Oakland’s $860 Million Crisis: Unfunded Retiree Healthcare

Conclusions 18

• CL1 Page 22
  Oakland’s elected and appointed leaders are responsible for the welfare of their residents, for the stewardship of city finances, and for honoring or renegotiating the promises they and their predecessors made to public employees who serve the city. The retiree health care benefits promised to city employees have been chronically underfunded, and the deficit is growing annually. Continuing the program of pay-as-you-go, without making a dent in the unfunded liability for future benefits, raises the prospect of massive budgetary cutbacks to programs deemed essential to the safety and welfare of its citizens. These circumstances are not unique to Oakland, or even to the state of California, but Oakland’s failure to take the tough steps necessary to address the problem has pushed its budget to the straining point, even in this period of relative economic prosperity. Moreover, other expensive issues, such as affordable housing, homelessness, decaying infrastructure, and more, are looming. Inaction, or insubstantial action, on this matter is no longer tolerable. An economic downturn following years of growth will only make the problem worse. Failing to take bold action risks further cutbacks to essential and valued services like public safety, parks and libraries, and also risks worsening Oakland’s bond ratings, imperiling its borrowing power, thus making Oakland a less desirable place to live and work. An informed community and courageous elected city officials must face this challenge head on to ensure a thriving and safe Oakland. ____________________________________________________________ 21
• CL2 Page 37
  The “U” in OUSD stands for unified. It is clear that there is little unity in the Oakland school system. Staffs come and go. Administrators come and go. So many ideas tried but so little to show for that effort. Trust and unity comes from achieving something. Failure breeds mistrust 36
• CL3 Page 38
  and that mistrust can be infectious. Principals won’t trust that a new superintendent can deliver. Teachers won’t trust that a principal will last. Most troubling of all, these can lead to a system that thinks its students cannot deliver. On its website, OUSD makes five commitments to the citizens of Oakland:  Provide every student with access to a high-quality school  Ensure each student is prepared for college, career, and community success  Staff every school with talented individuals committed to working in service of children  Create a school district that holds itself and its partners accountable for superior outcomes  Guarantee rigorous instruction in every classroom, every day The Grand Jury has determined that the district has failed in at least three of these commitments. ____________________________________________________________
• CL4 Page 58
  The Grand Jury found a myriad of problems with the ways Alameda County and the Joint Powers Authority handle the free luxury suite tickets that they receive under the contracts with the teams occupying the Coliseum Complex. The problems fall into three categories: distribution practices, reporting practices, and uninvestigated potential tax liabilities. Regarding ticket distribution, the Grand Jury discovered that tickets are repeatedly used by the same officials and employees, and not fairly distributed to other county workers, because there are no policies limiting the number of times individuals can use them, and no system in place to solicit applications from all eligible employees. The most valuable tickets are seldom given to community groups that could use them as important fundraising tools. There is no system in place to accept and rank ticket requests from community groups, resulting in unequal distribution to groups favored by the particular officials responsible for distributing them. Regarding reporting, while the county and the JPA established ticket policies listing what sound like valid public purposes, in practice, the policies are relied upon as a cover for the same officials and employees to use the tickets over and over again to perform “inspections” that never result in written reports. Neither the county nor the JPA has an enforcement policy to ensure that the stated purposes are being fulfilled; indeed, neither has a system for making sure that all the tickets distributed are even reported. The Grand Jury also discovered that FPPC forms are 57
• CL5 Page 59
  sometimes incorrectly prepared. They report the wrong dates, the wrong events, the wrong recipients, and the wrong ticket numbers (and sometimes omitting these items altogether), and occasionally leave off the alleged public purpose for which the tickets were distributed – the whole reason behind the creation of the reporting system. Finally, the Grand Jury learned that neither the county nor the JPA has ever considered the potential income tax consequences of giving free tickets to elected officials and employees, relying on the fact that those who use them check off one of the approved public purposes on the 802 forms. But IRS rules about taxability of fringe benefits have no relationship to the requirements of a state political disclosure act. While an official can avoid having to disclose the tickets as gifts on a state form by checking off a box that says they were used to “exercise oversight” during an NBA playoff game, the IRS has far more stringent requirements about the business purposes for which tickets are used in order to make them non-taxable. Although the Warriors and the Raiders will be leaving Oakland over the next few years, they will each spend at least one more full season at the Coliseum Complex. And, even after they depart, the facilities will be used for other events. Thus, it remains essential that the ticket distribution policies and practices of the county and the JPA be improved so that these valuable community resources are not squandered. ____________________________________________________________ 58
