmeter hours wi th no replaceme nt reven ue ident if ied ($0.33 mil lion); me ter vanda l ism, and thecont inuing weak economy ($1.19 miUion). Meter usage in parts of dow ntow n/up tow n Oaklandhas also declined as a result of meter jams caused by vandals, theft of coins from single spacemeters, and the sluggish econo my. As unemploy men t remains high and con su m er spending isant icipated to weake n, meter usa ge has been negat ively affected by fewer p eo pl e driving andpark ing downtown.Various other user fees declined by a total of $1.2 milhon, including the fr^Uowing fees: Parks &Recreat ion fees, Rentals & Concessions, Fi re Inspect ion fees, Deemed Approved Alcohol andTob acco inspec tion fees, and pu bh c nuisance fees. The most likely culp rit ag ain is the sloweconom y .M i s c e l la n e o u s R e v e n u e(FY 2009-1 0: new $0 .3 mi l lion s ur p lu sF Y 2 0 1 0 - 1 1 : $3.2 mi l l ion to t a l shor t fa l l ; no chanse f rom Feb 16" ' p ro jec t ion)Miscellaneous revenue is projected to be $1.2 miUion in FY 2010-11, a decr ea se of $3.2 mi l l ionfrom the adopted budget. It reflects the $3.2 mill ion unspecified rev enu e en han cem ent Coun cilincluded in the FY 2010-11 budget as part of balancing in July 2009. This enhancement has yetto be identified.

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D^n LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page Ip

f u n d T r a n s f e r(FY 200 9-1 0: $0.8 mi l l ion new short faU - $0.8 mi l l ion tota l short fa l lFY 2 0 1 0 - 1 1 : $0.96 miUion new short faU - $1.04 mil l ion tot al sh ort fal l )Fund Transfer revenue is projected to reach $11.9 mill ion in FY 2010-11, a decrease of $1,04million from the adop ted budg et. The decrease is attributed to dech ning assets associated with(he pensio n arm uity fund. This is due to an updated calculation of the me mb ership com posit ionofthe fund. Th es e calculafions ha ve resulted in less reve nue transferred to the fund.Add itionally, a sm aller portion oft he decline - $0.08 mill ion - is due to bud geted re venu e fromPacific Renaissance residential nightly parking that will not materialize.

P roposed B a l anc i ng M easu re s fo r F Y 2009-10Staff projects that a current-year budget gap of $10.4 mill ion remains after Council balancingactions through April 1, 2010. After closing a GPF budget deficit of $91-97 mill ion as part ofFY 2009 -11 b ud get appro val, staff projected a mid-y ear shortfall totaling $23.7 mill ion in FY2009-10. Staff presen ted balancing measures for FY 200 9-10 , and Counci l approved al l but $4,8mill ion of solu tion s to this deficit. Thes e mea sures include d a com bination of budget transfersand spe ndin g redu ctio ns . The revised projection for a ma nda tor)' pass-thro ugh projection andCouncil 's April 1, 2010 approval of reducfions to elected offices' GPF budgets provides apartia($0,4 miUion) offset to this remaining deficit {see table below ).

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Dan LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page 11FY 2009-10 Prop osed Gen era l Purpose Fund Ba lanc ing M ea su res

in $ mi l l i ons- . . : . ; ' : ; / i ' '. ' -' . -.

Pre-December 17 th Budget Def i c i tBalancing Measures Approved by Counci l onDecember 17, 2009Post-December 17th Budget Defici tAddit ional Anticipated Shortfal lsFebruary 16 , 2010 An t i c ip a te d Bud get Def i c i t

R ev enues /O the r F i nanc i ngSale of AssetsNew revenueSubtotalExpend i tu resPosit ion C hanges:

ReductionsTransfers

Grant reductionsProgram reductionsUse of One-Time FundsSubtotalT o ta l P ropos ed B a l anc i ng M eas u res

>:v; FY 0 9^ 10$$$$$

$

S$

(18 .87 )8.44(10.43)

(4 .83)(15 .26 )

