Assemblyman Darrell Steinberg is a Democrat from Sacramento and chairman of the Assembly Appropriations Committee. Since arriving in the Legislature in 1999, Steinberg has carried multiple bills that attempt to boost affordable housing production in the Sacramento region. He also has carried legislation seeking to reduce local governments’ reliance on sales tax revenue and to increase the percentage of property tax flowing to cities and counties. Thus far, Steinberg has had little success getting those bills passed.

Prior to winning election to the statehouse, Steinberg was a Sacramento city councilman for six years. A graduate of UCLA and University of California, Davis, Law School, Steinberg previously was a labor lawyer, arbitrator and mediator. CP&DR Editor Paul Shigley interviewed Steinberg in October at his Capitol office.

CP&DR It’s evident from the legislation that you have carried that you consider affordable housing to be a priority. Why is that?

Steinberg Because it is one of the largest quality of life challenges that we have in this state. Our demand is exceeding our supply. Affordable housing done right is also crucial to ensuring that we live and act as regions as opposed to separate, individual jurisdictions. In fact, some cities within a region are accomplishing a high percentage of affordable housing, and some cities are not. I think it has serious implications for the future of a region. … You talk about sprawl and you talk about working people having to move farther and farther away from where they work. We need to have a statewide policy that ensures that every jurisdiction is producing its share of affordable housing, and I know that the impact would be not only to create more housing but also to reduce sprawl and encourage genuine regional cooperation.

My best example is to look at some of these suburban cities and the big box malls they are building. Well, those places depend on real people making $7, $8, $9, $10, $12 an hour. The folks who work there need a place to live. And if they can’t afford to live in the community where they are working, that just exacerbates all our other problems.

Just from an equity point of view, affordable housing is very important to me.

CP&DR So how do you get there?

Steinberg We have put forward a new notion because the law as it has existed for many years has essentially required cities and counties to file the requisite paperwork with the Housing and Community Development department. The housing element. And it’s enforced really only through litigation which can take years.

What we’re suggesting is that we shift the onus from the paper chase to actual production. That’s what AB 1426 is about. It’s a so-called pilot, although that doesn’t do it justice in terms of the magnitude of the policy. It says in the six-county region here that every city and county is required to build 10% of its new housing starts for low- and very low-income households. The bill does not mandate how cities and counties can accomplish that. In other words, it doesn’t mandate inclusionary zoning, it doesn’t prohibit inclusionary zoning. It doesn’t encourage the set aside of land, it doesn’t discourage the set aside of land.

We spent a year doing pretty extensive studies that show that this region is the beneficiary of tens of millions of federal, state and local dollars that can be used to subsidize affordable housing. We know that most of these projects require subsidies. If the money is leveraged and put together for the region, as opposed to distributed in the disparate ways that it is distributed now, we can easily help cities and counties who fear they won’t be able to meet this production standard.

Yet it’s a struggle because the development community is nervous that they are going to get left holding the bag. Cities and counties don’t like the state telling them what to do. Many of them believe they are already doing enough.

CP&DR You were really close to getting AB 1426 through the Senate. What happened?

Steinberg The builders got nervous. We spent six or eight weeks after the bill left the Senate Appropriations Committee really working hard on the financing, and basically around this notion of leveraging the tens of millions of dollars coming into this region. We had a disagreement at the end … and they were able to convince the chair of the Senate housing committee and Sen. Burton to slow it down a little bit. I didn’t like it, but, on the other hand, I got over it quickly. We’re still alive and moving on.

CP&DR How do you get past the cities’ concerns?

Steinberg You don’t get past some of the cities. The fact of the matter is, though, that we got a number of cities and counties in support, and very interested and engaged in the policy. There are some cities that you’ll never please because it’s ideological.

CP&DR You’ve also carried legislation to alter the state-local finance system.

Steinberg Yes, Two bills. AB 680 [from the 2001-02 session] and AB 1221.

CP&DR How does state-local finance fit into the equation?

Steinberg It is very much related. When I look at what is broken about our state-local fiscal relationship, the first thing that comes to mind is that at the local level there is a serious mismatch between resources and responsibilities. The jurisdictions that take on the primary responsibility of producing affordable housing, of addressing social service needs, of addressing needs of those [people] trying to find their way up have fewer resources to deal with those sorts of responsibilities.