• CL6 Page 69
  Cities and counties play an essential role in helping to administer and oversee significant public investments in affordable housing. In Oakland, both the voters and city leaders have been committed to providing such investments for decades. Most recently, voters approved $100 million in bonds for affordable housing construction. The city of Oakland is distributing the funds in the form of loans but it is important for voters to understand that these are loans that most likely will never be repaid. Over the past 25 years, the city has provided private developers, including non-profit organizations, with these soft loans to build or refurbish thousands of rental units in over 100 affordable housing projects. In exchange, the developers were contractually obligated to keep the projects both habitable and available to low-income residents for decades. Despite some success stories related to building such projects, the city has a poor history of ensuring that failing housing project owners and managers are held accountable when residents are living in substandard conditions. Decades of mismanagement at the E.C. Reems Apartments have exposed the city’s failure to invest in proper oversight and enforcement of developer covenants. Lack of proper staffing, failure to inspect and audit each project annually, antiquated record-keeping systems and insufficient vetting of developers can only invite more failures like those that occurred at E.C. Reems and Oakland Community Housing before it. At a time when affordable housing is so essential, the city must make a more serious commitment to both protect this significant public investment and the vulnerable residents that these programs are supposed to support. ____________________________________________________________ 68
• CL7 Page 79
  The complaint brought to the Grand Jury the issue of the appropriateness of the contracts and the adequacy of oversight by AHS of its financial relationships through contract with medical groups and individual physicians. The Grand Jury focused its investigation on the largest of these contracts, the one with the OakCare Medical Group. For the contract ending in 2016, the Grand Jury concluded that the contract was inadequate as to its specifications of performance standards, compensation, oversight, remedies, and evaluation elements. Moreover, it found that the nature of the relationship between AHS and OakCare was not characterized by open communication, responsiveness, or collaboration, all of which would be necessary to ensure the best level of patient care and the judicious use of resources. There is evidence that OakCare did not operate in a manner that ensured full compliance with the clinical service obligations set forth in the contract. The Grand Jury found evidence that many of these issues have been partially addressed in the current contract; however, some of the concerns regarding lack of transparency and alignment remain. The Grand Jury concludes that the major contributor to this flawed dynamic is the outsized power that OakCare has in its relationship with AHS. OakCare provides the majority of physician services and virtually all of the physician leadership at AHS’s Highland Hospital. The Grand Jury also found evidence that contracts and grants were received by AHS for individuals who were members of OakCare, and that policies and practices for proper oversight and management of these grants were not in place or not followed in order to ensure proper 78
• CL8 Page 80
  operation. Similarly, the Grand Jury found evidence that a proper understanding of the organizational boundary between AHS and OakCare is not well understood throughout AHS, nor is there a proper set of policies and practices in place and followed for ensuring that public resources are not used to benefit OakCare. ____________________________________________________________
• CL9 Page 90
  Lake Temescal was designed in the mid-1880s to collect water that flows off the nearby Oakland hills. Dense urbanization, however, has made the job far more complex by significantly expanding the types of liquids that could flow into the lake. A substantial portion of the area’s sewer and drain pipes were laid during the 1920s when residential neighborhoods were first being developed in the Temescal area. Preserving the integrity of this drainage system is challenging, and natural phenomena such as heavy rains, tree root incursions, and seismic activity can easily push the aging clay pipes beyond their limit. The Grand Jury believes that these shortcomings can be managed. Doing so, however, requires OPW and EBRPD to focus on organizational fundamentals such as modern communication strategies, inter-agency partnerships, and staff training and development. In addition, these improvements must be supported by improved record-keeping. Lake Temescal’s popularity with the public and the potential health hazards from contamination make corrective actions absolutely necessary. With the public’s interests in mind, the Grand Jury offers the following findings and recommendations for immediate consideration and action. ____________________________________________________________ 89
• CL10 Page 98