7.750.508.25

0.260.080.000.001.872.20

10 .45Tota l Surb ius / (Def i c i t )Revision of parking citation pass-through payment toAlameda County ~ prior yearRevision of new parking citation contract revenue frombetter collection rate15 % Reduction of elec ted o ff icials' appropriationsAddit ional anticipated revenue shortfal ls

R es t ruc tu r i ng o f pens i on ob l i ga t i onsProposed ba lanc ing : Sa le o f Med ica l H i l l GarageOR bond aga ins t Med ica l H i l l Garage revenues

Surplu5/(Deficit)

0.50(0 .30)0.25

(6 .02)

Pos t February 16 ,2010 Ant i c ipa ted Budget Def i c i t ^ $ (10 .38)

5.505.00

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Dan L indhe imR E: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page 12

To balance the remaining FY 2009-10 deficit, staff proposes (a) restructuring the City's pensionobligations using $5.5 million deferred pension credits and (b) either selling or bonding againstthe Medical Hill Garage to generate an additional $5 million. These proposals are describedbelow and presented in Ex hib it A-1 attached to the legislation.~ Re structu ring o f pen sio n obligation s using deferred pension credits; these are comprisedof non-General Purpose funds that exist for the sole purpose of paying the City'sretirement o bligations. Staff is cuire ntiy researching how these funds could be used bythe City to pay its pension obligations.- M edical Hi ll Gara ge was built in 1985. It is a five-level, 143,600 square-foot concreteparking structure with 477 marked parking stalls. The Alta Bates Medical Centercurrently operates the gara ge, and the City receives no revenue fi-om the facility. Staffhave been marketing the facility for sale; sealed bids for the garage are due March 31,2010, with a minimum bid of S5 million. If no desirable bids are received by thedeadline, the City can take over the garage operations, realize net annual revenue, andbond against such reve nue to gene rate an upfront amount of som e $5 million. Aninformational report discussing asset sales for FY 2009-11 is presented as a separate iternon the April 1, 2010 special City Council meeting agenda.

Proposed Balancing Measures for FY 2010-31For FY 2010-11, $43.1 million in asset sales; new revenues; grant reductions and eliminafions;and additiona] staff reductions and transfers would be necessary \o balance next year'santicipated deficit and allow for a miniscule addifion to reserves. Exhibit A-2 details thisproposal and they are summarized in the table below.

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Dan LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page 13FY 2010-11 Proposed General Purpose Fund Balancmg Measures

in $ mil l io ns

Total of Fiscal Chal lenges to AddressRevenues/Other F inanc ingSale of AssetsNew revenuePossible Ballot MeasuresSubtotalExpend i tu res

Position Changes:ReductionsTransfers

Grant reductionsProgram reductions and eliminationsUse of One-Time FundsSubtotal

Total Proposed Balancing MeasuresTota l S i i rp lus/ fDef ic i t ) ,

The detai ls ofthe pro pos ed balancing measures are as fol lows;R evenues / O t he r F i nanc i ngBal lot measures to raise addi t ional revenues are simply unavoidable. We can not solve thecurrent fiscal crisis with one-time measures and program cuts alone, unless significant reductionsto public safety are ma de . The possible ballot meas ures are a pu blic safety pa rce l tax andtemporary increase and expansion to the uti l i ty users tax; combined, they could generate up to$20.6 mill ion in new revenues as soon as FY 2010-11 . Another ongoing sourc e of revenuewould be a quarter-percent add-on sales tax, otherwise known as a transactions and use tax(TUT). This possibil i ty could be considered, although it is not included in the balancingproposa l. Ci ty reso lu t ions p lac ing these new measur es on the N ov em be r 2010 ba l lo t wouldneed to be adopted no later than July 20, 2010 (the last scheduled Ci ty Counci l meefing priorlo recess) and filed with th e Alamed a County Registrar of Voters b y Aug ust 8, 201 0. The CityCouncil should contemplate preliminary legislafion related to these proposed ballot measuresbeginning in mid-M ay or early June 2010.

b . Ut i l i ty Users Tax (UUT)A temporary rate increase in the uti l i ty consumpfion or users' tax would help bridge thebudget gap, and ma intain the City 's service level to the co m mu nity . Estimated annua]revenue fi"om a 0. 5% increase in UU T wou ld generate about $2.1 m ill io n annually, UU T

