Budget Bits No. 4: The Matter of Deferred Capital Expenses

This is the fourth installment in our series on the 2015-17 budget process. The mayor’s budget is scheduled to be released on Thursday, so between now and then, we’ll summarize some of the observations in the city’s recently published Five-Year Fiscal Forecast, which help set context for the budget decisions to be made over the next two months. In this post, we look briefly at the City’s severe deferred capital problem.

Anyone who lives, works, drives, rides a bicycle or walks in Oakland knows something about our city’s deferred capital expenses. This problem is readily apparent from the horrible state of our streets and sidewalks. According to the Public Works Department, Oakland has 806 miles of streets and 1,120 miles of sidewalks. As the City acknowledges, the streets are on an 85 year resurfacing cycle, compared to the industry standard of 25 years. And (again, according to the City), 38% of the streets are in good condition, 38% fair, and 23% poor condition.

The Metropolitan Transportation Commission’s recent evaluation of Bay Area city streets paints a bleaker picture. MTC assigns a point value, or “Pavement Condition Index” (PCI) score to cities. This year, MTC assigned a 59 PCI to Oakland. This means the streets are “at risk,” a designation when the city has  “[d]eteriorated pavement requiring immediate attention, including rehabilitative work.”

But the issue of deferred capital expenses goes well beyond streets and sidewalks, and includes storm sewers, technological enhancements, buildings and facilities, including the Police Administration Building, which is in terrible condition.

The Five Year Forecast projects an average of $9 million per year for capital projects, and also states that there are projects that total $1.5billion that are key unfunded capital needs, that is, capital projects that are not included in the annual budget. Given that the average forecast total for all fund revenues over the 5 years is a little less than $1.2billion, that is like telling someone who makes $70,000 a year that they will need to a $70,000 repair on their house. And, like the homeowner who needs to make the repairs, the most likely source for Oakland to fund these projects is either to borrow the money (that is, issuing bonds)or to ask for help from the relatives (that is, go to the voters with a special parcel tax request). Let’s look at the projects listed in the Five Year Forecast and decide what needs to be done, and how to do it. The project categories and projected costs are these (and we would like to see a great deal more detail than appears in this table, or in the forecast):

Key unfunded capital needs

When then-Mayoral candidate Libby Schaaf was campaigning, she promised that if Measure BB passed, she would “bond against the new $8 million per year allocated to Oakland for road maintenance to make immediate upgrades in road conditions that will reduce maintenance costs going forward.” This is an important part of the plan for catching up. But there will undoubtedly have to be more.

The next steps for the city government is to prioritize the above projects, determine which to move forward with most quickly, and develop a plan for doing that.

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One response to “Budget Bits No. 4: The Matter of Deferred Capital Expenses

  1. Hobart Johnson

    Nice concise summary. Could have better spelled out consequences of Oakland’s business-as-usual priority-making. For example with a backlog of $443 million in street maintenance how much can Oakland borrow (“bond” in Schaaf’s lingo) using the $8 million annually from Measure BB so that Oakland’s streets are brought up to snuff in a useful timeframe rather than in half a century?

    It’s all in the details which Oakland’s leadership typically fails to spell out clearly. Transparency is terra incognita in Oakland and thanks are due to MOBN for helping to remedy this.

    Oakland historical “priority” system means throwing token amounts of funding towards critical projects like street maintenance or public safety. Token spending is not, however, going to solve problems except, perhaps, those of politics. Token spending lets pols claim they are acting. Token spending unfortunately doesn’t actually get things done.

    Making real priorities means spending enough on critical problems so that actual, measurable, progress results. It implies not spending on politically-popular programs that are not productive for the city as a whole. City hall simply doesn’t get this–it’s a good educational project for MOBN.

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