Budget bomb hasn’t gone off yet.

This afternoon, Oakland Mayor Ron Dellums will be releasing his proposed budget for the next two years. If you pay any attention to Oakland City Hall whatsoever, you’ve probably heard an awful lot our $83 million deficit and how nobody has ever seen anything like this. Every department, every City service will have to be cut in order for us to close this completely unprecedented hole and we will all have to just chip in and suffer together through these hard times, what with that awful economy and all. So…if you think this is bad, well, you’re right. But also, I have some very unpleasant news for you.

It’s only gonna get worse, folks. Please, scroll down and take a gander at some of what we have to look forward to (PDF) next time we go through this little circus.

  • Measure Y: Remember, oh, last year, when the Mayor announced his brilliant plan to spend all the Measure Y reserve funds on police recruitment? And how some people were all, “Wait! That’s a really bad idea! We’re going to need those reserves in a few years once the tax revenue collected through Measure Y is no longer enough money to pay for all the Measure Y officers!” And then the Council just went ahead and approved spending it anyway? Um, yeah. Well, they were warned at the time that it was gonna cost them sooner or later, and with each passing day, that later becomes, um, sooner. Measure Y won’t be able to cover the cost of all its officers starting in FY11-12, and the General Fund is going to have to cough up the difference of around $3.84 million. And that subsidy is only going to get higher from there until Measure Y expires in 2014.

  • East Oakland Community Library: Perhaps you have heard some of the rumors swirling around about the City potentially shutting down some of our branch libraries to save money. I think it’s more likely that they’d go for reducing hours at all the libraries rather than shut down one or more whole ones, but it’s really not worth it to speculate at this point, since the Mayor’s budget proposal is being released in a few hours. Anyway, those rumors might seem particularly strange to you if you were aware that we’re currently building another branch library. That’s right. A new branch is currently under construction at 81st and Rudsdale, and that sucker is gonna open in like a year and guess what, it’s going to cost money to operate. Expected FY11-12 funding needed? $1.13 million.

  • East Oakland Sports Center: Along those lines, we’ve also heard talk about closing parks and/or recreation centers because we just don’t have the money. How odd, then, that we’re currently building a new sports center in East Oakland. We’re not sure yet what this is going to cost to run, but estimates seem to float around $0.5 million a year.

  • PFRS: Everything else is kind of negligible compared to this. Currently, Oakland’s police and fire employees get their retirement benefits through CalPERS like everyone else. But employees hired before 1976 got their retirement through Oakland’s own Police and Fire Retirement System (PFRS) (PDF). They paid (well, a handful still do, we have just a few active employees left under PFRS) a fixed percentage of their salary into the pension fund and then the City also contributes to the fund. Or was supposed to, anyway.

    In 1997, we put off having to contribute to PFRS for a while by issuing $417 million worth of pension obligation bonds to cover our payments through 2011. I’m sure 2011 seemed like eons in the future back in the late 90s, but time always moves faster that you think it will, and here we are, with that deadline to start paying again just around the corner. And nobody has really given any thought to how exactly we’re going to do that. A year ago, we were expecting that contribution to be $39 million for the first year, FY11-12. But just like everything else, the PFRS fund took a nosedive last year, and back in March, Assistant City Administrator Marianna Marysheva-Martinez reported at a Finance Committee meeting that the current actuarial estimate for our 2011 payment is $56 million. Ouch.

  • In summary, what we’re looking at two years from now is a little over $61 million in brand spanking new costs out of the General Fund. To be very clear, those are entirely new expenses that we aren’t paying now. That figure does not include any increases in employee wages, medical costs, CalPERS contributions, debt service payments, or anything of the other many existing costs that rise with every passing year. Basically, it all means that even if the economy recovers completely in the next two years, we’re still completely screwed.

    So no matter what you hear about the impossible task of balancing this year’s budget and how there’s no way to do it without cutting everywhere, please remember this. With a budget that is only going to get worse next time around, nothing that gets cut this year is going to come back, like, ever. So if there’s a service that you care about, the time to speak up and send e-mails and go to City Hall and throw a temper tantrum about it and get all your friends to do the same is now. Cause this “sharing the pain” that we keep being told everyone has to do? It’s permanent. And anyone who tells you otherwise is lying.

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29 thoughts on “Budget bomb hasn’t gone off yet.

  1. das88

    Wow, I need a Unicorn Chaser after this post.

    Seriously, V. next time you have the urge to shock-and-awe can you at least hold the post in your draft folder and publish in the middle of the day? I got stuff to do this morning and now I am all bummed-out.

