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Could all Measure U funds go to pensions? ‘That’s just not accurate,’ city manager says

Hear Mayor Darrell Steinberg talk about what he’ll do with the money that comes from Measure U

Sacramento Mayor Darrell Steinberg talks to the Bee reporter Theresa Clift about Measure U at an election night party at Urban Roots in Sacramento on Nov. 6, 2018.
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Sacramento Mayor Darrell Steinberg talks to the Bee reporter Theresa Clift about Measure U at an election night party at Urban Roots in Sacramento on Nov. 6, 2018.

City Manager Howard Chan disagrees with Mayor Darrell Steinberg’s assertion that the city’s proposed budget outlook suggests “every penny” of new Measure U revenue would go to pensions and salaries. Future year budgets have not been written yet. And this year’s budget includes millions of dollars in Measure U funding for programs and services.

“It’s not accurate to say 100 percent of the dollars that would come in with the second half cent (sales tax increase) of new Measure U would go to salaries and pensions,” Chan said. “That’s just not accurate.”

Steinberg wants to safeguard Measure U money from going toward pensions in the four years after fiscal year 2019-20 – a request more council members would need to echo before staff could act on it, Chan said.

“I can’t take direction from any one council member, even the mayor,” Chan said. “I cannot and I will not.”

A piece of Steinberg’s request is moving forward, though.

City staff are working on a proposal to create a $25 million annual fund for inclusive economic development initiatives. Steinberg wants to securitize that money so it could raise about $400 million upfront through the sale of bonds that would be repaid by Measure U receipts over a 25-year period. The staff proposal could include securitization, which some council members raised concerns with, or some other strategy to leverage the money, Chan said.

“That is just half of it and I think it’s the right place to start,” Steinberg said. “It’s not where we should end, but it’s the right place to start.”

The other half of Steinberg’s proposal calls for the city to find a way to set aside an additional $25 million a year in new Measure U revenue for youth, small business growth, housing, and career development.

Setting aside both pots of $25 million annually would total $50 million a year – a generous estimate of what the city expects to receive in new Measure U revenue.

Chan’s $1.2 billion proposed fiscal year 2019-20 budget includes $23.5 million in new funding that would partly go toward areas targeted by Measure U campaigning. The $23.5 million would go toward inclusive economic development, homeless services, public safety, youth and essential core services. It also includes funding for 148 new full-time employees in those departments.

“The budget I put together, this proposed budget, is reflective of council priorities and it’s reflective of all the things talked about during the Measure U campaign,” Chan said.

Without growing the tax base and growing capital with the Measure U money, Steinberg worries the city will not be able to sustain the proposed $7.9 million for public safety, Steinberg said.

“Salaries and pensions are going to put us in the red,” Steinberg said.

Steinberg is now focused on two goals: Finding a way to make sure the Measure U revenue can go toward the categories of new projects and services promised to voters, and finding a way to make that sustainable.

To achieve those goals, he plans to bring in the city treasurer and outside experts to hold a series of public hearings in the coming months. During those hearings, Steinberg also wants to figure out where cuts can be made.

One place he wants to look, to start, is vacant positions, he said.

“We got a lot of vacancies we budget for,” Steinberg said. “Are all of them necessary to be filled?”

During the hearings, Steinberg also wants to further dig into some of the projects he proposed Measure U money could be used to fund.

“What would a large affordable housing trust fund actually look like?” Steinberg asked. “What would it mean to have capital to invest in Stockton Boulevard and other commercial corridors? What would it mean to help 1,000 people start small businesses?”

The City Council will approve the final fiscal year 2019-20 budget in June after changes are made to the proposed budget.

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Theresa Clift covers Sacramento City Hall. Before joining The Bee in 2018, she worked as a local government reporter for the Pittsburgh Tribune-Review, the Daily Press in Virginia and the Wausau Daily Herald in Wisconsin. She grew up in Michigan and graduated from Central Michigan University.
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