Will Mayor Steinberg’s tax spending plan bankrupt Sacramento? Two council members say it might

The debate over how the city of Sacramento should spend $50 million in annual Measure U sales tax dollars escalated this week as two council members assailed Mayor Darrell Steinberg’s controversial plan to sell bonds backed by a share of city revenue. And several community groups said they will show up at City Hall Tuesday to call for a slice of the new money.

In written opinion pieces, Council members Jeff Harris and Angelique Ashby accused Steinberg of putting the city at risk of bankruptcy with his bonding plan should the economy go south. Their protests suggest the council is facing its biggest rupture in the two-plus years since Steinberg took the helm. A divided council must come to an agreement on a 2019-2020 city budget by the end of June.

Steinberg has proposed that the city borrow against its budget to issue bonds and use that money to invest strongly upfront in housing, economic development and other community building programs, with much of it focused on less privileged neighborhoods and residents.

Harris, writing in the Inside Sacramento publication, called the proposal a “scheme (that) would expose the city to insolvency at the slightest economic downturn. “

Speaking to The Bee and in his written commentary, Harris said the mayor’s bonding concept is disingenuous because it is not what voters agreed to last November when they approved adding an additional half-cent surcharge to the city’s existing half-cent sales tax. “Nowhere in the ballot language was it suggested the tax would be the vehicle to incur massive new debt,” Harris wrote.

Ashby echoed Harris’ argument in her own commentary in Inside Sacramento headlined, “Let’s be responsible.” Both council members said the city must face the fact that some of the new Measure U money will have to go toward paying city employee wages and fast-escalating costs of retiree pensions.

Steinberg was unavailable for comment Monday night. He has said previously that voters approved Measure U expecting it to create funding sooner rather than later for projects. He wrote in a recent blog post that those investments would not come at the expense of core services such as police and fire protection.

“Public safety is always the first priority for our city,” the mayor wrote. “The only way to make our budget for those services more sustainable over time is to build a broader tax base through economic development.”

Steinberg’s concept is for the city to use a portion of its annual revenues to serve as repayment for 30-year bonds that would be issued in annual increments in the coming years to pay for specific projects. Each project would have to be approved by the City Council.

City Treasurer John Colville projected that would produce upfront capital of more than $400 million. The interest on those bonds, though, would mean the city must pay bondholders back far more than the $400-plus million over time, similar to how homeowners pay back mortgages.

Steinberg has said he fears the Measure U money, if left entirely in the general fund, would be completely eaten up by salaries and pension funding. Speaking to The Bee recently, City Manager Howard Chan disagreed, saying some would would go to pensions, but not all.

Councilman Jay Schenirer, a supporter of the mayor’s bonding idea, countered his two council colleague’s criticisms, saying the bonding plan allows the council to decide each year during those years whether the general fund looks healthy enough to go ahead with another round of bonding.

Schenirer said he believes voters wanted the city to be assertive in investing now in the community. He cited as examples a possible “mercado” on Franklin Boulevard that could include business classes for area residents, and a sports complex in North Sacramento.

“People have been waiting a long time. If we don’t do this now, when?” Schenirer said. The investments will boost the economy, he said, and should cover the loan interest payment costs the public would incur if the city does the bonding.

As the council debates what to do with the Measure U money, advocates around the city are asking for a piece of the pie.

Arts groups plan to show up at Tuesday’s council budget hearing, dressed in red with a #SaveSacArts campaign, asking the city to continue to fund the Creative Edge program, an arts advancement partnership of the city, county and Sacramento Metropolitan Arts Commission.

And affordable housing advocates will hold a press conference at City Hall, calling on the council to focus some Measure U funding on housing programs. Cathy Cresswell of the Sacramento Housing Alliance said she supports the mayor’s bonding idea, dismissing concerns that the council will get itself in over its head financially.

“Bonding is a normal practice. Cities and counties up and down the state do it,” she said. “You have to be prudent with it.”

Measure U offers the city a chance, she said, “ to have a meaningful impact in addressing the housing crisis, not only for people experiencing homelessness, but for families and workers who simply can’t afford the rent in Sacramento right now.”

One community business leader, Barry Broome, head of the Greater Sacramento Economic Council, weighed in last week with a tweet saying he’s disappointed with recent City Hall discussions about the measure, and fears that disadvantaged communities “may be overlooked.”

If that’s the case, he wrote, “I think repealing the measure should be on the table.” Broome did not respond to a Sacramento Bee request for elaboration.

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