Fiscal Year 2013-2015 Special Budget Meeting

HONORABLE CITY COUNCIL AND OAKLAND RESIDENTS Subject: FY 2013-2015 Proposed Policy Budget Date: April 17, 2013 Page 5 Looking forward, we must continue to grow our revenues to restore and enhance services to the community. We have actively supported long-dormant projects which have recently sprung to life, and are working to spur progress on other projects to draw investment to Oakland, creating more jobs and more economic development. Recent progress includes:  Preparing to begin construction at the Oakland Army Base by December 2013, which includes constructing a new marine terminal and 1 million square feet of trade and logistics space that will generate approximately 2,000 jobs;  Supporting efforts to break ground in spring 2014 at the Brooklyn Basin Project, which includes 3,100 units of housing, 30 acres of open space, and 200,000 square feet of commercial space, with an approximate job count of 8,000 over the 6 to 8 year build-out of the project;  Completing the “10K” housing project started a decade ago and strategically positioning Oakland for “10K” 2.0, which would build housing across all of Oakland's transit corridors;  Continuing to negotiate exciting opportunities for our sports facilities and the world-class potential of the Coliseum City development project; and  Aggressively pursuing retail projects. Since 2011, more than 1 million square feet of new or improved leasable retail space have been completed or are in the pipeline. Factors Outside the City’s Control Despite the good work we’ve done putting our fiscal house in order, outside financial forces are creating new challenges going forward. We face some significant losses, and some expenses are rising even faster than our revenues, but three primary factors affect our fiscal status: 1. Ongoing Impacts of the Global Recession Oakland continues to be challenged by the lingering impacts of the global recession and the harsh service impacts which resulted from reducing $318 million in expenditures and losing 720 FTEs in prior years, while simultaneously planning for additional reductions. We have begun recovery, but have not yet fully restored our pre-recession revenues. A good example of these ongoing points of recovery is property tax, a central revenue source for California cities. Although Oakland property tax revenues are on the rise, they remain $8.7 million short of pre-recession levels. Although revenues are showing modest, upward trends, continuously rising costs and deferred expenditures are projected to outpace revenue growth, mostly due to steep increases in health care and pension costs and critical deferred maintenance to repair City buildings and roads, upgrade technology, and replace fleet and equipment. 2. Increased Cost of Benefits CalPERS’ newly adopted actuarial assumptions will have a significant impact on the City’s budget.