Sacramento Mayor Darrell Steinberg repeatedly promised voters last year if they approved the Measure U sales tax increase in November, the new revenue would not go to employee pensions. But the mayor said Tuesday the city’s proposed budget outlook suggests it will.
Steinberg said Tuesday he wants the City Council to take action to guarantee his promise to voters will not be broken.
City Manager Howard Chan’s proposed budget projects that the city will have a roughly $51.8 million surplus in fiscal year 2019-20. The city’s proposed budget includes about $47 million in new Measure U revenue, which the council and Measure U Advisory Committee will decide how to spend.
Steinberg’s issue is not with the proposed 2019-20 budget, but with the projected revenue forecast for the four years after that, he said. For those years, the City Council previously directed budget officials to place new Measure U revenue into the general fund, which pays for most basic city services, salaries and pensions.
“If we keep the second half cent (of new Measure U revenue) in the general fund, every penny will go to pension and salaries,” Steinberg said. “All of the money will be gone, and so will the increased public safety that we promised in this budget. There is a more hopeful path for sustaining city services. I ran for mayor with a clear agenda to invest new city resources in economic development, disadvantaged neighborhoods, the creative economy and real pathways for young people.”
Steinberg told voters if they approved Measure U, the majority would go toward a series of projects to uplift the city’s disadvantaged neighborhoods and to increase the city tax base, such as incentives for new small businesses, revitalizing commercial corridors and new youth programs.
If Steinberg would have told voters that the Measure U sales tax increase would go toward pensions, salaries and basic services, they would not have approved it, Steinberg said. It passed with about 57 percent of the vote.
“This is now a matter of trust with the voters,” Steinberg said.
Steinberg asked the city treasurer to come back in the coming weeks with a plan to securitize $25 million of new Measure U revenue per year to create a capital equity fund. That fund could raise about $400 million upfront through the sale of bonds that would be repaid by Measure U receipts over a 25-year period and could be used for small businesses, youth facilities and workforce development.
Steinberg proposed the second pot of roughly $25 million in new Measure U revenue per year be set aside for achieving economic equity.
Councilman Jeff Harris said he does not support the mayor’s proposal to remove all new Measure U revenue from the general fund, and also does not support securitization.
“We have to balance our budget,” Harris said. “We have pension obligations that are growing year after year and we have to meet those obligations. There is no other way forward.”
Council members Steve Hansen, Angelique Ashby, Larry Carr and Jay Schenirer said they support removing the new Measure U revenue from the general fund.
However, Hansen does not support securitization, he said, raising concerns about interest and debt.
“Securitizing is dangerous,” Hansen said. “It is what got Stockton, in particular, into bankruptcy, and I did not support Measure U in order to securitize.”
“I am not a fan of securitizing,” Ashby said. “I think $25 million a year for 30 years of indebtedness is too big of a risk for Sacramento without having a project in particular we’re voting on in that moment.”
Ashby said she does not want the council to be faced with a decision between funding pensions or new services, but rather should find a way to do both.
“I want us to stay good on our promises to the people who have worked for us and who work for us now,” Ashby said.
To help with the potential budget deficit that could be created by pulling the new Measure U revenue out of the general fund, Steinberg proposed the council and staff speak to consultants to determine how the city can reduce at least $25 million per year in expenses.
Steinberg wants to find a way to make those cuts “without hurting operations or negatively affecting our employees,” Steinberg said.
A newly-formed group called the Sacramento Economic Growth and Equity Coalition sent a letter last week to Chan, expressing concern with his budget proposal.
“Members of this coalition supported Mayor Darrell Steinberg and the half cent increase of Measure U because of the promise that the additional revenue raised would be used to intentionally grow Sacramento’s economy,” the group’s letter said. “Many took the leap of faith to support this measure and the city owes it to them to follow through on the vision of a city that values the potential of its citizens. This is your opportunity to build trust and create measurable impact for the citizens that look to your leadership in times of need.”
The City Council will vote to approve a final budget in June.