Eye on Sacramento’s Position on Mayor’s Effort to Double Measure U Sales Tax Hike


For Immediate Release

Date/Time: July 31, 2018, 6:00 a.m.
Contact: Craig Powell, President,
Eye on Sacramento
Phone: (916) 718-3030
E-mail: craig@eyeonsacramento.org
Website: www.eyeonsacramento.org


Eye on Sacramento’s Position on Mayor’s Effort to Double Measure U Sales Tax Hike


Below is a link to a letter that was sent today by Eye on Sacramento President Craig Powell to Sacramento Mayor Darrell Steinberg regarding EOS’s position on the Mayor’s effort to double the Measure U one-half percent “temporary” sales tax hike in the City of Sacramento.

Measure U will be on the agenda of two Sacramento council meetings today, July 31st, one at 2:00 p.m. and a second meeting at 5:00 p.m. Mr. Powell will be available for interviews both before and after the 2:00 p.m. council meeting.

Letter to Mayor Darrell Steinberg


Is Steinberg Being Reckless? … Mayor wants to double a ‘temporary’ sales-tax hike

By Craig Powell

If all you knew about the performance of Mayor Darrell Steinberg in office was what you read in the pages of The Sacramento Bee, two things would be apparent. First, you’d think Steinberg was that rarest of creatures: a politician incapable of making a misstep or a bad policy choice. Second, you’d be woefully ill-informed about the potential downside consequences of his policies—and some of the cynical political calculations behind them.

Since the June primary, the mayor has been a man on fire. His first salvo was to publicly press the City Council and city voters to support his campaign to double the “temporary” one-half-percent sales-tax hike known as Measure U, which was approved by voters six years ago as an emergency response to city service cuts in the Great Recession. He seems not to care that Measure U was sold to voters as a temporary tax designed to fill the coffers of a recession-battered city.

Neither the mayor nor The Bee bothers to point out that city revenues have fully recovered from the recession. City revenues have risen 16 percent over the past two years and were up 6 percent last year. The mayor and The Bee have also failed to mention that the city’s labor costs soared 8.5 percent last year on the heels of pricey new city union contracts and soaring pension costs. How pricey? Under the new police contract, officers with more than four years on the job were given 17 percent pay raises (not counting the impact such raises have on city pension costs), while average annual increases in the CPI were less than 1.3 percent over the past four years.

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Budget Checkup … City Hits List of 20 Most Financially Distressed U.S. Cities

By Craig Powell

After devoting my last two columns to Sacramento’s homeless crisis, I figure we’re due for a review of the city’s financial situation since Darrell Steinberg became mayor.

Among the more than 3,300 issue files that Eye on Sacramento (the civic watchdog group that I head) maintains on municipal issues is one that is often whimsical: our city rankings file. We track every time a study or publication ranks Sacramento against other cities on everything from its appeal to millennials to the quality of our coffeehouses. (There’s considerable crossover there.) But the latest ranking, published by JPMorgan Chase, is anything but whimsical. It’s disturbing.

Since JPMorgan Chase manages about $90 billion in municipal bonds, it’s pretty concerned about whether cities will be able to pay back their bond debt. So it created what one financial analyst calls a comprehensive guide of “which municipalities haven’t the slightest hope of surviving their multi-decade debt binge and lavish public pension awards”—i.e., Chicago, Pittsburgh, Atlanta, Cleveland.

view/download … Budget Checkup … City Hits List of 20 Most Financially Distressed U.S. Cities

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Billion-Dollar Budget … City spending to increase 25 percent over five years

By Craig Powell

First, there’s the headline number: The city is poised, for the first time in its history, to spend more than $1 billion in the fiscal year that begins on June 30. Total general-fund spending (which pays for police, fire, etc.) is set to hit $450 million next year, while “enterprise” spending (primarily, the utilities department) consumes $584.2 million.

The city expects to employ 4,552 people next year, a slight increase over the current year, but an increase of 720 positions from five years ago. The city expects to employ 130 fewer people than it did in 2008.

