SACRAMENTO — The Sacramento City Council budget process is made a bit easier after voters passed Measure U, which is essentially a half-cent increase in the city sales tax that is generating an extra $52 million for the city.
Now, there are concerns by some council members regarding a plan by Mayor Darrell Steinberg that uses some of the money to finance long-term bonds to make a bigger splash for community projects, like affordable housing.
The mayor’s original plan called for a $400 million fund that would have cost $25 million per year to finance. He has since amended his plan to sell bonds in $40 million chunks, incurring $5 million annual interest payments, and only with the approval of the city council.
“We need capital, genuine capital, for housing,” Steinberg said.
Steinberg said the bond plan is part of a bigger vision that would provide services and economic growth for some of the city’s poorer neighborhoods.
But Councilman Jeff Harris worries an economic downturn would put the squeeze on the city budget if it has too high a debt load. Harris said the city’s pension obligation for city employees will go to a whopping $131 million a year just seven years down the road.
“We have to pay that … that’s no joke,” Harris said.
He prefers a pay as you go approach and said there is plenty of Measure U money to enhance city programs without using bonds.
The city council must approve the bond plan and there could be tweaks in the mayor’s proposal as city budget talks continue.