Measure U provides unexpected windfall for Sacramento | The Sacramento Bee

The city of Sacramento has an unexpected windfall coming from the sales tax increase voters approved in 2012. While part of the new cash is already accounted for, there may be room to use some of the money for much-needed facilities in the city, officials said.

A city report last week showed sales tax revenue raised by Measure U will be nearly $10 million above what was projected for the current fiscal year, which ends June 30. Voters approved Measure U by a wide margin in 2012, agreeing to increase the city’s sales tax by one half of a percentage point to support core city services.

Budget officials initially projected the tax would generate $31.8 million in the current fiscal year. Instead, Measure U dollars are now expected to reach $41.5 million this year and remain nearly $10 million above original projections for the next four years.

The additional money results from many factors.

City finance director Leyne Milstein said there has been a big increase in recent months in the number of city residents purchasing major items such as automobiles. Even in cases in which Sacramento residents buy cars outside city limits, one half of a percent of the purchase price is sent to the city to fulfill the Measure U tax obligation.

Taxed Internet sales are generating about $1 million to the Measure U balance. The measure’s budget projections were crafted before Amazon.com and other online retailers began collecting sales tax from California customers in September 2012 – and city officials had not budgeted that revenue into their original projections.

Lastly, the city is receiving much more tax revenue from business-to-business and business-to-government sales than it initially forecast. Those purchases include, for example, the state buying office supplies from a vendor in Southern California that are delivered to an agency in Sacramento.

After years of budget cuts, the city might seem eager to spend the millions of additional dollars it has coming its way. But Milstein said a portion of the money will be needed to pay for salary raises and increased pension costs for city employees who were already hired with Measure U dollars.

Still, there may be some wiggle room, Milstein said. The City Council could decide to spend some of the extra cash on one-time expenses such as new firehouses, upgrades to city pools and new park facilities.

The City Council is making one minor adjustment to its Measure U spending now: the city plans to set aside $158,000 to finish repairs at the pool in south Sacramento’s Cabrillo Park and pay for three employees at the pool this summer.

The council is scheduled to begin setting its priorities for the new Measure U spending at a March 3 hearing. Milstein said budget officials want the City Council to give direction on how large a reserve they want to create in the Measure U fund and lay out a long-term spending plan that takes into account the expiration of the sales tax in 2019.

“We’re not going to make any recommendations (on spending the additional tax dollars) until council has had these conversations and has put some policies in place,” Milstein said.