City officials are forecasting that the budget will sink into major deficit beginning in just two years, when a general-fund operating deficit of $11 million is expected to grow to $26 million by 2022. You would expect that a city manager, facing the prospect of such red ink, would propose a city budget for next year that calls for major cuts in spending to head off the coming fiscal ditch. But you would be wrong. Fiscal discipline is a very foreign, even suspect concept at City Hall these days. In fact, city manager Howard Chan’s recently released budget forecast anticipates sharp increases in general-fund spending on city operations over each of the next several years, rising from $412.9 million this year to $515.9 million in 2023, a 25 percent increase in operations spending over five years—a spending pace that’s more than twice the inflation anticipated during that period.

view/download … Billion-Dollar Budget … City spending to increase 25 percent over five years

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The Pot Tax … Helping kids at the expense of the general fund

By Craig Powell

Jay Schenirer means well, he really does. But programs launched with the best of intentions are no guarantee of sound policy or effectiveness, as Schenirer’s recent proposal confirms.

His basic idea is to dramatically increase city funding of programs for children and young adults by getting voters in June to approve a “new” 5 percent tax on marijuana cultivation, with the proceeds directed exclusively to youth services, bypassing the city’s general fund. Schenirer and his hardworking staff have spent the past year compiling research studies that show the benefits such programs can have on outcomes for kids.

Schenirer is certainly not new to youth issues: He’s spent most of his adult life working on them—in state service, on the city school board, as an education consultant and as the founder of youth-focused nonprofits since his 2010 election to the city council. (He’s raised more private funds for these nonprofits from corporations and foundations than any other councilmember with the exception of our city’s star private fundraiser, Mayor Kevin Johnson.) Schenirer is almost certainly the council’s foremost authority on youth issues, with Rick Jennings—the long-term CEO of the Center for Fathers and Families who served on the city school board alongside Schenirer—a close second.

Schenirer and his staff have prepared a thoughtful 22-page blueprint for how to create a new city department of youth services, an idea that city manager John Shirey threw cold water on by calling it a wasteful increase in city overhead. Shirey prefers to have the parks department, which administers the city’s current youth services programs, handle any expansion of such programs.

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Expansive Plans … The mayor’s budget message proposes wide-ranging ideas

Published on Wednesday, 01 April 2015

Expansive Plans

The mayor’s budget message proposes wide-ranging ideas

By Craig Powell

As I wrote last month, the mayor and city council have taken aggressive steps in the past few months to assert much greater front-end control over both the city budget and the city manager (hiring an independent budget analyst, forming a new council budget committee, public outreach on budget matters). But the process changes were just the beginning. On March 10, the mayor took the unprecedented step of releasing a “Mayor’s Message on Budget Priorities” that lays out what is likely the most expansive plan ever proposed for the role of city government in Sacramento. It proposes a cautious approach to city spending and debt management in the near future while proposing more than a dozen new and unprecedented programs and initiatives.

Notably, the mayor’s plan was not the product of deliberation and consensus by the council’s new budget and audit committee. Instead, it is the mayor’s own vision and was slated for initial council review late last month. If it ends up being approved by the council, it will represent marching orders to city manager John Shirey on how to draw up the city budget for the next fiscal year that begins July 1.

The central premise of Johnson’s plan is that the city must exercise spending caution in the short term as the city nears a fiscal cliff in 2019 (due to escalating pension contributions and expiration of the Measure U half-percent sales tax hike), but that the city must ultimately fix its fiscal problems by taking aggressive steps to grow the local economy, resulting in higher city tax revenues. His ideas for growing the local economic pie are bold: He proposes a slew of new investments, plans and programs that, if approved, would inject the city more assertively into local economic development than ever before.

view/download … Expansive Plans The mayor’s budget message proposes wide-ranging ideas

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Police and Pension Reform … Burden of new contributions erased by pay hikes

Published on Friday, 01 August 2014

Police and Pension Reform

Burden of new contributions erased by pay hikes

By Craig Powell

After three long years of informal and formal bargaining, mediation, more formal bargaining and, finally, a binding determination by an arbitrator, the city has a new labor contract with the Sacramento Police Officers Association. City police will finally join all other major city bargaining unions and be required to contribute the full employee’s share into the California Public Employees’ Retirement System (9 percent of their salaries)—and then some. In addition, city cops will be required to pony up another 3 percent of their salary to pension contributions—replacing a portion of the city’s existing contribution to cop pensions—for a total contribution by cops of 12 percent of their salary. In contrast, members of the next highest contributing city union, the firefighters, contribute 9.2 percent of their salaries to pensions.

To ease the pain of such a major reduction in take-home pay, the arbitrator awarded the police salary hikes, starting next year, of 3 percent in each of the next 3 years, totaling 9.3 percent once fully implemented. (Sergeants will get 7 percent raises.) The new contract’s near-term impact on the city’s general fund budget: a savings of $1.25 million in the current fiscal year and $2.24 million in 2014-2015, shifting to a net cost of $300,000 in 2016-2017 and $1.59 million in 2017-2018.

The arbitrator’s decision caps off a three-year effort by city manager John Shirey to require all city employees to contribute 100 percent of the employee’s share of their pensions. Until Shirey’s initiative, most nonpublic-safety city employees paid between 3 and 4 percent of their salaries to their pensions, while police, firefighters and city managers paid zip toward pensions. Shirey kicked off his campaign to require full contributions by setting a good personal example: He insisted that his own employment agreement require him to make a full 7 percent pension contribution. (Of course, that’s a little easier when you are making $258,000 per year.) Next, he required all nonrepresented city employees, including all city managers, to pony up. Then, as each city union contract expired, he insisted that each contract require workers to make full contributions.

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Balanced in Name Only … Small budget surplus is no cause to break out the champagne

Published on Sunday, 01 June 2014

Balanced in Name Only

Small budget surplus is no cause to break out the champagne

By Craig Powell

There is only a tiny handful of policy wonks who actually look forward to the release each year of the city manager’s proposed city budget for the fiscal year that starts on July 1. I’m one of them. City budget manager Leyne Milstein drove that point home in my interview of her last month, joking that I was one of only three people who have actually read the document that only a wonk could endure, much less enjoy.

But endure it I did and, knowing that most of you don’t spend your nights curled up with the city budget, I’m offering you the CliffsNotes version of it this month.

The good news is that after five years of battling chronic budget deficits, city manager John Shirey is proposing a $383 million general-fund budget that actually ekes out a small $2 million budget surplus. (The total city budget, which includes fee-collecting “enterprise funds” like city utilities, the convention center and marina, is actually $872 million, but most attention is paid to the city’s general-fund budget, which funds basic city services such as police, fire, parks, etc.) That means no cuts next year in services or city employees.

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Uncertain Future … Before upgrading the community center theater, homework’s Needed

Published on Saturday, 03 May 2014 20:05

Uncertain Future

Before upgrading the community center theater, homework’s Needed

by Craig Powell

One thing my experience with city government in Sacramento has taught me is that city policy is too often driven by an often unhealthy deference to conventional wisdom. The great pitfall of herd mentality governance is that key assumptions go both unquestioned and unexamined. A proposal to renovate the Sacramento Community Center Theater at a cost of as much as $53 million is chockablock with unexamined questions.

For example, why is the city council poised to spend tens of millions of dollars renovating a civic asset like the theater when it has received no briefings on the asset’s current financial performance? Is the theater a moneymaker or a money loser? If it’s losing money, how bad are the losses? Since the council hasn’t been briefed on its performance, it hasn’t a clue.

Eye on Sacramento (the watchdog group that I head) issued a report in September on the combined financial performance of the three city assets that make up the “convention center fund” assets: the Convention Center, Memorial Auditorium and the theater. EOS reported that the three assets have been losing a whopping $12 million annually for years, but EOS did not break out the operating losses of the theater. City staff should.

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Discretionary spending for councilmembers raises questions

“Inside City Hall” Column of Inside the City Magazine – July 2013

Back to the Future – Discretionary spending for councilmembers raises questions

By Craig Powell

What was so disappointing about this year’s city budget deliberations was the complete absence of bold thinking, creative solutions or different (hopefully smarter) ways of doing business. It was as if the city’s big push to nail down an arena subsidy deal in March had exhausted its capacity to adopt new solutions to serious city problems. Instead, the city council went “small,” cravenly snatching $391,500 of the city’s general fund to almost double funding for each councilmember’s individual discretionary spending account, increasing funding from $55,000 to $98,500 each—a cash grab made much easier by the $27 million annual sales tax hike voters approved in November (Measure U). Is this what Sacramento voters voted for?

Eye on Sacramento calls them “slush funds,” while Jon Coupal of the Howard Jarvis Taxpayers Association labels them “incumbent protection accounts.” Why? Because councilmembers have a long history of handing out such dollars to influential community groups, burnishing their reputations as politicians (or Santas) who “care” and who can “deliver the goods,” even if the goods in this case come out of the pockets of hardworking (or not working at all) city taxpayers. With two and perhaps three councilmembers preparing primary runs for state assembly next year, these funds give them an opportunity to buy a little goodwill and build positive name ID.

At a council meeting on the city budget last month, North Natomas councilwoman Angelique Ashby fairly bristled at the suggestion that such accounts are slush funds, citing her own use of such funds to buy uniforms for Little Leaguers. “These kids can’t vote,” she exclaimed. But their parents probably do.

The same night, a group of parents from Del Paso Heights flat-out begged the council to fund a Ceasefire anti-gang program in their part of town, similar to one operated by the city in the high-crime neighborhoods of southeast Sacramento. The anti-gang program has had significant success in a number of U.S. cities. While the results in south Sacramento have been mixed, parents and neighborhoods are desperate for the help (and hope) that Ceasefire offers.

So, on the same night the council decided to supercharge their own discretionary funds (on a 6-3 vote, with Kevin McCarty, Jay Schenirer and Allen Warren dissenting), the council rejected the bid for $499,000 of funding for a Ceasefire program in Del Paso Heights. Ashby, the co-architect with Bonnie Pannell of the plan to increase funding for council accounts, told the worried parents to hit up each of the nine councilmembers for money from their accounts to cobble together the money needed for a Ceasefire program. The Del Paso Heights parents were not mollified.

Sacramento Bee reporter Ryan Lillis did a sampling of nearby cities and counties and found that the discretionary funds controlled by Sacramento councilmembers were completely out of whack with the amounts handed over to other elected officials in the region—a major disparity that existed even before our councilmembers chose to raise their individual funding. “Sacramento County, with a general fund budget five times greater than the city’s, sets aside a total of $100,000 for its five supervisors to split,” Lillis found.

City manager John Shirey is projecting that general fund deficits will rise steadily from $12 million next year to $15 million three years hence. But the real fiscal cliff comes in 2019, when the city’s PERS pension bill is expected to increase by $17 million and the Measure U sales tax hike expires, blowing a further $27 million hole in the general fund (not counting any general fund taps that might be required to cover the city’s estimated $250 million of arena bond debt, which the city hopes to pay off with city parking revenue and hotel tax).

Eye on Sacramento, a big critic of the discretionary accounts, issued a statement acknowledging “that many councilmembers have used such funds responsibly and in a manner that provides tangible benefits to the community. But in too many cases they have not. The problem with unaccountable spending by councilmembers is that the ‘bad’ spending by some members undermines public trust in the council as a whole.”

It was not always thus. Twenty years ago, before council discretionary accounts were created, the city council used to parcel out small grants to nonprofit groups through an application process, with councilmembers supporting various grant applications, staff reviewing the proposals and the council as whole, in full view of the public and the media, approving the funding. Eventually, grant recipients were asked to sign contracts and city staff monitored payouts to assure that funds were being used as promised. When the monitoring program began, several grant applicants dropped out of the program, a sign that some nonprofits didn’t wanted to be hassled with city oversight.

Under the rein of former city manager Bill Edgar (during his first stint as city manager from 1993 to 1999, not his more recent interim gig), the city’s grant program was abandoned and councilmembers gave themselves direct control over pools of cash.

There is one question, however, that no one seems to be asking: Are discretionary spending accounts for councilmembers legal? Under the Sacramento city charter, the city council is given exclusive power to spend city funds. Is the city council’s assignment of spending power to individual councilmembers an illegal delegation of the council’s spending power under the city charter? Perhaps. It’s an interesting legal question that may receive increasing scrutiny, particularly in a town of almost 20,000 lawyers, many of whom are underemployed. (Woe unto us all.)

Meanwhile, the council approved a more expensive spending plan for Measure U tax receipts over the budget objections of the city manager. Councilmembers were (understandably) frustrated by the relatively paltry number of new cops that Shirey’s plan for spending Measure U money would buy and approved additional cop hiring that would spend more than projected future Measure U revenues, setting up the city to overspend future Measure U revenues (“deficit by design”).

