police academies every year, and investing in job creation, we can grow the Oakland economy for everyone."But the "plan" is really just a forecast -- and a grim one at that. There's nothing optimistic about it. To her credit, Quan went further than predecessor Ron Dellums, who simply ignored the problem. She also deserves kudos for building into her assumptions increased police staffing of 25 percent by 2017-18. Any hope of economic growth hinges on restoring a sense that Oakland is a safe place to live and work.But Quan provides no realistic financial road map, except perhaps driving Oakland deeper into debt.As she expands the police force, she drives up costs far beyond what the city can afford.Without Advertisementmajor cuts elsewhere, Oakland's general fund would have a structural deficit that, by the Quan administration's forecast, would grow to about $152 million annually by 2017-18. Put another way, the city would have only about 75 percent of the money needed to pay general fund bills.That's fiscal suicide, the sort of path that's landing other California cities in bankruptcy court. Something must give. Many things must give.It's not just the annual cash flow that's a problem. It's also the city's huge debt, on which it must make payments that are a key contributor to the yearly imbalance. Those payments will grow if city leaders don't address the underlying liabilities.Most of the debt isn't for assets, such as buildings and roads, that have future value. It's for employee retirement programs that should have been fully funded, along with salaries and other benefits, when the workers performed the labor.Right now, Oakland has a staggering $2 billion liability for underfunded pension and retiree health benefits. The city makes payments to retire some of that liability over an absurdly long 30 years.For other parts, Oakland does not cover even the minimum installments, thereby driving the city deeper in Mayor Jean Quan, right, listens along with City Council member Pat Kernaghan, left, and City Administrator Deanna Santana, to questions from reporters during a press conference to announce that the city of Oakland, Calif. will embrace a new community policing strategy to try to curtail the city's burgeoning crime problem, Thursday, Dec. 27, 2012 in Oakland. (D. Ross Cameron/Staff) debt. Either way, current city leaders are unfairly pushing a huge liability onto future generations.The mayor deceptively claims Oakland has been "paying down" those unfunded liabilities. Indeed, for one major pension debt, the city floated bonds and applied the proceeds to reduce its obligation to the retirement fund. But now it must repay the bond holders. In other words, it just shifted the burden from one credit card to another. Amazingly, Quan's five-year plan suggests Oakland might continue to underfund its retirement payments and not perform needed infrastructure improvements. That means higher costs in the future -- kicking the can down the road and watching it expand along the way. When she released her "plan" in October, Quan promised a follow-up report this spring with recommendations for balancing the budget long-term. That's what we've been waiting for since she took office in January 2011.There is no magic solution. Tax increases might need to be part of the mix. But city residents already pay unusually high rates, including a hidden 16 percent surcharge on property taxes just to help cover one of the city's retirement debts. And no tax increase could come close to bridging the huge budget gap.Most of the solution lies in tough cuts and major rethinking of the services Oakland can afford to provide. But that will require strong vision and leadership, something we have yet to see from Quan.Contact columnist and editorial writer Daniel Borenstein at 925-943-8248 or dborenstein@bayareanewsgroup.com. For links to past columns on Oakland finances, go to this column at contracostatimes.com/daniel-borenstein.Copyright 2012 Contra Costa Times. All rights reserved.Print Email Font ResizeReturn to Top • Readers: Let us know what you think of the new commenting system
police academies every year, and investing in job creation, we can grow the Oakland economy for everyone."But the "plan" is really just a forecast -- and a grim one at that. There's nothing optimistic about it. To her credit, Quan went further than predecessor Ron Dellums, who simply ignored the problem. She also deserves kudos for building into her assumptions increased police staffing of 25 percent by 2017-18. Any hope of economic growth hinges on restoring a sense that Oakland is a safe place to live and work.But Quan provides no realistic financial road map, except perhaps driving Oakland deeper into debt.As she expands the police force, she drives up costs far beyond what the city can afford.Without Advertisementmajor cuts elsewhere, Oakland's general fund would have a structural deficit that, by the Quan administration's forecast, would grow to about $152 million annually by 2017-18. Put another way, the city would have only about 75 percent of the money needed to pay general fund bills.That's fiscal suicide, the sort of path that's landing other California cities in bankruptcy court. Something must give. Many things must give.It's not just the annual cash flow that's a problem. It's also the city's huge debt, on which it must make payments that are a key contributor to the yearly imbalance. Those payments will grow if city leaders don't address the underlying liabilities.Most of the debt isn't for assets, such as buildings and roads, that have future value. It's for employee retirement programs that should have been fully funded, along with salaries and other benefits, when the workers performed the labor.Right now, Oakland has a staggering $2 billion liability for underfunded pension and retiree health benefits. The city makes payments to retire some of that liability over an absurdly long 30 years.For other parts, Oakland does not cover even the minimum installments, thereby driving the city deeper in Mayor Jean Quan, right, listens along with City Council member Pat Kernaghan, left, and City Administrator Deanna Santana
, to questions from reporters during a press conference to announce that the city of Oakland, Calif. will embrace a new community policing strategy to try to curtail the city's burgeoning crime problem, Thursday, Dec. 27, 2012 in Oakland. (D. Ross Cameron/Staff) debt. Either way, current city leaders are unfairly pushing a huge liability onto future generations.The mayor deceptively claims Oakland has been "paying down" those unfunded liabilities. Indeed, for one major pension debt, the city floated bonds and applied the proceeds to reduce its obligation to the retirement fund. But now it must repay the bond holders. In other words, it just shifted the burden from one credit card to another. Amazingly, Quan's five-year plan suggests Oakland might continue to underfund its retirement payments and not perform needed infrastructure improvements. That means higher costs in the future -- kicking the can down the road and watching it expand along the way. When she released her "plan" in October, Quan promised a follow-up report this spring with recommendations for balancing the budget long-term. That's what we've been waiting for since she took office in January 2011.There is no magic solution. Tax increases might need to be part of the mix. But city residents already pay unusually high rates, including a hidden 16 percent surcharge on property taxes just to help cover one of the city's retirement debts. And no tax increase could come close to bridging the huge budget gap.Most of the solution lies in tough cuts and major rethinking of the services Oakland can afford to provide. But that will require strong vision and leadership, something we have yet to see from Quan.Contact columnist and editorial writer Daniel Borenstein at 925-943-8248 or dborenstein@bayareanewsgroup.com. For links to past columns on Oakland finances, go to this column at contracostatimes.com/daniel-borenstein.Copyright 2012 Contra Costa Times. All rights reserved.Print Email Font ResizeReturn to Top • Readers: Let us know what you think of the new commenting system