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Oakland Budget: From $16 Million Up To $13 Million Down In One Year

The main question is why can't Oakland streamline its spending to smooth these wild swings in surplus and deficit? Are they conducting decent forecasts? I guess not.

Oakland looking at budget shortfall
City projected to be $13.5 million in the red for next fiscal year
By Heather MacDonald, STAFF WRITER

Article Last Updated: 03/23/2007 02:53:16 AM PDT

OAKLAND — Less than a year after reveling in a $16 million surplus, the City Council must grapple with a projected budget deficit of nearly $13.5million.
At a daylong retreat Monday at the Joaquin Miller Community Center, the council began working in earnest to craft a spending plan for the next two years. In addition to the deficit projected for 2007-08, the shortfall for 2008-09 is estimated to be $8.8 million.
The council spent the surplus on a host of programs, including tree-trimming and roof repairs. In addition, each council member got $250,000 to spend as they wished on projects and programs in their districts.
That windfall was fueled by Oakland's sizzling real estate market, which largely has cooled, with home prices leveling off and many homes going into foreclosure.
Because Oakland has few shops and stores, the city's budget relies heavily on property and real estate transfer taxes, leaving it vulnerable to the highs and lows of the housing market. Most large cities in California get a much larger percentage of their total revenue from sales tax than Oakland does, officials said.
Several council members said the city must diversify its sources of revenue.
Councilmember Nancy Nadel (Downtown-West Oakland) said the city should shift its focus from attracting housing developments to luring commercial and industrial developments to Oakland.
"We need to change to match the market," Nadel said. "It is essential that we do
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that as soon as possible."
On May 3, Mayor Ron Dellums will present the council with a budget plan for the next two years. A balanced budget must be in place by the start of the fiscal year, July 1.
Dan Lindheim, the mayor's director of budget and policy, said Dellums' budget would focus on four key areas: economic development, public safety, youth issues and health.
"We have to make expenditures more effective and efficient," Lindheim said.
Lindheim agreed that the city must increase revenue by securing federal and state grants, expanding public-private partnerships and tapping philanthropies.
In addition, Lindheim said the city does not charge developers what other municipalities do to cover the cost of their developments on the city's infrastructure and benefit existing residents.
Lindheim said developers would be willing to pay more as long as the requirements were "clear and predictable."
Several of the city's cultural institutions have asked the council to increase their funding. Children's Fairyland has asked for an additional $137,000, Chabot Space and Science Center applied for $860,000 and the Oakland Zoo requested $1.6 million in 2007-08 and $2.1 million in 2008-09.
The council members have not yet submitted their budget requests.
The city's budget is also being pinched by the rising cost of benefits, expected to increase 10 percent in 2007-08 and 10.1 percent in 2008-09.
Despite the city's budget woes, Oakland's fiscal house is in better order than it was two years ago, when the council was forced to close a $32million shortfall that prompted the closure of the city jail and the Henry J. Kaiser Convention Center.
About half of the city's deficit is in the fund used to maintain its parks and open space. Last year, voters rejected a proposal to fill the gap with a fee increase.
Unless the city makes up the difference, nearly 50 full-time jobs would be eliminated, parks would be closed and about
7,300 streetlights would be removed.
Councilmember Patricia Kernighan (Grand Lake-Chinatown) said those cuts would be intolerable and unacceptable.
Mike Petouhoff of the Budget Advisory Committee urged the council to pay special attention to the city's crumbling infrastructure, characterizing it as a "crisis."
Estimates peg the cost of repairing Oakland's crumbling sewer system at nearly $200 million, and roads, on average, are repaved every 85 years, leaving Oakland with some of the worst streets in the Bay Area.
City officials are hopeful that funds from a recently passed statewide proposition can be used to improve Oakland's infrastructure.
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