OAKLAND — The unions that represent thousands of public employees in Oakland are on edge around a looming $177 million deficit that has led the city’s leaders to contemplate heavy budget cuts, including possible layoffs.
Union representatives spoke Tuesday morning in front of City Hall to insist city officials should instead address all the tax money they haven’t collected from local businesses — one of several revenue streams that are falling far short of earlier projections.
It is yet more fallout from the financial woes stressing out city officials in an election year. Mayor Sheng Thao is expected to release an outline in the coming weeks of potential adjustments to the city’s $4.2 billion budget as it enters the second year of a cycle that concludes in 2025.
By the end of the current fiscal year in June, the city expects its business-tax revenue will fall short of earlier projections by $9.5 million, which represents just 5% of the current projected shortfall. Other factors, such as the real-estate transfer tax and police spending, are far more significant.
But union representatives point to the taxes that local businesses haven’t paid on their licenses, which had reached $34 million over the past three fiscal years through the end of March.
At Tuesday’s news conference, the reps held up a giant phony check made out to the city of Oakland to illustrate that amount.
“This has a serious and deeply unfair impact on our city’s ability to deliver services,” said Julian Ware, a leader at IFPTE Local 21, which represents engineers, attorneys and other employees. “Don’t make Oakland pay for tax evasion.”
City officials insist the $34 million total is misleading, given that the number may have changed since it was reported publicly in March, though it’s unclear by how much.
Much of the uncollected revenue, officials said in interviews, may not actually be possible to collect if it was expected from businesses that quietly have shut down — a common trend during the COVID-19 pandemic.
The city does not currently track how many businesses remain active, how many are truly avoiding their taxes or how many may not yet have paid because of some misunderstanding or mail issue.
There are 6,960 businesses that haven’t paid their licenses taxes this fiscal year, and it’s unclear how many of those are actually “delinquent,” as the city puts it.
The more immediate budget problem when it comes to the shortfall is that the city’s finance team is overestimating its projections of future tax revenue, leading the revenue to come up way short in reality. This was also a major cause of a historic $360 million deficit that Thao patched up last year.
City officials, including Finance Director Erin Roseman, set estimates of tax revenue based on reports from the business owners who predict how much money they’ll gross in the next year. The realities of crime, such as persistent break-ins, can often muddy the outlook.
The license tax is charged to anyone who shares in the ownership of business, even those who simply rent spare rooms in their homes to others (at a rate of $13.95 per $1,000 of rental income).
In the 2022 election, voters approved a new tax that left nearly all the city’s businesses with a larger burden each year, though the highest-grossing firms are charged higher rates than the smaller ones.
Nearly two years later, the city has indeed seen a net increase in revenue from the business tax, but fewer businesses are paying up.
This appears to be another consequence of the pandemic, from which most cities and California itself are still struggling to recover. The state is projecting a $27.6 billion deficit, though Gov. Gavin Newsom has promised to balance the books without raising taxes.
As far as possible layoffs go, city officials have hinted that public safety jobs would be protected as much as possible — especially as Oakland begins to make progress combating its crime problems. But the unions fear certain positions may be left unfilled. The city is currently in a hiring freeze.
“Our team has never been staffed well enough to keep wait times as low as we all want — and the prospect of budget cuts is just too harsh to imagine,” said Antoinette Blue, the new president of SEIU Local 1021 and a dispatcher for Oakland’s 911 system, which has struggled with staffing.
Zac Unger, the president of the Oakland firefighters union, said layoffs weren’t likely to be an issue among firefighters, but at Tuesday’s rally he worried aloud that the city may close down one or more fire stations from the two dozen currently in operation.
“A house fire doubles in size every minute, and what we’re looking at is an increase in response times from 4 minutes to 8 minutes, 10 minutes, 12 minutes,” said Unger, who is running to replace Councilmember Dan Kalb this November.
“Are you willing to roll the dice and hope that it’s not your home — not your loved ones — who are living near a firehouse that has nobody inside it?” Unger added.