; FY 10-11$

S

S$

(42.57)

12.753.48

20.6236.85

2.350.271.880.980.746.22

43.07

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D a n L i n d h e i mR E : R e s o lu t io n A me n d ing the Po l i c y B udge t fo r FY 2009-10 a nd M idc yc le Po li cy B ud ge t fo r FY 2010-1 ]Page 14

is a surcharge on ufil i ty consumption such as cable, energy, and telecommunicationse rvi ces . Th e City of Oakland curre ntly collects the UU T on electricity, natu ral gas,cable television and telephone; with voter approval, i t could be imposed on water usageas w&U. Ch ar gi ng U UT on w ate r serv ice i s estimated to bring in an addi t ional $0.3mil l io n. Combined, addifional reven ue from a tempora ry 0.5% U U T rate hike andexpansion to water service would be $2.4 mill ion annually.According to the Cal i fornia Local Government Finance Almanac (sponsored by theLeague of Califomia Cities), several locali t ies placed measures to change their UUTs onthe i r respecfive Novem ber 2009 bal lots wi th g eneral ly posit ive resul ts . In Po mo na andHunt ington Park (Los Angeies County) voters approved increases and/or expansions ofth eir cifies' U UT s of 9% or greater. Co mp ara ble rates in some ne igh bo ring cifies are asfo l lows:

- Berke ley: 7.5%- Rich mo nd: 10% (gas & elect ric) and 9.5 % (telecom & cable)- E iC err i to : 8%

c. Pu bl i c Safety Parce l Ta xA new parcel tax could be implemented to help the City fimd essential services, such aspub lic saf ety. If approved, the parcel tax would gen era te $18.2 mill ion an nua lly (beginn ingin F Y 20 10-1 1 ) .

Th e p arcel tax revenue would not be generated unt i l FY 2011-12 du e to the t iming ofth eNovember election and the August deadline for any new parcel i tem to be recorded bythe C ou nty for collection in that fiscal year. To addre ss this cash flow issu e, staffrecommends the issuance of a tax anticipation note that would securit ize the future parce.tax revenue stream so that fundscould be realized in the fiscal year in which the parceltax is levied. The revenue ant icipat ion no te wo uld h ave to be issued every y ear as long a;the parcel tax remained in place.

- S a le of ass ets includes the Ka iser Convention Center, which could genera te $10 millionon a one-t ime basis; lease ofthe George P. Scot lan Convent ion Center to the OaklandRedevelopment Agency (ORA) for $2 mil l ion, as wel l as saleof at leasf . two other Ci ty-owned properties. Generally, sale of assets to bridge a structural deficit and in a dov/n-real estate market is not good polic y. No net hele ss, there are l imited option s forad dr es sin g the deficit . On the ups ide, wh ere po ssible , staff pro pos es that blightedproperties be sold to the Redevelopment Agency to hold for resale when the real estatem ar ke t rega ins strength. Further, sell ing today ma y alloM' the Ci ty to off-load nonpro du ct iv e assets that drain Ci ty resources.

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Dan LindheimRE: Resolution Amending the Policy Budget for FY 2O09-10 and Midcycle Pohcy B ud ge t for FY 2010-13, Page 15- A dd ition al reve nue ixovci the citatio n mana gem ent contract is ex pe cte d to be $1.75mill ion based on improved c ollection efforts. Staff also anficipates one-fim e revenue tobe $0.3 mill ion in FY 200 9-10 (re vised d ow nw ard fi-om $0.5 m ill io n) . Separately, staff ispresenfing a report and legislation that could yield $1 miil ion from the sale of bil lboardspac e. Finally, the Fire De par tme nt a nticipates i ts successfl il ap plic atio n for a $0.5mill ion grant to offset firefighter personnel expense and $0.24 mill ion from stricter falsealarm enforcement.

