Mayor Steinberg lays out plan to ensure Measure U funds go to inclusive economic development, not pensions and salaries

On Tuesday, April 30, Mayor Darrell Steinberg made this statement to the Sacramento City Council after City Manager Howard Chan presented his proposed budget for the 2019/2020 fiscal year. Mayor Steinberg praised Chan and city staff for producing a balanced budget that includes nearly $52 million for the coming year to carry out the inclusive economic agenda promised during the Measure U campaign. But he expressed concern about the five-year budget forecast, which lumps Measure U funds in with other city resources. Members of the non-profit, business and arts community showed up in force to support using Measure U funds to invest in job creation, youth, the arts and affordable housing.

“I want to begin this budget season by stating clearly where I stand as your Mayor. I respect that under our current form of government, the City Manager proposes the budget and all of us as elected leaders make the ultimate decisions. I’m just one vote. But as mayor, I have a special responsibility to describe and push for a vision and for a budget that reflects that vision.

“I have always been a champion of public workers, public employees and will always be. You can’t bend math. The budget proposal in front of us has a fundamental problem. The problem is not created by the City Manager but by the math and the choices the city has traditionally made.

“The problem does not arise in the first year; in fact, the City Manager has been very helpful and collaborative in working with me and my colleagues to set aside the possibility of almost $52 million in budget year 2019-20, not counting collective bargaining contracts, for economic development, neighborhoods, and for members’ key district priorities.

“The problem with the budget occurs immediately after, in years two, three, four and five. For those years, the budget is balanced and even has slight surpluses, but it is balanced only by assuming that the whole second half cent of the recently passed Measure U goes into the general fund, not an economic equity fund.

“Let me break that down in an even clearer way regarding the relationship between this multi-year budget forecast and the second half cent of Measure U. By the end of the five-year budget forecast, the city will owe CalPERS an additional $39 million a year to pay for pension obligations for existing city employees.  We are also at the beginning of collective bargaining for nearly all of our city employees. Assuming modest wage increases, and we should always treat our employees with respect and real support, the additional outlay for the city will be at least $15-$20 million per year.

“These numbers are easily verified. Add them together – the pension obligation and the low end of the salary increases -- and they total at least $54 million.

“In this year’s budget the City Manager proposes an additional $9.3 million just for additional public safety and core service investments. These proposals are worth supporting, but they get wiped out in years two and three of the five-year budget because of pension and salary obligations.

“The second half cent equals $50 million. If we keep the second half cent in the general fund, every penny will go to pension and salaries. All of the money will be gone, and so will the increased public safety that we promised in this budget.

“I believe there is a more hopeful path for sustaining city services and upholding our obligation to our employees, which are both legal and moral. I ran for mayor with a clear agenda to invest new city resources in economic development, disadvantaged neighborhoods, the creative economy and real pathways for young people.

“From my announcement as a candidate for mayor in 2015 until now, I have given at least five major public addresses calling for us to set aside new and significant city resources to invest in economic equity. My advocacy culminated in a June 2018 speech at Sacramento City College announcing the Measure U campaign. I said, “I would not propose a penny if it was going to pay for only for a series of worthy but traditional city services. While we should of course consider some immediate restorations or expansions of city services after Measure U’s passage, I am convinced that the only sustainable way for us to expand library hours, add more community police officers and improve emergency response times is to invest directly in advanced, inclusive and dynamic job growth that will ultimately broaden our city’s tax base.”

“The council agreed overwhelmingly last July to put the full cent on the ballot. We ran the campaign as a general tax to maintain a majority vote threshold. I promised no specific projects, but instead laid out a consistent vision of equitable economic development that would create more opportunity for our people and build our tax base.

“Now people may have had varying reasons to raise their taxes by an additional half cent without a sunset. I will argue confidently throughout these next weeks that if I had not laid out a clear, inclusive economic agenda for the city in my first years as mayor, the city would have sought only to renew the original Measure U at half a cent, so there would not have been a second half cent to consider for pensions, or salaries, or basic services. I will argue that 57 percent of Sacramento voters supported Measure U largely because they believed we should invest in growing jobs, invest in our neighborhoods, invest in youth and invest in our creative economy.

“I strongly support defined benefit pensions for our public employees, but let’s be clear: People would not have voted for Measure U if they thought it was only going to pay for pensions and salaries.

“This is now a matter of trust with the voters. None of what I described was unknown or contradicted before the election. We knew the pension obligations, and we made it clear that Measure U was not intended to be a solution to that problem.

“I will ask my colleagues to take the second one half cent of Measure U out of the general fund and place it in an inclusive economic development fund.

“Since we pass only one budget at a time, and you cannot bind future city councils, there is only one way I know of to guarantee that significant resources will be dedicated long-term to the promise we made to our voters and to our neighborhoods. I will ask the treasurer to come back over the next weeks with a proposal to securitize $25 million a year from the second half cent. A commitment of $25 million a year for 25 years would allow us to create a capital equity fund of more than $400 million. I made this exact proposal in my 2018 State of the City address.

“A capital fund would allow us to make affordable housing a real priority and more than just a wish; it would allow us to invest in our small businesses and entrepreneurs; it would allow us to invest in the creative economy and establish an arts endowment, it would allow us to invest in youth facilities and childcare facilities so more people could actually get to work; it would allow us to invest  in workforce development around Aggie Square, Sac State and the California Mobility Center.

“It would allow us to invest in Stockton Boulevard and Northgate Boulevard and all the other commercial corridors which deserve and need real attention.

“In addition to the Capital Equity Fund, I will also ask that we take the second $25 million of the second half cent and dedicate it to achieving economic equity.

And so you ask, how can we do all this, maintain our obligations to our employees and address the deficits that arise when you take these Measure U resources out of the general fund? I have three strategies. You may come up with more.

First, we must show the clear connection between jobs, housing and more revenue for core services. It’s not rocket science; but we have never as a city analytically connected the dots in this way. We can’t afford not to anymore.

 Second, I will request a special budget hearing in May to have a public dialogue with Management Partners, the nationally recognized consulting group that is already engaged in helping us look for greater efficiencies in city operations. Third, we should account for the fact that for the past three years, the city has carried over between $20 million and $30 million annually because it underestimated revenue and overestimated expenditures. Those continued resources can help address any deficits.

In sum, I will request my colleagues and the city management to bring back the following reports for action between now and the date we pass the budget in June. I will ask that the 2019/20 budget forecast for the general fund for the next five years not include the second half cent of Measure U. I will ask the City Council and city management to help arrange a public meeting with Management Partners to determine how we can reduce at least $25 million a year in expenditures in our budget without hurting operations or negatively affecting our employees. I will ask that the City Council commit to the creation of a capital equity fund that will allow us to invest and reinvest in all our communities and our people throughout Sacramento.

The traditional approach by our city, especially in recovering from the Great Recession, has been to ask: How do we get back to the number of positions that we had before. I am suggesting we begin now aggressively taking a better path by amending that approach. Instead of just trying to get back to where we were, let us strive to grow in a way that is actually sustainable over the long term for the people we serve.

I look forward to hearing from my colleagues and the public. Let the debate begin.