OAKLAND ECONOMIC READER

Transcription

1 OAKLAND ECONOMIC READER

2 PROFESSIONAL & TECHNICAL ENGINEERS, LOCAL 21, AFL- CIO An Organization of Professional, Technical, and Administrative Employees Dear Councilmember, We have included 4 studies which have been presented at the bargaining table that are important to Oakland City workers, and speak to the issues that we are seeking to address. The Beacon Economics City of Oakland Revenue Forecast predicts a positive economic picture for Oakland over the next 5 years. The report forecasts increased real estate revenue, positive growth for consumer and business spending revenue, transient occupancy tax revenue growth, business license and parking tax revenue increases, etc. The Fairlie report on the State of the Economies in the Oakland Area, Greater Bay Area, and Alameda County examines the economic conditions in these areas and explores projections for the next few years. The report finds that the labor market in Oakland is very strong and is forecasted to continue to strengthen, the Oakland area and Bay Area has low unemployment and has some of the highest wage rates in the country, the Bay Area is an extremely expensive place to live with the highest housing costs in the country, and that inflationary pressures have resulted in a CPI of 3.8%. The Local 21 City of Oakland Financial Analysis shows a pattern of underestimation of revenue and overestimation of expenses. Despite actual total revenue increases of 11.6% and 8.5% over the past two years, the City is only projecting revenue increases of 7.25% and 2.63%. The Compensation Study commissioned by the City of Oakland finds that Local 21 members are underpaid by an average of almost 10% as compared with other Bay Area jurisdictions. We ask that you take into consideration the very positive fiscal outlook for the City of Oakland as compared with the uncompetitive wages of Oakland City workers as you enjoy your break. We believe that a fair contract for Oakland workers also supports a stronger Oakland. We hope you ll agree! Sincerely, Renee Sykes Vice President, IFPTE Local 21 ii

3 PROFESSIONAL & TECHNICAL ENGINEERS, LOCAL 21, AFL- CIO An Organization of Professional, Technical, and Administrative Employees BEACON ECONOMICS CITY OF OAKLAND REVENUE FORECAST- SUMMARY Beacon Economics forecast represents an optimistic outlook through and assumes that the U.S. economy will grow at a moderate pace, much as it has in recent years. The Oakland economy is trending in the right direction. The East Bay continues to reach record employment levels virtually each month. The City s revenue most closely tied to real estate will enjoy positive growth over the next five fiscal years. As of the fourth quarter of 2016, the median price of an existing Oakland home was $621,500 on a seasonally adjusted basis, a 10.7% increase over the same period a year earlier. Beacon is forecasting positive growth for consumer and business spending revenue sources over the next five fiscal years as the regional economy remains solid. Transient occupancy tax (TOT) revenue growth has been robust and Beacon expects TOT revenue to trend steadily higher as room rates in- crease and occupancy levels re- main elevated. The positive economic environment bodes well for the City s other revenue, such as business license and parking tax revenue, as residents, visitors and employees continue to spend locally. The State of the Economies in the Oakland area, greater Bay Area, and Alameda County Main Office: 1167 Mission Street, 2 nd Floor San Francisco, CA T: F: South Bay Office: 4 North Second Street, Suite 430 iii San Jose, CA T: F: Oakland Office: 1440 Broadway, Suite 610 Oakland, CA T: Martinez Office: 649 Main Street #226 Martinez, CA T: F:

4 City of Oakland Revenue Forecast April 2017

5 City of Oakland Revenue Forecast This publication was prepared for: IFPTE Local 21 This publication was prepared by: Beacon Economics Christopher Thornberg, PhD Robert Kleinhenz, PhD Founding Partner Economist and Executive Director of Research 5777 West Century Boulevard, Suite West Century Boulevard, Suite 895 Los Angeles, California Los Angeles, California Eric Meux Manager, Economic Research For further information about this publication please contact: Victoria Pike Bond Rick Smith Director of Communications Director of Business Development Beacon Economics, LLC Beacon Economics, LLC Or visit our website at Reproduction of this document or any portion therein is prohibited without the expressed written permission of Beacon Economics. Copyright 2017 by Beacon Economics LLC.

6 Contents Report Overview 1 National and State Economies 2 City of Oakland Revenue Forecast 3 Summary 6

7 City of Oakland Revenue Forecast Beacon Economics Report Overview This revenue forecast for the City of Oakland, extending to , uses standard time-series econometric techniques based on historical correlations and forecasts of economic trends. Beacon Economics method of forecasting takes a layered approach. National policy changes and external shocks are built into a U.S. model with a variety of economic indicators: GDP, production, demographics, interest rates, government spending, taxes, savings, income growth and real estate. Beacon then crafts a California model that incorporates macro trends at the national level with statewide trends in employment/labor markets, demographics, real estate and business activity. Taking into account these state and national factors, Beacon creates a regional model for the East Bay using macro trends to generate a local forecast that delivers a broad outlook for the region, comprising: Employment by industry Unemployment Consumer spending and income trends Population and components of change Residential and nonresidential real estate and construction. The regional assessment highlights the major drivers at the national level, continues with developments in the State of California, and zooms in on the economy of the City of Oakland to forecast the City s major revenue streams extending to City of Oakland Revenue Forecast Revenue Stream Actual Forecast FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Assessed Value ($ 000s) 51,265,709 55,095,742 58,318,980 61,585,280 64,649,140 67,430,330 70,261,700 Growth(%) Business Tax 71,152,040 74,627,920 78,530,680 82,215,290 85,865,390 89,643,730 93,619,160 Growth(%) Transient Occupancy Tax 19,813,441 23,322,650 26,233,940 28,431,259 30,243,602 31,852,808 33,493,037 Growth(%) Real Property Transfer Tax 87,011,301 95,313, ,822, ,217, ,174, ,686, ,564,094 Growth(%) Taxable Sales ($ 000s) 4,458,120 4,541,988 4,703,329 4,838,037 4,965,931 5,081,604 5,191,145 Growth(%) Parking Tax 10,213,451 10,774,890 11,677,690 12,445,160 13,141,300 13,796,150 14,440,690 Growth(%) Utility Tax 47,622,859 48,006,000 49,100,690 50,028,880 50,815,700 51,495,980 52,094,720 Growth(%) Source: City of Oakland, Forecast by Beacon Economics 1

