An unusual Friday afternoon budget meeting was at turns confusing and combative as Council members wrestled with options late into the night in the midst of a historic fiscal shortfall.
What's Going on?
The City is running late on passing mid-cycle budget amendments to the FY 24-25 budget. That mid-cycle process rebalances the second half of the biennial budget passed in mid-2023 to reflect revenue and expenditure realities that became apparent in the meantime for the coming fiscal year. Though there’s no hard deadline on passing the mid-cycle amendments like there is in the biennial budget process, the FY 24-25 budget that Council passed as part of the biennial process last year is no longer tenable and other operational deadlines loom by mid-week.
The process has been complicated by the Mayor’s late introduction of the Coliseum sale—which, if it comes to pass, will add a first payment of $63 MM to FY 24-25 revenues, saving the City from a grim year that would lead to ongoing austerity and harder decisions, like layoffs, in the future. Negotiations to ink a sale deal were approved less than a week ago and while the City continues to negotiate, the funds can’t be characterized as a guaranteed source of revenue. Confirmation that the sale would not be finalized by June 30 came late in the week, apparently, triggering the move to add contingencies in case the sale were to fall through.
Council has two options before it. The first is the Mayor’s official FY 24-25 amendments to the FY 24-25 budget, with reductions to services buffered by the Coliseum sale [titled "Errata Report" in Legistar]. It's the Mayor's originally published FY 24-25 budget amendments with some changes to the way capital projects would be funded through the year and changes to the OPD budget, adding more command staff in a cost-neutral shift.
Though the Mayor’s budget is similar to the one published in May , it adds a contingency plan if the sale proceeds aren’t available by September. That would trigger the contingency in October, with extreme reductions across the board, including the departments tasked with public safety roles, the Department of Violence Prevention, the OPD, and OFD.
The other option is an austere alternative set of budget amendments that plan for no Coliseum sale at all, and starts the Summer off with severe cuts to city services—the “budget that would have been” without the Coliseum sale.
At Friday’s meeting, CM’s Ramachandran and Reid argued that the passage of the Mayor’s budget amendment package with contingency would create a downgrade in credit. Both said they are skeptical that the sale will clear in time to avoid triggering the contingency plan. Finance Director Erin Roseman seemed to confirm the potential for a credit downgrade of some kind was likely.
But Bas, Kalb and other CMs argued that they’d been given every reason to believe that the sale would come through and that any minor reduction in the credit rating would have little impact on the City’s ability to access the bond market for its capital projects should it occur.
On the side of Bas and others arguing for the Mayor’s contingency budget, was the specter of an immediate set of service cuts similar to the worst outcomes highlighted at previous meetings by directors such as OFD Chief Damon Covington—who returned to describe such a reality during the meeting.
The meeting was continued to July 2nd, when deliberations will continue with the expectation of a vote before the meeting is through.
Budget Deliberations Begin with Misinformation and Confusion
Ahead of the meeting, misinformation about the budget plans created a cacophony around an already compressed budget timeline. CM Janani Ramachandran released a video on Instagram that characterized the alternative plan as if it were the Mayor’s budget amendments. Ramachandran suggested that the Mayor herself was claiming the Coliseum sale was a bust, and that Thao was rushing through devastating cuts on a short timeline. In the video, Ramachandran clearly describes the alternative budget, but presents it as Thao’s official budget—claiming for example, that the Mayor’s budget cuts the film incentive program, though it remains in Thao’s budget amendments and was recently passed as a legislative item by Council. Ramachandran also claims that the Mayor’s budget amendments would cut 4 police academies, an action neither the Mayor’s budget nor the alternative do, or could do, because there are only three academies in the baseline FY 24-25 budget passed last year. Ramachandran doesn't mention the Mayor’s contingency budget.
Others mistook a supplemental worksheet with an a la carte list of alternative budget cuts—which included cuts to senior and rec centers, cessation of GPF homelessness spending and the closure of Animal Services—as an integral part of the Mayor’s budget amendments. The list was presented should Council members choose to adopt the alternative budget as potential replacements for cuts to police and fire. Dozens of seniors came to the meeting pleading to save the centers, which were never under serious threat of closure and applauded with relief when City Administrator Jestin Johnson clarified that the cuts were only from a list of financial values for select services in an ancillary document, not the Mayor’s proposed budget amendments.
