The good news for Oakland is that after years of money problems, there's finally a bit of growth in city coffers.
Bad news, however, threatens to overshadow that
modest revenue increase - a strong need to find additional funds to pay
for its growing service costs.
According to a recently issued city staff report, Oakland must make some hard decisions around increasing its revenue, which may include the possibility of raising local taxes. Whether the city can truly pull itself out of its financial malaise permanently will depend how it will tackle this complex problem.
Oakland's revenue shortfall for its service needs will rise in a five-year period from $14.5 million to $48 million a year. And that's not even counting the city's need to improve its infrastructure.
"When accounting for deferred expenditures that the city could fund if resources were available - such as infrastructure repairs and important information technology upgrades - the shortfall ranges from $110 million to $152 million," the report states.
In addition, Oakland has to address its debt problem, despite the city making strides towards pay down some of its negative funds. City officials have touted recent revenue growth as an example of Oakland turning the corner on economic troubles, many brought on by the Great Recession.
The report notes that recent employment gains, added
funds from the city's business tax and money from the sales tax. Plus, there
was an increase in funds received from the property tax.
"Property tax is up by $13.6 million," the report notes. "And in August, Realtor.com ranked Oakland the top city for fastest selling homes in the nation."
As a result, for the first time in four years, Oakland has adopted a balanced budget without any layoffs. Revenue has also been growing steadily in recent years giving the city a bit of a mini economic boom.
But despite the recent sunny days, a grey cloud hangs over the bright fiscal numbers. City expenditures are projected to grow more than revenues, leaving Oakland with an ongoing, "structural imbalance."
Simply put, Oakland will need lots of money in the coming years to tackle its debt and keep its coffers full.
The last four years have been a financial challenge for Oakland, to say the least. Staff and service cuts, union protests and political in fights became an annual part of the budget process.
Meanwhile, during this time when the city's money was coming up short, Oakland's unstructured debt grew rapidly and infrastructure repairs, like paving city streets, fell further behind.
Although the city has been making debt payments and recently issued a bond measure to help pay down the cost of the old Police and Firefighters Retirement System, Oakland still will pay $143 million in debt service costs this recent fiscal year. Further payments will decrease over the five-year period and by fiscal 2017-18 Oakland's debt service payments will fall to $124 million.
The city must also find a way pay down costs related
to internal borrowing where Oakland borrowed from positive city funds to cover
shortfalls in its negative funds
"As of fiscal 2011-12 year end, the city had $105 million (unaudited) in negative fund balances. These negative balances are a result of historical overspending or under-recovery," the report states.