Why did the city manager lowball the hiring of new cops in his proposed budget, given the $27 million flood of fresh tax revenue under Measure U? He did it to maintain pressure on the Sacramento Police Officers Association to agree to a new labor contract that would require its members to contribute the full “employee’s share” of their own PERS pensions, amounting to 9 percent of salary. Unlike other city employees, city cops currently pay nothing toward their pensions. The city pays both the 30 percent employer’s share and the 9 percent employee’s share of pension costs. If the city is successful in securing the 9 percent pension contribution from cops, it would hire an additional 56 sworn officers under Shirey’s budget plan.

But the negotiations with the SPOA are not going so well. A one-day session with an impartial mediator in mid-June did not lead to a deal, leaving the city council with what was thought to be two options: Stick with the city manager’s plan to keep the pressure on the SPOA by going slow on the hiring of new cops or force the city’s contract dispute with the SPOA into “winner-take-all” binding arbitration. The council majority, knowing that negotiations with the SPOA were going nowhere fast, opted for a third choice: Hire additional cops now even if the action puts the city on a glide path to future deficits in Measure U spending. Did the council’s move undercut the city manager’s negotiation posture with the SPOA by taking pressure off city cops to contribute toward their own pension costs? Almost certainly.

So city costs will be higher, the city now faces a projected Measure U spending deficit, city cops still don’t contribute a dime toward their own pensions and city leaders once again flinched before forcing the politically juiced SPOA into binding arbitration while knee-capping the city manager’s negotiating posture with Sacramento’s most powerful union. The council also broke two of its earlier Measure U promises: not to use Measure U money to fill structural deficits (half of this year’s $8.9 million deficit was filled with Measure U funds) and to set aside some Measure U funds in a reserve to lessen the impact of Measure U’s expiration in six years. (Zero was set aside.) The good news is that the city will have an increased number of cops on the beat next year, but at a much heavier than necessary cost to taxpayers.

While city councilmembers focused on overspending Measure U money and enlarging their discretionary accounts, they missed the chance to adopt solutions to problems that just aren’t going away, such as:

  • The city’s $440 million unfunded liability for retiree heath costs, which is increasing at a pace of $30 million annually (an annual expense that is not considered part of the general fund deficit under the city’s obsolete cash basis of accounting).
  • Controlling the city’s rapidly rising costs of providing health care for current city employees. (Several U.S. cities are considering shifting health coverage for its employees to Obamacare’s public exchange option to reduce costs.)
  • Inefficiencies in the operation of the city’s tradition-bound fire department, including high overtime costs, excessive staffing of fire vehicles and a failure to fully adapt to its new dominant role: handling city ambulance calls. (The city, in its entire history, has never hired a fire chief from outside of its own fire department.)
  • Assessing opportunities to improve services and lower costs by outsourcing basic park maintenance (following up on last year’s move to outsource all city golf course maintenance) or allowing private trash firms to compete for residential garbage service, a move proposed by the Fresno city council with the hope of lowering garbage rates while increasing city franchise revenues, but recently killed by a close referendum vote backed by city unions.

Then there is the issue of the ongoing building moratorium in flood-prone Natomas that is strangling growth and job creation in the area. The downtown railyards project is pretty much stalled, as is the endlessly delayed Docks project to develop Sacramento’s waterfront. Meanwhile, West Sacramento races ahead to develop its Sacramento River waterfront.

There are also rumbles that the city’s planned upgrade of our water and sewer infrastructure, to be financed with the issuance of $2 billion of city revenue bonds over the next 15 years, is starting to cost more than originally projected. Will the city stick with its original financing plan, borrow even more or shift sooner than expected to a lower cost, pay-as-you-go financing plan?

These are big questions involving big, important issues. With all of these big issues facing us, what are the priorities of our city government? Current city staffing offers us a clue. Since becoming city manager almost two years ago, Shirey has cut the number of assistant city managers who directly report to him from four to just one, John Dangberg. Dangberg has but one job assignment: overseeing the building of a new downtown arena.

Craig Powell is a local attorney, businessman, community activist and president of Eye on Sacramento, a civic watchdog and policy group. Powell also chaired the campaign opposing Measure U. He can be reached at craig@eyeonsacramento.org or 718-3030. To read EOS’s report on the arena proposal, go to eyeonsacramento.org.


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