What’s broken about the system is exemplified in the way sales tax is distributed — it’s situs based. It provides an incentive for jurisdictions to battle with one another to locate the next big development and it encourages sprawl because these projects tend to just move up the freeway corridors where there’s additional vacant land, often to the detriment of the urban core. A much more rational way to run the system is to reduce city and county dependence on sales tax and at the same time give them more property tax, which is what they’ve been begging for for a decade or more since the ERAF shift [to schools]. That has the added benefit of giving cities and counties a greater incentive to build housing because one of the great impediments — I can tell you from experience as a former member of the Sacramento City Council — is that housing doesn’t pay for itself. Cities don’t get enough return on the property tax in order to make housing development worthwhile. So giving cities and counties more property tax and transferring equal dollar value of sales tax to the state so that they are left whole at a base year and they grow forward on a property tax basis is just plain good policy. That’s AB 1221.

680 was an even more ambitious effort last session. That was to divide the growth in sales tax among cities and counties. It aroused quite a bit of debate.

CP&DR Doesn’t that make a new set of winners and losers?

Steinberg I don’t view it that way because we are only dealing with growth. That argument would have merit if we proposed taking the base of the sales tax and redistributing it because then those who benefited from the current system, played by the rules so to speak, would arguably get hurt because they’d have to give away some of their money. But we were talking about growth. We were saying you leave the cities whole for what they’ve earned under the current system, but when it comes to future development — and we were willing to negotiate all those terms, base years and how you take into account infrastructure built already for future development — there are no winners and losers. It’s just a change in the system in a way that benefits the entire region. It gives the incentives for cities and counties a reason to be more balanced.

CP&DR Do you think the state needs a land use policy?

Steinberg No. I don’t think the state ought to be in the business of dictating land use. I do think that is appropriately a local decision. But I do think that we have an obligation to look at the underlying financial incentives as a way to help local decision-makers not be forced into making land use decisions based solely on the need to fund police and fire departments, which is happening.

CP&DR Do you have any feel for how the new administration will approach land use?

Steinberg I don’t. My hope — and I’m going into this very hopeful and with a hand extended to the new administration — is that they recognize that the key to this governor’s success is going to be his willingness to really tackle structural reform. I think people don’t understand what that means necessarily because it has a number of different definitions. But he got elected to shake up the system, and I hope he does in substance as well as in message.

Here are some opportunities because how we grow determines in many respects quality of life. I don’t care what community meeting I go to as a city councilmember or as an Assemblymember, people still want to talk to me about traffic. They want to talk about speeders through their neighborhood. These are issues that affect people’s day-to-day lives. The problem is that they are a little wonky in terms of trying to create a lot of public excitement. You talk to people about distribution of sales tax and they kind of glaze over. People “get” affordable housing. Many people fear it because there is this unfair stereotype.

But these are the things we need to break through. And certainly we could use leadership from the governor to say there are a lot of things in the state-local fiscal relationship that are broken and that affect not only … the state budget but have a direct impact on the quality of life in our communities.

One more thing. You wrote about this “triple flip.” [See CP&DR, September 2003.] Can I tell you what didn’t get reported here? What a terribly wasted opportunity this whole thing was.

CP&DR To do some of what you’re talking about?

Steinberg Exactly. The whole reason for it was to get an increase in state sales tax so that you have a dedicated revenue source to pay off the bonds. To do that and make it revenue neutral, they had to lower the local sales tax and backfill it with property tax, which is exactly what I’m talking about. However, to protect the cities who were concerned that this was going to hurt them, they said cities and counties, despite the fact that they have a new property tax base, their growth is going to be based on the growth of sales tax. Totally missed opportunity.

CP&DR So that was your chance.

Steinberg That was a chance. I tried, big time. But I didn’t quite make it. Nobody quite got it in the end. Then there were concerns from some of the budget people, especially in the Senate, that this could have a negative fiscal impact on the state because what I proposed as a compromise was to give cities and counties a choice over this five-year period that the bond was being paid back. You either choose property tax or you choose sales tax growth. And their fear was they [cities and counties] would pick the higher, although you don’t know what the higher will be going in, and the state would lose money down the line. We’re either willing to dive in or we’re not.

The triple-flip … was a contrivance to ensure repayment of the bond debt, which was OK. But at the same time we could have accomplished something different, something more.