  The Grand Jury finds that the Oakland City Council’s decision to bypass the city’s own Workforce Development Board when making funding decisions was shortsighted. The unique skill set and expertise of the OWDB and its staff provide the city with the ability to develop a unified regional approach to attack joblessness and ensure that the CBOs they fund are held accountable. Ironically, last winter one council member proposed diverting 5% of voter-approved funding for capital improvement projects to job training organizations of that councilmember’s choosing, again circumventing the OWDB experts, and again without oversight or independent professional input regarding the long-term value of the programs. The Grand Jury recognizes and supports the value of job training as a benefit to individuals, the local business community, and society as a whole. It commends the city council for wishing to further support workforce development. But since dollars are scarce, the city council must make targeted, thoughtful decisions. The Grand Jury believes that this can only be done when the city council uses the expertise of its own Workforce Development Board. ____________________________________________________________ 97
• CL11 Page 108
  When rates need to rise to support higher labor costs, ACWD should make the case on its merits rather than embed these costs under the water supply categorization. ACWD must explain to the public the need to retain quality employees for safety and continuity of care with the district’s precious water supply. The Grand Jury appreciates that ACWD continues to provide a reliable supply of high quality drinking water to its customers, and thanks the district for its cooperation with this investigation. We acknowledge that the business of running a public utility requires specialized knowledge that is not always easily communicated to ratepayers. Nevertheless, board members are elected to be stewards of this process and stewards of the finances involved. They have a duty to ensure that citizens are paying a fair and equitable price for their water. When rates can be raised through a simple vote of a five-member board, the decision can appear to be out of the public’s control. The public deserves assurances from the board that their hard-earned money is being spent as efficiently as possible. While the 230 ACWD employees are entitled to competitive salaries with good benefits, the public deserves assurance that the board is sensitive to the impact of employee costs on rates, and that it negotiates labor contracts in good faith on behalf of the ratepayers who have limited powers to protest a rate increase. . ____________________________________________________________ . FINDINGS Finding 18-35: The Alameda County Water District is not sufficiently transparent with its customers about the costs of current employee compensation and retiree benefits, and how these impact rate increases. Finding 18-36: Droughts can significantly reduce the revenue of the Alameda County Water District, while the fixed costs of providing quality water remain high. Finding 18-37: The Alameda County Water District has provided overly generous salaries and benefits to its employees over the years, even in times of economic downturns. 107
• CL12 Page 115
  The Glenn Dyer facility, while showing some signs of age, appeared to be clean, well-maintained, and in good operating condition. The Grand Jury observed no security issues that are not in the process of being addressed. ____________________________________________________________ FINDINGS None RECOMMENDATIONS None RESPONSES REQUIRED None 114
• CL13 Page 116
  LIVERMORE CITY JAIL INSPECTION The Grand Jury inspected the Livermore Jail on October 24, 2017. The jail is located at 1110 S. Livermore Avenue in Livermore, and serves as a temporary holding facility for the Livermore Police Department. The jail is used very infrequently. The facility held only nine adult and three juvenile detainees from January 1 The Grand Jury found the Livermore Jail to be very clean, well-maintained, through October 24, 2017. At the time of the Grand and in good order for fulfilling the facility’s limited uses. Jury’s inspection, there were no detainees at the jail. The police department and jail share the same municipal building, which was built twenty years ago. The jail consists of two holding cells, two interview rooms and one room for meeting with attorneys. The holding cells have working sinks and toilets, and a shower room is located nearby. The holding cells do not have beds, but offer raised concrete slab benches for sitting and sleeping. A juvenile holding room, resembling a small conference room, is also located among the police department offices. It is surrounded with windows to permit constant observation of a juvenile detainee. Adult detainees are brought to the jail and held for up to six hours awaiting police transportation to Santa Rita Jail in Dublin unless they are given a citation or released. Juvenile detainees are transported to the Alameda County Juvenile Justice Center in San Leandro if the seriousness of the case warrants further detention. Detainees are not booked at the jail, although exceptions are sometimes made for juveniles brought in for non-violent acts. Upon arrival, a detainee completes a health questionnaire that is reviewed by police staff. Any detainee requiring immediate medical attention or a life-preserving prescription medication is transported by Livermore Fire Department EMTs to Valley Care Hospital in Pleasanton. The jail does not provide health care beyond basic first aid. Detainees’ personal items are bagged upon arrival and always transported with them to their next destination. Jumpsuits are available for detainees needing clean clothing. Blankets are also available upon request. 115
• CL14 Page 117
