Last summer, we followed the City of Oakland’s budget process with more attention than we normally would. The reason for the coverage was that the City was doing some financial trickery in order to make the budget work. In order to fill a $58 million budget deficit, Mayor Jean Quan tried to pass a parcel tax that would’ve covered half of that deficit. The parcel tax failed, which led to cuts. The City also sold the dormant Henry J. Kaiser Convention Center to the Oakland Redevelopment Agency for another $29 million. HJKCC is inoperable at the moment due to necessary repairs and retrofits, and it’s too expensive to run, making that $29 million a black hole.
Now Matier and Ross report that State Controller John Chiang is coming after that $29 million. Chiang has declared the land sale void, setting up a situation in which Oakland now owes the state $29 million. ORA is dead per legislation, however Oakland has set up a successor agency to continue projects already underway. It’s unclear what the City can do to plug this new-found gap. The property isn’t worth on the open market without either a discount to rehabilitate HJKCC. It couldn’t be demolished because it has historic landmark status. Some combination of additional asset sales and major cuts would also seem to be in order for the City. A major target could be the $3.5 million earmarked for the Coliseum City project, of which some percentage has already been spent.
The HJKCC situation is different from the Diridon ballpark land situation in San Jose, in that no money changed hands there. It was simply a transfer from one agency to another. Should Chiang go after the Diridon land in earnest, it would simply be auctioned off at the state’s discretion and they’d end up with the proceeds, with Lew Wolff potentially getting the land in a sale (though without the negotiated discount). In Oakland’s case, if HJKCC couldn’t be sold for the $29 million price or there were no bidders, the $29 million budget gap re-emerges. At this point there’s no telling what would have to be sacrificed to make ends meet. I have to think that the City has planned for this possibility, at least for the sake of Oakland citizens who may be adversely affected.
I thought it was strange that on other sites many were cheering news last week about land seizures because they could hurt San Jose’s ballpark efforts. The truth is a little more complicated than that, and on the surface, may be worse for Oakland. That’s why we looked at Oakland’s budget situation last year. It seemed unusual and ripe for a reversal. That chicken is coming home to roost.
Update 2:19 PM: Quick clarification on the HJKCC sale: $5.2 million was to be applied to this fiscal year and again to next fiscal year (2012-13), with the balance held in reserve.