As Oakland and ALCO Election Winners Solidify, Uncertainty Entangled with Financial Woes Await City Officials: Update Janani Ramachandran Goes On Parental Leave: Correction

*per Council mtg on 11/19/2024, Council President Nikki Fortunato Bas announced that D4 CM Janani Ramachandran has gone on parental leave, leaving a standing count of 7 CMs at the time of this writing, and subtracting one CM from the math shown here for a currently unknown period of time. 5 CMs would be the bare minimum to pass legislation and the bare minimum for quorum.

Despite Oakland and ALCO’s most anticipated electoral races solidifying into final outcomes, the now most dynamic puzzle piece of the election settled into further doubt with the Registrar’s most recent vote count update on Friday. Current Oakland D2 CM Nikki Fortunato Bas overtook John Bauters in the ALCO D5 race with an unbelievably slim lead of 106 votes.

Bas initially trailed Bauters by a significant margin of over 8 points in the first batch of votes, an outcome many assumed would continue with further vote counts. But the opposite happened—in a dynamic that’s become a mirror of most of Oakland’s races, the D5 votes grew more left-leaning with each drop, giving Bas an increasing edge against Bauters that's eventually led to her slight lead.

The race could still go in either direction and there's at least one more drop of around 17K votes countywide, although it could be more when ballots in need of curing and other confirmations are tallied. But the now more concrete possibility that Bas could move out of City Hall and down the street to the Alameda County Administration Building leaves big questions for the Mayor’s office and Council in the coming months after the apparently successful recall.* [correction at end of article]

In the event that Bas wins the race and leaves for the Board of Supervisors, she could serve two or three weeks in a transitional role as Mayor before being required to give up the role to assume her office at the Board. The new Council, composed of four remaining CMs–Carroll Fife, D3; Janani Ramachandran, D4; Noel Gallo, D5; Kevin Jenkins, D6—and three incoming CMs would convene in early January. Only two candidates in the other three seats are currently certain to prevail, Unger and Brown. D7 is still too close to call as of Friday and it's not clear if Ramachadnan’s Chief of Staff, Iris Merriouns or Ken Houston will prevail.

Bas’ D2 seat would remain empty and five of the remaining seven votes would be necessary to elect the new Council President to become Mayor and the pro tem to replace them on Council.* Council would thereafter be reduced to 6 members until the special election is carried out and a new Mayor and new D2 representative is elected**. In the meantime, Council would need near-unanimity of the standing six members to pass legislation—if four CMs vote for legislation, it would be considered a tie by current rules, requiring the interim mayor to break the tie.

Public Safety-Driven Fiscal Cliff Comes into View for City and Council

That uncertainty comes at a critical time for Oakland. The County continues to delay what would typically be a ministerial approval of a transfer of the Development Agreement [DA] for the County’s share of the Coliseum site to African American Sports and Entertainment Group [AASEG], a process necessary to complete the purchase. AASEG has an agreement to purchase the site from Fisher’s purchasing group, but the site is still locked into the DA with the County, and it must be transferred to AASEG by a vote in a public meeting for the sale to be completed. In its most recent opportunity to agendize the transfer vote in a closed session meeting, the body again declined to do so. Recent comments by David Haubert indicate the approval is close—but the delay that is now rounding three months was unexpected. Without the executed closed sale, the funds can’t be budgeted. Instead an austere contingency budget that lacks the Coliseum funding and was passed as a safeguard fallback alongside the sale-dependent budget goes into effect.

At a Special meeting on Tuesday morning scheduled weeks ago, Council members will discuss the much-anticipated FY 2024-25 first quarter revenue and expenditure report***. The report written by Finance Director Erin Roseman outlines the contingency budget with the AASEG funds removed and contains dire warnings for Council members about the budgetary problems caused by the delay. The report warns of fiscal insolvency—literal bankruptcy—without significant and immediate budget cutting action in the police [OPD] and fire departments [OFD]. As budget and financial department staff told Council earlier in the year, there are few other places to cut spending to the size of Oakland's revenue and expenditure imbalance.

