OAKLAND (CBS SF) — The City of Oakland has been improperly increasing parcel taxes for two emergency service programs for the past 10 years even though they have large unspent balances, City Auditor Courtney Ruby said in critical audits that she issued Thursday.

“It is not in Oakland residents’ best interest for the city to accumulate special tax funds when the general fund is overburdened to the point Oakland is reducing city services and laying-off city employees,” Ruby said.

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The audits are timely because the Oakland City Council will meet Tuesday night to consider putting several revenue-raising measures on the ballot in a special Nov. 15 election to help balance the city’s budget, including a proposal by Mayor Jean Quan to impose a parcel tax of $80 per single-family home to raise $11 million a year for the next five years.

In 1997, Oakland voters approved Measure N to pay for paramedic services and Measure M to raise funds for emergency medical services.

Ruby said her audit of Measure N audit found that its balance had grown by 50 percent and that the city did not take steps to reduce the balance and establish an appropriate reserve, as was recommended in a 2008 audit.

She said city staff asked the City Council to approve an increase in the parcel tax for each of the past 10 years even though the Measure N fund balance reached a peak of $2.1 million in fiscal 2010, which is $1 million above the needs identified by the Oakland Fire Department, which manages the funds.

“The continued practice of increasing the Measure N fund balance and not expending voter-approved monies is inconsistent with the intent of Measure N,” Ruby said.

She said city staff also asked for annual increases in the Measure M tax even though its fund had large surpluses.

In the case of Measure M, which also is administered by the Fire Department, Ruby said city officials reduced its balance but failed to establish a reserve policy.

Ruby said the Fire Department’s projected balance and spending plan “did not accurately project or otherwise account for Measure M’s balance.”

She said, “In fact, the department’s lack of internal controls resulted in inadequate cost projections, incomplete analysis and a lack of an expenditure time frame.”

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Ruby said the city should have spent more of the Measure M and N funds instead of letting their balances become large.

However, she said when the funds were used they were dispersed appropriately and weren’t misspent.

Referring to both measures, Ruby said, “As the city struggles with record deficits, ballooning pension liabilities and an aging infrastructure in dire need of repair, the administration now more than ever should be committed to ensuring policies and procedures are in place and operating, reassuring the public that their parcel tax dollars are being utilized in a timely manner.”

Ruby said, “We are in extraordinary times, and yet these audits highlight the administration’s choice to abandon management systems. This approach does not reassure the public that their tax dollars are being monitored appropriately or that the intents of Measure M and N are being met.”

Sue Piper, Mayor Jean Quan’s spokeswoman, said Quan has no comment on the audits at this time because she is out of town and has not seen them.
City of Oakland spokeswoman Karen Boyd also declined to comment.

In a letter to Ruby on June 9, Finance Director Joseph Yew and Interim Fire Chief Mark Hoffmann said, “We respectfully disagree” with Ruby’s findings.

They said, “The Fire Department does indeed have strong internal controls in place to monitor not only the Measure N fund balance, but also the Measure N spending plan and the actual expenditures made each year.”

Yew and Hoffmann said the Fire Department also has strong internal controls to monitor Measure M funds.

They said the Fire Department “continues to enact a reasonable spending plan each year, while maintaining a reasonable fund balance that is based on the projected needs of the fund in future years.”

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