Finance, Tuesday 9:30am
$177 MM Budget Shortfall Looms for End FY23-24 on Projections of Lower Real Estate Transfer Tax, OPD Overspending
The Finance Committee will review the 2nd Quarter Revenue and Expenditure report’s ominous findings of the budget deficit in the current 2023-24 fiscal year. Several months ago, the first quarter report projected an incipient deficit, just three months into the new fiscal year. That forecast has only grown more dire in the meantime.
On the revenue side, the biggest gap is a $57 MM shortfall in the Real Estate Transfer Tax [RTTF], the tax paid whenever property changes hands. The revenue is hard to predict and unstable in every year, with sales often coming in the last quarters of the fiscal year. It's skyrocketed in the last few years due to the bay area-wide real estate boom—but as of now the prediction is that RTTF will come in 51.8 % lower than was projected for this fiscal year last June due to higher interest rates. But because of the overheated property market of the last several years, property tax is performing higher than expected and will actually have a $4.2 MM surplus.
Business tax is also forecast to perform worse than predicted in the budget. The City had predicted growth in the revenue that would exceed last year’s revenue, but the funds will likely come in about the same as last year’s, per the report. It’s worth noting that regardless, the business tax revenue is much higher than in previous years, due to the passage of the progressive business tax ballot measure. The new sliding scale puts a greater onus on Oakland's largest corporations, greatly increasing business tax revenue by pegging it to the highest grossing businesses on a sliding scale—the projected FY23-24 revenue is over $14 MM higher than in FY 2019-20, before the effects of both Covid and the income of the progressive business tax.
On the expenditure side, the City would have underspent by about $18 MM owing to city-wide vacancies in all of its departments—if it hadn’t been for one department that massively overspent by $25.6 MM, the OPD. Most of OPD overspending is in non-reimbursable overtime, as the police staffing has hovered under the budgeted sworn staffing for much of the year.
The two numbers together mean the City is looking at a $177 MM budget shortfall by the end of the fiscal year—that means the City budgeted its revenues at a higher rate and its expenditures at a lower rate than are currently predicted to come to pass. Then, in addition, the City is required by its own ordinances to set funds aside for fiscal due diligence. But the City does have a $93 MM surplus from last year which will offset the final projected operating shortfall. It’s still pretty hefty, according to the report, at $117 MM and the City will be carrying that on its way into the mid-cycle budget process in May and June, which already assume a budget deficit for the coming year. All of these projections are in flux, especially because the RTTF is a very volatile fund to begin with and often exceeds expectations due to high end building sales. Budget deficits for years to come have been forecast in now several Finance and Budget department statements.
More on all this after the committee discussion.
Public Works, Tuesday 11:30 am
—OPW and DPW Hiring Blitz Report: Overall, according to the report, vacancies decreased in the departments, from 23% to 17% for OPW and 32% to 23% for OakDOT.
—Nearly 20 MM in OPW Contracts for Various Sub Contracts
—Report on Illegal Dumping and Analysis of Current Waste Removal and Dumping Mitigation
Community and Economic Development Committee, Tuesday 1:30pm
—State Cannabis Equity Grants [$3 MM] and Grant Disbursement Contract with 4Front Partners
Life Enrichment [Canceled]
Public Safety, Tuesday 6pm
—OFD Trailer Purchase for MACRO Headquarters Space: OFD pays $15K a month for the trailers and specialized equipment that MACRO uses as its HQ. To save money going forward, the OFD suggests buying the trailers outright for $375K through a special deal with their provider, Cobalt. The purchase is proposed to bypass normal bidding because the trailers are already in use and set up and the deal is specific to the company.
—OPD Cold Storage Contract with Schaefer Cold Storage: OPD must warehouse certain biological evidence indefinitely and doesn’t have cold storage on site at the Police Administration Building. OPD has an ongoing contract with Schaefer’s Cold Storage; this would renew it as a no-bid contract for 5 years, with two optional renewals for a total potential spending package of $4 MM
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