Oakland must fix structural deficit, says Mayor Sheng Thao

A long-planned estate deal is saving Oakland from catastrophic budget cuts this year. But this one-time reprieve won’t fix the city’s long-term, structural financial problems. To do that, Mayor Sheng Thao is preparing a budget that prioritizes maintaining a “clean, safe city” while jumpstarting the process for drafting the next biennial budget.

Mayor Sheng Thao outlined the broad strokes of her budget at a press conference on Thursday. Thao said that a deal to sell Oakland’s share of the Coliseum for at least $105 million to the African American Sports and Entertainment Group—a deal that has been in the works for three years—will stave off drastic cuts to public safety services. 

“I will protect city services,” Thao said. “My budget will not reduce public safety; my budget will not close fire houses or libraries or recreation centers or animal services. I will not cut cops, I will not lay off our city workers.” 

The Oakland City Council must amend and approve the budget by the end of June. Over the next month, Oaklanders will have numerous opportunities to hear their councilmembers discuss the city’s finances at district town halls and city meetings. 

The line-by-line breakdown of the proposal won’t be publicly available until Friday. But below are some high-level takeaways from what the administration has described.

No layoffs and no public safety cuts

The city won’t be laying off any permanent employees. Thao, who received significant support during her mayoral campaign from the city’s unions, also made this a priority in her proposed budget last year. Before reaching an agreement to sell the Coliseum, the mayor’s team was considering firing scores of city workers.

Representatives for IFPTE Local 21, SEIU Local 1021, IBEW Local 1245, and Oakland’s Fire union are supporting Thao’s proposed budget revisions and representatives from these unions stood beside her during Thursday’s City Hall press conference. The unions have criticized the city’s finance staff for contributing to the budget deficit by allegedly failing to collect business tax revenue, which they said put their members’ jobs in jeopardy. 

Thao’s proposed budget would fully fund Oakland’s anti-gun violence program Ceasefire. Launched in 2012, experts believe that Ceasefire contributed to significant declines in shootings and gun-related homicides in the city but became less effective through neglect over recent years, including a reorganization of OPD by former chief LeRonne Armstrong that put more resources into a centralized Violent Crimes Operations Center. Earlier this year, Thao and the City Administrator made a commitment to reinvest in Ceasefire, which included fully staffing the OPD crime reduction teams and hiring more specialized staff for the Department of Violence Prevention.

The city is also maintaining all funding for the 911 emergency system. Last year, Thao and the City Council approved $2.5 million in additional funding for the 911 system after the state threatened to withhold funding if the city didn’t improve its response time to calls. Oakland has also filled most of the vacancies in the 911 dispatch center.  

The city will also spend money to try to maintain its current police force, which as of May has 714 sworn officers. Thao was previously considering a plan to let the department shrink organically through retirements and severances until it reached the low 600s. Now, Thao’s office and the city administration say they’re in a position to fully fund police academies for the coming year, although Thao did not offer specifics on how the city will improve the graduation rate for new cops. The city is also maintaining dedicated foot patrols and the traffic enforcement unit.

Oakland will not close any firehouses this year. City officials said they were contemplating shuttering four of Oakland’s stations. The city is continuing to fund the Mobile Assistance Community Responders of Oakland (MACRO) program, which has civilian teams respond to non-violent, non-emergency situations. But the program will receive its funding from a settlement agreement Alameda County entered with companies that make, distribute, and prescribe opioid drugs.

The city is maintaining hours and services at all Oakland senior centers, animal shelters, and public-funded summer programs. And while Oakland is grappling with a smaller deficit in its restricted funds, officials said the city will be able to fully invest in the Department of Housing and Community Development, and use money from the tax bond Measure U to pay for more housing development.  

OakDOT’s unit that scours the city to identify and remove abandoned vehicles will continue to get funding this year. So will Thao’s Oakland Fresh pilot initiative, which has departments coordinate on painting curbs, cleaning up illegal dumping, and fixing signs, among other tasks.

Economic development efforts

To boost future city revenue, Oakland officials said they are exploring ways to spur the local economy.

Part of this is maintaining the city’s economic engines, big and small. For example, the mayor’s proposed budget includes $1.7 million in assistance for the company that operates the George P. Scotlan Convention Center. Oakland owns the convention center, but a company controlled by the Marriott Hotel operates it, and has been doing so at a loss since at least the start of the pandemic. Under the worst-case budget scenario, the convention center would have been mothballed and city staff this could have led to a closure of the Marriott because many of its guests attend conventions. City staff said this would have negative spin-off effects on other downtown hotels that rely heavily on the center to supply guests.

Thao’s proposed budget is also making an investment in Oakland’s bid to become a filmmaking hub by funding a pilot program to give filmmakers rebates for projects shot in Oakland. Officials said they’re hoping to snag talented filmmakers and crews that have been laid off in Southern California.

What’s the bad news?

In April, City Administrator Jestin Johnson ordered departments to stop hiring new workers, issuing new contracts or grants, and cut off payments for employees to attend conferences and other work events.

Officials said this measure and others helped prevent the deficit from growing bigger. But Oakland was still staring down the barrel of a projected $155 million shortfall in the general-purpose fund. This pot of money, which is projected to be about $715 million by the end of the fiscal year, is what Oakland leaders have the most discretion to spend. The other piece of Oakland’s budget consists of restricted money—cash in the form of special taxes, fees, grants, and other payments earmarked for specific services.  

The Coliseum deal covers much of Oakland’s projected deficit in the general fund, but not all of it, and it does nothing to address the city’s chronic financial problems. City staff told reporters that Oakland and the Bay Area are effectively in a recession, and the decline in certain revenue categories rivals the situation the city found itself in during the 2008 financial crisis. 

To balance the remaining shortfall, Thao wants to freeze just under 100 full-time vacant city jobs, meaning funded positions that departments were hoping to fill but must now put on hold. A few exceptions will be made for departments with high priority positions, including police and violence prevention. Looking ahead, budget officials will evaluate these positions in coming months to figure out which ones should be preserved or eliminated entirely. Officials didn’t share an estimate for how many positions will eventually be cut, but they emphasized that Oakland is focusing on its core services and getting rid of anything that is just “nice to have.”

As another long-term structural fix, the mayor wants to consolidate operations wherever possible. For example, every city department currently processes its own payroll. Under Thao’s proposed budget, payroll would be centralized under the Finance Department.

City officials didn’t have any other specific examples of consolidations. They said this process will require close examination of how departments work and chipping away at the problem with small measures that altogether could add up to millions in savings. This may also include looking for old programs and “pet projects” set up by councilmembers that no longer serve a purpose. 

Consolidation is not a new strategy for the Thao administration. Last year, the City Council approved a plan to merge several departments to save money and increase efficiencies. One consolidation—bringing homelessness services under Housing and Community Development—is moving forward, staff said. It’s unclear if other planned mergers are advancing.

There is a strong likelihood that Oakland faces another serious budget deficit next summer when it is due to approve another two-year budget. To better prepare for this scenario, city staff said they plan to jumpstart budget discussions in September—just three months into the new fiscal year.