FY 2026-27 Proposed Midcycle Budget

CITY REVENUE EXPENDITURE FORECAST METHODOLOGY The City prepares revenue and expenditure forecasts for its biennial budget. The forecasts are based on: current expenditure spending revenue collection trends historical budgetary performance prevailing general economic conditions department input   A detailed forecast is prepared for the General Purpose Fund (GPF) and for other selected funds.   To prepare the forecast, a comprehensive analysis of the City's revenues and expenditures is performed. These major components are projected into the two-to-five-year period based on various relevant assumptions. For example, projections for property tax, the single largest source of revenue for the City's General Purpose Fund (GPF), are made based on the projected growth in the net assessed value of local property and projected changes to the tax delinquency rate. Similarly, a forecast of expenditures is performed by separately analyzing individual expenditure categories (e.g., salaries, retirement, benefits, utility expenses, etc.) based on projected cost increases (e.g., pay/step increases, PERS retirement rates, benefit cost inflation, energy prices, etc.). FORECASTING TECHNIQUES Citywide revenues and expenditures are projected using two forecasting techniques: qualitative analysis and quantitative analysis. Qualitative Analysis Quantitative Analysis This analysis projects future revenues and/or expenditures using non-statistical techniques. These techniques rely on human judgement rather than statistical analysis to arrive at revenue projections. Qualitative forecasting is essential for projecting revenue or expenditure components that are unstable, volatile, or for which there is limited historical information. To facilitate sound qualitative analysis, the City of Oakland seeks input from outside experts in economic forecasting, municipal finance, and other relevant fields. Just two examples of this are the City's reliance on the League of Cities' analysis and recommendations relating to legislative issues impacting cities, and the Legislative Analyst Office for their expertise and analysis of the State of California budgetary issues that may potentially affect the City of Oakland. This involves looking at data to understand historical trends and causal relationships. One type of quantitative analysis is a time series analysis which is based on data that has been collected over time and can be shown chronologically on graphs. When using time series techniques, the forecaster is especially interested in seasonal fluctuations that occur within one year, the nature of the multi-year cycles, and the nature of any possible long-term trends. Causal analysis is another type of quantitative analysis which deals with the historical inter-relationships between two or more variables. One or more predictors, directly or indirectly, influences the future of revenue or expenditure. The causal forecasting techniques are predicated upon selecting the correct independent variables, correctly defining their interrelationship to the dependent variable, i.e., the projected revenue or expenditure item, and finally, collecting accurate data. REVENUE FORECAST Citywide revenues are projected using dynamic forecasting that anticipates changes in revenues triggered by new economic development, economic growth, changes in the levels of service of departments and agencies, (in the case of Master Fee Schedule changes approved by the City Council), changes in governmental policies at the state or federal level, and various economic and demographic changes. The purpose of this dynamic forecast is to demonstrate the potential impact of various events and actions on the selected revenue sources. Under this scenario:   Tax Revenues are projected to grow at rates that are responsive to dynamic forces in the economy. Generally, the assumption is the local economy will be affected by national and state trends, with some deviation expected due to specific characteristics of regional businesses and labor markets.   Forecasting Methodology & Forecasting Methodology & Budgeting Basis Budgeting Basis F Y 2 0 2 6 - 2 7 P R O P O S E D P O L I C Y B U D G E T F Y 2 0 2 6 - 2 7 P R O P O S E D P O L I C Y B U D G E T 28