2025-city-of-oakland-acfr_final-123025.pdf

This section of the City of Oakland’s (the City) Annual Comprehensive Financial Report provides an overview and analysis of the financial activities of the City for the year ended June 30, 2025. We encourage readers to consider the information presented here in conjunction with the additional information contained in the City’s financial statements and related notes and our letter of transmittal that precedes this section. FINANCIAL HIGHLIGHTS The government-wide statement of net position for the City’s governmental and business-type activities indicates that as of June 30, 2025, total assets and deferred outflows of resources exceed total liabilities and deferred inflows of resources by $1.4 billion compared to a net position of $982.8 million at June 30, 2024: • $1.3 billion of net position represents the City’s investment in capital assets, less any related outstanding debt and related deferred outflows and inflows of resources used to acquire those assets (net investment in capital assets). These capital assets are used to provide services to citizens and are not available for future spending. • $930.5 million represents resources that are subject to restrictions on their use and are available to meet the City’s ongoing obligations for programs, of which $460.7 million is restricted for Housing and Community Development programs, $359.6 million pertains to Low and Moderate Income Housing Redevelopment, and $41.3 million is restricted for debt service. • $0.9 billion represents a deficit in unrestricted net position that has primarily resulted from the underfunding of the pension and other postemployment benefits (OPEB) liabilities, and other unfunded long-term liabilities (unrestricted net position). The net pension and OPEB liability deficits are the biggest contributing factors at $1.8 billion and $0.6 billion, respectively. The remaining changes in net position are discussed below. • $188.4 million of the $414.7 million improvement in net position is attributable to prior period restatements. Specifically, a $199.9 million increase to the beginning balance resulted from the reclassification of employee benefit liabilities, offset by an $11.5 million decrease from the implementation of GASB Statement No. 101. The remaining improvement in net position reflects results of current year operations derived mostly from increase in revenues including $85.3 million in operating grants stemming from growth and timing of affordable housing and Caltrans grants, $35.6 million in real estate transfer tax resulting from a one-time boost from PG&E property sale, and $9.3 million in legal settlements, offset by a decline of $70.8 million in property tax due to a lower PFRS liability rate. $37.6 million is due to reduction in expenditure to address the budget deficit. • The government-wide increase in net position was also supported by a $16.4 million increase in net position from the business-type activities, mainly the Sewer-related activities. Total fund balances for the City’s governmental funds of $1.6 billion represents an increase of 8.8 percent, or $132.6 million, compared to the prior fiscal year. This increase results primarily due to restatement of the beginning balance to reclassify employee benefit liabilities. Total general revenues increased compared to prior fiscal year, while total expenditures decreased mostly due to Council- approved budget-balancing actions. The General Purpose Fund Emergency Reserve, a subfund of the General Fund, decreased to $63.8 million, which together with unassigned General Purpose Fund balance of $34.6 million raised General Purpose Fund reserves to $98.4 million, exceeding the amount required under the City's Consolidated Fiscal Policy of 7.5 percent of FY 24-25 General Purpose Fund appropriations, or $59.9 million. CITY OF OAKLAND Management’s Discussion and Analysis (Unaudited) Year Ended June 30, 2025 5