OAKLAND -- City leaders are pointing to better-than-expected revenue growth as a sign that Oakland's economy is rebounding and the era of cutbacks and layoffs is fading.

Spurred by robust sales and hotel tax growth, Mayor Jean Quan released a budget update Thursday that includes money for an additional police academy and restores senior center funds. The proposal, which calls for no layoffs or service cuts, will go to the City Council next month for approval.

"This budget reflects the fact that Oakland is rising back economically," Quan said during a news conference. She also announced that the city will begin efforts to civilianize numerous police desk jobs, including the Office of Inspector General, to get more officers on patrol.

The 2008 financial collapse battered Oakland, forcing the city to close shortfalls totaling nearly $350 million and lay off more than 150 employees, including 80 police officers.

The City Council approved a two-year budget in 2011 that closed a $58 million deficit, only to face an additional $28 million shortfall in January because of the loss of state subsidized redevelopment.

Although Oakland's operating budget is balanced for now, the city remains on tenuous financial footing.

Quan's updated budget proposal is predicated on the City Council agreeing to issue another series of bonds to fund a pension plan for retired police and firefighters. Without the bond measure pushing pension payments into the future, Oakland would have to spend about $46 million this year funding the pension program -- nearly wiping out the city's entire $48 million reserve fund.

And the reserve fund itself is already at risk. Nearly half of it comes from a legally questionable deal in which the city sold the vacant Henry J. Kaiser Convention Center last year to its now defunct redevelopment agency.

If the state revokes that sale and several others, Oakland's reserve would shrink to about $25 million -- less than required by city policy although still more than the city has had in several years.

Oakland is establishing a fund to prepare for possible state take-aways, City Administrator Deanna Santana said. Additionally, Santana said this fall she expects to release a five-year budget plan that will include a strategy to begin tackling the city's estimated $2.5 billion in unfunded liabilities. Most of the liabilities are for employee pension and retiree health care benefits as well as unmet infrastructure needs.

Oakland's operating budget has managed to stay in the black despite the city spending nearly $6 million this fiscal year on Occupy Oakland-related activities, officials said.

Sales tax revenue increased by $6 million primarily because of high fuel prices and the opening of Target and several car dealerships. Business license revenue was up $3.1 million and the hotel tax increased by $2.1 million.

The additional funds will be used to add economic development staffers, a civilian fire marshal, two crews to repair streets and parking meters as well as the police academy, which is needed just to stabilize the department's ranks.

Contact Matthew Artz at 510-208-6435.