Bond and Credit Ratings Bring up Thorny Questions
During a presentation and question and answer session from the Finance Department, staffers revealed that they believed the as yet-unconfirmed Coliseum sale could impact the City’s credit-rating, which improved to one of the highest levels attainable in 2023-2024 due to holding ARPA reserves. Bradley Johnson told Council that if the City were forced into the contingency—which features $63 MM in immediate cuts to budget—the City would have to cancel its capital projects budget.
Johnson described the difference between the two options in the event of a failed Coliseum sale. Under the contingency budget, OPD would be reduced to 600 officers and five fire stations would have to be browned out in the second half of the year. All contracting and travel would have to be halted immediately and positions in DVP would have to be frozen. Johnson called such a scenario pulling “the emergency brake on our organization on both expenditures and services.”
Johnson called the alternative scenario “smoother” and more “flexible” but with consequences almost as severe from the start, including a rolling brown out to OFD’s fire houses beginning during fire season, an OPD reduction to 610 officers, freezing vacant positions across departments, and reduction of services and cultural and economic development. Johnson referred to the alternative as hitting the brake pedal, as opposed to the other scenario where the emergency brake is pressed. Neither proposal would impose layoffs. Johnson described both options as presenting “tough choices” for the city.
“I do not envy the position that any of you are in or the responsibility that is on your shoulders,” Johnson said.
Roseman described the potential impact to the City’s credit rating by using uncertain one time funds to balance the budget. Roseman said a downard change in the credit rating could could influence not only how the City's access to the bond market and how much it pays on its debt.
“So we have a really high credit rating right now, double A plus, which is the second to the highest. Based off of the perception about these actions that this body takes and the outcome of it, our credit rating may change. Then there is a commensurate sort of interest rate action. Whenever you go to the market to sell, you could go to the market to try to sell your bonds, and you could be provided rate options that are really high, or you could find yourself with no takers…,” Roseman said. Later, in a response to a Council President Bas, Roseman said she did expect a credit downgrade with the Mayor’s budget.
The City would have to state in its disclosures that there is a level of risk in its choice of a budget based on a one time sale that itself has yet to be executed. Roseman, however, confirmed that the contingency itself improved the relative risk of the budget, and it was better to have it—despite the fact that its existence highlights the risk—than not.
Reid/Ramachandran Support Austerity Budget
Though neither Roseman nor Johnson articulated a clear recommendation on the options, CMs Ramacandran and Treva Reid seized on staff statements, including Roseman’s statement that the sale would have to be included in a disclosure, as evidence that the Mayor’s budget is too risky, excoriating the mayor and demanding the Council address only the alternative budget. Reid implied the alternative was the actual budget that should have been presented a month earlier which would have given Council time to add amendments to it.
“This budget was ready for our review on May 17, as City Administrator Johnson said, and the mayor, the CEO of our city, elected not to provide the accurate and more truthful budget to be presented for us to have enough time to sufficiently review and make amendments. And we are now within days of making critical decisions on how we're going to show up and serve our city, and that is thoroughly disappointing,” Reid said.
Ramachandran chastised City administrative staff and the Mayor’s office, and said she regretted the level of trust she’d placed in the Mayoral administration on the Coliseum deal, and implied that “others in the city” knew the Coliseum deal would not be finalized by June 30.
“I only received information of this new proposed budget and information on the lack of viability of the Coliseum deal being finalized in time, at the same time that the public did—this Tuesday afternoon, three days before today's budget meeting. In what only appears to be an effort to tie the hands of Council and steamroll us into an irresponsible vote, we were presented at the 11th hour with an impossible choice,” Ramachandran said.
According to the City Clerk's records, however, Ramachandran missed the June 20 closed session meeting where the Coliseum sale negotiations status were discussed with staff attorneys and real estate staff a week earlier. The subsequent addition of a contingency to the Mayor’s budget and the alternative with no Coliseum sale seem to have been requested by Council members who attended the meeting or expressed concerns about the timing of the execution of the sale just ahead of it—the agenda item appears to have been pulled directly after the meeting
Ramachandran Plan "Very Similar to What We've Experienced During Ransomware"
Later in the meeting, Ramachandran for her part introduced a new plan on the dais to extend the budget process for thirty days through July, including town halls and amendment processes, to seriously contend with the austerity budget she says is the only reliable one. Though there’s no legal deadline to pass the budget as confirmed by City Attorney Barbara Parker at the meeting, both Johnson and Assistant City Administrator G Harold Duffy described serious operational impacts resulting from Ramachandran’s idea during a follow-up series of questions from Bas. Duffy and Johnson described disastrous impacts similar to the aftermath of the City’s 2023 Ransomware attack if Ramachandran’s plan were followed.
