Oakland’s Finances at ‘Significant Risk,’ Report Warns, as Coliseum Sale Raises Questions

Oakland is in a DOOM LOOP.  The Mayor of Oakland is on the ballot for a Recall.  The DA of Alameda County is on the ballot for a Recall.  The city has a massive deficit—and recently lost both the Raiders and the Athletics.  Hotels and restaurants have closed.  The schools are run by the State.  This city is facing it closing days.

“According to the latest financial report to the city administrator, Oakland is in a “precarious fiscal situation” as it moves to implement a contingency budget amid a new funding schedule for the Oakland Coliseum sale, adding to concerns about the city’s almost $80 million operating shortfall at the end of the 2023-2024 fiscal year.

Earlier this month, council members and critics of Mayor Sheng Thao raised alarm when it appeared that a payment expected in the city’s highly anticipated deal to sell its share of the Coliseum didn’t arrive on time. As it turns out, the terms of the land deal had been amended, extending to November, the deadline for the developers, the African American Sports and Entertainment Group, to fulfill a second payment of $10 million, which the city says has been deposited to an escrow account.”

Oakland’s Finances at ‘Significant Risk,’ Report Warns, as Coliseum Sale Raises Questions

Katie DeBenedetti, KQED,  10/15/24  https://www.kqed.org/news/12009486/oaklands-finances-significant-risk-report-warns-coliseum-sale-raises-questions

As uncertainty continues to surround Oakland’s budget and how it will be affected by the Coliseum sale, the city’s finance department is warning that its fiscal situation is at “significant risk.”

According to the latest financial report to the city administrator, Oakland is in a “precarious fiscal situation” as it moves to implement a contingency budget amid a new funding schedule for the Oakland Coliseum sale, adding to concerns about the city’s almost $80 million operating shortfall at the end of the 2023-2024 fiscal year.

Earlier this month, council members and critics of Mayor Sheng Thao raised alarm when it appeared that a payment expected in the city’s highly anticipated deal to sell its share of the Coliseum didn’t arrive on time. As it turns out, the terms of the land deal had been amended, extending to November, the deadline for the developers, the African American Sports and Entertainment Group, to fulfill a second payment of $10 million, which the city says has been deposited to an escrow account.

Thao, AASEG and council members, including President Nikki Fortunato Bas, have called the revised deal a win because it raises the total revenue, reduces the city’s outstanding bond debt on the Coliseum by $12.8 million and closes the deal sooner. But council members Treva Reid, Janani Ramachandran and Noel Gallo have called for increased transparency about how they say the revised payment schedule will affect the city’s budget.

Roughly $63 million from the sale’s revenue was to be used to patch holes in a massive deficit in Oakland’s 2024-2025 budget. Because the funds were outstanding in July when the council adopted the budget, it also included a contingency: If those payments were not received on time, it would trigger a much tighter budget that made cuts akin to stepping on the funding emergency brake.

“There’s a lot of uncertainty now that this [contingency] budget has been triggered,” Ramachandran said. “My focus is on trying to understand what’s going to be cut first because there is absolutely no doubt and no lack of clarity on the fact that things have to be cut.”

Oakland’s finance and management committee was slated to meet Tuesday for the report on the status of the contingency budget activation, but the meeting was canceled at the last minute at the administration’s request for more time, according to Ramachandran.

The original Coliseum deal — which was tied to the budget that the City Council passed in July — called for an initial $5 million payment upon signing, followed by $10 million in September, $15 million in November, $33 million in January, and the final $42 million by June 20, 2026.

The amended sale agreement between AASEG and the city changes the payment schedule, pushing the $10 million expected in September to November and the remaining $95 million to the end of next May.

While the $10 million payment is already in an escrow account and will become available in November, according to Casey Pratt, the mayor’s spokesperson, Ramachandran and Reid said in a statement last week that these changes mean that the contingency budget has been triggered, and “Oakland must cut $48 million from its budget.”

The mayor’s office did not provide comment for this story, but Thao posted on social media that city officials briefed Ramachandran and Reid on the amended deal.

“They are welcome to be a part of the solution, not deepen distrust with false information and further divide us,” she wrote in a post on X.

Thao’s chief of staff, Leigh Hanson, told the San Francisco Chronicle last week that she doesn’t believe the changing payment schedule — specifically the removal of a $15 million installment that was expected in November under the initial deal — will change Oakland’s management decisions around fire stations or police academies significantly.

“We don’t have a cash flow issue,” she told the Chronicle.

However, the city’s frequently asked questions page regarding the budget says that “cost-saving measures were articulated in the contingency budget and per the budget resolution are in the process of being implemented.”

The finance department’s report, which is set to be presented at an Oct. 22 committee meeting, also says that the conditions of the contingency budget have been met and it is being implemented, adding that a substantial portion of the city’s general purpose fund is in non-cash assets that “do not provide immediate cash flow to address the city’s operational needs.”

The contingency budget includes brownouts, or rotating shutdowns, of five fire engine companies, reducing the number of sworn police officers from 709 to about 600 through attrition, and freezing or eliminating violence prevention positions.

It would also trigger a citywide halt of hiring, contracting and travel and could cause a multi-year delay or cancellation of $200 million in planned bond-funded infrastructure, affordable housing and other projects slated for the coming fiscal year.

There’s been no clarity from either Thao’s or the city administrator’s office regarding which contingency budget policies are being implemented. The fiscal report says that “steps are being taken to minimize impacts to public safety of implementation.”

The city administrator’s office did not respond to a request for comment at the time of publication.

Ramachandran said that regardless of whether or not the amended Coliseum sale agreement is executed on time, the city will still not receive more than $40 million between now and January that is accounted for in the budget plan.

“I think that it’s great that if this deal goes through on time, we’ll get a purchase price of $5 million more — and down the road with development markers potentially up to $15 million more than that. But all of that future money and promise of future money is irrelevant to this budget,” she told KQED. “Nothing that council has passed has superseded this contingency budget.”