Quan warns Oakland of state cash raid

straightcash

When the City of Oakland sold the Henry J. Kaiser Convention Center to the City’s dying redevelopment agency for $29 million last May, most observers saw through the shell game and figured that it would only be a matter of time before the state’s Department of Finance came looking for the money. Now we know that the raid is happening, thanks to Mayor Jean Quan’s warnings to the City Council this week. For more background on what got Oakland to this point, I’ll point you to two past blog posts.

As Oakland scrambled to deal with the ramifications of redevelopment’s demise, the City sought creative ways to move money around to fund basic city services. Methods included using redevelopment money to pay for items that would have normally be covered by the general fund, and transfers like HJKCC. State Controller John Chiang warned cities doing such transfers that if they felt that assets would be at risk for seizure, those assets should be placed in a reserve, which Oakland did to the tune of $30 million. In 2012, the City received a large uptick in tax revenues, bringing its surplus to over $80 million including the reserve. Quan expressed confidence about the surplus.

Even under the worst-case scenario, we have $45 million in reserves. We can cover this.

That worst-case scenario is approaching soon, as the seizures will occur, short-term benefits deals cut with unions to help balance the budget are set to expire, major unfunded pension liabilities loom, and the City works to maintain and add to police staffing. During Tuesday’s City Council meeting, a large union contingent was in attendance to protest any notions of prolonged or additional concessions.

Oakland made a huge mistake in 2011 in assuming that a crippled form of redevelopment would be allowed if bills AB 1x 26 & 27 passed. The nightmare scenario came to fruition when AB 1X 27 was ruled unconstitutional, leaving no avenue for future RDA activities. In addition to the state coming down on the HJKCC deal, the DoF asked Oakland to return $18 million of RDA money in January. All told, Oakland could be dealing with a new $50+ million hole that will go straight to future budgets. Unlike some of the other illegal transfers such as the ballpark land in San Jose, Oakland’s problems are related to cash that was either allocated or spent. The City still has the reserve that can backfill most of the hole, but it will put other parts of the budget at risk and jeopardize other projects, including broad development initiatives such as Coliseum City. Land transfers are a different case in that they don’t have to be liquidated unless the DoF determines that a city has come up so short that a fire sale is needed. In many cases, it’s merely a matter of determining that a piece of land has to be taxed normally instead of being placed in a RDA-style tax increment scenario.

Howard Terminal is owned by the Port while the Coliseum is jointly owned by the City and Alameda County. Neither HT nor Coliseum City are at greater risk in terms of feasibility due to the coming raid. However, it’s possible that the budget crunch will cause additional funding for pre-dev work at HT or CC to be rerouted elsewhere as both fall down the priority list in favor of more pressing matters. That already happened once with Victory Court in 2011, and we all know what happened with that plan.

The full impact of the RDA seizure and clawback won’t be known until the DoF releases its final report on Oakland and the City bakes the impact into its next budget.

8 Responses to Quan warns Oakland of state cash raid

  1. pjk says:

    At this very moment, I am at Philadelphia airport. On my way here, I drove by the sports complex featuring brand spanking new stadiums for Eagles and Phillies and a new arena for 76ers and Flyers. Does anyone believe something like that will ever be built in Oakland? There’s just no money.

  2. berry says:

    @pjk
    How is Philadelphia?? Did u have a cheesestake from Philly?

    On a different note…i wonder if the Raiders and A’s are getting their bags packed…I do feel that Oakland sports can return in form of expansion team , but for the next few years +, Oakland needs to keep the colisem vacant and just get their finances in order…whether 10-20 yrs… It’s ok Quan to be honest…east bay sports is not dead but we won’t get anything new untill we get our money in order. Same for Sacramento…I beileve if Oakland and Sacramento get their money in order they can get a expansion team in the next decade.

  3. plrraz says:

    Berry, if/when Oaktown loses their teams, they aren’t coming back. Our best hope is that they remain in the Bay Area.

