In light of how San Jose Mayor Chuck Reed used hardball tactics to get across-the-board concessions from public employee unions, it’s a good time to check in on how his counterpart in Oakland, Jean Quan, is doing.
In late April Quan presented three different budgets to the City Council, which included different mixes of cuts, union concessions, and new revenues from a parcel tax Quan supports.
The budget deficit is $58 million, or 2 x $29 million. Why am I using that notation? You’ll see shortly.
First the parcel tax. Quan has heavily advocated for a $80 parcel tax which would raise up to $11 million for the upcoming fiscal year. Nevermind that parcel taxes aren’t frequently used to take care of general fund shortfalls, she’s pushing ahead anyway. Fundamentally it’s difficult to base a budget, which has to be approved in June, on a tax whose fate is unknown until a few months down the road via a special election. Council is expected to vote on the tax on the 21st. If approved the special election would follow.
On the cuts side of the budget, Quan is looking for nearly $29 million (ding!) from the unions. Ever the consensus builder, she chose to start talks with labor in May, which put a huge crunch on Mayor and Council to wrap up the budget. There are allegations that the different unions are not being treated as equal partners, and are being given more or less favorable deals based on who they are. The final budget can’t be voted on unless the true amount of concessions from the unions is known. They’re six days away from the deadline.
The last part of the tale is a sad but increasingly common deal. Should the parcel tax not pass, City will need to take care of another $29 million to balance the budget. It turns out Oakland’s had something up its sleeve for while, courtesy of Oakland Redevelopment Agency. Last week ORA offered to buy the Henry J. Kaiser Convention Center (SFGate) from City. The price: $29 million (ding!). An appraisal done last year pegged the value of the auditorium and land at – you guessed it – $29 million. Whether a building that hasn’t been used in several years is worth $29 million is up for debate. The fact is that $29 million is being transferred from ORA to the City to address a budget problem. Coincidentally, that money is coming out of the coffers of two ORA districts, Central and Central City East. Both of those districts meet at the Victory Court site, and it is assumed that additional fundraising from those two districts would be required to buy land and improve infrastructure at Victory Court.
That’s not to say that this is currently problematic for Victory Court’s prospects. Since the EIR has only begun and no decision by MLB has been made, neither the City nor ORA were in the position to buy additional Victory Court land. San Jose used a similar “rob-Peter-to-pay-Paul” tactic when it sold its old City Hall to Santa Clara County as part of a settlement. Money’s extremely scarce for all municipalities, so if they have assets they might have to liquidate them.
However, taking money from ORA to pay the bills leaves ORA with an asset that isn’t useful in the near term. It’s too expensive to run and renovate. Peralta Community College District isn’t interested in buying HJKCC. While the setting is absolutely beautiful, it has limited redevelopment prospects. The actual lot has shrunk in recent years thanks to the 12th Street Project. Any new commercial development would require a good deal of new parking, which is lacking in the area.
Yet there are a couple of juicy pieces that come out of all this activity. One, ORA suddenly owns a large piece of land outright, on which a ballpark could be built (HJKCC), right? Well, not quite. The shrinking of the lot makes its size around four acres, much too small for a ballpark. The distance from the sidewalk on 10th Street to the new 12th Street curve is less than 400 feet, making it difficult to plant a regular baseball field, let alone a gigantic grandstand behind the diamond.
Finally, there is a real opportunity cost with this money move. An advisory council for the Central City East district expressed disapproval of the sale via a 13-1 vote against. That doesn’t matter since the ORA board is essentially the City Council in a different guise. A rubber stamp is a mere formality. The sale also gives Oakland a very good excuse for not pursuing Victory Court with more alacrity – the money is sworn to other obligations. That’s a key difference between what Oakland is doing and what San Jose is doing: San Jose is selling redevelopment land to private buyers to help make the ballpark deal complete, whereas Oakland is selling City land to ORA to make the budget.
The upshot for Oakland is that it’s even more important than ever that redevelopment (the institution) survives the state’s budget negotiations. If redevelopment takes a big hit in either legislation or from Governor Brown, Victory Court is basically dead. How can I be sure of this? This is how:
If the State of California eliminates redevelopment as been proposed in the Governor’s Budget, unencumbered bond funds would be used to defease corresponding bond debt, and unencumbered operating funds would be used to pay Agency’s obligations. The net funds available, after expenses related to eligible Agency activities, will go to the taxing entities, including approximately 27% to the City of Oakland. Without Redevelopment funds, the City will have significantly less capital funds for City infrastructure – streetscapes, parks, public facilities, etc. – but will have an increase in property tax revenue. This increased revenue will not offset the current staffing funded through redevelopment, let alone provide additional funds for capital projects.
That came from Interim City Administrator P. Lamont Ewell’s April report supporting a separate $4 million City-to-ORA land sale. It’s possible that the compromise plan being worked out in the Legislature will save Oakland’s bacon in this regard – but there’s no guarantee that will happen.