Oakland to pave roads with lucrative bond sale attained despite city’s credit rating decline

OAKLAND — Mayor Barbara Lee on Tuesday touted $334 million in new bond sales as a reflection of the city’s improving financial state, though persistent budget deficits continue to plague the city’s credit rating and throttle public spending.

Revenue from the new bonds will be used to fund $50 million for citywide street repaving, $33 million for public transit improvements in West Oakland and $30 million for affordable housing developments, among other initiatives.

“When the financial markets believe in Oakland’s direction, that helps us fund the work that Oakland deserves and needs,” Lee said Tuesday at a news conference.

The bonds saw strong investor demand, officials said, which should keep interest rates at just under 4% for $143.5 million in tax-exempt bonds and 5.5% for $191 million in taxable bonds.

Lee took office amid a crisis point in Oakland’s finances, when City Council members openly clashed with then-Finance Director Erin Roseman, who had warned ahead of her resignation in the spring that any city bond sales would yield prohibitively high interest rates and a higher burden on taxpayers.

Roseman’s successor, Bradley Johnson, said Tuesday that the city is now in better financial condition, having balanced its two-year budget and revised its planned sale of the Oakland Coliseum. The Federal Reserve has also lowered its interest rates.

“The market punishes you for uncertainty as much as anything else,” Johnson said in an interview. “Timing matters — the idea of going to the bond market was never a ‘never.’”

Municipal bonds are repaid to investors through tax increases. In this case, the city has sold all its bonds from Measure U, a voter-approved 2022 ballot measure that will raise property taxes, with the longest increases expected to take 30 years to pay off.

Johnson said he could not project how much taxes will rise for Oakland’s property owners, citing other factors that affect tax rates, such as how housing values in the city are assessed.

But he credited the city’s tax management policies for an overall decline that has led homeowners, as well as landowners and business owners, to pay less in property taxes now than in 2021.

Tuesday’s announcement marked a sign of optimism among city officials. Johnson, who worked closely with Roseman as the city’s budget director, had previously rung alarm bells around the city’s spending.

Still, Oakland received a lower credit rating for its bonds than it would have just a couple years ago. A pair of credit agencies, Moody’s and Fitch, respectively awarded AA2 and AA- ratings to the city’s Measure U bonds. Those ratings still fall within a “high grade” level, but they are a significant step down from the AAA ratings Oakland regularly enjoyed before 2024.

The city was able to save $5.6 million in debt service obligations by keeping $143 million in bonds exempt from taxes, as they will go exclusively to public projects.

Another $191 million in bonds remain taxable, however, because most of that money will go to private developers tasked with building affordable housing in Oakland.

Oakland, meanwhile, faces a core budget deficit of around $130 million this fiscal year, according to a five-year financial forecast released in the spring.

Voters approved a new sales tax in the spring that will add $20 million annually to the city’s general fund, while the city’s current two-year budget has already incorporated $40 million in revenue from another tax measure that hasn’t even been approved to go on the June 2026 election ballot.

The council is expected to vote sometime early next year to bring the new parcel tax before voters.

For now, the new money offers a boost for Oakland’s declining infrastructure. Earlier this year, a civil grand jury credited city leadership for making progress in repaving Oakland’s notoriously pothole-ridden streets — efforts that will now receive $50 million in additional funding.

And the city’s Department of Transportation is already planning a dual housing and commercial development, Mandela Station, near the West Oakland BART station. The project will receive $33 million from the bond sale.

Another $28 million will go toward developments at Liberation Park in East Oakland, along with $10 million to the Oakland Ice Center and $3 million to reopen the Brookdale Recreation Center on High Street.

“We rolled up our sleeves and did the hard work to get our fiscal house in order,” Lee said at Tuesday’s news conference, citing “tough spending decisions” that included hiring freezes, eliminated job positions and tapping into reserve funding.

The city is expected to begin planning for its mid-year budget in the early months of 2026, when more spending cuts could be on the table.

Shomik Mukherjee is a reporter covering Oakland. Call or text him at 510-905-5495 or email him at shomik@bayareanewsgroup.com.