Monday, March 29, 2010

Oakland--First World Taxes, Third World Services

The Oakland Tribune recently reported that due to the city's "truly unprecedented" financial crisis, the City Council may be placing both a parcel tax and a utility tax on the November ballot to generate more revenue ( New Oakland tax measures.). The City of Oakland already has some of the highest combined taxes in the west. Overall, the city's annual budget for FY 2009-11 is approximately $1.1. billion dollars (Oakland City Budget). Yet,  the city is unable to use existing revenues to balance our budget and maintain infrastructure and wants more money from residents. Its hard to imagine how overtaxed middle class residents are going to be willing to fork over even more taxes when most feel they don't get their money's worth to begin with.

City Councilmembers and the City Administrator, Dan Lindheim, suggest the budget problem is due strictly to the dire state of the economy. There is no doubt revenues across the board are down. While all local governments in the State of California face the same problems of reduced tax revenues due to the poor economy, not all all share the same massive budget problems as Oakland. In the City of Oakland, Councilmembers and the City Administrator alike are framing the budget quandary to force residents to pony up more tax revenues--give us more money or we will cut core police and fire services. Certainly, there is more to this story than the poor economy.

The City Council's recent demand for more revenues is largely a scare tactic to cover up the mismanagement and lack of leadership among the City Council, the mayor and the City Administrator. Their rationale for new taxes is that a good share of the city's budget is consumed by voter mandated programs, such as Kids First OO and Measure D, Measure Q for libraries, and Measure Y for Violence Prevention and Public Safety, and because they have already cut other programs to the bone, they need more revenue from John Q. Public or they will be forced to cut police and fire which make up the majority of the General Purpose Fund. If police and fire are not to be cut, they proclaim a need to eliminate wholesale senior citizen services, libraries and parks.

Of the approximately $1 billion of revenue, approximately $421 million is the General Purpose Fund budget. Of that $421 million approximately 88%, or $369 million, is mandated for certain programs. This of course all depends where you pull the numbers. (Oakland Budget Office) (Balancing Measures FY 2009-10 Budget Shortfalls) (Oakland City Budget Facts). Of course there are alternatives to additional taxes including repealing all voter mandated programs or suspending them to allow discretion in re-directing revenues to provide core city services like police and fire. These measures would have to be taken to the electorate in the form of ballot measures not unlike new taxes. However, that tough solution seems to have eluded City Council, the Mayor and the City Administrator.

Nevertheless, what is being ignored here is any discussion on the mismanagement of city finances and the lack of leadership among City Councilmembers, the Mayor and the City Adminstrator. As early as July 2008, concerns were being expressed about the revenue projections of former City Administrator Deborah Edgerly that relied on rising property tax and transfer tax revenues at a time when the economy was tanking. In 2008 the City Administrator and City Council also were drawing down the City reserves from $70 million to $15 million. Despite furloughs, elimination of vacant positions, and other budgetary measures, the then $15 million dollar deficit eventually ballooned to approximately $114 million (cumulatively). This was largely because City Councilmembers, the Mayor and the City Administrator failed to make realistic revenue projections and failed to act swiftly enough and cut deeply enough to stem this massive budget deficit.

Why neither Councilmember Jean Quan, as the Chair of the Finance Committee, or Dan Lindheim as the City Administrator have been able to get a handle on revenue projections and their relationship to the budget deficit is a mystery. Budgets involve revenues and expenditures. If revenues are going down, expenditures must follow at an equal or greater rate or you generate a deficit. 

Another glaring lack of leadership revolved around the Kids First debacle. When the voter approved Kids First Measure OO went back on the ballot for a second time as Measure D seeking even a greater piece of the budget pie, every City Councilmember knew that the program was a budget buster. At that point, the City was projected to be $50 million in debt. Yet, none of the City Councilmembers, including Jean Quan who is now running for Mayor, took an active leadership role to campaign against the Kids First revenue grab. They all saw that train wreck coming, but did nothing to repeal Measure OO altogether. In fact Jean Quan actively negotiated a compromise that put Measure D on the ballot and guaranteed Kids First a significant slice of the City budget, albeit at a lower rate than Kids First originally sought. She then spun it as a budget saving measure and a necessary compromise at a time when the city finances were in disarray and going downhill fast.