  Detainees are permitted three local phone calls without charge, which enables them to contact family members as well as their attorneys. Due to the very short holding period, only attorneys are allowed to visit detainees at the jail. CCTV cameras, monitored by police department staff, provide continuous visual coverage of the jail’s physical space and access points. First aid and AED equipment are nearby, clearly marked and readily accessible. First aid kits were well-stocked, and police staff are trained on first aid, CPR and AED services. Fire extinguishers are inspected and certified monthly. Police officers use keyed lockers for storing their weapons before entering the jail area. Food is not prepared on site. The police department provides detainees with water, soft drinks and snacks. A police officer may occasionally pick up local fast food for a detainee upon request. Overall, the Grand Jury found the Livermore Jail to be very clean, well-maintained and in good order for fulfilling the facility’s limited uses. ____________________________________________________________ FINDINGS None RECOMMENDATIONS None RESPONSES REQUIRED None 116
• CL15 Page 118
  EAST COUNTY HALL OF JUSTICE HOLDING FACILITY INSPECTION The Grand Jury inspected the new Alameda County Superior Court East County Hall of Justice holding facility on September 26, 2017. This facility is located in Dublin, part of the newly constructed East County Superior Court building that first opened in June of 2017, and is run by the Alameda County Sheriff’s Office. The expense of running the new facility is jointly funded by the state and the county. The court and holding facilities are located across the street from Alameda County’s Santa Rita Jail. The proximity of Santa Rita to the court has lowered the cost of transporting detainees to their court appearances, even though they are still transported between facilities by vehicle. Initially, the court was used for all arraignments, but that has since changed, and many arraignments have been moved back to Superior Court in Oakland, lowering the number of detainees transported to the Dublin facility per day. The Grand Jury focused its inspection of the holding facility on cells, hallways that provide detainee access to the courtrooms, attorney-client communication rooms, safety factors, and detainee transportation to and from the jail. The jail facility contains 23 holding cells. All of these are mixed gender cells, but females and males are not held in cells together. No juveniles are brought to this facility. The large number of cells allows protective custody detainees to be held separately if needed. The holding cells have working sinks and toilets. The cells do not have beds or blankets, but offer raised concrete slab benches for sitting. All cells are ADA-approved. The holding cells and aisles the jury observed were very clean; a janitorial service operated by the county does nightly maintenance at the facility. Although Santa Rita Jail is close to the holding facility, the only detainee transportation between the two facilities is by deputy-driven vehicle, primarily bus. Transportation is tightly controlled, and buses arrive in an enclosed garage where they are unloaded. Detainees are carefully checked in by deputies according to identification and passenger record. Santa Rita transports all detainees with morning court dates in time for their appearances, and returns them by noon. 117
• CL16 Page 119
  Then the detainees with afternoon court times are transported, and returned to Santa Rita at the end of day. The average detainee is held in these cells fewer than four hours due to the proximity of the originating jail, although the time may increase on occasion due to understaffing – the Grand Jury was told that funding allocations from the state do not defray the full cost of a sheriff’s deputy. Typically, Mondays and Tuesdays are the highest volume days for court appearances, averaging 180 to 200 detainees. Normal volume during the rest of the week is from 140 to 170 detainees per day. At the time of our visit on a Tuesday morning, there were 159 detainees at the holding facility awaiting court appearances. Due to the short amount of time most detainees spend at the holding facility, meals are eaten before arrival or after return. As a result, no food preparation facilities exist at the holding facility. Some detainees bring over snacks, and bagged lunches made at Santa Rita may be available based on scheduling. The holding facility does not provide health care beyond basic first aid. First aid and AED equipment are located throughout the facility, clearly marked and readily accessible. First aid kits were well-stocked, and deputies and other non-sworn staff are trained on first aid, CPR and AED services. Fire extinguishers are inspected and certified monthly. Safety within the courtrooms, hallways and cell areas is a high priority for the sheriff’s office. Law enforcement personnel must store firearms in keyed gun lockers before entering the jail area or courtrooms. There are over 200 red emergency buttons located throughout the facility. These are placed approximately two to three feet off the floor so they can be reached from sitting or lying positions. (Initially, the emergency buttons were placed too high on the wall, but have been appropriately lowered.) Alarms and closed-circuit video feeds are centrally monitored so that assistance can be promptly directed to the correct location. The facility has interview rooms attached to each courtroom for detainee communication with attorneys. When the facility first opened, the speakers embedded in the partitions in these rooms blocked out too much sound, and attorneys often resorted to shouting that could be heard in the adjacent hallway. The jury was told that the issue was being addressed. 118
• CL17 Page 120
  This is a rather new facility, and the design seems to be working as planned. Overall, the Grand Jury found the Alameda County East County Hall of Justice Holding Facility to be very clean, well-organized, well-maintained, and in good order for fulfilling the requirements of the county. ____________________________________________________________ FINDINGS None RECOMMENDATIONS None RESPONSES REQUIRED None 119
• CL18 Page 121
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