“Without an adopted budget, we do not have the information to interface into our financial system. There's a likelihood that this will freeze up our financial system and make us unable to pay obligations. I think we're particularly concerned about making sure that we have accurate treatment of payroll going forward, we effectively need proper data, information files from an adopted budget, put together for the first payroll run—that's our most immediate concern. Prolonged delay of the budget would inhibit our ability to make payments in other manners, because we wouldn't have access to the data in the financial system to do that in a normal way. It would be very similar to what we've experienced during ransomware,” Johnson said. Johnson noted that the July 2nd passage of the budget is viable, but the budget would have to be ready by July 4th to avoid the problems he described.
Duffy noted that during Ransomware, staff had to hand submit payroll, which led to mistakenly overpaying $1.2 MM to City employees—funds that can only be requested but cannot be legally taken back.
“To this day, we still are owed somewhere around $200,000 that we did not get back,” Duffy said.
Ramachandran later returned to the failing idea, suggesting though disastrous, it was still possible, so its unclear whether she intends to pursue the month-long deliberation.
Bas, Kalb and Kaplan Stay Course on Mayor’s Budget Amendments and Their Own
Despite the claims about the Mayor’s contingency budget, Bas reiterated her support for it and her budget team’s amendments which are based on it. Bas said she felt confident from statements made by AASEG's director Ray Bobbitt that the sale would come through on time.
“You know, we heard at Wednesday's meeting an update on the land sale. I had an opportunity to talk with the developer as well, and I'm confident that we are on track in terms of the negotiations,” Bas said.
During the meeting, as well, Bobbitt gave a brief overview of the negotiations and noted that the legislative process of two readings necessary to give the City Administrator authorization to negotiate had only been completed a few days earlier. Bobbitt said he was committed to the sale and process.
"We understand that there was a potential expectation of us signing a purchase and sell agreement by June 30. However, because the process of going through the ordinance, of getting formal approval, we have been in feverish negotiations with the city negotiations team and the staff. We are very, very much committed to this process...we understand clearly what the timelines are. We understand clearly that while this is a proposed schedule of payments, we certainly believe that we are going to get to a purchase and sell agreement in a in a timely fashion," Bobbitt said.
Kalb noted in his response that there was no way around voting for the Mayor’s contingency budget, but that those arguing against it should be up front about the choice they are making.
“So I mean, what we're hearing basically, you know, either we pass a budget…that includes the 63 million...maybe there's a one notch reduction in our credit rating for a few years. Maybe not, we're starting at a very strong place, many other cities are not, but we are. Or if we don't do that, then we're going to be passing a budget that brings us down to...605 police officers…browns out some fire stations on a rotating basis, and a whole bunch of other things. So these are the choices we have to make. They're all horrible choices. We got to pick one, because if we don't pick a choice and we don't pass the budget, we're stuck with our two year budget, which is out of balance. And that is the worst possible outcome, our credit rating would absolutely go down the tubes if we did that,” Kalb said.
Kalb noted that for months the Council has been urged by members of the pulic to keep police and fire staffing as high as possible, and added that in the alternative budget the only solution that marginally reduces the impact of public safety cuts would be the spreadsheet outlining cuts to parks, homelessness services, senior centers and other equally “horrible” choices.
Kristen Schumacher, IFPTE 21’s lead researcher, during public comment, shared Kalb’s skepticism about a significant credit downgrading or failing out of the bond market. Schumacher said she’d spoken to other local jurisdictions, which were also relying on one time funds and they did not believe the outcomes were that dire.
“I've spoken to finance leadership in other cities, and they expressed skepticism that Oakland would outright not be able to access the bond market this year. They also noted that an actionable contingency plan in the event of the Coliseum sale not going through would likely address many of the major concerns you might hear from credit ratings agencies. Cities like Fresno, Sacramento, Long Beach, Los Angeles, all have lower credit ratings than Oakland under both Standard and Poor's and Moody's, and these cities still access the bond market to serve their residents,” Schumacher said. Schumacher added that Oakland was far from alone in balancing their budget with one-time funds this year.
Rank and file SEIU and IFPTE city workers came by dozens to support Thao’s contingency plan as well.
Several Public Safety directors fleshed out some of the potential impacts of the alternative budget at Bas' request.
DVP Chief Holly Joshi told Bas that the department had been building strength over the past four months of focused revival, but she said that without the ability to hire more staff by Fall the program’s life coaching capacity would be overwhelmed.