E x p e n d i t u r e s- Gr an ts to City Inst i tut ions an d Lo ca l No n-P rofi t s : GPF support o f Ci ty inst itufions andlocal non-profits, including the Oakland Zoo and Chabot Space and Science Center totalsnearly $4.5 million in FY 2 0 1 0 - 1 1 . Counci l approved 20% red uc t ion s to many of these 'insti tutions as part of budget adoption in June and July 2009; now, fi jrther reductions are'nec essa ry. Staff contem plated a few different s cenarios for such re du ct io ns , recog nizing '

that any level of reduction to thes e organiz ations wou ld be difficult to absorb.No nethe less, additional red uctio ns are una void able to balance the anticipa ted shortfall. 'The o ption proposed by staff leave s intact betw een 50 to 75%) of m o s t gran tees'subs idies; the only exception is the O akland S choo l for the Arts, w h o s e su bsidy isrecommended to be eliminated in FY 2010-11 (see table below).

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Daii LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page 16FY 2010 -11 G ene ra l P u rpose Fun d G ran ts and S ub s id i e sO p t i o n s C o n s i d e r e d a n d R E C O M M E N D E D( in $ m i l l i ons )

C u r r e n tO r g a n i z a t i o n S u b s i d yCity Insti tutions

Oakland Zoo S 0.85Ctiabot Spa ce & Science Center 0,48Children's Fairyland 0.18Subtotal 1.50

Rotated City Insti tutionsAIDS Preven tion & Educ ation Ini t iative 0.10Hacienda Peralta 0,14City/County Col lab. on Chi ldren & Yo uth 0.30Subtotal 0.54

Non-Profi t OrganizationsVietnam ese Senior Services 0.05Family Bridges 0.10Fnj i tvaie Senior Center 0.22Cypress-Mandela r ra in ing Center 0 .22Symp hony in the Schools 0.08Wo me n's Busines s Ini t iative 0.12Jack London Aquatic Center* 0.14Oak land Asia n Cultural Center 0.06Human Serv ices - Academ ies Prog ram 0,15Ad Grants 0.97Day Laborers Program 0.16Subta ta ! 2 .30

Other Prior GrsnteesOaklan d Schoo l for the Arts 0,14

G R A N D T OT A L $ 4 .48

Op t i on 1C o n s i d e r e d

25-50-75-100V. reductionR e v i s e dS u b s i d y S a v i n g s25 % reduction

0 .6 4 [ T0.360,141.13

0,160,120,050.32

5 0 % reduction0.05 0.050.07 0.070,15 0.150.27 0.27

75% reduction0.010.030.060.060.020.030.03 0.020.040.240.040.57

0.040,080.170.170.060.090.090.060.11

"0.730.121.71

100% reduction0.14

1.97 S 2.45

O p t i o n 2L C O M M E N D E

25-?O-50-1OO%reciucti.' .evised

jS ubs idy S a25 % reduc t i on0.64 I $0,36 0.120.14 0.051.13 0.32

50 % r educ t i on0.05 0,050.07 0.070.15 0,150.27 0.27

50 % r educ t i on0,02 0.020.05 0.050,11 0.110.11 0.110.O4 0.040.06 0.060.07 I0,04 C0.08 C0.49 C0.08 C1.15 1

100% red uc t i on

0.06

O p t i o n 3C o n s i d e r e d

50-50-75-100% reductionR e v i s e dS u b s i d y S a v i n g s '5 0 % reduct ion \

0.4 2 I $ 0,370.24 0.240.09 0,090.75 0.70

5 0 % reduct ion0.03 0,050.04 0.070.15 0.150.21 0.27

75% reduct ion0.010.030.060.060.020.030.03 \20.020.040.240.040.57

0.040,080,170,170,060.090.09)0,060.110,730,12'1.71

100% reduct ion 0-14

1.54 $ 2.83'

NOT ES: Savings lo the GPF from red uct ions to the Oakland Zoo and Jack London Aquat ic Center wou ld be decreased by the add i tiona l5% budget reduct ion in Parks and R ecreat ion as a resu l t o f Counci) act ion Ihat was not re f lected in thes e grant ag reem ents.