  4. letsgoas says:

    yeah there is no way mlb will be adding a third team.

    now nba that’s a question mark. if sj does end up getting the a’s there and in the next decade or two shows it can be handle at the time two pro sports teams, along with being heavy involved with the niners move to santa clara, i could see a hard charge from the sj folks in getting an nba team over oak if this likely scenario ever takes place. but then again if sac keep the kings which then it’d make it less likely there will be three nba teams in northern california and or if they lose the kings to sea but the sac politicos and business community get a new arena built anyways they may get a expansion team over oak.

    nfl? probably is oak’s best hope but imo it’s a longshot. raiders may someway work their way into renting out for 5-10 years playing at the new niners stadium and if somehow oak can get their act together and work with the raiders and eventually build a new nfl stadium, i think that’s oak’s best chance to having a pro team long term.

  5. berry says:

    What i meant was expansion in basketball or baseball? I’m sorry but a debt less Oakland cam be attractive to a new owner over san Jose I’m sry… But again in reality I hope Oakland can find some private finance help

  6. letsgoas says:

    if the a’s move to sj, mlb isn’t going to expand with a third team in the bay area.

    nba? if the kings move to sea which there is a strong chance of happening, i could envision expansion possibly happening in the next decade to cities like sac and i could see a city like kc which already has a state of the art arena and a midwest state of mizz probably should have an nba team since the state itself has 2 nfl/2 mlb and 1 nhl team are already there.

    any hope the bay area which will have to deal with the w’s stupid terrtorial rights of getting an nba team is likely to go thru moving an existent team and the modt likely are the grizzles in memphis.

  7. Mike2 says:

    The NHL won’t relocate or give Oakland an expansion team so long as the Sharks stay in SJ. The NHL is set up for future expansion with the new re-alignment starting next year. Seattle, Toronto, and Quebec City would be the leading contenders for possible NHL expansion or Yotes relocation. The Yotes could throw a wrench in the NHL re-alignment plans if the team is sold and moved back to Canada. Rumor has it the NHL might announce the fate of the Yotes in the next few weeks. Quebec City would be the front runner for the team if Seattle does not make a bid for the team.

    The Grizzlies are locked into their lease until 2021, and they do not have plans on leaving Memphis anytime soon. If the NBA does expand here are the possible cities in order coming from the Czar himself:

    “I haven’t heard anything about expansion from our owners. They have discussed contraction in conjunction with the last Collective Bargaining Agreement. I don’t think (expansion) is an option. Right now, we have no approved plan for an arena in Seattle. We have a very good potential ownership group and set of plans, but there’s a lot of work to be done. I keep a little green book with a list of all the cities interested in NBA teams and could respond pretty quickly. There’s all kinds of stuff going on in Pittsburgh, Columbus, Louisville, Virginia Beach, Las Vegas, Vancouver, Mexico City, Kansas City.”

  8. C.F.L. says:

    Mayor Quan has done a great job getting expensive long term projects done in Oakland.
    -1st She gets the deal done for the Oakland Airport to Coliseum BART connector done!http://www.bart.gov/about/projects/oac/

    -2nd with the help of Gov. Brown She gets a $242 million grant from the state of California to fund the $ billion Army Base / Port of Oakland Developement Project http://www.portofoakland.com/pdf/BoldVision.pdf

    - Now Gov. Brown & Mayor Quan get a a $1.5 billion deal from a Chinese investment group to fund development of Oakland’s 65-acre Brooklyn Basin project. http://www.bizjournals.com/sanfrancisco/blog/2013/04/oak-to-ninth-to-break-ground-with.html?page=2

    http://sfist.com/2013/04/10/gov_brown_announces_15_billion_chin.php#photo-1

    This will help strengthen Oakland’s economy and help future development which will help keep the Teams in Oakland. Mayor Quan has ensured that 50% of the new jobs from these development will go to Oakland residents, and construction jobs will not require criminal background checks so that ex-convicts can get construction jobs if they have the necessary skills. Also the group from China will have to pay Oakland $500,000 a year for 5 years for the corporate green card to build in Oakland. People have a lot of negative things to say about Mayor Quan. Maybe she deserves some of the criticism she gets, but she is also the scape goats for things that go wrong in Oakland that are not her fault. She had nothing to do with the one of a kind police pension that was signed by the police union and city of Oakland in the early 1950s, which has sucked a great deal of the city’s resources over the last 60 years and is preventing Oakland from hiring the police and teachers Oakland needs today. Great Job Mayor Quan & Gov Brown for getting these huge projects done!

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