Oakland’s Credit Rating Downgraded 2 Levels by Fitch

According to Bloomberg, Fitch Ratings announced that it will downgrade Oakland’s credit rating by two levels. The company cited the city’s ongoing financial struggles and challenges in addressing its growing deficits.

By The Numbers

The projected shortfall for the current fiscal year is $93M, following a $79M deficit in the previous year.

Public safety expenditures, consuming over half of Oakland’s main spending account, have surged due to rising personnel and overtime costs. 

This financial strain has been exacerbated by delays in securing revenue from the city’s share of the Oakland-Alameda County Coliseum sale, which had been critical to avoiding budget cuts.

Political Turmoil

Oakland’s political landscape adds another layer of complexity. The city’s mayor was recently recalled, just two years into office, amid criticism over public safety and fiscal management. 

Fitch noted that implementing significant spending reductions in the short term would be challenging due to this leadership upheaval.

Contingency Measures

To address its fiscal challenges, Oakland enacted a contingency budget that included:

• Freezing Positions: Hiring pauses across all departments.
• Lowering Spending: Reducing expenditures citywide.
• Halting Contracts and Grants: Suspending new agreements to limit outflows.

However, proposed cuts to police and fire services have met political resistance, further complicating efforts to balance the budget.

What’s Next for Oakland

Oakland’s downgrade follows a similar move against San Francisco, which lost its top credit rating from Moody’s in October. Both cities face economic headwinds, including reduced commercial real estate activity and fiscal pressures tied to the post-pandemic environment.

Fitch anticipates further spending cuts this month to address the growing deficit. However, the city’s negative outlook suggests lingering risks, including political challenges and ongoing delays in revenue streams.

Oakland will need to navigate its fiscal constraints while managing political and community expectations regarding public safety and essential services to regain financial stability.