The report reiterates that searching for other areas to cut will prove fruitless and calls the OPD/OFD cuts "unavoidable".

"Avoiding cuts to public safety would require drastic reductions across all GPF services, effectively eliminating 83% of nonpolice and non-fire expenses – an approach that is neither practical or likely compliant with legal or charter requirements."

OFD’s high vacancy rate usually allows it to recoup its overtime overages by the end of the year, as happened in FY 2023-24 when OFD came in $13 MM under budget despite overtime overages. But overspending in OPD is far greater and the vacancy rate does little to pay it down. CMs were warned weeks ago that OPD was already overspending the primary budget—the one bolstered with expected AASEG revenue—by nearly $30 MM. At that meeting, CM Noel Gallo complained that police spending overages are brought to council at the last minute. During that meeting, Budget Director Bradley Johnson reminded Gallo that the Council was being warned about this overage before the first quarter statement was even released, and about the previous overages at every quarterly revenue and expenditure reporting meeting throughout the past fiscal year. 

With the current reduced revenue budget, the OPD budget deficit grows to about $52 MM. With lower revenue also, the OFD’s deficit widens beyond the expected vacancy savings, and the OFD is projected to overspend by $34 MM, though it's unclear what the final total would be in that department. Together these two expenditures drive about 90% of the $93 MM operating budget shortfall.

The dialed down revenue projection–after $49 MM of expected Coliseum revenue is removed—is actually on track, however. In the current lower revenue forecast, Oakland is breaking even on its higher and lower performing revenue, although many expectations are set lower than they were budgeted last fiscal year.

Though there are various other cuts in spending, including a pause in the Mayor’s Film Incentive Program, and unexecuted grants as well as throughout other departments, the bulk of the savings will be found in cutting OPD and OFD—including a freeze of police academies, with a commensurate reduction in graduated police staffing, and the “brownout” of five fire companies, according to Roseman. 

This isn't the first time the City has been confronted with the stark possibility of bankruptcy late in the calendar year. In late December 2020, then-City Administrator Ed Reiskin suddenly presented Council with unilateral cuts the Schaaf administration would carry out to avoid imminent bankruptcy caused by extraordinary police spending amid diminishing revenues during Covid. ARPA funds subsequently passed early in the next year headed off most of the cuts—and the OPD even received more GPF funding.

Public Safety Spending More Complicated Than On Paper Cuts

The cut in fire comes weeks after a new hills firestorm was apparently averted by OFD with county and state support, and as fire season ebbs—although the situation would have been drastically different according to OFD Chief Damon Covington if the budget had been cut in July instead as some council members sought. 

So too, the anticipated savings in the OPD is also more complicated than it appears on paper. A current academy struggling with recruitment is scheduled to begin in January. Freezing that academy and the next would eventually mean an on paper cut of 78 officers, according to the contingency budget's math. But that savings is seen only through attrition that will take time to unwind. OPD graduates around 25 officers in December, and with a current staff of 681 sworn officers would jump back to around 700 officers thereafter. A mutually agreed change to the OPD's labor agreement would be required for layoffs.

While up to 80 officers are eligible to retire in 2024, the true number of retirees will likely be only a fraction of that—any retirements are likely to become known in the next few weeks. Thereafter, the department would grow smaller by an average of 3 to 5 officers per month. Barring a large number of retirements, it would take much of the entire half-year left in the fiscal year to reduce staffing to below current levels. Regardless, reports from police officials at the Public Safety Committee and Police Commission note that the City has continued to struggle with unusually low recruitment over the past several months for the 195th academy, delaying its commencement several times from August because the OPD could not recruit more than 16 candidates for a class budgeted at 33, even after months. It's likely the City would have either indefinitely delayed the academy regardless to fill it with even 22 recruits—the class size from last year’s historically low academy in 2023.

