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Jennifer Inez Ward

At Oakland City Hall, government departments have been slashed, while services to citizens have been cut. The city is currently carrying a heavy debt load of up to $2 billion. Photo by Jennifer Inez Ward

Can Oakland continue to blossom despite serious financial woes?

Thursday, September 22nd, 2011 

Jennifer Ward writes for Oakland Local, a hyperlocal partner on the What Went Wrong project.

OAKLAND, Calif. — The Oakland City Council is facing a fiscal meltdown.

A silent financial crisis has bubbled underneath the surface for some time now. As the city has racked up debt and absorbed deep revenue cuts, its residents have seen their wages and job opportunities decline.

If Oakland doesn’t find a way to rein in its fiscal woes and create more sustainable jobs for its residents, it could see a steep crash, with a long road ahead to recovery. As it stands now, the West Coast city is already headed for painful fiscal times.

Today, Oakland is a city that is in the midst of a  cultural renaissance. Great weather, a thriving arts community, world-class restaurants and a picturesque location on the San Francisco Bay have helped make Oakland an incredible "it" location.

But beneath the golden tint, there is a corroding structure. Oakland's city government is awash in deep debt that is rapidly eroding its basic foundation. Accounting for unfunded liabilities, bonds and pension systems, Oakland's total debt has been pegged by city officials at $1.5 billion to $2 billion.

Long before the Great Recession, Oakland's finances started crumbling. The city has a narrow revenue stream that depends heavily on state funds and sales taxes. During the housing boom, the city leaned heavily on a housing transfer tax to fill its general fund coffers.

Over the past five years, general fund revenue for Oakland has plummeted from $476 million to about $407 million. According to the mayor's office, once police, fire, debt and restricted funds are taken out of the budget pie, Oakland only has $26 million available to cover $72 million in programs.

Oakland's financial woes don't just show up on a spreadsheet. Crime, education and jobs have been severely impacted by the financial downturns of the city.

Over the course of the Great Recession there have been deep cuts to public education, police and social services. At the same time, Oakland's numbers for homicide and robbery have jumped sharply, while the city's graduation rate for boys of color are at a rock bottom 30 percent. Meanwhile, finding jobs with livable wages in the East Bay city remains an elusive endeavor for far too many residents.

On the whole, Oakland's unemployment rate is at 17 percent, higher than the state's 12.1 percent. In some neighborhoods, the unemployment rate for those between 18 and 24 years old is as high as 30 to 40 percent, experts say. About 80,000 Oaklanders live in poverty.

Neighborhoods in Oakland have the highest rate of foreclosure or bank-owned property in the Bay Area, with as many as 8 percent of loans in distress.

The city's  woes are not happening in a vacuum. While the nation's economy wobbles in its recovery, the state of California is going through its own money issues — tightening purse strings and eyeing cuts in everything from education to redevelopment. Right now the Golden State is struggling not to collapse under its own budget challenges.

What to do with Oakland's massive budget problem is a vexing, pressing question for city leaders, who've been accused of not providing leadership on the city's financial issues. So far, Oakland has weathered its city cuts better than expected, and a large-scale layoff of city workers was mostly avoided this fiscal term thanks to give-backs by the unions.

But in this next fiscal cycle, there will be no more tricks in the city's budget bag to mask the money problems. Oakland will have no more buildings to sell and no more employee contracts to negotiate in the next budget season. Even if the national economy finds a way to gain traction, Oakland will still have to make hard decisions around taxes, core services and debt pay.

The city's revenue stream remains painfully tight. Right now there is an $80 parcel tax measure on the November ballot, but its passage is not guaranteed. At $11 million annually, it is not nearly enough to make a significant impact to the city's revenue needs. The deficit for Oakland's next fiscal term is expected to be around $76 million.

How Oakland will begin to deal with its dire financial problems is still very much up in the air. The 2011-2013 budget has just passed and issues around the city's structural debt have yet to be addressed. Nevertheless, Oakland is a scrappy city that has weathered many challenges. Here’s hoping that cultural renaissance keeps blossoming.

What Went Wrong

Donald Barlett and James Steele are revisiting America: What Went Wrong, their landmark 1991 newspaper series, in a new project with the Investigative Reporting Workshop. Over the next year, the project team will examine how four decades of public policy has shaped America's ongoing economic crisis.

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Back Story

The authors talk about What Went Wrong

Donald Barlett and James Steele talk about the project, and why they decided to revisit a book they wrote two decades ago, in a series of video clips produced by the Workshop.

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Read an Excerpt

The Betrayal of the American Dream on Google Books

The Betrayal of the American Dream on Google Books

Check out the first chapter of Barlett and Steele's 2012 book here.