On another front, the city has allowed tax dollars to be spent on sending staff to attend Eskimo yo-yo making classes in Alaska and other excessive out of state travel that occured in 2007-2008 as revealed by the Alameda County civil grand jury (Frequent Flying Staff). All the while, Mayor Dellums continues to spend extravagant amounts on his Washington expense account for top five star hotels, exclusive restaurants, limousine service and a chauffeur (Ron Dellums Living Large). Ironically in a September 27, 2008 SF Gate article, Chris Heredia quoted Mayor Dellums in response to our budget woes as saying that "At the end of our review, we came to the conclusion: Oakland is living beyond its means. As mayor, my job is to speak the truth, as painful as it is". It is certainly true that some have been living large at the public trough, including our Mayor. Yet our City Administrator Dan Lindheim and Councilmember Jean Quan routinely dismiss such boondoggles as being so small they are irrelevant to the overall budget problem.

On still another front, the City Auditor has refused to take a 15% budget cut that other politically elected officeholders agreed to. It's no wonder the city's budget deficit seems to grow and grow and grow.

Now that the city has dug itself a huge budget hole, we have to wonder why City Councilmembers and the City Administrator Dan Lindheim have chosen to frame the budget problem as one of raising more revenue through additional parcel taxes, rather than one of repealing voter mandated measures, such as Kids First, to allow greater discretion in the use of all existing revenues so that core city services, such as public safety, can be maintained. Oakland has first world taxes, but third world services. The problem is lack of leadership and an unwillingness to tackle the real problem--voter mandated spending, mismanagement of existing revenue and a failure to set core priorities. City Councilmembers are unwilling to discuss repealing Kids First because it is like the third rail of politics in liberal Oakland.

Meanwhile, our public infrastructure seems to be crumbling before our very eyes and has a direct effect on reducing the volume of taxes we collect. The city uses very little of its discretionary budget to maintain infrastructure such as roads and sidewalks. The paving cycle in the City of Oakland is 80 plus years. That's right, the city streets get paved once every 80 years or so. Maintenance of infrastructure, such as roads and sidewalks, is commonly viewed in the United States as a core local government service, as are police and fire. In the City of Oakland they are not. The city relies on state and federal tax dollars to repave city streets. This money, which is subject to state and federal budgetary issues, is largely metered through the Metropolitan Transportation Commission.