    So, besides never voting for another incumbent, what can we in the city do? Are we destined for bankruptcy or loads more taxes? Are there some sources of non-tax revenue? Can we encourage our 420 industry, so it grows (two meanings of the word) enough to provide significant tax revenue? Does the city have some assets it can sell off? Can we get more significant give-backs from the unions than currently being proposed? Can we get more from the Feds than currently being talked-about.

    I got loads of questions. I just wish my elected officials have some answers that make sense.

  2. Dave B.

    Yet the Oakland Housing Authority is still trying to build more of their slum projects throughout the City. They are trying to get federal stimulus dollars to build unneeded projects in Oakland yet they can’t police or maintain their current slums.

    One specific case, they want to build an oversized behemoth on 30th and Telegraph that will tear down the historic Courthouse Athletic Club building. This building was originally designed for market rate condos but the design wasn’t modified properly for public housing. OHA will tell you it’s Tax Credit housing, but in reality, the income requirements are even lower than their own public housing projects.

    A lot more effort needs to focus on this rogue agency. Ever try to request public records from them? They even have a records request form on their website, yet if you requst info you will be treated to an arrogant dismissal.

    Checkout No-OHA.com

  3. len raphael

    Dellums and the city council doesn’t have the political cajunes do the right thing which is permanent layoffs and give backs on a large scale, while replacing management with people who will manage better the remaining staff.

    Gotta love the pols for blaming the whole mess on the real estate crash.

    So they’ll patch it together with a combo of stimulous grants, modest layoffs, and longer furloughs for a couple of years when Dellums and several of the current council members will retire (to free medical for life plus Calpers pension). They’ll hand it all over to the new mayor and a new council for the inevitable.

    In their daydreams, they’re fantasizing about future massive state and federal tax hikes which will generate big subsidies to cities. They also hope that real estate tax revenue recovers by then, though that wouldn’t cover the bulk of the shortfall later.

    So, what do you figure, 20% reduction in city expenditures needed within the next three years?

    Civil service reform is going to needed, because if the layoffs are strictly by seniority we’ll be stuck with the most expensive employees with no assurance that they are the most productive.

    -len raphael

  4. V Smoothe Post author

    I think the important thing is that we look at the changes and cuts we make this year not as plugging a hole, but as long-term changes in the way the City will have to operate for the forseeable future.

  5. MarleenLee

    Today’s story in the Trib about the budget crisis and having to possibly lay off 140 police officers made no sense. On the one hand, the story acknowledged the need to fund 739 officers, which is required by Measure Y, but on the other hand, the focus was about the possibility of laying of 140 cops. The whole reason the language about maintaining general fund funding for 739 officers was in the measure was to prevent this sort of tactic, i.e. get the taxpayers to specially fund 63 officers, and then take away the general funded officers. No way. So how can they possibly think cutting sworn officer staffing is even remotely possible? I suppose they could give up Measure Y funding, but that’s giving up $20 million a year. Are they nuts?

    Dellums’ plan to spend the Measure Y reserve funds on officer recruitment was not only a bad idea – it was patently illegal. Now the City has lost a lawsuit and owes Measure Y back $15 million. And that $15 million isn’t even included in the $83 million deficit. Reducing sworn officer staffing is NOT an option.

  6. Ken O

    Marleen: it is an option if you are City of Stockton.

    I am certain Oakland will need to cut police/fire services inside of three years. Other cities around the bay such as Newark/Union City are already looking to combine fire departments due to lack of revenue.

    Smart cities like Cleveland did all their layoffs before the whole national real estate / debt mess erupted publicly.

  7. Ken O

    Oakland Housing Authority needs to stop ALL new construction plans.

    Their projects are not revenue generating. The people who live in OHA “slum” projects don’t have any reason to try to get out of there, unless they prefer a quieter living situation.

    I lived across the street from an OHA project for years and it was not pleasant about half the time.

    I asked the residents what their monthly rent is. Some people were grandfathered in at $99 per month. Across the street, I was paying $500+ per month for 225 square feet. So who has more inclination to go out and get a job, or get more education? Me or the OHA residents?

    Cities are where wealth concentrates. Cities are supposed to be more expensive. Poorer people are supposed to live in the countryside.

    Living in public housing must have a negative effect on one’s psyche. People outside view the insiders as not deserving a subsidy, and the people inside see themselves as victims of the people outside who call the police on them for unruly behavior.

    I tried to get homeowners and OHA residents together, as did others, but it was always a strained process. I planted sunflowers on OHA property. I’m against too-affordable housing. If you get something, you must give in return.