8 City of Oakland Revenue Forecast Beacon Economics National and State Economies The City of Oakland s economy is heavily dependent on the national and state economies. In the most recent edition of Beaconomics (free of charge at Beacon Economics analyzes national and state economic trends in depth. Below is a summary of what Beacon sees happening in the U.S. and California economies. United States Economy With the start of the second quarter of 2017, two distinctly opposing trends have formed in terms of the U.S. economy s outlook for the year. On one hand, the economy is clearly gaining momentum after slow growth in On the other hand, policy uncertainties created by the surprise election of Donald Trump have only become more pronounced as his administration moves into its fourth month. President Trump s first major agenda items travel bans and health insurance reform have become mired in political and legal battles. The result is that although Beacon Economics point estimate for growth in 2017 has increased marginally, to slightly less than 2.5%, the range of variance around this estimate is also widening. In other words, uncertainty is the biggest current issue for the nation. U.S. annualized growth in the last quarter of 2016 came in at a weaker-than-expected 2.1% and may be even lower for the first quarter of this year. But these top-line numbers belie growing momentum in the economy. Fourth-quarter growth was pushed down by a very large jump in the nation s trade deficit, yet in contrast, domestic demand (driven by increases in consumer, business and government spending) grew 2.6% the best since the third quarter of Beyond overall GDP growth, other indicators show momentum for the economy. Industrial production estimates from the Federal Reserve have been rising since last fall, and the ISM indexes for both manufacturing and services continue to rise. These improved outcomes are being driven by an international economy that has returned to a growth track with better-than-expected numbers coming from many corners of the globe. If Beacon Economics believed that President Trump would be able to enact his policy priorities, we might have better clarity on economic outcomes, for better or worse. But given that the administration s first three major policy initiatives the travel ban, health insurance and the budget have been stymied by the courts or Republican Party infighting, it has become increasingly difficult to predict how policy will actually change and what that may mean for economic growth. California Economy California has good reason to be concerned about the disruptive political environment that has characterized President Trump s first months in office. With a large foreign-born population and a significant amount of the nation s trade passing through its ports and over its borders, the state and its economy are hardwired to the rest of the world. In 2016 California s economy generally tracked the national economy. The state s unemployment rate fell to its lowest point in 10 years, 5.1%, in January 2017, marginally higher than the U.S. rate. California s real GDP in the third quarter of 2016 (the latest available data) grew 3.3% in annualized terms, roughly on par with the nation s 3.5% rate in that period. 2

9 City of Oakland Revenue Forecast Beacon Economics Entering 2017, the state showed steady but somewhat slower job growth. Jobs increased 2.0% year over year in January, considerably lower than the 3.2% growth rate a year earlier. California s housing market performance continues to be mixed. In general, prices have advanced modestly despite hurdles that have limited sales. Outside the San Francisco Bay Area, real home prices have yet to surpass their pre-recession peaks. Demand has been sustained by low interest rates but has been impeded by limited inventories, high underwriting standards and large down payment requirements. Home resales have been well below their long-run averages. On the supply side, new home construction has been relatively weak since the recession. Meanwhile, with the homeownership rate at its lowest level in decades, high demand for rental units has driven rents up and vacancy rates down. It will take time for policy changes in D.C. to work their way through the political process. As such, California should experience continued growth in economic activity and jobs throughout 2017, with the largest contributions to employment coming from Health Care, Leisure and Hospitality, and Professional Services. City of Oakland Revenue Forecast Beacon Economics current forecast for the City of Oakland continues to assume a baseline trajectory for the national economy. That is, the forecast assumes that current federal government policies will not change in a way that affects the underlying dynamics of economic growth, and that the U.S. economy will continue to expand at a moderate pace. It should be noted, however, that with considerable uncertainty surrounding President Trump s policy actions, our outlook on short-term growth could change significantly. Beacon will monitor the situation and reassess as new information becomes available. East Bay Home Price Outlook Price growth holding steady $ 000s $ 000s Median Home Price Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Inflation Adjusted Annual Cost Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics % % of Per-Capita Income Year Mortgage Rate Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Housing Affordability Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Real Estate Driven Revenues Oakland s real estate market has been mixed over the last year, with prices steadily trending higher but home sales continuing to disappoint. Although this has led to projections for slower growth for assessed value (AV) and property transfer tax, we remain confident that the City s revenue most closely tied to real estate will enjoy positive growth over the next five fiscal years. 3

10 City of Oakland Revenue Forecast Beacon Economics As of the fourth quarter of 2016, the median price of an existing Oakland home was $621,500 on a seasonally adjusted basis, a 10.7% increase over the same period a year earlier. This was a strong reversal of the 0.9% year-over-year decline in the third quarter of 2016, and slightly higher than the 9.9% growth in This price growth is in line with expectations and will help support growth in property transfer taxes in the current fiscal year and in the assessor s estimate for the assessment roll. Home resales, however, have continued to come in below expectations. During the first half of the fiscal year there were 1,500 sales on a seasonally adjusted basis, which was 2.7% lower than the first half of The City s home sales have been trending much lower than historical averages in recent years, restricted by a limited inventory. In the third and fourth quarter of 2016 home sales averaged about 750 per quarter, lower than the historical average of 880. The limited inventory is not showing many signs of abating in the near term. For the fiscal year to date through March, there was a two-month supply, according to East Bay Home Sales Outlook Market inventories remain at historic lows Units (000s) Units (000s) Existing Home Sales Q1-90 Q1-00 Q1-10 Q1-20 Value fcast Source: Forecast by Beacon Economics Sales Less Foreclosures Q3-01 Q3-04 Q3-07 Q3-10 Q3-13 Q3-16 Total Sales Source: DataQuick Less Foreclosures Units (000s) Oakland Construction Trends Permitting activity trending favorably Residential Permits Q1-00 Q1-05 Q1-10 Q1-15 Multi-Family Single-Family Source: Construction Industry Research Board Construction Employment Values ($ Millions) Taxable Sales ($ Millions) 5 0 Defaults and Foreclosures Q3-06 Q1-09 Q3-11 Q1-14 Q3-16 Defaults Source: DataQuick Months Supply Foreclosures Q1-90 Q1-95 Q1-00 Q1-05 Q1-10 Q1-15 Source: California Assocation of Realators Non-Residential Permits Q1-00 Q1-05 Q1-10 Q1-15 Source: Construction Industry Research Boar 1,100 1, Construction Spending Orange County Mar-97 Mar-01 Mar-05 Mar-09 Mar-13 Mar-17 Q1-09 Q1-11 Q1-13 Q1-15 Q1-17 Source: California Employment Development Department Source: HdL Companies the California Association of Realtors, meaning the homes on the market would be exhausted in two months at the current pace of sales. This was little changed from a 2.1-month reading in and notably lower than the historical average of a 4.6-month supply. On the plus side, construction activity has been trending favorably, which will help support AV growth. The total value of nonresidential permits in the City nearly tripled for the first half of , which is even more impressive because it comes on top of a 76% increase in Residential permitting has been strong as well. The number 4