OPD Chief Floyd Mitchell told the Council that OPD would be stretched to its ultimate simply providing patrol, with questions about what would happen to the Ceasefire program.
“If we go down to 610, it is going to have a major impact on my ability to cover patrol shifts and to just provide basic response services to the citizens of Oakland,” Mitchell said.
OFD Chief Covington expressed concern over the 4 station brownouts.* **
“All brownouts aren't equal. So depending on the time of the year, as we go into the fire season, clearly, we can't brown out some of our normally slower stations in the hills, because that's where the high fire severity zones are. So we have to leave those stations open. When we run 80,000 plus calls a year, we have to be very mindful about which stations we're closing, because we don't want to further impact our communities who call on us the most. So we're going to try and stay away from those communities when we're looking at brownouts. However, there's no way to really quantify the amount of additional pressure we're putting on our stations that are still open, instead of it being from 25 stations it's going to be from 20, so there's going to be an impact there,” Covington said.
Council President Budget Team; Kaplan Amendments
Bas presented her budget team’s amendments, which shift revenues from parking revenue and the City Attorney’s office, among other things to restore: up to $600K for ambassadors, together with an amendment the Mayor added in the latest version of the mid-cycle amendments; to restore an OFD Captain frozen in the original Mayor’s budget; funds for sideshow prevention; OPD civilian investigators and a CPRA attorney, among other restorations and policy directives. Bas’ budget team consists of CMs Kevin Jenkins, Carroll Fife and Dan Kalb, who obviously support the amendments.
Kaplan’s additional amendments had originally focused on using Measure BB fund to pay for sidewalk infrastructure, abandoned auto towing and CPTED bollards and k-rails for vulnerable storefronts. Kaplan now also seeks 1010 shifts to fund more civilian OPD techs and a swimming pool attendant for the East Oakland Sports Center as well as a Public Ethics Commission analyst and investigator.
Ironically, several of Bas’ amendments incorporate the Ramachandran/Reid proposed amendments, which were not presented anew at the meeting—that means that Ramachandran can focus on critiquing the budget process without risking her promise to constituents to restore community safety ambassadors. Reid also included additional budget restorations of her own, but without a spreadsheet, including the restoration of Bulky Block Party. It’s clear that none of the amendments would work in the austerity alternative, already cut to the bone.
Reid for her part returned to amendments, though it was never clear to which budget she was proposing potential changes to. Reid suggested using 20 MM from increased overtime to instead add police staffing, but offered no concrete proposal before the Council moved on.
Final Passage Tomorrow at 10am Continued Meeting
According to Council President Bas, her current plan is to have council pass the budget amendments by July 2nd. Though she also noted that Council meetings can be continued for a period of up to five days, Johnson in his rebuttal to Ramachandran’s idea of extending the deliberations for a month noted that if the budget is not passed by July 4, the “ransomware” level problems could begin.
With Bas’ budget team composed of herself, Fife, Kalb and Jenkins, and with Kaplan already telegraphing support for the Mayor’s budget with her amendments, the Mayor’s contingency budget is likely to pass with Bas and Kaplan's amendments. Noel Gallo, who nominally signed on to Ramachandran and Reid’s initial amendments to the Mayor’s budget, suggested he was ready to vote for the Mayor’s budget early in the meeting. But he left abruptly in the middle of Bas' clarification that no vote would occur. Bas had announced that no vote on the budget would happen that night to the public hours earlier.
@Nikkiforallofus doesn't get the credit she deserves for smoothly navigating endless rudeness while chairing mtgs. @NoelGallo5 wasn't listening, he was cranky & didn't think the other agenda items or public comments were worth his time, which is better spent picking up trash. https://t.co/yQjHII8Auk pic.twitter.com/7O136RFbMi
— (there is no) roseability ✡ 🇵🇸 (@_roseability) June 29, 2024
The meeting has been continued to Tuesday morning at 10am—all of the public comment legally required on the items has already been taken, as well as open forum, so the meeting will consist purely of deliberation. There will also be a regularly scheduled meeting on the same day at 3:30 pm.
*a firehouse station brownout means that a company does not man a fire station in a rolling selection of closures. Other companies from other firehouses respond to those emergencies, with increased response time and additional work load.
** this publication originally reported that the brownouts would begin immediately. The actual timeline for brownouts was never specified and Chief Covington's commentary suggested they would begin during fire season. However, during the July 2nd meeting it was clarified that brownouts would not begin immediately.
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