(Bloomberg) -- On her last day as mayor after being recalled, Sheng Thao leaves Oakland, California, at a crossroads. There’s a $130 million deficit, challenges maintaining basic services and no sign of relief from a stalled stadium sale that was supposed to save the budget.
Her departure on Tuesday leaves a leadership vacuum at a critical moment when budget negotiations have rekindled a common battle between progressives and moderates in the East Bay over criminal justice and policing.
Violent crime, which jumped 17% over the five-year-average in 2023, has prompted several businesses and companies to move workers out of the city, including Kaiser Permanente, Oakland’s largest private employer.
“The city is under siege with crime, the public has lost confidence in its leadership and the people who live there are suffering from it,” said Christopher Thornberg, a founding partner of Beacon Economics LLC, an independent research and consulting firm that works with municipalities.
City Council President Nikki Fortunato Bas will serve as interim mayor upon Thao’s departure, though Bas will then resign on Jan. 6 to assume her new position on the Alameda County Board of Supervisors. An interim mayor, appointed by the City Council, will then take Bas’ place until a special election for mayor is held on April 15.
On Tuesday, the council plans to approve budget cuts aimed at closing the $129.8 million deficit for the current fiscal year after delays in the sale of the Oakland-Alameda County Coliseum — the longtime home of baseball’s Oakland Athletics, who are leaving for Las Vegas — forced the city to abandon its original spending plans. The cuts, proposed by City Administrator Jestin Johnson, target public safety spending, which accounts for more than two-thirds of the city’s general purpose fund.
If Johnson’s recommendations are approved, the Oakland Police Department would see a $25 million reduction in its overtime fund and the city’s fire department might have to temporarily close up to six stations. Additionally, Oakland would eliminate about 92 full-time positions across various departments.
Some progressive advocates welcome potential cuts to the OPD’s budget, arguing that violence-prevention programs are more effective than police when it comes to reducing crime.
“The police department consistently overspends, even what’s set aside for overtime,” said Vanessa Riles of the East Bay Alliance for a Sustainable Economy, a progressive advocacy group. “Obviously the Oakland Police Department is not doing a good job with the money that it’s been given, and they’re not doing an effective job of making people safer.”
Hiring Freeze
The City Council froze hiring at the OPD in 2023, which, has fueled an increase in crime, according to former Oakland Mayor Libby Schaaf.
“When I became the mayor, Oakland had the lowest officer-per-crime staffing of any city in America,” Schaaf said. “Oakland officers respond to more emergency calls per shift than any department in America, and I fought unsuccessfully to preserve the staffing in the police department.”
The OPD didn’t respond to a request for comment.
Oakland initiated an effective strategy for reducing gun violence in 2013 following one of the city’s most violent years in recent history. But the program, called Ceasefire, has since come undone as the city stripped away resources, and gun violence spiked.
Concerns about public safety have taken a toll on local businesses. In February, Kaiser Permanente said it was moving more than 1,200 positions, or about 10% of its workforce, out of its Oakland headquarters office. The company also announced plans in November to significantly reduce the amount of office space it leases in downtown Oakland. And In-N-Out Burger announced in January it would close its location near the Oakland International Airport due to safety concerns.
Oakland had hoped to close the deficit without cutting critical services like policing. Thao announced in May that the city was selling its 50% stake in the Oakland-Alameda County Coliseum for $125 million to a local developer, with proceeds expected to help plug the budget shortfall and stave off drastic cuts. But the transaction is being held up by Alameda County. For the stadium deal to advance, the county needs to sign off on the sale, and it hasn’t done so.
The Coliseum complex lost its two most lucrative tenants over the past five years. Las Vegas enticed the Raiders of the National Football League and the A’s to relocate to Nevada with publicly funded stadium deals. Oakland no longer has a professional sports team in any of the four major North American leagues. The Golden State Warriors left town for San Francisco in 2019.
Selling off assets is one option cities have to close funding gaps, but they’re often seen by investors as risky short-term solutions. Thao was recalled by voters in November in part, because of accusations that she mishandled the city’s finances.
Thao, 39, was the first Hmong-American woman to lead a major US city. She didn’t respond to a request for comment.
In the years before the pandemic, Oakland had benefited from the tech boom in nearby San Francisco and Silicon Valley, becoming a haven for residents and companies with its cheaper real estate, access to public transportation and pleasant weather. But remote work and concerns about crime have taken a toll across the region.
To the west, San Francisco is projecting an $876 million budget shortfall over the next two fiscal years. The gap is prompting outgoing Mayor London Breed, who lost her reelection bid in November to a more centrist Democratic mayoral candidate, to instruct city departments to plan for 15% across-the-board spending cuts.
But San Francisco is on more solid footing than its neighbor across the bay, as the city’s tourism has nearly rebounded to pre-pandemic levels and artificial intelligence is breathing new life into its tech scene.
That may bode well for Oakland in the long run, said Jim Wunderman, president of the Bay Area Council, a group of local business leaders.
“If San Francisco ends up doing better, it’ll help Oakland,” said Wunderman, who previously served as chief of staff to former San Francisco Mayor Frank Jordan. “There’s no question about it. It’ll take some time, but that’s been the story of these cycles.”
--With assistance from Kara Wetzel.
©2024 Bloomberg L.P.