    Because it’s a “government” program there’s no real human relationship to it. I found the inside of OHA apartments to be depressing. They have steel doors, poor layout, and lack insulation. And are too small for the amount of people living in them.

    Why does Berkeley, which talks about affordability and social equity, have very few public housing projects. Are there ANY? Oakland has many many many public housing projects. Oakland should follow Chicago’s lead and start to tear these down. One per year.

    Why should the rest of us be getting pay cuts and pay more taxes, so these people can live on super cheap rent? Not fair!!

    On the other hand, one could argue that these OHA properties are a necessary burden due to the lack of reparations for slavery. We’ve paid out money to Japanese Americans who were interned. We have DOI programs for Indian Affairs. Maybe OHA is the slave equivalent. Also, we need SOME amount of affordable housing for service workers.

  8. Chris Kidd

    …and the city council wants a compromise on measure OO instead of a full repeal…

    Yes, I’d much rather have a glut of unaccountable, oversaturated after-school programs instead of parks or libraries or drivable roads.

  9. Eric Fischer

    The Berkeley Housing Authority’s web site says they have 18 sites of low-income public housing (but a total of only 75 units). I couldn’t find a list of where they all are, though.

  10. Colin

    So what kind of steps can the take to deal with this in the long term. Are there additional sources of income we can be tapping? Waste we can cut? My impression is that the city gets enough money coming in relative to its size (although I don’t know how our tax rate compares to other local cities, so I’m not a good judge here), so where are the expenditures that are throwing this all out of whack. Pensions? Staff? Yachts?

    I don’t know enough about our budget or the financing of mid-sized city governments to have any idea where to point to in fixing this. I’d be curious to see your ideas of how to make a workable budget, outside of political concerns.

  11. journalist

    OHA owns 3300 apartments throughout the city, making it one of Oakland’s largest land owners . . . I also found this as a description: ” a state agency chartered to operate in the city” . . . Does anyone know what this means?

  12. AD

    And don’t forget Measure OO which requires 26 million from Oakland’s General Fund be spent on privately run children’s programs. Privately run means that city agencies, like Parks & Rec and the library, can’t use this money to fund their children’s after school programs which will most likely be cut, if they haven’t been already.

  13. Anne

    Journalist– That quote means Carolyn Jones of the Chronicle wrote an inaccurate story that used facts from Chris Heredia’s also inaccurate story. The OHA is a governmental agency that is chartered by the state.

  14. Robert

    Actually, there is one huge thing that can be done. Remove the restrictions in the charter that block outsourcing of work.

  15. Robert

    Anne, although you use different words, they fundamentally mean the same thing as Journalist’s. An agency chartered by the state to operate within Oakland.

  16. Robert

    There is also something else that may help for the short term. The city owns a lot of property, start selling it.

  17. Christopher

    Can someone please explain the Measure Y sleight of hand? Is the threat to lay off 140 police officers an accounting trick to lay off officers paid by the General Fund, but hire more Measure Y officers paid by Measure Y funds? Thus freeing up General Funds for other users?

    Dellums said the city would lay off police officers because if they didn’t “we might as well pack up and go home, because you’d have to abandon government. You’d only have $17 million to deal with all of the other programs that are out there — the recreation department, libraries, etc.”

    I would prefer the city close libraries and recreation departments before it cripples the Police Department. Apparently Dellums has different priorities than I do.

  18. V Smoothe Post author

    Okay, here’s the deal. Nobody is actually planning to lay off 200 police officers. The City is anticipating a COPS grant that would fund 140 officers from the Federal Government. Although the idea behind these grants is that we use them to hire new police officers, the City wants to use the money to backfill the General Fund – basically, we use the grant to pay for police we already have, thereby freeing up that funding for other uses. Since we are expecting to get the grant, the Mayor is submitting a budget that does not budget for those officers in the General Fund. If we approve the budget that anticipates the COPS grant, but then don’t get the grant, then we won’t have any money to pay for those police. But we’re expecting the grant. So basically, this is all being blown way out of proportion.

  19. MarleenLee

    Measure Y provides: “No tax authorized by this Ordinance may be collected in any year that the appropriation for staffing of sworn uniformed police officers is at a level lower than the amount necessary to maintain the number of uniformed officers employed by the ity of Oakland for the fiscal year 2003/04 (739)”.

