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Pensions or your neighborhoods? Sacramento City Hall fights over how to spend $40 million

Steinberg on sales tax increase: ‘One penny could change the economic arc of Sacramento’

Sacramento Mayor Darrell Steinberg speaks on Thursday, June 7, 2018. about a proposal to raise city's sales tax one cent.
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Sacramento Mayor Darrell Steinberg speaks on Thursday, June 7, 2018. about a proposal to raise city's sales tax one cent.

Sacramento Mayor Darrell Steinberg made his case Tuesday night for setting aside $40 million in public funding every year for the next five years to pay for projects and services he said will benefit the city’s disadvantaged neighborhoods.

But it’s far from clear whether the City Council is on board.

While three council members indicated they supported the mayor’s concept, two more – including the longest-tenured member of the City Council – said they opposed the idea because they are worried not enough money will be left for core city services and pension obligations.

Steinberg said last month he wanted to secure new revenue from the recently-passed Measure U sales tax expansion for “new city resources in economic development, disadvantaged neighborhoods, the creative economy and real pathways for young people.” Voters approved increasing the Measure U sales tax rate in November, and Steinberg raised concerns that money generated by the new tax rate – estimated at $50 million a year – would go to pensions and employee salaries.

At Tuesday’s City Council meeting, Steinberg proposed that the city use a portion of the city’s budget — starting at $5 million in fiscal year 2020-21 and building to $25 million over five years — to serve as repayment for 30-year bonds that could be issued to pay for specific projects. Each project would have to be approved by the City Council. City Treasurer John Colville projected that annual payments of $25 million would produce upfront capital of more than $400 million.

The rest of the $40 million could be used for programs and services benefiting disadvantaged neighborhoods.

“I’m just trying to set a direction here so that money is not gobbled up by our obligations, our debt obligations, beginning in years two through five,” the mayor said.

Steinberg laid out his idea to set aside money for disadvantaged neighborhoods during his February State of the City speech in Meadowview, the neighborhood where unarmed Stephon Clark was fatally shot by police.

The money could be used to build an affordable housing trust fund, grants for minorities to start small businesses and to revitalize commercial corridors like Stockton and Del Paso boulevards, Steinberg has said. The projects would be vetted by the city’s Measure U Advisory Committee and another committee under the city manager’s office, then approved by the City Council, Steinberg said.

Steinberg suggested some of the $40 million he wants set aside to help neighborhoods come from new Measure U dollars, some from new revenue generated by a larger tax base as the economy expands and some from “efficiencies” that a consulting group would look for, such as leaving vacant positions in the city budget unfilled.

“We’ve got an ethic around here that we need to get back to where we were before the recession in terms of (city employee) positions. No we don’t,” Steinberg said. “We need to provide more opportunity for our people and the government and the city ought to be the vehicle to help provide that opportunity.”

Council members Jay Schenirer, Eric Guerra and Rick Jennings said they support the mayor’s proposal to set aside $40 million a year for five years. However, Council members Angelique Ashby and Jeff Harris said they oppose the idea.

“We have looming (pension) obligations we can’t get away from, we just can’t,” said Harris, the only council member who voted against putting the Measure U sales tax increase on the November ballot.

Council members Larry Carr and Steve Hansen raised concerns with the $40 million a year proposal, but stopped short of ruling it out entirely.

“I do think what you’re trying to do is stop the threat of pension and labor costs from creeping in, but I don’t know what it’s gonna do to everything else,” Hansen said to Steinberg. Hansen, who represents downtown, midtown and Land Park, said he feared the new fund would not benefit his residents enough.

The council directed City Manager Howard Chan to bring back more details about how setting aside $40 million a year would affect the rest of the budget for the next five years.

Steinberg proposes the fund begin in fiscal year 2019-20. Chan’s proposed budget includes $23.5 million in spending in new funding that would go partly toward areas targeted by Measure U campaigning, and also includes a roughly $51 million surplus. Steinberg suggested that surplus could be used to cover the $40 million this year.

Council members raised concerns about where the money would come from in the next four years.

Ashby, who has been on the council since 2010, said $51 million is the largest surplus she has seen.

“We have more resources, but to obligate them up front would be to handcuff ourselves and that would be a mistake,” Ashby said.

The council plans to adopt the fiscal year 2019-20 budget on June 11.

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