Amid Oakland City Hall turmoil, a devastating budget crisis still looms

OAKLAND — There was already plenty of cause for stress at City Hall before a series of FBI raids in Oakland last week cast a shadow over Mayor Sheng Thao and the flow of political money in the Bay Area.

For months, Oakland has been dealing with another crisis — a projected $155 million budget shortfall, largely due to tax revenue that has fallen well short of expectations — and the deadline to approve a balanced budget is fast approaching.

By the end of this week, the Oakland City Council must pass the mayor’s proposal to close the revenue gap, as well as fix a structural deficit expected next year.

But the mysterious FBI raids on Thao’s family home and three other addresses with ties to the politically influential Duong family — which has a city contract to provide recycling services and donates widely to California politicians — has presented City Hall with a major distraction.

Thao has given no other public statements since the raids besides a fierce declaration on Monday of her innocence. Her absence from public view has led critics around town to wonder who’s been running City Hall, though observers say there’s little reason to worry.

“Everyone’s all freaked out about ‘What’s going to happen to the city? The mayor is missing!’ ” said Dan Lindheim, the former city administrator and now a professor of public policy at UC Berkeley. “The reality is, nothing is going to happen. The mayor isn’t involved in daily operations. That’s the city administrator’s job.”

The City Council is responsible for reviewing and voting on Thao’s budget proposal that would freeze a large number of vacant city positions to close this year’s gap and use revenue from the private sale of Oakland’s share of the Coliseum complex to address next year’s deficit. The council plans to meet Friday to finalize the budget.

Thao’s proposal would freeze 18 sworn police positions, on top of 16 already set to be frozen, bringing the total number of full-time sworn officer positions from 712 to 678.

Instead of layoffs, these reductions would rely on officers leaving or retiring — a likely outcome, given that 91 officers will become eligible to retire this year, and about 80 more are currently out on administrative or medical leave.

Still, next year’s budget will shave staffing at Oakland’s police force to the bare minimum allowed by a 2014 voter-approved tax measure that required at least 678 cops in Oakland at all times. If the number drops below that, the city risks not collecting funding tied to the measure.

That baseline itself — and a number of other staffing minimums — may be suspended if the City Council votes to undo it by declaring a “state of extreme fiscal necessity.”

The mayor’s proposal would also freeze numerous fire department positions, including 20 vacant paramedic jobs, as well as 10 positions in the Community Police Review Agency, which looks over police misconduct.

Selling the city’s stake in the Coliseum complex — including the stadium, arena and space in between — is expected to net Oakland roughly $63 million next year and $40 million in the 2025-26 fiscal year, though the terms are being finalized with the group buying the property.

The proposal has earned Thao criticism from financial analysts — not for selling the Coliseum, which had long been the city’s plan — but rather because it would put the revenue toward one-time salaries instead of longer-term needs.

“Unless they have another Coliseum to sell, they don’t have anything to close the budget in the following years,” Lindheim said in an interview.

Still, a city representative said Tuesday that the revenue “buys valuable time” for a longer-term budget planning process that would begin right away, instead of next year.

“This time will help soften immediate impacts so that the deeper work of correcting structural imbalance can be conducted well in advance of the upcoming biennial budget process,” city spokesperson Sean Maher said, adding that officials are not “taking any of this time for granted.”

The city is also preparing a contingency budget that would take effect if the African-American Sports and Entertainment Group — led by Oakland native Ray Bobbitt and backed by the investment fund Loop Capital — doesn’t meet payment deadlines in September and January.

Those more difficult cuts still wouldn’t involve layoffs, but they would include freezing two of Oakland’s six police academies, which Thao has said she wants to avoid at all costs, and freezing an additional 60 fire positions.

Thao’s detractors have hammered the mayor to avoid cutting staffing and instead pressure Oakland’s labor unions to renegotiate large cost-of-living adjustments approved at the height of inflation during the pandemic.

Despite the criticism, Thao has been adamant about avoiding layoffs during the budget crisis, which officials have likened to the Great Recession. It is just one of the crises plaguing Oakland in an election year.

On the day of the FBI raids, Councilmember Carroll Fife vowed to focus on passing the budget, calling it her “primary goal in this moment.”

“I don’t want to get sidetracked by something sensational that none of us have any control over. My goal is to be the leadership needed in the city and continue to move Oakland forward.”