11 City of Oakland Revenue Forecast Beacon Economics of housing units permitted in the first half of , 678, was up sharply from 278 in the first half of and driven primarily by permits for multifamily units. As the drop in energy prices fades into the past and oil prices stabilize, national inflation is finally returning to the Federal Reserve s 2% target, which bodes well for the City s AV base. The latest data show that from October 2015 to October 2016, the California CPI rose 2.6%, which will allow AV for properties not subject to reassessment to grow at the 2% upper end of Proposition 13 restrictions. Consumer and Business Spending Driven Revenues The City s revenue more closely tied to consumer and business spending in the region has been mixed over the last year. Transient occupancy tax (TOT) revenue growth has been robust, while taxable sales growth has been lagging. Nevertheless, Beacon Economics is forecasting positive growth for these revenue sources over the next five fiscal years as the regional economy remains solid. East Bay Labor Market Employment reaching new record high levels Employees (000s) 1,300 1,200 1,100 1, Nonfarm Employment Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Industry Job Creation % Unemployment Rate Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Industry Employment Growth As measured by the labor market, local economic health is quite good. The East Bay continues to reach record employment levels virtually each month. For all of 2016, total nonfarm employment in the East Bay increased 3.3% over Education/Health Professional/Business Government NR/Construction Leisure/Hospitality Financial Activities Other Services Information Trade/Logistics Manufacturing ,740 5,457 5,326 4,517 4,416 3, ,000 4,000 6,000 8, Source: California Employment Development Department 2015 average employment. This was higher than the 2.7% pace of job creation statewide and matched the same rate of job growth in 2015 for the East Bay. The industries leading the job gains in the region are the Education and Health Care and the Professional, Scientific, and Technical Services industries, both sectors associated with a growing population and subsequent spending base, and an expanding economy. Taxable sales growth has been disappointing, and in the first half of taxable sales in the City were down 0.5% from the same period a year earlier. The recent slowdown has been primarily due to transitory factors, and to a lesser extent, a general slowing of economic growth compared with the recovery period that followed the Great Recession. One of the major drags on taxable sales growth, not just in the City of Oakland but also across the state, has been the decline in fuel prices, which weighs down nominal spending. Oil prices have stabilized recently, however, which will help support growth in the near term. During the first quarter of 2017, the average price for West Texas Intermediate, the U.S. oil benchmark, was 55.6% higher than in the first quarter of 2016, when it fell to the lowest average quarterly price since the fourth quarter of

12 City of Oakland Revenue Forecast Beacon Economics TOT revenue has increased at a robust pace this last year, reflecting strong tourism and business travel. For the year-todate period through March, TOT revenue was 17% higher than the same period a year earlier. With no projected reversal in overall economic activity in the region, Beacon expects TOT revenue to trend steadily higher as room rates increase and occupancy levels remain elevated. The positive economic environment bodes well for the City s other revenue, such as business license and parking tax revenue, as residents, visitors and employees continue to spend locally. East Bay Spending and Income Stabilizing fuel prices to support nominal sales growth $ Million $ Billion 15,000 10,000 5, Taxable Sales Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Personal Income Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Autos and Transportation Building and Construction Business and Industry-0.9 Food and Drugs Fuel and Service Stations General Consumer Goods Restaurants and Hotels Total 3,000,000 2,800,000 2,600,000 2,400,000 2,200,000 2,000,000 Taxable Receipts Growth Source: HdL Companies Population Q1-90 Q1-00 Q1-10 Q1-20 Actual Forecast Source: Forecast by Beacon Economics Summary Beacon Economics forecast represents an optimistic outlook through and assumes that the U.S. economy will grow at a moderate pace, much as it has in recent years. Because of uncertainty surrounding President Trump s policies, there is an inherent uncertainty within this forecast. Beacon will closely monitor policies as they are announced and enacted and will adjust its economic outlook accordingly. The Oakland economy is trending in the right direction, as is the national economy overall. At the end of January, the U.S. Bureau of Economic Analysis reported 3.5% annualized growth for the third quarter. This came after a 1.4% rise in the second quarter and was the highest rate in two years. This flies in the face of the negative campaign rhetoric and points to a strong national economy on an upward trajectory. Fourth-quarter growth came in at 2.1%, in line with the post-recession average, indicating that U.S. GDP is on a steady, if slow, track. As the national economy continues to grow, there is little doubt that the economy of the City of Oakland will do likewise. 6

13 City of Oakland Revenue Forecast Beacon Economics City of Oakland Revenue Forecast Revenue Stream Actual Forecast FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 Assessed Value ($ 000s) 51,265,709 55,095,742 58,318,980 61,585,280 64,649,140 67,430,330 70,261,700 Growth(%) Business Tax 71,152,040 74,627,920 78,530,680 82,215,290 85,865,390 89,643,730 93,619,160 Growth(%) Transient Occupancy Tax 19,813,441 23,322,650 26,233,940 28,431,259 30,243,602 31,852,808 33,493,037 Growth(%) Real Property Transfer Tax 87,011,301 95,313, ,822, ,217, ,174, ,686, ,564,094 Growth(%) Taxable Sales ($ 000s) 4,458,120 4,541,988 4,703,329 4,838,037 4,965,931 5,081,604 5,191,145 Growth(%) Parking Tax 10,213,451 10,774,890 11,677,690 12,445,160 13,141,300 13,796,150 14,440,690 Growth(%) Utility Tax 47,622,859 48,006,000 49,100,690 50,028,880 50,815,700 51,495,980 52,094,720 Growth(%) Source: City of Oakland, Forecast by Beacon Economics 7

