Fiscal Year 2013-2015 Special Budget Meeting

FINANCIAL SUMMARIES INTRODUCTION TO FINANCIAL SUMMARIES This section contains tables summarizing revenue and expenditure data for the entire City. Summaries are presented by fund. Tables are also presented on fund balances and fund descriptions. CITY REVENUE AND EXPENDITURE FORECAST METHODOLOGY The City prepares revenue and expenditure forecasts for its biennial budget. The forecasts are based on agency input, historical budgetary performance, prevailing general economic conditions and department input. A detailed forecast is prepared for the General Purpose Fund (GPF), and for other funds. To prepare the forecast, a comprehensive analysis of the components of the City's revenues and expenditures is performed. These major components are projected into the two-to-five-year period on the basis of various relevant assumptions. For example, projections for property tax, the single largest source of revenues for the City's General Purpose Fund (GPF), are done based on the projected growth in the net assessed value of locally assessed property and projected changes to the tax delinquency rate. Similarly, forecast of the expenditures is performed by separately analyzing individual expenditure categories (e.g. salaries, retirement, benefits, utility expenses) based on forecast cost increases (e.g. pay-step increases, PERS retirement rates, benefit cost inflation, energy prices). Forecasting Techniques Citywide revenues and expenditures are projected using two forecasting techniques: qualitative analysis, and quantitative analysis. Qualitative analysis projects future revenues and/or expenditures using non-statistical techniques. These techniques rely on human judgment 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 is 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. Quantitative analysis involves looking at data to understand historical trends and causal relationships. One kind of quantitative analysis is time series analysis; it is based on data which have been collected over time and can be shown chronologically on graphs. When using time series techniques, the forecaster is especially interested in the nature of seasonal fluctuations which occur within a year, the nature of multiyear cycles, and the nature of any possible long- run trends. Causal analysis is another type of quantitative analysis; it deals with the historical interrelationships between two or more variables. One or more predictors influence, directly or indirectly, the future 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. D - 1