Oakland touts balanced budget, new mayor ahead of bond sale

“We deeply appreciate the work of our finance team and underwriting partners who help position Oakland as a trustworthy investment and vibrant, resilient city,” said Oakland Mayor Barbara Lee.

City of Oakland

Oakland is touting the city’s turnaround efforts as it prepares to sell $335 million in general obligation bonds Dec. 3 to support affordable housing, street projects and infrastructure.

Lead manager Siebert Williams Shank will price the bonds in four tranches: $94.26 million tax-exempt Series 2025 B-1 GOs, $180.75 million Series 2025 B-2 taxable social bonds, $10.05 million Series 2025 B3 taxable GOs and a $49.94 million tax exempt GO refunding.

The bond issuance is an important milestone for the city, Oakland Mayor Barbara Lee said in an emailed statement. “The bonds represent our city’s continued commitment to sound financial management and responsible investment in Oakland’s future.”

“The proceeds will help fund vital infrastructure and community projects, ensuring we deliver on promises to our residents while maintaining transparency and fiscal discipline,” Lee added.

After flirting with insolvency in 2024, the city was able to close a $130 million general fund deficit for fiscal 2025 through spending cuts, hiring freezes and by tapping $40 million from reserves, S&P Global Ratings analysts wrote in an Oct. 6 report.

Voters elected long-time Congresswoman Lee, a Democrat, as mayor in an April 15 special election after former Mayor Sheng Thao was recalled on Nov. 5

Thao was indicted in January by the U.S. Attorney’s office on bribery charges in an alleged scheme involving two businessmen. Thao’s trial is tentatively set for early 2026.

The delay of the $125 million sale of the city’s 50% stake in the Oakland-Alameda County Coliseum to the African American Sports and Entertainment Group caused the deficit to balloon. The venue formerly housed the Athletics, a Major League Baseball team; the Raiders, a National Football League team and the Warriors, a National Basketball Association team.

City Administrator Justin Johnson said the sale is moving forward, and when completed, the money will be spent to replenish reserves and on one-time projects across the city, rather than being used solely to close a budget deficit.

“We were in a place where we recognized the significant changes we needed to make,” Johnson said of the balanced budget. “We took a holistic approach to addressing the issues.”

Knowing the city had to slash $100 million from the budget in December, the city cut hundreds of vacant positions and reviewed all of its contracts and right-sized them, said Deborah Edgerly, the assistant city administrator. It also is tightening up its business and parking tax collection processes, she said.

As of July 1, the city has balanced budgets for fiscal 2024-25 and 2025-26, she said.

Voters approved Measure A, a 10-year, 0.5% sales tax, by a 64.95% majority in April. It is expected to bring in $30 million annually for general purposes. City leaders are also discussing placing a parcel tax on the ballot in June 2026 that would yield an estimated $40 million in revenues annually.

Despite its current problems — including the loss of three professional sports teams in recent years — the city has a strong economy and benefits from its position as the San Francisco Bay Area’s third largest city. It is also host to a large port and international airport.

The city retained investment-grade ratings ahead of the deal on the strength of those economic characteristics, but Moody’s Ratings, S&P Global Ratings and Fitch Ratings all give the city a negative outlook.

Moody’s assigned an Aa2 rating ahead of the deal, but maintained a negative outlook assigned in December when it downgraded the city’s issuer rating, GO and pension bond rating to Aa3 from Aa2.

S&P affirmed its AA-minus rating but threw caution flags in its report.

“Despite notable steps taken to close the fiscal gap, including the passage of a half-cent sales tax increase in April, we believe the city still operates with a structural deficit,” S&P analysts said.

S&P noted the city adopted a $4.2 billion balanced budget for the fiscal 2025-27 biennium, but the city’s forecast also assumes $40 million in anticipated revenue from the parcel tax proposed for the June 2026 ballot. It has a contingency plan should the parcel tax fail, but S&P said the optimistic budget assumptions “add risk that further emergency cuts will be required.”

David Stinfil, managing director Siebert Williams Shank — Oakland’s bonds are expected to fare as well as comparable issuers who have sold debt this year, said David Stinfil, managing director at Siebert Williams Shank.

Fitch didn’t rate the upcoming deal. But it affirmed an A rating and negative outlook on the city’s issuer default rating in October.

“The city’s IDR and negative outlook reflect ongoing budget challenges within its general purpose fund, leading to widening deficits in the city’s five-year forecasts,” Fitch analysts said. “In November 2024, city officials published a financial report that stated immediate action is necessary to avoid beginning the Chapter 9 process. The report has since been replaced with one that calls for immediate action but excludes Chapter 9 language.”

Though the City Council has addressed the largest budget gaps, Fitch’s negative outlook “incorporates the political difficulty in fully enacting the necessary budget solutions to close outyear gaps.”

Based on bond sales this year by comparable credits, the city expects a favorable reception from investors.

“East Bay and muni credits that share the same tax base, which support the city’s GOs, their transactions have gone phenomenally well,” said David Stinfil, a managing director at Siebert Williams Shank. Those issuers include Peralta Community College District, Bay Area Rapid Transit District and East Bay Municipal Utility District and the Oakland Unified School District, he said.

“I expect the same for Oakland, because I think we have a great story,” he said. “The city waited to issue debt until after the budget and new mayor were in place.”

Though a separate retail order period isn’t planned, he expects the deal will benefit from retail demand, which he said is beating historic levels. “There is a lot of demand this year for investment-grade, non-alternative minimum tax bonds and they tend to do well in California, because it’s a high tax state. In general, California credits are pricing very strongly through the triple-A benchmark.”

“The equity markets are hitting records on a daily basis and when gains are realized, investors need to find a place to park that money,” he said.

BofA Securities and Loop Capital Markets are co-managers on the deal. PFM Financial Advisors serves as financial advisor, Orrick, Herrington & Sutcliffe as bond counsel and Nixon Peabody as disclosure counsel on the upcoming deal.