A main Sacramento homeless provider settled a $3 million suit. Here’s what to know
One of the city of Sacramento’s primary homelessness contractors paid $3 million to settle a state lawsuit, The Sacramento Bee reported last week.
The Bee’s reporting found that in addition to the settlement, the executives of the nonprofit, Santa Monica-based Step Up on Second, earn much higher salaries than other homeless nonprofits that contract with the city.
The news comes after a city audit found Step Up misspent city taxpayer funds, and after a motel shelter program it runs led to evictions of multiple families with small children last month.
Here are key takeaways from the Bee’s reporting:
Nonprofit pays $3 million settlement
In January 2024, Attorney General Rob Bonta, on behalf of the state’s Department of Housing and Community Development, sued Step Up along with its development partner Shangri-La. The suit alleged that state money intended to build affordable housing in central and Southern California that was never constructed.
Step Up in October signed the $3 million settlement agreement, repaying the state for money that was meant to build housing through the Project Homekey program, but ended up in Step Up’s coffers.
The suit is still active against Shangri-La, which has since declared bankruptcy.
Nearly $20 million in city money — and high executive salaries
The city of Sacramento since 2021 has paid Step Up on Second $19 million in taxpayer money to address homelessness.
Only two other nonprofits — First Step Communities and Hope Cooperative, both based in Sacramento, have received more homelessness money from the city in that timeframe.
For the fiscal year that ended in June 2025, according to tax documents, Step Up CEO Tod Lipka earned a salary of $424,000. Six other executives earned salaries between $196,220 to $314,485.
By contrast, no executive for either First Step Communities or Hope Cooperative earned more than $215,055, according to tax forms for those nonprofits in the same year.
Troubled motel shelters
Since 2023, Step Up has been running the city’s motel shelter program, which contains about 200 rooms and is considered a lifeline for homeless families in need of emergency housing.
Last month, the city changed the program, leaving it up to the motel operators to decide if families get a room or get kicked out. The change led to 44 families, who had been in the program at the time, being left without a room, Lipka said.
Step Up and the city were able to move many of those families into other shelters or housing, but motel shelter guests, who now have to reapply for their rooms every 28 days, are worried there could be more mass evictions to come.
A bode of confidence
Despite the city audit and the settlement, the city in January signed a new contract with Step Up, increasing its already significant role in the city’s homelessness strategy.
This week the city opened a new so-called “safe ground” shelter in the River District, where homeless people can live legally in 96 uniform tents.
The city tapped Step Up to provide case management to the guests there — part of a $2.8 million contract with the nonprofit, which also includes case management at the motels, as well as street outreach — through Dec. 31.
Sacramento City Council member Lisa Kaplan has said she has many questions about the city’s relationship with Step Up. The council is on summer recess until July 21.
