The $450M culprit behind Oakland’s budget crisis
Crime data, sideshows, downtown development
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Story of the week
Oakland’s budget problems are well-documented, with the city facing a $100M+ deficit next year, even after it sold the Coliseum to cover this year’s budget deficit.
Spending problems: A major contributor? Out of control spending, which city officials have failed to reign in, including employee pay raises the public isn’t privy to.
Oakland spends more per capita than similarly sized California cities (and nearly all Bay Area cities).
At the same time, local property taxes have gone up 65% since 2013, with little to show for it across public safety, infrastructure, and city services.
What’s the culprit? The Oakland Report uncovered the root cause of Oakland’s spending problems: crippling pension costs and city wages that grew 2.5x faster than inflation.
Oakland currently spends $450M a year (more than 1 in 4 dollars of unrestricted revenue) on pension costs and above-inflation pay raises.
These costs are larger, and have grown faster, than 9 similarly sized California cities, both in absolute amount and per capita.
The Oakland Report also has prior reporting on how city pay raises massively exceed inflation.
Poor planning: Of the $450M spent annually, more than half ($280M) is for what’s called Unfunded Actuarial Liabilities (UALs). Basically, the city promised to pay pensioners much more than it could afford, so it needed to borrow debt to cover the difference.
In 2023, Oakland paid a whopping $133M in interest payments alone for the UALs.
These interest payments are expected to cost $1.5B over the next 20 years.
Baby steps: The city reformed most (but not all) of its pension systems in 2013 in accordance with updated state law.
New employees are now receiving a more sustainable pension benefit, and the city is able to fully fund those promises without breaking the bank.
But among the remaining unresolved issues, the UAL problem is the most severe.
Digging out: The Oakland Report proposed several solutions to help city leaders start digging their way out of this financial hole.
Some smart refinancing could help alleviate the burden of the interest payments, but no matter how well the city manages its UALs, it has to get wage escalation under control.
Oakland Report says: “Presently, wages are set in closed-door negotiations between the city administration, the City Council, and union leaders that helped elect the very city leaders who are negotiating with them. The public has no ability to know what is said, or how deals are cut. Clearly this is a conflict of interest that undermines city leaders' commitment to the interests of residents they are elected to serve. These negotiations need to be made more transparent.”
In other news…
A recent analysis of California Department of Justice data shows that Oakland’s crime rate has been consistently higher than other Bay Area cities, while the rates in SF and San Jose have leveled off since peaks during the pandemic. (Mercury News)
Last Saturday alone, Oakland PD responded to two shootings within four hours on opposite sides of the city. Later that day, an ABC7 news crew was robbed at gunpoint in the Longfellow neighborhood. And later that night, more than 100 cars blocked the Bay Bridge for a sideshow, where a woman was struck by a spinning truck. (SF Standard)
Mayor Thao recently touted 911 dispatch upgrades that should improve the city’s emergency call response. However, reporting shows that 1 year after the Mayor announced a $2.5 million investment in the 911 system, average answer times are still the worst in California by a wide margin. (NBC)
The California attorney general’s office dropped a case filed by DA Pamela Price against her former prosecutor Butch Ford. (Berkeley Scanner)
Shortly after taking office, Price put Ford and a number of veteran prosecutors on leave, but never gave any reasons for her decision. Ford eventually left and went to work for SF DA Brooke Jenkins, where he quickly climbed the ranks.
Price brought the case against Ford last July — claiming he had committed prosecutorial misconduct — but it was just weeks after he attended a meeting to begin planning a recall campaign against her. Ford has said Price’s lawsuit against him was politically motivated.
In property news, Kaiser Permanente is selling another one of its office towers in Oakland to an apartment developer that wants to build an ‘urban campus.’ Meanwhile, cosmetics company E.l.f. Beauty is more than doubling its real estate footprint in Oakland.
Berkeley City Council passed a proposal (8-1) that will give city workers the authority to sweep certain homeless encampments even if they can’t offer residents shelter elsewhere. This is the latest in a number of similar policy changes being enacted across the Bay Area. (Berkeleyside)
🍽️ Oakland Proud
Last week kicked off the first ever Bay Area African Restaurant Week with a host of special seatings and pop-ups across the East Bay and San Francisco, featuring some of the region’s up-and-coming African and Afro-Caribbean chefs and restaurants.
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Oakland is hardly the only public agency that has a big pension problem, but it's probably the worst example in the Bay Area, which is full of bad examples. Add in practically all city and county governments, city managers in particular, firefighters and police, BART. Remember a lot of taxpayers work in the private sector where there are no pensions at all except for social security and that's if you can stay employed.