Title
Subject: Long-term Financial Planning Policy
From: Financial Services Agency
Recommendation: Adopt a Resolution regarding the City of Oakland Long-term Financial Planning Policy
Body
F:1
)FFIC E C T HE C" Y CL ER K
CITY OF OAKLAND @ L .-. @. -)
AGENDA REPORT 2903 JUN 12 PM 5:07
TO: Office of the Citv Manager
ATTN: Robert C. Bobb
FROM: Budget Office
DATE: June 24, 2003
R_E: Adoption of Financial Poliev on Long-Term Financial Planning
SUMMARY
This report proposes a formal policv on long-term financial planning and recommends that the
Council adopt that policy. It is a follow up to an informational report presented to the Council on
February 18, 200J. That report presented the recommendations of the Moving Oakland Forward
(MOF) Team 44A, on the adoption of a comprehensive set of financial policies by the City. The
Council requested that staff provide more detailed analysis and recommendations regarding each
proposed policy: this report is a response to that Council request
FISCAL IMPACT
There would be no direct fiscal impact from implementing the proposed policy. However. the policy
would benefit the City's financial management by improving its Iongg-term financial planning. Also,
credit rating agencies are likely to favor the City's intention to plan ahead because such planning
provides for greater financial stability, and signals a prudent approach to financial management. A
positive credit rating leads to lower interest rates on borrowing, thus freeing up more funds for
operations and services.
BACKGROUND
Team #4A of Moving Oakland Forward was established to review and make recommendations
regarding the Citv's financial policies. One of Team #4A's Findings was that the City's current
financial policies are not consolidated under one authority, and cannot be found in a sin-IC location:
some are Council-adopted, some are reflected within Administrative Instructions, and others are
followed in practice but lack formal authority.
In September 2002, Team 94A presented a report recommending steps the City should take in order to
adopt and consolidate a Comprehensive set of financial policies, and a process for staff to report to the
Council on the extent to which City operations are in compliance with these policies. Long-term
financial planning was one of the policies discussed in the September report.
The Bud-et Office currently prepares and annually updates a five-year Financial Plan, although there
is no formal policy requiring this plan. item 10.2,-3 06
ORA/Council
July 15, 2003
Al -
i U03 __qWft
aAaw"l-.4
Financial Polin, on Long-Terin Planning Page 2
KEY ISSUES AND IMPACTS
Long-term planning helps ensure that the City's commitments to continuina outlaNs are avoided
unless revenue arowth can reasonably be expected. Specifically, Iona-term financial planning
hproves the Council's ability to make informed decisions recarding economic development projects.
tax policy and labor negotiations.
The Government Finance Officers Association (GFOA) recommends that pvernments at all levels
forecast major revenues and expenditures for a period of three to five Years beyond the adopted budget
period. Also, credit rating agencies are likely to favor the City's intention to plan ahead because Such
planning provides for greater financial stability. and signals a prudent approach to financial
management. A positive credit rating leads to lower interest rates on borrowing, thus freeing up more
funds for operations and services.
DISCUSSION OF PROPOSED POLICY
Purpose/Definition
The Five-Year Financial Plan ("Plan") forecasts the City's revenues and expenditures over a five-year
period. The Plan focuses on the General Purpose Fund, and other major funds Such as [fie Landscape
and Lighting Assessment District and the Oakland Redevelopment Aguicy. The intent of the Plan is
to allow the Council and the City Manager to put current funding decisions in tile context of
forecasted economic conditions. The Plan incorporates economic and demographic data at the
national, local and state level, as well as other data that aids in forecastin.a.
General Responsibilities
Cit'y Manager
The City Manager, shall be responsible for producing an updated Five-Year Financial Plan on an
aftnual basis. The Plan shall be produced and distributed prior to the beginning of any annual budget
deliberations by the Council. The Budget Off-ice. under the supervision and direction of the City
Manager currently perfornris this function.
Other Departments
Other departments shall be responsible to the City Manager for providing such information as the City
Manager, requires to produce the Plan in a timely mariner. Currently, the Budget Office under the
supervision and direction of the City Manager oversees this process.
The Cit'v Council ana' the City Manager
The Council and the City Manager shall make use of the inforniation contained in tile Plan as they
consider actions that would have a significant impact on tile City's revenue or expenditures over a
five-year period.
SUSTAINABLE OPPORTUNITIES
Adoption of the long-term financial planning policy would not &rectly impact economic,
envirormiental or social eqUit'Y' opportunities. However. credit rating agencies are likeiv to favor the
Financial Polici, on Long-Term Planning Page 3
City's intention to plan ahead because such planning provides for greater financial stability. and
si.-nals a prudent approach to financial manaaement.
