Ten Strategies to Make Oakland Better: (1) Start Honest Discussion about Finances

Ten Strategies to Make Oakland Better

Strategy One: Start an Honest Discussion About Oakland’s Financial Condition

Make Oakland Better Now! was established to advocate for public safety, public works, government transparency, accountability and budget Reform. Often, however, we are recognized simply as advocates for increasing the size of the Police Department. While we stand by our position that Oakland desperately needs 925 sworn officers, much more is needed to make Oakland the city its residents want and deserve. Today, we begin a ten part series on steps Oakland can and should take to make this a better, safer and more sustainable city. For our first strategy, we advocate clear statements from City leadership and a definitive, inarguable agreement about Oakland’s financial obligations and how they will be paid.

Here is a challenge for any resident of the City Oakland: Do Oakland’s anticipated  expenditures over the next four years exceed its projected revenues?  If so, by how much? What is the City going to do about it?

There is an enormous dispute in Oakland over issues related to these questions, but not over the answer to the first one.  There seems to be no disagreement that for the period ending mid-2018, there is a major gap between projected income and expenses.  The quarrel is over how big the gap is and what should be done.

On one side of the debate:  In commenting  on City Administrator Deanna Santana’s departure last week, the Oakland Tribune editorialized as follows:

While [Mayor] Quan last month emphasized that revenues were expected to surpass projections by more than $18 million this fiscal year, Santana focused on the $28 million projected shortfall at the end of next year, $241 million imbalance the following year and $292 million deficit in fiscal year 2017-18.

While Quan made one-line mention that the city faces unfunded pension and retiree health liabilities, without specifying the magnitude, Santana was quick to peg retirement debt at approximately $1.5 billion. In fact, it exceeds $2 billion.

Meanwhile, in a recent letter to City Council members concerning a report on “unfunded liabilities,” one City employee union blasted Santana’s estimate of unfunded liabilities as “a distortion of facts” and “a San Jose approach that is inappropriate for Oakland.”

Late last year, Oakland’s Budget Director graphically demonstrated the projected shortfall for the City’s entire budget as follows:  mobn1

On top of this, last month the administration reported that based on changed demographic assumptions by the CalPERS public employee retirement board, Oakland’s pension contributions to CalPERS were expected to start climbing in 2016, with a range of increases that looks like this:

mobn2

These numbers are similar to, but worse than, those in the Tribune editorial.  If they are correct, there is a total projected shortfall the three fiscal years 15-16 through 17-18 of more than $800 million! Put differently, for those years, on average, that’s a 20% shortage of revenues needed to cover expenditures.

Are these numbers real?  We can’t say.  But we do know that if they are real, Oakland has a serious problem that has to be addressed.  And we won’t make the problem go away by ignoring it.

So our first strategy for making Oakland better is this:  the mayor, mayoral candidates, administration, the City Council, citizens, employees and all other stakeholders need to start having an honest discussion about Oakland’s financial condition, what its problems are and how they can be addressed.

A recent Sunday Chronicle featured an op-ed by Robert Selna addressing this same issue, and urging “Oakland needs to hire an independent budget analyst.” We would go one step beyond that. Oakland needs to get to a definitive, universally accepted view of its financial condition. If the condition is as reported, it then needs a long-term plan to solve the problem.

And yet we see little or no public discussion of the City’s financial condition.  In her State of the City Address, the mayor spoke only of $18 million in excess revenue, without mentioning that nearly all of this will come from one-time sources of income that won’t be there again. Looking at the mayoral candidates’ web sites, we see no discussion of a financial crisis.

Are these numbers real? The answer to that question is not a matter of differing opinions – it’s a matter of facts.  And so far, Oakland is ignoring those. But if the numbers are real, Oakland has a serious problem to address.  We won’t make the problem go away by ignoring it. The mayor, mayoral candidates, administration, the City Council, citizens, employees and all other stakeholders need to start having an honest and public discussion about Oakland’s financial condition, what its problems are and how they can be addressed.

Don’t forget:  April 3, 2014, 6:30 p.m. is the Make Oakland Better Now! / Metropolitan Greater Oakland Democratic Club Mayoral Candidate Public Safety Debate.  Come listen as 9 mayoral candidates answer the hard questions about how to make Oakland a safe city.  More information here.

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4 responses to “Ten Strategies to Make Oakland Better: (1) Start Honest Discussion about Finances

  1. Part of the discussion should also include how Oakland’ budget compares to the budgets of other reasonably similar cities.

  2. Bruce and team, this is VERY HELPFUL. Despite 30 year career in finance and MBA, I have found this discussion very hard to follow until now. The net issue seems to be the definition of “unfunded liabilities” vs the city’s bond payments (well defined..). This is the most crucial issue facing the city after crime and all politicians should be continually questioned on both their understanding and their solutions. Keep up the good work

  3. David, we agree. To see some pretty good comparisons, check the study Fresno did of its financial and other city metrics compared against other California cities in 2003 and 2009. http://tiny.cc/lmf9cx. And its web site currently shows tons of city salary information, comparing its own high-end salaries against those of other cities. http://tiny.cc/r5f9cx

  4. Don’t forget that you can actually navigate the city budget for the first time ever at http://openbudgetoakland.org – and we’re talking to Oaklanders about how to make this resource even more useful, so contact OpenOakland.org to help improve this- and look for our new campaign finance disclosure app launching soon!

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