Reductions of 15% in elected offices: Council approved reduc ing elected offices' budgetby 15% or a total $ 1.5 m illion at its regular meeting on March 16, 2010 . The CityCouncil asked that all elected offices provide details of their actual reductions forinclusion in this repo rt. The Ma yo r's Office, City Counci! and C ity Attorn ey's Office'sdetailed reducfions are presented below. A letter from the City Au dito r's Office isincluded with this report {Attachment A). The M ay or's Office proposes eliminating 2.0 FTB M ay or's PSE 14s and reducingits operations and main tenance budget. GPF savings for FY 2010-11 total $0.27miUion. The City Cou ncil itself approved eliminafion of all 6.0 FTE of its Senior PolicyAnalysts/Legislafive Analysts as of May 1, 2010, including the 1.95 FTEs

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Dan LindheimR E : Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11Page 17,budgeted in the ORA Projects Fund. The GPF savings are estimated to be $0.08million in the current year and $0.49 million in FY 2010-11.

In fulfilhnent ofthe C ity Co unc il's direcfive, the City Attorney's Office intends toeliminate 2.0 FTE Deputy City Attom ey Ills and save fi-om filling a vacantDeputy City Attomey II at the lower end ofthe pay range (both actions continuedfi-om FY 2009-10 to FY 2010-11); and eliminate 1.0 FTE Paralegal beginning inFY 2010-11.

Reductions in departments already approved : As part of FY 2009-10 bu dget balancing,Council approved position eliminafions totaling $2.2 million or 8.0, FTE po sitions in FY2010-11. Positions eliminated include:- Info rma tion Technology: eliminations of 2.0 FTE Microcom puter SystemsSpecialist Is and 1.0 FTE M icrocomp uter Systems Specialist IIT for a total savingsof SO.34 million.

Fi na nc e an d M anag em ent: elimination of 1.0 FTE Rev enue Assistant, savingS0.08 miUion. Pe rso nn el Resource M ana gem ent ; eliminafion of 1.0 FTE Adm inistrativeAnalyst 11 saving SO. 1 million Po lic e: restructuring of personne l management (S0.09 mil lion ) by elimina ting 1.0FTE A dministrative Analyst II; elimination of Rangers (2.0 FTE s sav ing $0.28milli on). In addifion Coxmcil approved the transfer ofthe Cad et Program to theAsset Forfeiture Fund (9.0 PTs saving $0.27 million).

Reductions in departme nts to be approve d total $1.67 miUion. A portio n of thesepreliminary balancing measures were presented to Council in the February 16, 2010report. These mea sures include: M us eu m ; realize savings of $0.6 million through revised public/privatepartnership arrangement between the City and the Oakland Museum of CalifomiaFoundation. Libr ary ; shift $0.54 million of eligible appropriation to the Library Enhancem entFund (M easure Q) Pa rk s an d Rec reation: shift uncommitted balancesfi-om he Golf Fund to theGPF ($0.2 million). H um an Services: elimination of Linkages grant funding in concert with theState's proposed elimination of this grant will save $0.19 million. Elimination ofthe remaining Homeless Mobile Outreach/California Hotel grant, saving $0.14miUion. EUminafion ofth e remaining grant reduces outreach fi-om five to three

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Dan LindheimRE: Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11^ _ _ ^ Page 1days per week. This grant is part of th e PA TH program to co nduct outreach toencourage homeless people in work activit ies and access to housing.

S U S T A I N A B L E O P P O R T U N I T I E SThere are no direct sustainable opporlunifies associated with this report .D I S A B I L I T Y A N D S E N I O R A C C E S SThere are no direct disabil i ty and senior access opportunit ies associated with this report .R E C O i V I M E N D A T I O N SStaff requests City Council direction and possible action on the following:1. FY 2009-10 General Purpose Fund balancing measures presented in Exhibi t A-1 ofthe

attached legislation.2. FY 2010-11 General Purpose Fund balancing measures presented in Exhibi t A-2 oftheattached legislation.3 . Declare a fiscal emergency to use one-time funds to balance the anticipated $10.4 mill ioDremaining FY 2009-10 shortfall and $42.6 mill ion FY 2010-11 shortfaU in the GeneralPu rpo se Fund (an action required by the City's financial poHcy, or din an ce 12946 C.M.S.),AND declare such one-time General Purpose Funds restricted to be used only for balancingsaid shortfall .

