City authorities took an extreme move this week, warning in a shocking report that Oakland is on the edge of bankruptcy as the election is over and the city’s financial situation continues to worsen.
However, the legal activity following a bankruptcy declaration had vanished from the web schedule of an impending City Council meeting by Monday morning, just days after authorities warned against more reckless spending to avoid the Chapter 9 process.
Instead, a revised report with much milder wording was released by city officials. It had fewer references to insolvency—the financial situation that would force Oakland to file for bankruptcy—and no mention of Chapter 9.
Both reports, which were written by municipal finance director Erin Roseman and signed by city administrator Jestin Johnson one week apart on November 8 and November 15, detail the city’s receipts and outlays for the first quarter of current fiscal year.
An unauthorized draft of the report was accidentally and briefly published, according to city officials on Monday. However, the contents were changed after internal analysis determined that the Chapter 9 level of decision making was and is still premature at this time.
But according to a spokeswoman, the analysis in no way lessens the importance of the financial discussion that must take place before City Council.
As the Nov. 5 election changes City Hall, the switcheroo provided a peek of how Oakland’s officials are coping with the gravity of a historic financial crisis that may now come into full view.
Roseman cautioned in both reports that balancing the books will require spending cuts across the board, including to the fire and police departments, as the structural budget issues are now predicted to result in a nearly $115 million deficit in general purpose funds by the end of the current fiscal year in June.
Roseman stated in both reports that the current financial situation must be taken seriously by all city policy makers, employees, citizens, and other stakeholders.
She added—a paragraph that had been deleted in the second report—that “fecklessness and failing to take drastic and urgent actions to curb spending will almost probably result in insolvency.”
Roseman presents some harsh facts, such as the fact that Oakland must declare a fiscal emergency because it has depleted its emergency fund and won’t be refilled this year.
Although she doesn’t provide an example, she cautions the city against using other sources of funding, such as impact fees developers pay for new projects, to make up the difference in the general purpose budget, which covers the majority of city salaries and day-to-day operations.
As part of a contingency budget that was made official following the Coliseum’s sale due to speed bumps, Mayor Sheng Thaohit has already implemented spending reductions. In addition to halting hiring across the city, authorities have postponed the opening of any new police trainee schools and frozen two already-existing ones.
Five fire-engine teams, which employ the equivalent of 60 full-time firefighters, and four non-sworn police positions have been frozen.
Less than two years after Oakland suffered a devastating ransomware assault, the city has also cut more than $1.1 million in funding for IT cybersecurity.
The Five After Five program, a recent mayoral invention that may be discontinued permanently, allows employees and customers of restaurants to park in a secure garage on 19th Street after 5 p.m. for a flat fee of $5.
According to the most recent statistics available, 60% of voters agreed to remove Thao from office in the recall election held on November 5th. Thao has been trying to manage the structural budget deficit for the past two summers.
The decrease in house sales tax revenue, which slowed after the Federal Reserve hiked interest rates to fight inflation, is mostly to blame for the revenue gap over the last two years.
The Oakland Police Department is mostly to blame for the city’s excessive expenditure; it is anticipated that overtime expenses would account for a substantial portion of its $51 million budget overrun this year.
The city’s Fire Department is the second big albatross, with an estimated $34 million over budget.
Huy Nguyen, the president of the police union, said in a statement on Monday that his members would not accept any cuts until the full amount of the city’s debt was known.
Roseman’s reports make no mention of perhaps negotiating with the unions to retrospectively cut the amounts of labor contracts, a strategy used by city authorities during the Great Recession, and staffing reductions are not currently included in her suggestions.
Thao’s attempts to use the proceeds from the Coliseum sale to partially offset this year’s deficit are failing thus far; the city has only $5 million in its coffers and another $105 million is not anticipated to arrive until the end of May of next year.
Although Roseman cautioned against it in harsh terms that were later softened in the second report released Monday, technically, funds that arrived at that time could still be used to backfill the worst of the gap.
According to Roseman, staff strongly advise decision makers to wait until the money has been received and the property’s ownership has been transferred before include the revenues of the Coliseum sale in any future budget balancing measures.
The second version corrects a typo in the text and eliminates the use of all-caps for the phrase do not. In other places, Roseman’s statement on anticipating Coliseum income planning is left out of the new report: irresponsible with money.
Reporter Shomik Mukherjee covers Oakland. You can reach him via email at [email protected] or by phone at 510-905-5495.
Note: Thank you for visiting our website! We strive to keep you informed with the latest updates based on expected timelines, although please note that we are not affiliated with any official bodies. Our team is committed to ensuring accuracy and transparency in our reporting, verifying all information before publication. We aim to bring you reliable news, and if you have any questions or concerns about our content, feel free to reach out to us via email. We appreciate your trust and support!