14 City of Oakland Revenue Forecast Beacon Economics About Beacon Economics Beacon Economics, LLC is a leading provider of economic research and forecasting, industry analysis, public policy analysis, and economic data services. By delivering independent, rigorous analysis, we give our clients the knowledge they need to make the right strategic decisions about investment, growth, revenue, and policy. Learn more at Services Economic and revenue forecasting Economic impact and fiscal analysis Regional economic analysis Public policy analysis Real estate market analysis Industry and market analysis EB-5 Visa analysis Contacts Sherif Hanna Managing Partner (424) Sherif@BeaconEcon.com Rick Smith Director of Business Development (858) Rick@BeaconEcon.com Victoria Pike Bond Director of Communications (415) Victoria@BeaconEcon.com 8

15 Robert Fairlie Professor of Economics University of California, Santa Cruz Visiting Scholar, Stanford University June 14, 2017 Executive Summary This report examines economic conditions in the Oakland area, broader Bay Area, and Alameda County over the past several years and explores projections for the next few years. The report focuses on conditions in the labor market, businesses, housing market, gross domestic product, and inflation. A detailed analysis of economic conditions in the Oakland area, Bay Area, and Alameda County over the past few years clearly indicates that the local economy is strong and all forecasts call for continued strength. The main findings from the analysis are: The labor market in the Oakland area is strong and continuing to strengthen. The unemployment rate is very low, employment is growing, and wage rates are increasing. Forecasts call for continued strong performance in the labor market. Over the next few years, unemployment is projected to remain very low, employment is projected to increase, and wages are projected to grow. Compared to the rest of California and the United States, the Oakland area and Bay Area have very low unemployment rates and consist of many of the highest wage rate counties in the country. Gross domestic product (GDP) is growing and is projected to continue growing over the next few years. The Bay Area is an extremely expensive place to live. House prices in and around San Francisco and Oakland are the highest or next to highest in the country. The housing market in the San Jose-Sunnyvale-Santa Clara MSA is the most expensive in the nation and the housing market in San Francisco-Oakland-Fremont MSA is the second most expensive in the nation. House prices have risen rapidly in the San-Francisco-Oakland MSA over the past few years: 59 percent since Recent trends for housing prices project further increases in housing prices. Recent economic growth in San Francisco has created inflationary pressures. The latest annualized CPI for the Bay Area is 3.8 percent (April 2017). Alameda County, the largest county in the Oakland Metropolitan Division, is experiencing strong economic conditions on all measures. iv

16 Introduction An analysis of the Oakland and Bay Area regional economies is important for understanding their health and trajectory. Conditions in the labor, housing, business, consumer, and tourism markets have major implications for local tax revenues. They directly or indirectly affect property taxes, business taxes, local sales taxes and hotel taxes. Furthermore, conditions in these markets, especially in housing, directly affect the cost of living for residents of the Oakland metropolitan area and its surrounding areas. Trends in the past few years and the most current data available on several aspects of the Oakland and Bay Area regional economies are examined. Forecasts for several measures of the local economy from prominent sources are also presented. The key regional designations used here follow the standard designations used by federal and state government agencies (e.g. U.S. Census Bureau). The largest area examined is the San Francisco- Oakland-Hayward, CA Metropolitan Statistical Area (MSA). 1 The next largest area is the Oakland- Hayward-Fremont, CA Metropolitan Division (MD), which is comprised of Alameda and Contra Costa Counties. In the figure this is referred to as the Oakland MD. For some measures, separate results are shown for Alameda County which is the most populous county in the Oakland MD. The U.S is experiencing strong economic growth. Gross domestic product (GDP) grew 1.6 percent over 2016 and 1.2 percent in 2017Q1. The national unemployment rate declined nearly a full percentage point from the beginning of 2015 to the beginning of With this broader overview of national economic conditions in mind, recent trends in conditions in the Oakland and Bay Area regional economies are examined. Labor Market Conditions Conditions in the labor market are one of the most important barometers of local economic conditions. The labor market has a major effect on personal income, which in turn affects consumer demand and tax revenues. Two of the most common measures of local labor market conditions are the unemployment rate and the employment growth rate. I examine these measures for the Oakland area (i.e. Oakland-Hayward-Fremont MD), great Bay Area, Alameda County, and California as a whole. Figure 1 displays annual unemployment rates from 2010 to The first year reported is 2010, which is when local and national unemployment rates hit their peak from the Great Recession. Unemployment rates have been declining steadily since the 2010 peak. The unemployment rate was 10.9 percent in 2010 and dropped to 4.3 percent in 2016 in the Oakland area. Alameda County had similar unemployment rates. The greater Bay Area and California experienced similar patterns in unemployment rates from 2010 to The Bay Area (San Francisco Oakland-Hayward MSA) is defined as the 6-county area: Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara counties. 2 Source: U.S. Bureau of Labor Statistics (2016). 5

17 14.0% Figure 1: Unemployment Rate ( ) 12.0% 10.0% Unemployment Rate 8.0% 6.0% Oakland MD SF Bay Area California Alameda County 4.0% 2.0% 0.0% Another interesting finding from the comparison of unemployment rates is that the unemployment rate in the Oakland area was lower than for California over the entire time period. The most prominent forecasts for unemployment rates in California all call for further improvement in the unemployment rate over the next few years (Table 1). Projections by the California Department of Finance are for continuing low unemployment rates in California. 3 The unemployment rate is projected to be 5.1 percent in 2017, and 5.0 percent in 2018, 2019 and The California Legislative Analyst's Office (LAO) also projects a strong labor market over the next two years. 4 The unemployment rate in California is projected to be 5.3 percent in 2017 and 5.2 percent in The UCLA Anderson Forecast also projects a strong California labor market. 5 The unemployment rate in California is predicted to be 5.1 percent in 2017, 5.1 percent in 2018, and 4.6 percent in Forecasts were prepared by the California Department of Finance in April Forecasts were prepared by the California Legislative Analyst's Office in November 2016 and reported in The Budget: California s Fiscal Outlook. 5 Forecasts were prepared by the UCLA Anderson Forecast in March 2017 and June

18 Table 1: Unemployment Rate Forecasts California California Department of Finance 5.1% 5.0% 5.0% 5.0% California Legislative Analyst's Office (LAO) 5.3% 5.2% UCLA Anderson Forecast 5.1% 5.1% 4.6% Another measure of labor market conditions is the employment growth rate. Figure 2 displays employment growth rates for the Oakland area, great Bay Area, Alameda County, and California. 6 The employment growth rate is not affected by individuals who move into and out of the labor force as is the unemployment rate measure. After the low growth rates in the Great Recession employment growth has been strong since then. Employment growth has ranged from 2 to 3 percent from 2012 to 2016 in the Oakland area and Alameda County. Employment growth has been similarly strong in the past few years in the broader Bay Area and California. 5.0% Figure 2: Employment Growth Rate ( ) 4.0% 3.0% 2.0% Employment Growth Rate 1.0% 0.0% % Oakland MD SF Bay Area California Alameda County -2.0% -3.0% -4.0% -5.0% 6 Source: U.S. Bureau of Labor Statistics (2016). 7

