OAKLAND — After layoffs, fire station closures and other deep funding cuts, Oakland officials hope the worst is over with the city’s budget woes. At least for now.
For the first time in a while, circumstances appear to be slightly improving for the city. Four fire stations slated to be temporarily shuttered — on top of two that have already been “browned out” — no longer face closure, while over half the nearly 100 anticipated city worker layoffs have been nixed.
The city had brought its projected budget deficit this year down to $87 million from around $130 million, but even the current gap is on path to being closed by the summer, city officials have said.
An overarching structural deficit of nearly $140 million, however, continues to loom over City Hall, clouding the optimism around how Oakland’s finances will look for the next two years. The deficit impacts the city’s general purpose fund, which mostly pays salaries and other operating costs.
The new mayor elected in April will be expected to plan the budget and address the structural deficit immediately after taking office. There may be deeper cuts coming down the line.
But the city expects additional revenue if the local economy continues to recover, and if voters approve a new citywide sales tax on the April ballot. Measure A is a 0.5% sales tax hike that could generate nearly $30 million annually if passed by a simple majority of voters.
For now, Oakland appears to be coming up for air following a series of painful cuts the city endured in January.
In total, the reductions amounted to 42 layoffs and 34 demotions; the closure of two fire stations that will reopen in June; the cancelation of all police-training academies; the slashing of $2.6 million in funding for outside nonprofits and a host of other grants and citywide programs that are no more.
The city also browned out a third fire station that had already been closed for renovations. Officials are not certain when the stations will be reopened.
The cuts, executed by City Administrator Jestin Johnson, irked some councilmembers who said they hadn’t been consulted or even given a heads-up. Now, though, the council and administration appear to be getting on the same page.
“I’m here to support (Johnson’s) leadership, if he’s making informed decisions,” Councilmember Carroll Fife said in an interview on Friday.
City officials promise that even worse outcomes initially planned can now be avoided, including police academies expected to make a comeback in the new fiscal year, which begins in July.
Revenues from property taxes and parking citations rose between October and December, the second quarter of the city’s current fiscal year, while an initial $5 million the city received in its troubled deal to sell the Coliseum provided another financial boost.
The main culprit for a recent trend in revenues falling short of expectations is a tax on real-estate sales, which began declining in 2022 after an early pandemic spike.
But the home-sales market, officials said, is now in recovery: Nearly 10% more homes changed hands in the last quarter than in the same period of time a year before, according to a new revenue and expenditures report published by the city.
As expected, more than 90% of the city’s overspending is due to public safety, as Oakland’s police and fire departments continue to blow through their budgets.
Police overspending mainly stems from overtime pay, which has become a source of political tension in a city that is often divided over how its up-and-down crime trends should be addressed.
Overtime caps were intended to save $25 million, but the latest financial report places that number closer to $14 million, “due to operational constraints and staffing needs that prevent further reductions at this time.”
Loren Taylor, a candidate for mayor in the April 15 special election, attributes the hefty officer overtime to an understaffing of officers. He promises, as his top priority, to hire as many more cops as the budget can handle and calling on some retirees to return to the force.
Barbara Lee, the former member of Congress also running to be mayor, has promised in her campaign to scrutinize officer overtime and assess whether the police department is spending money efficiently. She has said she wants more officers, too, but has resisted promising a hiring spree.
Meanwhile, what’s helping the city resolve its current $87 million deficit, officials said, is a series of city council moves on Dec. 17 that boosted the general purposes fund. The councilmembers drew extra millions of dollars from its emergency reserve and funds that normally are restricted for other purposes, such as affordable housing.
It remains to be seen how many of the cuts that remain standing from January could eventually be restored. And it is also unclear whether any of the existing cuts are factored into officials’ projection of a $140 million deficit next year.
Pension spending continues to strain the city’s general purpose fund, with the retirement system CalPERS expecting the city to contribute to over 35% of their workers post-career savings. Unfunded liabilities top $500 million, the report states.
The new report, authored by Finance Director Erin Roseman, urges the city to establish “sustainable budget practices” if it wants continued improvement.
“This inherently requires increasingly difficult decisions regarding service reductions and priority setting for the City,” Roseman writes in the report.
As the city looks to turn the tide on its financial state, officials are no longer budgeting revenue from the Coliseum sale, for which the buyers are expected to pay $95 million by the end of May and when an additional $10 million they already paid comes out of escrow.
The one-time revenue — which former Mayor Sheng Thao had planned to use to pay salaries, a move widely criticized by financial analysts — will now go toward paying off debts and not operating costs, unless the council decides otherwise.
Shomik Mukherjee is a reporter covering Oakland. Call or text him at 510-905-5495 or email him at shomik@bayareanewsgroup.com.