C H ^ R Y ^ T A Y L O RDirector, Budget Office

A P P R O V E D F O R F O R W A R D I N G T O T H EC I T Y C O U N C I L

Office ofthe City Administrator APR 2 0 ZOIO

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Dan LindheimR E : Resolution Amending the Policy Budget for FY 2009-10 and Midcycle Policy Budget for FY 2010-11^ Page 19Attachment A: Letter fi-om City Auditor Courtney Ruby to Mayor De llum s, City Counci! andCity Administrator Dan L indheim; City Attomey O pinio n (April 2006)

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ATTACHMENT ACITY OF O AKLAN D m K

C I T Y H A L L ONi : F R A N K H. O G A W A P L A Z A , 4TH F L O O R O A K L A N D , C A L I F O R N I A 9 4 6 1 2

O f f i c e of the Ci ty Aud i to r (510 )238 -3 378C o u r t n e y A, Ruby, CPA FAX (51 0) 2 3 8 [ 7 6 4 0C i t y A ud i t o r ^ TD D (510) 2 3 8 1 3 2 5 4w w w . o a k l a n d a u d i t o r . c o m

April L 2010OFFICE OP THE M AYORHONORABLE CITY COUNCILCITY ADMINISTRATOR DAN LINDHEIMOAKLAND, CALIFORNIAR E : REQUESTED 15 % BUD GET REDUCTION

Dear Mayor Dellums, President Brunner, Members ofthe Council, andCity Adm inistrator Lindheim:In the spirit of cooperation, the City Auditor's Office has worked with the Administrationand the City Counci] to implement previously requested budget reductions. While it hasbeen very difficult for the Office, we have taken a 12.3% cut to date, including areduction in staff. As the Office with the City's smallest departmental budget and staff,any cuts have a disproportionately large impact that must be considered in relation to theOffice's significant charter mandated responsibilities.On April 25 , 2006, the City Attom ey issued a legal opinion, which concluded that theCity Council must provide the City Auditor's Office minimum funding so that it mayperform, without material impairment, its charter mandated duties. An additional 15% cutafter a 12.3% cut earlier this fiscal year will result in a further reduction of essentialauditing staff and materially impair the Office's ability to perform its charter mandatedduties. Therefore, I requested an additional legal opinion on March 6* from the CityAttomey that would clearly e stablish an objectively determined minimum fundingamount for the City Auditor's Office.Unti! the legal opinion is provided and a minimum hinding amount is determined, theCity Auditor's Office cannot move forward with the requested 15% reduction for FY2010-2031. However, due to a one time salary savings in the current fiscal year, theOffice will be able lo provide the requested pro-rated reduction for FY 2009-2010 of$33,470 as a one-time only reduction to personnel costs.

http://www.oaklandauditor.com/http://www.oaklandauditor.com/

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Mayor DellumsHonorable City CouncilCity Administrator LindheimRequested 15%. Budget ReductionApril 1,2010Page 2 of 2

1 have asked the City Attorney to prioritize my request given its FY 2010-11 budgetimplications. It is my hope that the City Attorney will be able to provide an opinionbefore the end of the current fiscal year.Respectfully submitted.

COURTNEY A. RCity Auditor

cc: City Attomey John Russo

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CITY OF OAKLANDOff ice of the City Attorney

Legal OpinionTo; Roland Smith, City AuditorFrom: Off ice of th e City AttorneyDate: Apr i l 25,2 006

RE: City Auditor B.u6get CutsI Ques t ion

Doss the Charter require the City Council to provide minimum funding for staff ofthe City Auditor's Office?

n. Summary Co nc lu s ionThe City Council must provide minimum funding so that the City Auditor mayperform, Vi'ithout material irnpairment, his Charter mandated duties.

III. Analys is ^^

Budgetary matters, including fixing of the number of employees, their salaries,and their benefits, are leg islative actions. (Scott v. C omm on C ou nc ii, 44 Cal.App.4th584, 690 (1996)) The gener al rule is that a legislatu re, a city co un ci! for ex am ple , ha swide discretion over purely legislative actions. (Id.; Hicks v, Board o f S upe rvis ors . 6 9CaI.App,3d 228, 232: see aiso Scott v. Com mon Cou ncil. 44 C aL Ap p,4 th 684 (19 96 );County of Butte v. Superior Court (Brooks) 176 Cal.App.3d 693 (1985).)