19 The strong rate of employment growth in the Oakland area was not concentrated in only a few industries. Figure 2.B displays employment growth rates from 2014 to 2015 in the Oakland area by industry. The Information industry which includes a substantial part of hi-tech grew rapidly at 6.1 percent. Five additional industry classifications experienced rapid employment growth of rapid employment growth of close to 4 percent or higher. Figure 2.B: Employment Growth Rate ( ) by Industry, Oakland MD Other services Leisure and hospitality Education and health services Professional and business services Financial activities Information Trade, transportation, and utilities Manufacturing Construction Total, All Industries -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% The California Department of Finance projects that employment in California will continue to grow over the next few years (Table 2). The prediction is for employment growth of 1.4 percent in 2017, and just under 1 percent over the next three years. The California LAO projects that wage and salary employment will grow by 1.9 percent in 2017 and 1.6 percent in The UCLA Anderson Forecast projects employment growth of 2.1 percent in 2017, 1.2 percent in 2018, and 0.9 percent in Table 2: Employment Growth Rate Forecasts California California Department of Finance 1.4% 0.9% 0.9% 0.8% California Legislative Analyst's Office (LAO) 1.9% 1.6% UCLA Anderson Forecast 2.1% 1.2% 0.9% 8

20 Wages are extremely high in the Oakland area and greater Bay Area compared to the rest of California and especially compared to the rest of the country. Figure 3 displays average weekly wages by year. Average wages have increased steadily since 2010 in the Oakland area, greater Bay Area, and Alameda County. $1,900 Figure 3: Average Weekly Wages ( ) $1,800 $1,700 $1,600 $1,500 Average Weekly Wages $1,400 $1,300 $1,200 $1,100 Oakland MD SF Bay Area California Alameda County $1,000 $900 $800 $700 $ Examining the latest available data on wages, average weekly wages were $1,346 in the Oakland area and $1,828 in the greater Bay Area in 2016Q3. 7 Average weekly wages were $1,394 in Alameda County. These average wages are higher than the California total ($1,216) and substantially higher than the U.S. total ($1,027). All of the Bay Area counties are ranked among the highest average wage levels of the 345 largest counties in the United States. Santa Clara County is the highest wage county in the country, followed by San Mateo County and San Francisco County. Alameda County is the 15 th highest ranked county and Contra Costa County is the 28 th highest ranked county in the United States. 7 Source: U.S. Bureau of Labor Statistics (2016). 9

21 The California Department of Finance projects that average wages in California will continue to grow strongly over the next few years: 4.3 percent in 2016, 4.1 percent in 2017, 3.8 percent in 2018, and 4.2 percent in Three main conclusions can be drawn from this analysis of labor market conditions in the Oakland area and broader Bay Area. First, unemployment rates are very low and employment growth is strong. Second, recent trends in unemployment rates and employment growth suggest continuing improvement in the Oakland area, greater Bay Area, and Alameda County labor markets, which is supported by three separate forecasts of the California labor market over the next few years. All three forecasts predict future improvement in labor market conditions in California. Finally, average wages are high in the Oakland area and greater Bay Area, and have grown in the past few years. Wages are forecasted to grow strongly over the next few years in California. Business Conditions The local business climate is another gauge of how well the local economy is doing. Figure 4 displays the growth rate in employer establishments in the Oakland area, greater Bay Area, Alameda County and California over the past several years. 8 Businesses that hire employees are more successful than nonemployer businesses and tend to follow the business cycle more closely. The employer establishment growth rate was generally negative in 2010 and By 2012 growth rates were positive in all locations. The growth rate in employer establishments in 2015 was 2.2 percent in the Oakland MD. In the Bay Area the growth rate was 2.0 percent, and in Alameda County the growth rate was 2.4 percent. 8 Estimates are from the U.S. Census Bureau (2016) County Business Patterns. 10

22 3.0% Figure 4: Number of Employer Establishments Growth Rate ( ) 2.0% Employer Establishments Growth Rate 1.0% 0.0% % Oakland MD SF Bay Area California Alameda County -2.0% -3.0% Gross Domestic Product The growth rate in Gross Domestic Product (GDP) captures the combination of the worker, consumer and business sides of the local economy. GDP is defined as the output of goods and services produced by labor and property located in the regional area and is considered a broad measure of economic activity. Figure 5 displays GDP growth rates for the San Francisco-Oakland-Fremont MSA, San Jose- Sunnyvale-Santa Clara MSA, and California. GDP in the San Francisco-Oakland-Fremont MSA was $431 billion in Since 2010 GDP has grown steadily. In the past few years, GDP in the Bay Area and California has grown very rapidly. In 2015 GDP growth rates were 6-10 percent. 9 Source: U.S. Bureau of Economic Analysis (2015). 11

23 12.0% Figure 5: Gross Domestic Product Growth Rate ( ) 10.0% 8.0% 6.0% GDP Growth Rate 4.0% 2.0% 0.0% % San Francisco- Oakland- Hayward, CA (MSA) San Jose- Sunnyvale- Santa Clara, CA (MSA) California -4.0% -6.0% -8.0% The California Department of Finance predicts real GDP to grow over the next few years (Table 3). The forecast is for growth of 2.4 percent in 2017, 2.2 percent in 2018, and 2.1 percent in both 2019 and The California LAO projects real GDP growth in the United States to be 2.3 percent in 2017 and 2.2 percent in Note that projections for actual (or nominal) GDP growth rate would be even higher because these projections for real GDP adjust downward for inflation. Table 3: Real GDP Growth Forecasts United States California Department of Finance 2.4% 2.2% 2.1% 2.1% California Legislative Analyst's Office (LAO) 2.3% 2.2% Housing Conditions The housing market not only represents an important barometer of local economic conditions, but also provides the most important measure of the cost of living in a local area. Figure 6 displays median home prices in the San Francisco-Oakland-Fremont MSA, San Jose-Sunnyvale-Santa Clara MSA, and 12

