The Measure U increase will kick in April 1, raising the city sales tax from its current 8.25 percent. Once in effect, it will add an additional 50 cents over the current rate on every $100 of taxable spending. The increased money could fund core services including fire and police, fund affordable housing, or go to youth and neighborhood equity projects.
The 8.75 rate ties Sacramento with the tiny city of Isleton for highest sales tax in the region, topping San Francisco’s 8.5 percent rate.
Since 2012, the city has mostly used the revenue from the original half-cent to fund police, fire and parks. City officials plan to continue to use some Measure U money for those services. Currently, the revenue pays for 195 police positions, 137 personnel in the Youth, Parks and Community Enrichment Department and 90 positions in the fire department.
Critics of Measure U, including watchdog group Eye on Sacramento, have warned growing costs for city employee pensions could eat up additional revenue from the increased rate, leaving little for other promised uses. City pension liabilities are expected to increase by $60 million a year and are projected to hit $129 million by 2022-23.
Critics have also argued the sales tax is regressive because it has a higher impact on low-income residents who lack the disposable income to absorb it. Steinberg defended the hike by saying many of the services funded by the increased sales tax would help lower-income families.
Despite the ambiguity about where funds will be spent, Steinberg has been vocal on where he would like to see the extra dollars go. His list includes projects he has said could diversify the city’s economy, create jobs and expand its tax base. Steinberg has said the money could also be used for affordable housing, homeless services, riverfront revitalization and grants to fund arts and culture.
Crisand Giles — a Measure U supporter and member of the North State Building Industry Association — said if Measure U passes, more affordable housing could be built in Sacramento.
In the aftermath of the police shooting of Stephon Clark in Meadowview in March, Steinberg and other city leaders have also promised some Measure U money would be used for neighborhood equity projects. The city has promised to create a community advisory commission and an investment advisory committee to help direct the funds.
“Measure U is a once-in-a-generation opportunity to invest real resources in building a modern economy in Sacramento that includes everyone,” Steinberg said.
Steinberg said before Tuesday’s election that city officials made a calculated decision not to tie the expected Measure U revenue to specific programs because doing so would have required it to win by a two-thirds majority. A general tax requires only a majority of votes for passage. The original Measure U in 2012 passed with 64 percent of the vote.
Even with Measure U’s passage, the city’s budget is still projected to be in the red. The city deficit is estimated to be $7.6 million in fiscal year 2019-2020 and $28 million in 2022-23, according to the city budget. If Measure U had failed, the city’s deficit was projected to grow to $47.3 million in fiscal year 2019-2020, and to $80 million in 2022-23.