OAKLAND -- In another sign that Oakland's financial problems are far from over, the City Council had to rewrite its budgeting rules Tuesday to balance its books even as the city enjoys the fruits of a real estate boom.
Thanks in large part to tax revenue from property transactions, the city is entering the new fiscal year with $29 million more than it anticipated when the council approved a two-year budget in 2013.
However, expenses, including new union contracts approved by the council, also have increased. And city budgeting rules limit council members from spending one-time money, such as property transfer tax proceeds, for ongoing expenses, such as adding jobs.
The restrictions stem from the mid-2000s when the council used money from soaring property transfers to splurge on new hiring. Many of the added jobs, including 80 police officer positions, were soon slashed following the 2008 financial collapse.
Before the council passed an amended budget Tuesday, it altered its policies so it didn't have to declare a fiscal emergency in order to use $19.9 million in one-time funds to balance its books. Such a declaration could have alarmed lenders and increased the city's borrowing rates, officials said.
The council also did away with a policy it established last year placing restrictions on the use of property transfer tax revenues that came in above budget estimates.
"We know that is not the ideal way to run a city," City Council President Pat Kernighan said about the council's actions to revise the policies. She added that the one-time expenditures were necessary to resolve long-standing issues such as outdated technology systems that could harm Oakland's economic prospects.
"I think under these circumstances the fiscal necessity has been shown," she said.
The amended $489 million operating budget for the new fiscal year, which began Tuesday, includes funding for a police academy, expansion of the city's gunshot detection system, technology upgrades and animal shelter jobs.
The council also included $900,000 for additional street repairs, $200,000 to combat graffiti vandalism and illegal dumping and $1 million to assist businesses that will be impacted by AC Transit's Bus Rapid Transit Program along International Boulevard.
The council also approved setting aside $500,000 for anticipated shortfalls in library funding.
The budget amendment was approved with Councilwoman Desley Brooks and Councilman Larry Reid abstaining. Councilwomen Brooks and Libby Schaaf did not vote in favor of authorizing the use of the property transfer tax revenue to pay for ongoing expenses.
Contact Matthew Artz at 510-208-6435.