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

Proprietary Funds: The City’s proprietary funds provide the same type of information found in the government-wide financial statements under the business-type column but in more detail. The portion of net position invested in capital assets, excluding internal service funds, was $231.7 million as of June 30, 2025, compared to $233.4 million for the previous fiscal year. The decrease of $1.7 million is primarily due to depreciation and capital asset retirements exceeding capital asset additions in the Sewer Fund. General Fund Budgetary Highlights During the year ended June 30, 2025, the General Fund had a $6.6 million increase in budgeted revenues between the original and final amended operating budget due to the increase in charges for services. Actual budgetary basis revenues of $978.8 million were $57.8 million higher than the final amended budget due primarily to higher business license tax and real estate transfer tax revenues. Appropriations increased by $46.8 million between the original and final amended operating budget for the General Fund. The increase in appropriation is primarily due to the carryforward of unspent prior year appropriations. Actual budgetary basis expenditures of $825.9 million were $127.9 million less than the final amended budget due to a combination of Council-approved budget balancing measures, including aggressive vacancy and hiring controls, discretionary spending reductions, and deferral of certain costs including contracts. Capital Assets The City’s capital assets, net of depreciation/amortization, totaled $1.84 billion as of June 30, 2025 compared to $1.78 billion as of June 30, 2024, an increase of $64.7 million, or 3.6 percent. Governmental activities additions included $140.0 million in capital assets from construction in progress which met the City’s threshold for capitalization, and were offset by retirements and depreciation. Major construction projects underway include roadway and traffic improvements and park and recreation center upgrades. Business activities, primarily in the Sewer Fund, decreased capital assets by $5.0 million due to depreciation. See Note II, part D to the financial statements for more details on capital assets. Construction Commitments As of June 30, 2025 the City had construction commitments of $61.6 million. Major commitments include $51.5 million for street and sidewalk improvements and $3.7 million for building, facilities and infrastructure. See Note III, part C.1 for more details on construction commitments. Debt Administration: General Obligation Bonds and Other Bond Ratings A credit rating is a value assigned by one or more of the recognized rating agencies that “grade” a jurisdiction’s credit, or financial trustworthiness. The three primary rating agencies are Moody’s Ratings (Moody’s), S&P Global Ratings (S&P), and Fitch Ratings (Fitch). These rating agencies serve as independent assessors of municipal and corporate credit strength. Rating agencies generally focus on four major areas when assigning credit ratings: finances, management, economy and outstanding debt. The City has consistently maintained strong credit ratings on the City’s existing general obligation bonds from all three national rating agencies. However, on November 27, 2024, Fitch downgraded Oakland's Issuer Default Rating from AA- to A, with the rating outlook revised from stable to negative. On December 5, 2024, Moody's downgraded the City's issuer, general obligation bond, and pension obligation bond ratings from Aa1 to Aa2. Moody's also downgraded the City's lease revenue bonds from Aa2 to Aa3 and CITY OF OAKLAND Management’s Discussion and Analysis (Unaudited) Year Ended June 30, 2025 18