    If the Mayor’s budget does not include sufficient funding for maintaining at least 739 sworn officers, then I would say the budget violates Measure Y, and the City would not be able to collect Measure Y taxes. I don’t know anything about COPS grants or how likely it is that the City would get the money. But I don’t think the City should be banking on something like that in light of the language of Measure Y, and in light of the fact that they have a history of making false assumptions.

  20. V Smoothe Post author

    The City will find out about the COPS grant by late summer. If we don’t get it, they’ll lay off the officers at the end of October.

  21. MarleenLee

    But if the budget passes as currently written, without the necessary appropriations, then the City will automatically lose its right to collect Measure Y taxes, will lose $20 million in funding, and will need to start laying off officers pretty much immediately. I think this whole plan is just insanity.

  22. V Smoothe Post author

    What the budget proposal does is to fund the entire force through October 31st, so it would keep the Measure Y required baseline until then. We’ll find out in late summer if we get the grant, and if we do, then it will be used to fund the positions that would otherwise be laid off. If we find out in late summer that we didn’t get it, then we go back to the table to figure out what to do.

    (I’m updating as I get information, sorry if its hard to follow.)

  23. Christopher

    (V: thanks for the time you invest researching and explaining Oakland city government! Your blog is very informative.)

    I (now) understand the threat to lay off 140 police officers. I just wish the city hadn’t assumed the COPS grant is a given. Does Dellums *really* plan to lay off those officers if COPS doesn’t come through? He should prepare for torch-bearing commoners storming his castle.

    I wish the city had prepared two realistic budgets: one with COPS and one without.

    The COPS grants only last three years. Does the new budget have a roadmap for a balanced budget and sustainable police department when the COPS grants dry up?

  24. V Smoothe Post author

    I will have a full post about the budget proposal tomorrow, but for now – the Mayor’s proposed budget further defrays costs into the future, making us even more screwed in two years!

  25. Max Allstadt

    Woohoo! Debt party!

    What a brilliant move. Pass the bill to the next mayor.

  26. livegreen

    Here’s an excerpt from the Tribune article today:

    “The COPS program is designed to supplement, not replace, police jobs. That means jurisdictions are eligible only if they cannot afford to fill vacant positions or are looking to hire laid off officers or officers who would be laid off without the grant.

    Dellums, who has visited Washington, D.C., a number of times to lobby for federal money for Oakland, said he has been told not to count on the COPS money as the city puts together its spending plan for the next two years.

    ‘We’ve been admonished to deal with our budget deficit in a very straightforward way,” Dellums said recently, “to do it in a way that assumes that the COPS program doesn’t even exist.’ ”

    It sounds like this is an effort by the Feds to not upset some cities if they don’t get COPS funding, and in that case cities will have planned alternatives. Exactly what Oakland is NOT doing. A high stakes game of russian roulette. We’d better hope the Feds comply IF the City isn’t going to devise alternate plans.

    Of course the City should but my guess is they don’t want to upset the unions representing the rest of the City government. Boy if they don’t get that COPS money there’s going to be a real circus come October/November.

    At least we’ll get another entertainment venue without having to build a thing…

  27. Christopher

    > “… jurisdictions are eligible only if they … are looking to hire laid off officers or officers who would be laid off without the grant.”

    I think that quote is the crux. If Oakland adequately funded the OPD, then its officers would not be in risk of being laid off and thus the city might *not* be eligible for COPS. So by failing to fund the OPD, (Dellums hopes) the city will be eligible for COPS.

  28. livegreen

    V, You say the City is expecting to get the funding. Obviously it would be great if Oakland gets the COPS funding. But in the Tribune article the Feds seem to be hedging (as described in my previous post).

    So what happens if the City DOESN’T get the funding? In that case I find it highly unlikely the City’s going to start renegotiating with everybody, go through this process again, and do ANOTHER budget.

    If this happens by then it’s too late, those Officers are gone. Unless a backup plan is put in the Budget now there probably won’t be a second chance (and unless you have some more info). OPD probably doesn’t appreciate having their jobs put at risk and, personally, neither do I.

    The more I think about this, the more I agree with Marlene that this is “insanity”.
    (Again, unless you have some other information about this…).

  29. len raphael

    a minor part of Dellum’s budget speech, that close to his mention of “cutting costs” by delaying 24Mill repayment of interfund borrowing, was his “restructuring” city bonds.

    i don’t know diddly about muni bond financing. i did notice on the latest city financial statements a footnote about “interest rate swaps”. aren’t those something where the city substituted short term borrowing with lower variable interest rates for long borrowing at fixed rates? Does Dellums mean (or does he even understand the speech he read) doing more of that? Or longer term fixed rates that push the debt repayment undo next later generations?