Pre‑Shocks on the Fault Line: City of Hayward Needs More Than Cosmetic Fixes to Stay Solvent
Hayward, the Bay Area’s sixth largest city, is facing a self-inflicted financial crisis. By failing to responsibly budget, municipal leaders are failing the 162,000 residents who pay the city’s high taxes and rely on municipal services.
At its June 17, 2025, meeting, the Hayward City Council adopted the city’s operating budget for Fiscal Year 2025-26.1 According to the budget document, expenditures for Fiscal Year 2024-252 were projected to exceed the adopted budget by $8.5 million ($226.7 million vs. $218.2 million). In the absence of a catastrophic event, such unauthorized spending is an inexcusable breach of legal authority—and raises serious questions about the organization’s fiscal controls and management discipline.
But it gets much worse. On August 29, just ten weeks later, the city issued a press release announcing updated general fund projected expenditures of $248 million, “which was $21 million over budgeted spending for the fiscal year [ended June 30, 2025].” Thus, in this short period, projected excess expenditures for the year had ballooned from $8.5 million, or four percent of authorized spending, to $21 million, or nearly ten percent of authorized spending.
Let’s go back to early June, when city staff were preparing for the final budget hearing and council action scheduled for mid-June. By that time, finance staff would have known the actual expenditures through at least April 2025, and payroll and benefit costs through at least mid-May. In other words, roughly 85% of the city’s general fund annual spending should have been available to support projections for total Fiscal Year 2024-25 expenditures. This spending number is critical because it affects the general fund reserve balances that the city would have on hand to begin the new fiscal year on July 1.
The city has yet to explain the source of excess general fund spending. The city manager’s press release cites post-pandemic staffing increases, new labor agreements from 2023 and 2024, and an $8.6 million loan to the Hayward Economic Development Corporation. But none of these qualify as unforeseen or emergent events. Their fiscal impact should have been incorporated into the Fiscal Year 2024-25 budget. (The appropriateness and wisdom of making loans is a separate issue.) https://californiapolicycenter.org/wp-admin/index.php
While budgeting negligence can be corrected, a deeper challenge remains: aligning the city council on the seriousness of the city’s financial condition. The city has been through serial budget crises throughout the years and received a D grade from California Policy Center’s fiscal dashboard based on its most recent audited financials. But, in the words of one of its leaders, “It’s always worked out.” However, the same statement could have been uttered in any number of cities in the months preceding their declarations of fiscal emergency or Chapter 9 bankruptcy filings.
City leaders cannot afford to indulge in superficial solutions. For example, the August press release highlighted “vacancy management” as one of the measures to boost the city’s fiscal health. Holding vacant positions open is not “management”—it’s abdication. It surrenders the organization to the randomness of attrition, rather than employing strategic staffing. Such management passivity will never result in the assemblage of personnel best suited to provide city services.
At its May 13 budget meeting, city staff recommended other mitigation measures, such as “identify revenue enhancement,” “evaluate all programs,” “redefine core services,” and “encourage staff, council and community feedback.”
Revenue enhancements in the form of higher taxes are not sustainable. Nor are they defensible without first verifying that the city is operating within a proper scope and delivering services cost-effectively. (The inability to comply with approved operating budgets suggests that there is room for improvement.)
Evaluating all programs and redefining core services sound like promising steps, but only if there is a clear standard by which to evaluate the programs and determine what truly is a core service. Unfortunately, the status quo activities and methods of service delivery are so entrenched, cities typically throw their hands up at the first signs of pushback and conclude that higher taxes and fees are the path of least resistance.
Finally, obtaining feedback from the community is great, but only if the city shares up-to-date, accurate information. Transparency is impossible when the organization itself lacks clarity about its own operations, obligations, and financial resources.
With the city already in fiscal distress, Hayward must adopt a disciplined, transparent framework for forecasting and accountability as part of its first Fiscal Year 2025–26 budget review. The City Council cannot afford to treat deep fiscal fissures with surface-level remedies. Cosmetic fixes like vacancy management and vague program reviews only entrench the illusion of control. They do not solve anything. Meanwhile, the fault line widens beneath them. The crisis is here, and if city leaders continue to manage perception instead of reality, they are not responding to it—they are perpetuating a pattern of fiscal erosion that endangers Hayward’s solvency, credibility, and capacity to serve its residents.
Footnotes:
- the fiscal year beginning July 1, 2025
- the fiscal year ending June 30, 2025
Mark Moses is a senior fellow with California Policy Center. He has thirty years of experience in local government administration and finance. His recent book, The Municipal Financial Crisis – A Framework for Understanding and Fixing Government Budgeting was published by Palgrave Macmillan and is available from major online booksellers.
https://munifinanceguy.com/ X/Twitter: @MuniFinanceGuy