24 California. 10 The median home price in the San Francisco-Oakland-Fremont MSA increased from $526,000 in 2010 to $830,000 in 2016Q4 (an increase of 58 percent). House prices in the San Jose- Sunnyvale-Santa Clara MSA also increased substantially over the past several years, from $595,000 in 2010 to $1,005,000 in 2016Q4 (an increase of 69 percent). $1,200 Figure 6: Median Home Price ( ) $1,000 Median Home Price (000s) $800 $600 $400 San Francisco- Oakland- Fremont, CA San Jose- Sunnyvale- Santa Clara, CA United States $200 $ House prices in the Bay Area are extremely high relative to the rest of the country. The median home price in the San Francisco-Oakland-Fremont MSA of $830,000 is more than three and a half times the national median of $235,000. The San Francisco-Oakland-Fremont MSA has the second highest ranked median home price out of all metropolitan areas in the country. Figure 7 displays median home prices in 2016Q4 for the San Francisco-Oakland-Fremont MSA and all other metropolitan areas listed in the data. Only names of the San Francisco MSA, San Jose MSA and the other largest MSAs are reported in the figure to make it easier to read. The San Jose-Sunnyvale-Santa Clara MSA at $1,005,000 has the highest ranked median home price out of all metropolitan areas in the country. The median home price in the San Jose-Sunnyvale-Santa Clara MSA is nearly four and half times the national median. After the San Jose and San Francisco MSAs, the next highest median home prices are for the Anaheim, Honolulu, and San Diego MSAs. The figure makes it clear how much higher home prices are in the San Francisco Bay Area relative to other metropolitan areas in the country. 10 Source: National Association of Realtors (2015). 13

25 1100 Figure 7: Median Home Price by MSA (000s) (2016Q4) Inflation In the last several years the CPI was large and positive for both the San Francisco Bay Area and the United States. It has also been rising over the past two and a half years. Figure 8 displays the Consumer Price Index (CPI) for the San Francisco-Oakland-San Jose region and the United States. 11 The CPI is annualized for the year prior to the reported month. Since 2016, the annualized CPI ranged from 2.7 to 3.8 percent in the San Francisco Bay Area and ranged from 0.8 to 2.7 percent in the United States. Since late 2013 inflation has been substantially higher in the Bay Area than the rest of the nation. 11 Source: U.S. Bureau of Labor Statistics (2016). 14

26 6 Figure 8: Consumer Price Index (2010-Apr. 2017) Consumer Price Index San Francisco/Oakland/San Jose United States Forecasts for inflation over the next few years in the San Francisco Bay Area call for very high levels of inflation. The California Department of Finance projects that the CPI for the San Francisco Bay Area will be 3.5 percent in 2017, 3.7 percent in 2018, 3.5 percent in 2019, and 3.4 percent in Forecasts of inflation in California also call for very high rates of inflation over the next few years. The California Department of Finance projects that the CPI will be 3.0 percent in 2017, and 2.9 percent over the following three years in California. The California LAO projects the CPI in California to be 2.8 percent in 2017 and 2.7 percent in For the United States, the California Department of Finance and the California LAO projects the CPI to generally be in the range of 2.2 to 2.3 percent over the next few years. 15

27 Table 4: Consumer Price Index Forecasts San Francisco California Department of Finance 3.5% 3.7% 3.5% 3.4% California California Department of Finance 3.0% 2.9% 2.9% 2.9% California Legislative Analyst's Office (LAO) 2.8% 2.7% United States California Department of Finance 2.3% 2.3% 2.3% 2.2% California Legislative Analyst's Office (LAO) 2.3% 2.2% Summary The analysis of local economic conditions over the past few years clearly indicates that the Oakland area, greater Bay Area and Alameda County economies are growing strongly. Recent trends indicate substantial continued growth in the local economy and all forecasts for California project continuing growth over the next few years. The improvements are found in all aspects of the local economy studied: unemployment, employment growth, GDP growth, and home prices. The cost of living in the Oakland area and greater Bay Area is also extremely high and there are considerable inflationary pressures that are forecasted to continue. 16

28 PROFESSIONAL & TECHNICAL ENGINEERS, LOCAL 21, AFL- CIO An Organization of Professional, Technical, and Administrative Employees CITY OF OAKLAND FINANCIAL ANALYSIS- SUMMARY May 24, 2017 A comparison of budgeted versus actual revenue and expenses over the last several years shows a pattern of underestimation of revenue and overestimation of expenses. For example, the City ended FY15-16 with $58.5 million more revenue than forecasted. Oakland consistently spends less than it forecasts. In FY 15-16, the City spent $61.9 million less in expenditures than forecasted. The City ended up with a significant positive balance in its General Fund every fiscal year: FY2016 $130.9 million excess of revenues over expenditures FY2015 $89.3 million excess of revenues over expenditures FY2014 $47.1 million excess of revenues over expenditures The largest sources of revenue (property taxes, real estate transfer tax, business license tax, transient occupancy tax, sales tax, utility tax) have seen substantial increases. Actual total revenues increased by 11.36% in FY2016, 8.5% in FY2015, and 2.7% in FY2014, yet the City projects GF revenue increases of only 7.24% in FY2018 and 2.63% in FY2019. The City's reserves are fully funded and the City has taken positive strides towards increasing the funding ratio of unfunded pension liability. Main Office: 1167 Mission Street, 2 nd Floor San Francisco, CA T: F: South Bay Office: 4 North Second Street, Suite San Jose, CA T: F: Oakland Office: 1440 Broadway, Suite 610 Oakland, CA T: Martinez Office: 649 Main Street #226 Martinez, CA T: F:

29 PROFESSIONAL & TECHNICAL ENGINEERS, LOCAL 21, AFL- CIO An Organization of Professional, Technical, and Administrative Employees CITY OF OAKLAND FINANCIAL ANALYSIS May 24, 2017 Proposed and adopted budgets are living documents that constantly change they are merely the City Administration s interpretation of the budget situation. All numbers in these documents are ultimately inaccurate since they are projections (ie. guesstimates ) intended to maintain current levels of expenditures, and they are regularly adjusted to reflect the dynamic needs of the City of Oakland (City). The City s Quarterly Revenue and Expenditure Result reports can be a useful tool to track changes in revenue and expenditure projections during the fiscal year. 12 Most of the information needed to evaluate a local government s financial condition can be found in its Comprehensive Annual Financial Report (CAFR), which is an audited financial document that includes accurate year-end numbers. 13 The General Fund (GF) is the City s primary operating fund. It accounts for all the unassigned/unallocated resources of the general government. These activities are funded principally by property taxes, sales and use taxes, business, utility and real estate transfer taxes, interest and investment income, and charges for services. The GF is an important measure of a local government s fiscal strength. Although the condition of every fund is relevant when analyzing a government s financial health, this analysis focuses primarily on the GF because it finances general government operations, including the day-to-day operations of most of our departments, such as salaries. Cities and counties generally make cautious predictions because they don t want to create a budget crisis. There is frequently a systemic bias where they underestimate revenue and overestimate expenditures. Exact predictions are impossible, and there is an obvious preference for this approach rather than running up a budget deficit. If we compare budgeted versus actual revenue and expenses over several years, we can get an idea of the City s ability to forecast revenue and control expenditures and in some cases establish a pattern of over and/or underestimates. Excess balances are either used as revenue for the next fiscal year or 12 These reports can be found in the City s Special Finance and Management Committee Agenda available on line. The most recent on is available at 13 CAFRs are available on the City s website at 18

30 categorized as one time revenues. City managers have been known to deliberately hide money in reserves to prepare for future budget deficits. The purpose of this analysis is to provide an overview of what the financial reports say about the City s budget situation and potentially identify areas to seek further clarification from the City. What we hope to find in reviewing the financial statements includes an unreserved fund balance in the general fund of over 16.67% of the GF annual expenditures. There should be sufficient cash and assets to cover most of the general fund balance. We also like to see revenue increasing over time and sufficient to meet expenditures, a manageable level of debt, and the other funds in good enough condition so that the general fund (the fund of last resort) is not required to cover the expenses of such other funds. However, the CAFR doesn t provide any clues about the local political situation or possible personal agendas of elected or appointed officials. Remember, all budget decisions are political. OVERVIEW OF OAKLAND ECONOMY Oakland s economy has shown steady signs of growth particularly in the housing, rental, and commercial property markets. 14 The City ended 2016 with continued growth in the local economy. Notably, an improved local real-estate market has led to strong growth in realestate related revenues, including property tax, real estate transfer tax, and transient occupancy tax. Other key economic indicators are trending positively: growth in total assessed value, stabilized low unemployment rate, continued regional employment growth, and City revenues are up in most categories (e.g., property tax, sales tax, business tax, real estate tax). 15 The City has taken steps to improve its financial situation, such as implementing the 3-tier pension plan reform system for all labor unions, establishing a Vital Services Stabilization Reserve, and fully funding the General Purpose Fund reserve to 7.5 percent per City Council. The City ended fiscal year with continued growth in the local economy. While the City continues to experience economic growth and increases in revenues, it still faces longer term financial challenges due to rising health care costs, pension and retiree health (OPEB) unfunded liabilities, years of deferred equipment purchases and facility maintenance that can no longer be delayed, and the need for substantial investment in City infrastructure CAFR, p. iii CAFR, p. iii CAFR, p. iv 19

31 The City s general obligation credit ratings of Aa2\AA- and stable outlook from Moody s Investors Services, Inc. and Standard & Poor s Corporation, further exemplify the City s fiscal health. UNDERESTIMATING REVENUE AND OVERESTIMATING EXPENDITURES IN THE GENERAL FUND REVENUES OAKLAND UNDER-PROJECTED REVENUE LAST 2 YEARS FY2016 The City ended the fiscal year with $58.5 million more revenue than forecasted. The biggest sources of revenue were property taxes ($257.7 million), real estate transfer taxes ($89.6 million), charges for services ($85.2 million) and business license taxes ($75.5 million). Sales and utility taxes were another considerable source of revenue ($52.2 and $ 51 million respectively), though actual sales taxes fell short by 3.2 million compared to projections. Annuity income, fines and penalties, and licenses and permits also fell short of projections. 17 FY2015 The City ended the fiscal year with $44.3 million more revenue than forecasted. The biggest sources of revenue were property taxes ($228.1 million), charges for services ($82.5 million), business license taxes ($66.7 million) and real estate transfer taxes ($62.7 million). Sales and utility taxes were another considerable source of revenue ($48.8 and $ 50.6 million respectively). Annuity income was the only revenue source that was significantly under projections. 18 FY2014 The City ended the fiscal year with $1.5 million less revenue than forecasted. 19 The biggest sources of revenue were property taxes ($205.9 million), charges for services ($78 million), business license taxes ($62.9 million) and real estate transfer taxes ($59.1 million). Sales and utility taxes were another considerable source of revenue ($47 and $50.4 million respectively). Annuity income, sales tax and other revenues were all significantly under projections. 20 EXPENDITURES OAKLAND CONSISTENTLY SPENDS LESS THAN IT FORECASTS FY2016 The City spent $61.9 million less in expenditures than forecasted. In fact, the only two expenses that were over projections were the Police Department ($7.7 million) and Bond Insurance Cost ($240,000). All other expenses were below projections CAFR, p CAFR, p CAFR, p CAFR, p CAFR, p

32 FY2015 The City spent $45.1 million less in expenditures than forecasted. In fact, the only two expenses that were significantly over projections were the Police Department ($3.2 million) and Parks and Recreation ($1.4 million). 22 FY2014 The City ended the fiscal year with $48.6 million less in expenditures than forecasted. The only expenses that were significantly over projections Economic and Workforce Development ($7.1 million) and Public Works ($858,000). 23 OAKLAND HAD EXCESS REVENUES OVER EXPENDITURES FOR LAST 3 YEARS By comparing actual revenue and expenditures with the City s Final Budget projections for revenue and expenditures, we see that the City ended up with a significant positive balance in its General Fund every fiscal year: FY2016 $130.9 million excess of revenues over expenditures 24 FY2015 $89.3 million excess of revenues over expenditures 25 FY2014 $47.1 million excess of revenues over expenditures 26 LARGEST SOURCES OF REVENUE HAVE SEEN SUBSTANTIAL INCREASES 27 Actual total revenues increased by 11.36% in FY2016, 8.5% in FY2015, and 2.7% in FY2014. Yet the City projects GF revenue increases of only 7.24% in FY2018 and 2.63% in FY Property tax Property tax is the largest single source of revenue for the GF and represents over one third of all General Purpose Fund Revenue. FY2016 The City received $257.7 million in property tax revenue, which was $21.8 million more than projected. There was a 13% increase ($29.6 million) from the previous year. FY2015 The City received $228.1 million in property tax revenue, which was $21.6 million more than projected. There was a 10.8% increase ($22.2 million) from the previous year. FY2014 The City received $205.9 million in property tax revenue, which was $8.6 million less than projected. There was a 4% decrease ($ 8.6 million) from the previous year. Real estate transfer tax CAFR, p CAFR, p CAFR, p CAFR, p CAFR, p CAFR, p. 13, 119; 2015 CAFR, p. 14, 119; 2014 CAFR, p. 14, City of Oakland Five-Year Financial Forecast, p. 4 21