Even if the Coliseum sale funds appear on track to be realized in the coming weeks, the Finance Department report urges City officials to enact the contingency budget cuts and not wait on the funds to become effective.

"Given the severity of the City’s financial situation, it would be fiscally irresponsible to rely on funds any property sale (including the Coliseum) until after the sale is completed, cash is received by the City and title is transferred"

Regardless, in a scenario where the money comes through and runs the risk on the sale closing in FY 23-25, the City will have the nearly $30 MM in OPD spending overages to close, along with a still undiscussed unbudgeted expense for a special election that could range up to $20 MM. It's still unclear whether the Thao administration has already enacted some or all of the cuts, or will enact the cuts unilaterally, as it has been authorized to; or if the Administrator will bring the cuts back for Council input and/or action as part of a budget amendment.

Incoming Mayor and Council Face Uncertainty as Financial Challenges Grow

The interim Mayor will be thrown immediately into this maelstrom and the coming one, as the City also must create a balanced budget sheet by May for the coming fiscal year. Without Bas’ in the D2 seat, the role of both the Council President, who creates the Council’s budget amendments, and the Mayor, who creates the initial budget [with guidance from the Finance Department and City Administrator] will be an open question until early January. 

The Council will vote for a Council President in January, who will immediately become Mayor—and a Pro Tempore President, who will, upon the President assuming office, become the Council President. Only two of the current 4 CMs have completed an entire first term as of press time. None of the incoming CMs have held elected office.

The outcome could lead to a Freshman CM assuming either the Mayor’s seat, the Council President role or both. Then both will face the current budget’s problems as well as be faced with crafting next year’s budget, already assumed to be unbalanced, while the electoral toxicity driven by outside monied interests continues in a new election cycle that is likely to begin around the same time. And in that scenario, there will be only six council members seated. 

*It’s also possible that in light of the upcoming transition, Bas and Kalb abdicate their roles as Council President and President Pro Tempore upon confirmation of the election results, should Bas win, allowing a vote for Council president and Pro Tempore for the purposes of appointing the interim mayor. But a new Council President election would elect a new Mayor in early January.

**Council does have a provision to appoint a council member if an absence lasts 100 days.

***per Oaklandside, an original report was replaced in the packet without an updated title. In the original report, Roseman warned potential “fecklessness” would lead to bankruptcy in an admonition addressed to "City policy makers, staff, residents and other stakeholders"

Correction:

This article was written in absence of a City Attorney opinion on the process and attempts to get answers on these processes were not responded to by the City and there was no confirmation the City Attorney would issue one. In light of a new opinion by the City Attorney, the following is not accurate and has been removed from the original article:

"In the conventional wisdom until now that assumed a Bas loss at the county level, Bas would have stayed in her Council President role and assumed the Mayor’s office in December, providing a single interim administration from mid-December to the special election.

Council President Pro Tempore Dan Kalb would assume the Council role until his term ends at the end of December, and a new Council president and Pro Tempore would be elected with the first council meeting in January. Council would apparently have seven members for the duration of the interim period as Bas ran the Mayor’s office, creating some minor difficulties in passing legislation with a supermajority of standing members necessary to reach the five required votes for legislation. 

Though this scenario was expected to become the working assumption on Friday, the most recent dump has increased uncertainty instead. If Bas is removed from the equation, a significantly more chaotic future could await Oakland."

According to an informed source, at the time of this writing, the initially appointed Council President would serve as the Mayor for the duration of the original vacancy. But the City Attorney now says that regardless, the new election for Council President required every two years and taking place in early January would put the new Council President in the role. Regardless, essentially the same processes would occur as those laid out in this writing, because they assumed the absence of Bas after being elected to the BOS. Bas would have likely been voted as the new Council President for the purposes of continuing her role as interim Mayor if she had lost the BOS election and stayed on, but that question is also now moot if she is confirmed as the winner of the BOS election.