OAKLAND — To patch up a financial crisis likened by some officials to the Great Recession, Oakland’s leaders on Tuesday approved budget changes that will avoid drastic cuts but also rely on the still-pending sale of the city’s most valuable real estate property.
The heavily contested, 5-3 decision by the City Council resolves, for now, a massive $177 million revenue shortfall plaguing Oakland in the second year of its $4.2 billion budget cycle — a crisis that Mayor Sheng Thao was keen to resolve without layoffs.
It also operates on an assumption that the city selling its half of the Coliseum property in East Oakland to a private development group will begin yielding revenue by the fall — a wager that buys the city time to ponder more long-term budget decisions.
Still, the new budget will freeze a total of 34 police officer positions and a host of other vacant jobs in the city, cuts that depend on sworn officers leaving or retiring.
And although there weren’t any layoffs on the table, financial analysts roundly warn against putting revenue from the sale of major assets like the Coliseum toward remedying short-term budget shortfalls.
“We take our responsibility to the people of Oakland very seriously,” said Councilmember Nikki Fortunato Bas ahead of the vote. “We believe that among some very, very difficult choices, this option best preserves our services.”
The planned Coliseum sale to the African-American Sports and Entertainment Group, led by Oakland native Ray Bobbitt, is estimated to bring the city at least $105 million, though the final terms are still under negotiation.
The other half of the property — which includes the stadium, arena and vast parking lots — is owned by the soon-to-depart Oakland A’s, which are similarly discussing a sale to AASEG that would allow a massive commercial redevelopment of the site to move forward.
In the meantime, Oakland’s leaders had been tasked with plugging a major deficit fueled largely by revenues falling way short of projections, including those from taxes on business licenses and real-estate transfers that became strained during the pandemic.
Mayor Thao had promised in May that the Coliseum sale would help bandage the city’s budget woes in the next two fiscal years: $63 million in the year that began July 1 and $43 million more in the subsequent year that starts next summer.
But with a deal still not complete by late June, officials proposed an eleventh-hour contingency budget that would stake more serious cuts — freezing two city police academies and browning out two fire stations — against the first $15 million from the sale arriving by Sept. 1.
Raising alarm bells over the unfinished Coliseum sale, Councilmember Janani Ramachandran went further, pushing to delay any formal budget decisions until the end of July so the council would have additional time to consider new outcomes.
“We simply do not know when this incredibly complex deal will be finalized,” Ramachandran said at a meeting late last week where the council pushed a final decision to Tuesday. She voted against the adopted budget changes, along with councilmembers Treva Reid and Noel Gallo.
Brad Johnson, Oakland’s lead budget analyst, warned that city officials will still need to “walk on eggshells” until the fall so they don’t overspend with revenue that might not arrive in time.
Bobbitt, the development group’s founder, has maintained a deal will soon be completed and financed by Loop Capital, a massive Black-owned hedge fund backing the Coliseum’s transformation into a new hub of live entertainment, nightlife, hotels and housing.
But if something goes wrong, Johnson spoke ominously of a nightmare scenario.
“It would be incredibly severe,” he said. “We would essentially need to pull an emergency brake on the city.”
Revenue from Oakland’s sale of another property — the former Raiders training facility in Alameda — was meant to fix last year’s budget deficit, but since then a number of obstacles have gotten in the way.
Michael Forbes, a member of the city’s budget advisory commission, said that, at large, the city has adopted “bad habits” repeated every year that have compounded Oakland’s financial woes.
Even the proposed rescue plan, he noted at a meeting last week, is little more than a temporary fix.
“That Coliseum piece (of revenue) is an order of magnitude bigger than anything we’ve ever received,” Forbes said. “And, sadly, it’s going to go away in about a year.”