OAKLAND — Whatever happens in the highly contentious Nov. 5 election won’t change a lingering truth that looms over the city: Oakland is spending more money than it is making.
Despite the expected arrival of $95 million from the city’s Coliseum sale next May, budget director Bradley Johnson said this week that cuts to some city services are simply unavoidable, even if the money arrives on time, in the face of a $120 million deficit over the next two-year budget cycle.
Across the entire 2023-24 fiscal year that concluded in June, the city brought in 14.9% less revenue than expected, per a report published this week that outlines hard numbers from the year’s final quarter.
The current fiscal year, which ends next June, is in a “precarious position,” the report notes — with spending projected to exceed revenues by $30 million.
“This reflects deeper, ongoing imbalances between revenues and expenditures,” the report states.
At fault once again are declining revenues from taxes on real estate sales and business licenses, among others, plus consistent overspending by the Oakland Police Department on officer overtime.
Those reductions may very well include the police and fire departments, which Johnson said together comprise three-quarters of Oakland’s entire general purpose fund.
“To the extent that they are not reduced means even more disproportionate cuts on all other functions that the city has across its services,” said Johnson at a City Council committee meeting earlier this week. “There are no easy answers to this.”
The structural problems of Oakland’s finances have persisted for several years, though federal funds kept the city afloat during the COVID-19 pandemic.
Faced with a historic deficit in summer 2023, Mayor Sheng Thao proposed a budget — eventually approved by the City Council — that froze numerous unfilled positions and merged some departments, avoiding layoffs.
But home sales didn’t pick up over the following year, in part due to sky-high interest rates imposed by the Federal Reserve to combat pandemic-era inflation.
At a smaller scale, the city is still missing revenue that it had budgeted for 2023-24 from the sale of the old Raiders training facility — a net gain of $12 million that hasn’t arrived even though a buyer, San Francisco real-estate firm Prologis, stepped forward roughly a year ago.
The property is currently being leased to the local soccer franchise Oakland Roots SC, which uses the facility as a practice ground. Team officials declined to provide details of the deal’s status.
Thao attempted to avoid layoffs a second time by freezing even more positions and putting all the revenue from the sale of the Coliseum toward one-time expenditures.
At the time, the sale had not yet been complete — prompting the City Council to approve a proposed contingency budget that reduced Oakland Police Department officer positions even further than Thao’s proposed budget, and reduction of service — known as “browning out” — multiple fire stations.
That contingency budget is now in effect after the financial backers of the group buying the Coliseum decided not to make incremental payments to the city without securing their ownership of the property against the city’s risky financial state.
But the worst of the cuts have not yet taken effect, because the city intends to plow through reserves and unused funds in the meantime.
Thao, facing a recall in the upcoming election, has said in interviews that she had no choice but to put the Coliseum revenue toward one-time salaries and other costs — a move roundly criticized by financial analysts, who argue the money should be invested in long-term needs.
At the meeting this week, Fire Chief Damon Covington said the vegetation fire earlier in the month would’ve been “virtually impossible” to fight if those deep cuts in the contingency budget were already in place.
“We would be having a different conversation,” Covington said of the fire’s damage, which officials said was ultimately limited to one structure.
City Council members Janani Ramachandran, Treva Reid and Noel Gallo had voted in the summer to go forward with the contingency budget straightaway, though they’ve countered criticisms on that front with the accusation that Thao had presented them with two bad options at the eleventh hour.
Financial experts say the city may have another option: asking the unions to renegotiate their current labor contracts and agree to less money. Former city leaders went this route as the city tried to recover from the Great Recession in the late 2000s.
Union leaders at the meeting earlier this week did not address the prospect — which may depend on how five City Council seats are elected in November, as well as the mayoral recall. But they did warn that more cuts to the workforce won’t be tolerated.
“I’m here to say,” said Julian Ware, the head of IFPTE Local 21, “deeper cuts cannot be the answer.”
Shomik Mukherjee is a reporter covering Oakland. Call or text him at 510-905-5495 or email him at shomik@bayareanewsgroup.com.