33 FY2016 The City received $89.6 million in real estate transfer tax revenue, which was $ million more than projected. There was a 43% increase ($26.9 million) from the previous year. FY2015 The City received $62.7 million in real estate transfer tax revenue, which was $9.7 million more than projected. There was a 6.1% increase ($3.6 million) from the previous year. FY2014 The City received $59.1 million in real estate transfer tax revenue, which was $2.3 million more than projected. There was a 24.6% increase ($11.7 million) from the previous year. Business license tax FY2016 The City received $75.5 million in business license tax revenue, which was $5.5 million more than projected. There was a 13.2% increase ($8.8 million) from the previous year. FY2015 The City received $66.7 million in business license tax revenue, which was $6.1 million more than projected. There was a 6% increase ($3.8 million) from the previous year. FY2014 The City received $62.9 million in business license tax revenue, which was $3.1 million more than projected. There was a 4.2% increase ($2.5 million) from the previous year. Transient occupancy tax FY2016 The City received $20.2 million in transient occupancy tax revenue, which was $3.3 million more than projected. There was a 19.6% ($3.3 million) increase in revenue from the previous year. FY2015 The City received $16.9 million in transient occupancy tax revenue, which was $2 million more than projected. There was a 15.9% ($2.3 million) increase in revenue from the previous year. FY2014 The City received $14.6 million in transient occupancy tax revenue, which was $11,000 more than projected. There was a 17.1% ($2.1 million) increase in revenue from the previous year. Sales tax FY2016 The City received $52.2 million in sales tax revenue, which was $3.2 million less than projected. There was a 6.9% increase ($3.4 million) from the previous year. FY2015 The City received $48.8 million in sales tax revenue, which was $1.4 million more than projected. There was a 4% ($1.9 million) increase in revenue from the previous year. FY2014 The City received $47 million in sales tax revenue, which was $1.9 million less than projected. There was a 1.8% increase ($813,000) from the previous year. 22

34 Utility tax FY2016 The City received $51 million in utility tax revenue, which was $1 million more than projected. There was a 0.8% increase ($412,000) from the previous year. FY2015 The City received $50.6 million in utility tax revenue, which was $594,000 million more than projected. There was a 0.3% increase ($172,000) from the previous year. FY2014 The City received $50.4 million in utility tax revenue, which was $1.3 million more than projected. There was a 0.7% decrease ($330,000) in revenue from the previous year. THE CITY MAINTAINS SUBSTANTIAL RESERVES FOR ECONOMIC UNCERTAINTY, LIQUIDITY, CONTINGENCIES, AND EMERGENCIES The Government Finance Officers Association (GFOA) recommends that at a minimum, that general-purpose governments, regardless of size, maintain unrestricted fund balance in their general fund of no less than two months, or 16.67%, of regular general fund operating revenues or regular general fund operating expenditures. The City of Oakland has maintained the recommended unreserved fund balance: FY % FY % FY % It is reasonable to assume that the 16.67% guideline is appropriate during relatively normal non-recessionary economic conditions, and it is understandable that a municipality would want to maintain a higher reserve level in uncertain financial circumstances when the likelihood of drawing on the balance is greater. However, if a local government determines a high reserve is essential, it should be able to justify the level it wants to maintain. GENERAL FUND UNASSIGNED FUND BALANCE IS INCREASING FY2016 At June 30, 2016, its unassigned fund balance was $65.1 million or 21% of the $310.1 million total General Fund balance. 29 FY2015 At June 30, 2015, its unassigned fund balance is $37.4 million or 24.3% of the $266.3 million total General Fund balance. 30 FY2014 At June 30, 2014, its unassigned fund balance is $23.5 million or 9.3% of the $253.9 million total General Fund balance. CITY IS OUT OF STRUCTURAL BUDGET DEFICIT CAFR, p CAFR, p

35 The government-wide statement of net position for the City s governmental and business-type activities indicates that as of June 30, 2016, the total assets and deferred outflows of resources exceed total liabilities and deferred inflows of resources by $44.3 million compared to a negative net position of $86.3 billion at June 30, OAKLAND S RESERVES ARE FULLY FUNDED The City s new Rainy Day Fund (Vital Services Stabilization Reserve) and 7.5% General Purpose Fund reserve are fully funded. Additionally, the City has been able to start paying down long-term OPEB liabilities, which were previously funded on a pay-as-you go basis. RETIREMENT LIABILITY Overall, the City has been increasing its funding ratio of unfunded pension liability. Miscellaneous employees: CAFR, p. 3 24

36 Safety employees: Main Office: 1167 Mission Street, 2 nd Floor San Francisco, CA T: F: South Bay Office: 4 North Second Street, Suite San Jose, CA T: F: Oakland Office: 1440 Broadway, Suite 610 Oakland, CA T: Martinez Office: 649 Main Street #226 Martinez, CA T: F:

37 PROFESSIONAL & TECHNICAL ENGINEERS, LOCAL 21, AFL- CIO An Organization of Professional, Technical, and Administrative Employees CITY OF OAKLAND COMPENSATION STUDY- SUMMARY The City of Oakland commissioned outside consultants Koff and Associates to complete a compensation survey to compare 20 classifications within the City of Oakland to neighboring jurisdictions. The data from this comp survey finds that Local 21 members are underpaid relative to other jurisdictions in both wages and benefits. On wages; the starting wages overall were an average of 9.7% below average of the Bay Area jurisdictions surveyed (under market by a median of 8.7%) for starting salaries. Even maxing out on a salary schedule still saw members in Oakland far behind their counterparts in the Bay Area, with a 9.3% below average maximum monthly salary overall (7.4% median below average maximum salaries). Main Office: 1167 Mission Street, 2 nd Floor San Francisco, CA T: F: South Bay Office: 4 North Second Street, Suite San Jose, CA T: F: Oakland Office: 1440 Broadway, Suite 610 Oakland, CA T: Martinez Office: 649 Main Street #226 Martinez, CA T: F: