Fiscal Year 2013-2015 Special Budget Meeting

Page 14 FY 2013-2015 BUDGET HIGHLIGHTS VII. FIVE-YEAR PLAN TO FISCAL SUSTAINABILITY The City has demonstrated its resolve in addressing economic challenges; now is the time to strategically plan for the future in order to preserve essential City services over the long term and increase investment in top community priorities, while maintaining long-term fiscal stability. Under current conditions, our expenditures and long-term financial liabilities are expected to outpace our modest revenue growth. Last fall, the City presented a five-year forecast to establish a clear roadmap of the financial obligations and challenges ahead. Based on historic trends and conservative assumptions, the forecast includes estimates on future revenues and long-term obligations, including retiree medical costs, pension costs and about $100 million annually in critical deferred maintenance for City building and road repairs, technology upgrades and critical fleet and equipment replacement. Table 11 below illustrates the unfunded and long-term liabilities the City faces over time. Table 11: Unfunded and Long-Term Liabilities Unfunded Amount Description $743M CalPERS California Public Employees Retirement System. 75% funded. $520M OPEB Other Post-Employment Benefits. Retiree medical benefits. $216M PFRS Police and Fire Retirement System. Closed system. City issued bonds to reduce the liability and made advance payments for five years. No new payments until 2017-18, then GPF payment of $28.5 million/yr. until 2026. $743K OMERS Oakland Municipal Employees Retirement System. Closed retirement system. $ 99M Negative Projected by June 30, 2013, 54 out of 173 funds have negative balance; $70 million of total on repayment plan after $39 million paid over past 3 years. $29.5M Accrued Estimated amount owed to employees for accrued vacation and leaves. $1.6 Billion TOTAL Deferred Capital Expenses Additionally, the City has deferred various capital expenses over time because funds have not been available to invest in these critical needs. Below are three categories that illustrated needed levels of investment to keep pace with the City’s capital needs.  $7.5 million/year Technology upgrades and replacements.  $10.2 million/year Equipment and vehicles.  $100 million/year Deferred maintenance and replacement. Legislative Activities In Sacramento, a number of legislative proposals are being developed that pertain to economic development and local government. These bills seek to fill the void left by the elimination of redevelopment agencies and provide tools used by local governments to remedy blight, provide affordable housing, and spur local economic development. Several bills are also being proposed that would change the State Constitution to lower the vote threshold for ballot measures from 2/3 to 55%. Additionally, the State Department of Housing and Community Development has proposed major changes to the Enterprise Zone program which would have a negative impact on Oakland. The legislative process has just begun. Bills would have to go through the legislative process and reach to the Governor’s desk to be vetoed or signed into law by October 13.