DISABILITY AND SENIOR CITIZEN ACCESS
Adoption of the Ion,--tenn financial planning policy would not directly impact disability or senior
citizen access.
ACTION REQUESTED OF THE CITY COUNCIL
Staff recommends that the Council adopt the attached resolution containing a polic@ on long-term
financial plannin.g.
Respectfully submitted,
-MARIANNA MARYS4EVA
ACTING BUDGET DIRECTOR
Prepared by:
Kirby Smith, Financial Analyst
Budget Off-ice
APPROVED FOR FORWARDrNG TO THE
FfNANCE AND MANAGEMENT COMMITTEE:
01
OFFICE OF THE CITY MANAGER
Item 10 - 2-5
ORA/Council
July 15, 2003
FINAN MTE.
N 2 4 200
APPR0% ED AS FO FOR@\l A@'@-DA@ 7U.
[NTRODLCED B@ COU\CILMENIBER
@)FFICE CIT 7 @_@SR
OAKLAND CITY COLINq@,@,.,1,1,11, 12 Pill 5:07
RESOLUTION No. C. M. S.
RESOLUTION ADOPTING THE CITY OF OAKLAND LONG-TERM FINANCIAL
PLANNING POLICY
WHEREAS, the City of Oakland's Five-Year Financial Plan is the City Manager's
best assessment of future revenues, expenditures and operating results over a five year
forecast period; and
WHEREAS, the Five-Year Financial Plan includes analysis of economic and
demographic data at the national, local and state level, and analyzes revenue and
expenditure trends for the General Purpose Fund and other major funds such as the
Landscape and Lighting Assessment District and the Oakland Redevelopment Agency;
and
WHEREAS, the Five-Year Financial Plan forecasts major revenue and
expenditure components of the aforementioned funds; and
WHEREAS, a long-term financial planning policy is intended to help the City
make prudent and informed financial decisions on matters such as economic
development, tax policy and labor negotiations; and
WHEREAS, the implementation of a long-term financial planning policy will help
the City attain a favorable rating from credit rating agencies; and
WHEREAS, the implementation of a long-term financial planning policy should
not result in significant increases in staff costs; now therefore be it
RESOLVED: that the City Council of the City of Oakland hereby finds,
determines, declares and resolves as follows:
Section 1. All of the recitals set forth above are true and correct.
Section 2. In order to insure that City of Oakland decision makers have the
information to allow them to prudently manage the City's fiscal resources, the City
Council hereby adopts the financial policy, as set forth below:
CITY OF OAKLAND LONG-TERM FINANCIAL PLANNING POLICY Item X.Wea
ORATC-Oeif
FurposelDefinition July 15,2003
The Five-Year Financial Plan ("Plan") forecasts the City's reverues and expencitures
over a five-year period. The Plan focuses on the General Purpose Fund, and other
malor funds such as the Landscape and Lighting Assessment District and the Oakland
Redevelopment Agency. The intent of the Plan is to allow the City Council and the City
Manager to put current funding decisions in the context of forecasted economic
conditions. Specifically, long-term financial planning improves the City's ability to make
informed decisions regarding labor negotiations, economic development projects and
tax policy. The Plan shall incorporate economic and demographic data at the national,
local and state level, as well as other data that aids in forecasting.
Credit rating agencies are likely to favor the City's intention to plan ahead because such
planning provides for greater financial stability, and signals a prudent approach to
financial management. Five-Year Planning also brings the City into compliance with
current "best practices" of other governmental entities.
it. General Responsibilities
City Manager
The City Manager, shall be responsible for producing an updated Five-Year Financial
Plan on an annual basis. The Plan shall be produced and distributed prior to the
beginning of any annual budget deliberations by the Council. The Budget Office, under
the supervision and direction of the City Manager currently performs this function.
Other Departments
Other departments shall be responsible to the City Manager for providing such
information as the City Manager requires to produce the Plan in a timely manner.
Currently, the Budget Office under the supervision and direction of the City Manager
oversees this orocess.
I
The City Council and the CitV Manager
The City Council and City Manager shall make use of the information contained in the
Plan as they consider any action that would have a significant impact on the City's
revenue or expenditures over a five-year period.
In Council, Oakland, California, 2003
PASSED BY THE FOLLOWING VOTE:
Ayes- BROOKS, BRUNNER, CHANG, NADEL, QUAN, REID, WAN AND
PRESIDENT DE LA FUENT E
Noes-
Absent-
Abstention-
1tern116-Ud4!,,
ORA/Council
July 15,2003
2