In a remote Oakland location surrounded by large trees on hilly terrain, Oakland's City Council sat down with the Mayor Jean Quan to begin publicly discussing one of the worst financial budget in the city's history.

At a budget retreat on Monday, city officials said out loud what many concluded long ago: Oakland is broke.

"As sobering as that may sound, it is the reality that we are faced with today and it is the reality that we're going to have to make some significant changes moving forward with," Interim City Administrator Lamont Ewell said.

The retreat at the Joaquin Miller Center was far from a good time around the campfire. City officials must find successful ways to close a significant deficit gap, deal with serious debts and shore up Oakland's narrow revenue stream. And so for a full day, City Council members read documents, listened to presentations by city staff and discussed the financials challenges ahead.

"What my goal has been is to leave Oakland's infrastructure intact as much as possible," Quan said.

Keeping core services from seeing deep cuts may be a huge challenge for the mayor. Oakland's budget numbers for the next three years are ugly, with a good chance of them getting worse.

At the retreat, held in a log cabin-inspired structure, Quan reported that the city’s structural deficit for the next fiscal year now stands at $58 million. It had been previously thought to be $46 million. For the following fiscal year, the deficit will balloon to $72.1 million.

Debt and flat to negative revenue are two large issues that Oakland officials must conquer. According to Quan’s office, once police, fire, debt and restricted funds are taken out of the budget, Oakland only will have about $26 million to cover $72 million in city services.

The mayor is fighting to put a temporary $80-per-parcel tax on the budget, but at $11 million a year, it’s only going to bring in a small source of revenue for the city if voters approve the measure.

The crowd that made the trip to center nestled in the Oakland hills was large and overflowed out of the conference room for a good portion of the all-day event.

Many public speakers said the city need to give thoughtful considering for how they will handle the financial challenges of the city.

"This budget has to be a real budget," said Bruce Nye, who is with the grassroots group Make Oakland Better Now! "It can't be made up out of hope, and wishes, and quick fixes ... it's absolutely essential that the city base its budget, frankly, on worst case scenario and if there's more money available later, then there's more money available later."

While there were few hard directives from the mayor’s option plan, it’s clear that significant employee reductions will likely take place in City Hall; close to half of the city’s departments will likely see staff reduction as a way to reduce Oakland's budget.

"Given the magnitude of this challenge, restructuring just isn't going to get us there," said Ewell. "We'll be collapsing the organization wherever we can, eliminating redundancies, looking at centralization, especially as it relates to payroll and accounting functions; all of the things where there is commonality across the organization. But, again, this will be playing around the edges because of the magnitude of the budget."

Quan called for the retreat to be held at the Joaquin Miller Center, a bit of a throwback since Oakland had not held a budget retreat at the center in the last few years.

The next City Council budget discussion will take place May 3 at a regularly scheduled meeting.