Roads that are full of potholes and sidewalks that are significantly deteriorated have a direct affect on the city's ability to maintain and generate a higher volume of tax revenues. If our basic infrastructures is falling apart and creates blighted conditions, it signals to others the poor state of our local economy, the poor health of our local government, and the inability of the city to maintain core services. These conditions, on top of already high tax rates and high crime rates result in fewer people interested in locating in Oakland, fewer businesses willing to operate in Oakland, and fewer people interested in recreating and shopping in Oakland. This means lower demand for housing which results in lower home prices and lower property tax revenues and transfer tax revenues. This also means lower business taxes, hotel taxes and sales taxes because the lower overall volume of businesses and shoppers. Think of all those people flocking to San Francisco, Walnut Creek, and Corte Madera for their safe, clean, pothole free shopping experience. Oakland is one of the lowest sales tax generators in the Bay Area. Ever wonder why?
In North Oakland, residents have been complaining to the Public Works Department and for the past year about the poor state of Shattuck Avenue between the Berkeley border and 55th Street and torn up sidwalks on Tremont Street. The City Public Works Department has made several half-hearted efforts to fill some potholes and to put asphalt over concrete sidewalks. Still Shattuck is rapidly deteriorating and has numerous potholes that are a safety hazard to bicyclists and motorists and the deteriorated sidewalks on Tremont Street have already caused one serious injury. Frustrated residents have even taken it upon themselves to mark numerous potholes with spray-paint on Shattuck between Alcatraz and 65th Street, as a warning to motorists and bicyclists. The city cannot provide basic core services such as filling potholes and fixing deteriorated sidewalks that are safety hazards, yet they want more money. Interestingly, as part of the proposed budget solution the city will reduce the street and sidewalk maintenance program by eliminating five vacant staff positions in the Public Works Agency. This reduces the number of concrete grinding crews from three to one for the entire city.
To the City Council and the City Adminstrator here are our recommendations to address the budget crisis:
  1. Place measures on the November ballot to repeal all voter mandated programs, including Measure OO/D Kids First, Measure Q and Measure Y. This is necessary to restore discretion in our budget process. We have enough existing revenues to provide core city services. We are just being forced to use them in ways that do not meet core objectives such as public safety and maintenance of infrastructure;
  2. Develop a prioritization of core city services with a focus on public safety, infrastructure, and revenue generating enterprises. A safer, cleaner and better maintained city will attract middle and higher income residents and shoppers to Oakland, thereby, generating more tax revenue. We need to increase the volume of taxes not by taxing the middle class out of Oakland, but by growing businesses and attracting new residents;
  3. Stop using a budget process that mandates across the board cuts equally. Not all services are equal and not all services are necessary in times of budgetary crisis. Whole programs should be cut if they do not fall within the core services provided by local government. Cut all other city services that do not meet the descriptions identified in number 2. We cannot continue to be all things to all people during a budgetary crisis;
  4. Personnel expenditures are the single biggest cost in the city. City employees have some of the highest salaries in the state and country for comparable sized cities. Require all remaining staff to take a 20% furlough and eventually renegotiate 15-20% permanent reductions in pay scales and freeze any cost of living adjustments for the next four years when union contracts are due.
  5. Re-negotiate benefit packages when the union contracts are due to create a second tier retirement program for new staff that is no higher than 2% at 55, requires an 8 year vesting time period and requires existing staff to pay an additional 5% towards their retirement benefits;
  6. Institute pay for performance measures to ensure taxpayers actually get their money's worth from city employees. This would include courteous and prompt service to all city residents. Fire employees who do not perform to well-defined metrics. This will create incentives for all employees to better perform their assigned job duties.
  7. Require that all elected offices take a 20% funding cut. Yes, this even includes the City Auditor.
  8. Establish strict guidelines and protocols for travel and training that applies to all city staff and all elected officials. This policy should mirror the per diems the state of California has adopted including strict controls on out of state travel.
  9. Require the City establish a rainy day account for future economic crises.
Oh, and stop ignoring the residents' complaints and fill the potholes on Shattuck Avenue and fix the sidewalks on Tremont Street before someone gets seriously hurt, sues the City and makes our budget deficit even larger.

3 comments:

Keyman11 said...

Amen!

Reducing core services will certainly not be a solution. People of worth will leave.

We need people of service in the city offices, not "fat cats" looking for perks. Same for political offices as well.

Meanwhile, we get to pay for damage to our vehicles due to cut backs in infrastructure which means less jobs adding to more unemployment?
And, as mentioned, potential law suits.

Hmm, not much logic to this equation.

Reminds me of the statement, "If we build it he will come".
I think the opposite is true as well. If we destroy it they will leave.

I am dreaming of a prosperous Oakland!

salmonmoose said...

WFB, thank you for your extremely thorough and thoughtful post. The title really says it all - we are taxed near to death here and I for one see zero benefit to any of it. I have been emailing back and forth with Public Works for the past TWO MONTHS trying to get them to fix the awful potholes on Shattuck Avenue between 55th and Woolsey. Finally last week I got a reply saying they will be undertaking a "Pothole Blitz" in April. Could this mean that my days of swerving like a drunk to minimize the damage to my own vehicle by these abysmally maintained city streets are coming to an end? I'm not holding my breath. And if I get lonesome for that offroading feeling in the city landscape I can always drive Telegraph between 51st and the Highway 24 underpass.

What DO they spend our money on anyway? I really hope you were kidding about Eskimo yo yo making....

Anonymous said...

Keyman11,

What you don't realize is that Oakland's abysmal roads are actually a job creation engine, part of the economic revitalization plan put forward by the City Council. You see, as the roads pummel your vehicle, you have to pay for the damage to be repaired, which creates more demand for repair services, and hence more local jobs right here in Oakland!

The same goes for other policies that, at first glance, seem counterproductive. Like mismanaging measure Y or refusing to respond properly to records requests. Local citizens then sue the City, which has to defend the lawsuits, paying top dollar for legal services as it does. Again, this creates jobs for local lawyers!