Oakland Eyes 1st-Ever Citywide Sales Tax to Avoid Fiscal Insolvency

As Oakland leaders scramble to stave off fiscal insolvency, they might ask voters to approve a citywide sales tax for the first time ever.

Councilmember Kevin Jenkins has proposed adding either a quarter or half-cent sales tax to a special election ballot in April when voters will likely elect a mayor to replace Sheng Thao, who was recalled. Convincing voters to give the city more of their money could be challenging, though, as the budget crisis has threatened major cuts and Oakland is navigating possible public school mergers.

City officials warned council members last week that Oakland will have to declare a state of fiscal emergency if it can’t cure a $115 million budget deficit by next summer — a task that becomes impossible if changes aren’t made before the new year.

The city is currently implementing a lean contingency budget since revenue from the sale of its 50% stake in the Oakland Coliseum has been held up by timeline renegotiations and, more recently, the Alameda County Board of Supervisors, which has to approve the parallel sale of the A’s share to the same developers.

Since the contingency took effect in September, Oakland has implemented a hiring freeze, delayed a police academy class and halted unfinalized contracts and grants. Significant public safety cuts called for in the budget haven’t been rolled out yet. However, they will be necessary in the coming months if the city is going to get back on track.

Oakland is projected to go $93 million over budget this fiscal year, fueled mostly by its public safety departments. The Fire Department is expected to exceed its budget by $34 million, and the Police Department is on track to overspend by $52 million. Oakland must also replenish the $27 million it withdrew from emergency reserves last year.

According to Councilmember Dan Kalb, the revenue from a city sales tax would mostly go toward maintaining and likely refunding public safety services. It could generate up to an additional $20 million annually, Council President Nikki Fortunato Bas said during last week’s city council meeting.

“We have to look at additional revenue as part of the solution,” Kalb told KQED. “One thing that a number of cities have done around the state is to have a quarter or half-cent sales tax to pay for vital services during this challenging budget time.”

Oakland voters recently showed support for public safety funding. They overwhelmingly passed Measure NN, which renews a measure that helps fund the police and fire departments through property and parking taxes and increases rates as of next July.

While neither NN money — nor the revenue from a possible sales tax — would be available this fiscal year, Kalb said that the city’s budget crisis is going to continue past this make-or-break moment, whether the city balances its 2024 budget or not.

“We have a long-term budget challenge that’s been built up over 15 years,” he said. “Now we can’t solve it in one year. In order to protect and even restore some of the cuts that may need to be made in public safety services, you have to look at some increased revenue.

“There are other solutions that are going to involve cutting other things, but you have to look at increased revenue for part of the solution.”

If Oakland officials decide to put a sales tax measure on the spring special ballot, they will need to do so before the end of next month.