371596^1

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April 25, 2006Re: City Auditor Budget Cutspage'2o(4However this general rule yields to the exception that the budget cuts may notprev ent the performance of a city official's duties as enumerated by a city ch ar te r (Sco ttV. Comm on Council, sup ra, at 69 5.) The Scott court recognized that In "rare" cases

jud icial He rferen ce with the legislative process is justified . A city co u nc ii c ann ot violateits own charter. The Chy C oun cil, by a budgetary act, could n o t Ignore a c harterofficer's charier mandated du ties.It is weW settled that a charter city m ay not act in co nf lic t with itscharter. Any act tha t is violative of or not in com plia nce wit h thecharter is void. The city council cannot relieve a charter officer of thecity from the duties devolving upon him by the charter..,. (Id,, internal- quotations and citations omitted, emphasis added.)

in Scott, the trial court fou nd that elimina tion of all of tl ie city a ttorne y'sinvestigators "materially impaired" the city attorney in the perfornnance of his chartermandated prosecutorial duties. Th e investigators were "absolutely n ece ssary " for theperformance of the city attorney's city charter functions. The wori^ of the investigatorswas "inseparable",from the city attorney's prosecutorial function. T h e San Bern ardinocouncil's budgetary actions rendered the city attomey "unable to perform his statutoryfunctions" and "eliminate[d] [the city attorney's] ability to carry out the sworn statutoryand.charter requirements and duty mandated by the people of tliis city and .the Sla te ofCalifornia." (id. at 694-695.)

The appellate court uphe ld the trial court an d held that th e city co uld onlyeliminate charter mandated duties after it had eliminated non-charter mandatedprograms first. (Id, at 698, fn. 11.)Can the City Council Cut Positions in the City Auditor's Office?

Under the guidelines of Scott and Hicks, the O akland City Co unc il's fun ding ofpositions in the City Auditor's O ffice depends on a factu al question; W ill the redu ction ofpositions in the City Auditor's olTice "prevent" or "materially impair" t h e City Aud itor fro mperforming his Charter mandated duties?The City Auditors Charter Mandated Duties

Under the Oakland City Charter, the City Auditor has wide ranging mandatoryduties to review the City's financial documents:The City Auditor shall ha ve the power and it. shall be his o r her duty toaudit the books, accounts, money and securities of all departments andagencies ofthe City and such other matters as the Council may request;[T]o report to the Co unc il periodically the resu lts of such aud its and toadvise and make recommendations to the City Administrator regardingaccounting forms design, fiscal and statistical reports and the methods or

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April 25, 2006Re: City Auditor Budget CutsPage 3 of 4 procedures for maintaining the accounts and acc ou ntin g systemthroughout all departm ents, offices and agencies of th e City. . . . .

The City Auditor shall conduct surveys, reviews, and audits as the Auditordeems to be in the bes t pub lic interest or as require d by tf ie Co un cil orMayor, (Charter section 403, emphasis added.)The Charter goes on to define that the "public InteresV "shall include, but not be l imitedto":

(1) Reviewing and appraising the soundness, adequacy and application ofaccounting, functional, a nd operatin g controls an d reliability a n d timeline ssof accounting and other data gen erated within the orga nizatio n.(2) Evaluating the city's internal controls to ensure that the City's assetsand resources are reasonably safeguarded from fraud, waste, andmismanagement,(3) Ascertaining compliance with Council's resolutions and policies andthe Mayor's Adm inistrative Instructions and Directives, a s we ll asapplicable State and Fed era l laws a nd regulations.(4) Providing assistance to City Departments to enhance theeffectiveness, efficiency and economy of their operations.(5) Preparing an impartial finan cial analysis of all ballot me asu res,pursuant to the provisions of the Municipal Code.(6) Preparing impartial f inancial analyses of propos ed m ajor exp en ditu resprior to the approval of such expenditures. These analyses will be forinforma tional'purpose s only and will include, but not be limite d to,proposals, contracts, ventures, programs and construction projects. Theproposed major expenditures selected for these financial an aly se s 'wil l bebased on requests from M ayor/Council and/or deem ed to b e prudentlyadvisable in the objective and professional judgm ent o fth e City A ud