Budget and Audit Committee Special Meeting – January 26, 2021

The Sacramento City Council's Budget and Audit Committee held a special teleconference meeting on Tuesday, January 26, 2021, from 3:01 p.m. to 5:01 p.m. The committee reviewed and acted on the consent calendar, selected the 2021 Vice Chair, accepted the FY2019/20 Comprehensive Annual Financial Report (CAFR), and held lengthy discussion on the FY2020/21 Midyear Review and the Measure U Community Advisory Committee's recommendations. Several public comments were heard, and the committee forwarded competing proposals—the city manager's original midyear budget and an alternative from Mayor Steinberg—to the full City Council for final action.

Consent Calendar

• Item 1: Approved the 2021 Regular Meeting Schedule for the Budget and Audit Committee.
• Item 2: Forwarded to City Council an amendment to the Master Fees and Charges Schedule to authorize an administrative fee for SB 35 Ministerial Housing Notice of Intent applications.
• Item 3: Received and filed the FY2019/20 Independent Accountants’ Report on the Appropriation Limit Calculation.
• Item 4: Forwarded to City Council the FY2019/20 Transportation Development Act Fund Audited Financial Statements and Compliance Report.

All consent items were approved unanimously by a single motion (Guerra/Jennings; 4-0).

Public Comments & Testimony

• On Item 7 (FY2020/21 Midyear Review): Eight callers spoke in support of the proposed midyear budget adjustments, particularly the staffing and budget increases for the Sacramento Police Department. Speakers included:
  • Michael Ault (Downtown Partnership): Supported the budget, noting the need for cleaning services and public safety investments.
  • Terry Harbergell (resident, business owner): Supported adjustments, especially police staffing for safety and accountability.
  • Shelley Morandell (general manager, hotel association): Expressed support for police department adjustments to address quality-of-life issues.
  • Jameson Parker (Midtown Association): Supported police staffing to improve transparency, diversity, and accountability.
  • David Shipman (Citizen Hotel general manager): Supported police budget adjustments for recovery.
  • Kevin Patt (restaurant group CEO): Supported police staffing for safety of employees and families.
  • Murray (resident, developer, board member): Echoed support for the midyear budget.
  • Mike Testa (Visit Sacramento CEO): Supported police department adjustments to aid tourism recovery.

All callers emphasized the need for public safety, cleanliness, and accountability as the city recovers from the pandemic.

• On Item 8 (Measure U Recommendations): No public callers; the committee heard a presentation from the Measure U Community Advisory Committee chair, Dr. Flojon Copher.

Discussion Items

• Item 5 – Selection of 2021 Vice Chair: Mayor Steinberg nominated Councilmember Eric Guerra to continue as Vice Chair. Councilmember Jennings seconded, and the motion passed unanimously (4-0).

• Item 6 – FY2019/20 CAFR: Osvaldo Lopez, Finance Manager, presented the CAFR, reporting a clean audit opinion and highlighting a $5.2 million surplus in general fund tax revenue, $8.1 million in departmental savings, and an available fund balance of approximately $50 million for the general fund and $18.7 million for the major youth fund. The Economic Uncertainty Reserve stood at $55.2 million (9.5% of general fund, below the 10% target). The committee accepted the CAFR and forwarded it to the City Council (motion passed 4-0).

• Item 7 – FY2020/21 Midyear Review: Dawn Holm, Finance Director, presented the midyear review. Key points:

  • General Fund and Measure U revenues estimated at $589 million, with sales tax and cannabis revenues performing better than expected, but department revenues (parking, community development, youth programming) significantly below pre-pandemic estimates.
  • The report recommends $30.2 million in investments for council priorities (homelessness, climate action, youth, community response, etc.) and $10.6 million for departmental needs (fire, police, parks, etc.).
  • Proposed $6.8 million to the Economic Uncertainty Reserve (bringing it to 9.8%) and $5.5 million set aside for a projected FY2022 shortfall.
  • Mayor Steinberg offered an alternative expenditure plan using one-time money: $40 million to a housing trust fund, $6 million for youth programming, $1 million for a participatory budgeting pilot, and $500,000 for climate action (total $47.5 million). He argued that the 10 new police positions requested by the city manager could not be filled quickly (earliest after the next academy, starting July 2021) and that the decision should be made during the regular budget process.
  • Committee members debated the proposals. Councilmember Guerra supported the mayor's plan and suggested adding air quality initiatives. Councilmember Jennings wanted more time to discuss the police positions with the chief. Councilmember Vang opposed adding police positions, citing community desires for investment in youth, libraries, and housing.
  • The committee ultimately voted to forward both the city manager's original midyear budget recommendation and the mayor's alternative to the full City Council for further deliberation (motion passed 4-0).

• Item 8 – Measure U Community Advisory Committee Recommendations: Dr. Flojon Copher presented the committee's recommendations, which called for reallocating Measure U funds to align with the 2018 campaign promise: reducing police and fire funding, increasing economic development to $37.1 million (including $15 million for participatory budgeting), and directing $12 million to affordable housing and $8 million to homelessness. The committee recommended zeroing out police funding from Measure U, noting that the department had received $40 million more than promised over 18 months. The committee argued that the current allocation fails to meet community needs expressed during the pandemic and racial justice protests.

  Mayor Steinberg acknowledged the committee's work but noted that Measure U revenue is part of the general fund, and that the city has made other investments. He committed to continued dialogue and joint meetings. Councilmembers thanked Dr. Copher and expressed support for participatory budgeting. The committee received and filed the report.

Key Outcomes

• Consent Calendar: Approved unanimously (4-0).
• Vice Chair Selection: Councilmember Eric Guerra selected as 2021 Vice Chair (4-0).
• CAFR: Accepted and forwarded to City Council (4-0).
• FY2020/21 Midyear Review: The committee voted to forward both the city manager's proposed budget (including 10 new police positions) and the mayor's alternative (housing trust fund, youth investment, participatory budgeting, climate action) to the full City Council without a recommendation. The council will debate and decide on the final midyear adjustments at a future meeting.
• Measure U Recommendations: Received and filed; no formal action taken. The committee agreed to schedule joint meetings with the Measure U Community Advisory Committee to improve alignment and transparency.

Next Steps: The full City Council will consider the midyear budget proposals on February 2, 2021. The committee's discussion highlighted the tension between investing in public safety staffing and redirecting funds toward housing, youth, and economic development.