A $250 million ‘prudent middle path’ emerges in Sacramento tax dollar spending fight

In the midst of a messy budget process as millions of dollars in new sales tax revenue flows in, the Sacramento City Council took a step toward compromise Tuesday.

Councilman Steve Hansen laid out a proposal as a “prudent middle path” that would give the city a little over half the amount of bond funding that Mayor Darrell Steinberg had previously proposed, but also does not expose the city to as much risk or decades of large debt payments, Hansen said.

“I’ve been working really hard to listen to the things the community is saying, that our stakeholders are saying, that my colleagues and the mayor are saying and I think this threads a needle for us to remain fiscally healthy and doesn’t expose us to too much risk but allows us to make significant investments,” Hansen said.

The majority of council members appeared to support Hansen’s proposal Tuesday, including Steinberg.

“I had proposed $440 million of bonding, you proposed $250 million,” Steinberg said during Tuesday’s council meeting. “I could happily go along with your proposal because it gets us off to a great start. So I want to thank you for that. You’ve also added some significant protections.”

Hansen proposed spending $250 million in bond proceeds in three categories: $100 million on affordable housing, $50 million on city libraries, parks and fire stations and $100 million for economic development.

The affordable housing money would be used for “gap financing,” used to spark construction of thousands of units of affordable housing.

Under Hansen’s proposal, the city would issue a 30-year bond in the fiscal year that starts July 1, making a payment between $7 million and $8 million and receiving $125 million. After the city spends the first $125 million, which could be in about two years, the council could issue another 30-year bond to get another $125 million. Under that scenario, the city would pay up to $16 million for about 30 years.

Hansen also proposed the city spend no more than 6 percent of its general fund budget on bond repayment.

The city does not currently have a debt repayment limit, though it does try to ensure that debt burden levels are in line with other cities and follow rating agencies’ guidelines, city debt manager Brian Wong said in an email.

The city’s current debt ratio stands at 3.4 percent, City Treasurer John Colville told the council. A 6 percent debt limit is “better than best practice,” Colville said.

The council would be able to use the limit in deciding whether to issue additional bonds after the first $125 million is spent, Hansen said.

Hansen also proposed the city over time move about $10 million in new Measure U revenue into the city’s “rainy day” reserve fund.

Under Steinberg’s proposal he laid out earlier this month, the city would issue 30-year bonds each year for five years, starting in fiscal year 2020-21. Starting in fiscal year 2024-25, the city would have payments of $25 million for about 30 years in order to receive $440 million to use for “inclusive economic development.” It was unclear whether that proposal would get enough council support to pass.

Council members Jeff Harris and Angelique Ashby — who earlier this month published columns saying the mayor’s bonding proposal could bankrupt the city — said they support Hansen’s proposal moving forward and being vetted by city staff.

Since February, Steinberg has been pushing for $40 million of the expected $50 million in annual new Measure U revenue each year to benefit residents of disadvantaged neighborhoods.

Hansen proposed also setting aside $40 million a year for disadvantaged neighborhoods. His proposal suggests including some projects in City Manager Howard Chan’s fiscal year 2019-20 budget in that total, including about $13 million for economic development and youth; $2.2 million for arts funding; and $18 million over two years for homeless shelters with services.

It also includes some new projects, such as $10 million for a new community empowerment grant program; $12 million for council projects in disadvantaged neighborhoods; $10 million to fix streets that have the highest number of transportation deaths; and a new city hiring initiative for minorities.

Steinberg said he wants to leave the decision of how to spend the $40 million to the full council and the Measure U Community Advisory committee, as well as another committee that runs under the city manager’s office.

More than 150 people from community groups and activists showed up to City Hall Tuesday in bright yellow shirts reading “Our Neighborhoods Need U,” urging the City Council to spend most of the new Measure U money on projects benefiting disadvantaged neighborhoods.

“You don’t show up to Thanksgiving, make half the meal and get half a plate,” said Flojaune Cofer, an epidemiologist and activist who chairs the Measure U Community Advisory Committee. “The whole purpose of this is to make sure those young people in those disadvantaged communities are getting their fair share.”

Berry Accius, a community activist, said $40 million a year for disadvantaged neighborhoods is not enough, especially if the council whittles it down to give more funding to police, fire and other core services.

“We have to go deeper,” Accius said. “I think people don’t realize that there has never truly ever been an investment to any of these communities. And if there has been investment, it has been gentrification.”

Accius said he would like to see the city provide capital for new minority-owned small businesses and funding to create new “pop-up” markets with food venues in vacant lots.

The City Council will adopt the fiscal year 2019-20 budget by the end of June.

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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.