Sacramento labor, housing groups push back on multimillion-dollar Railyards deal

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Sacramento labor and housing advocates pushed back this week on a financing package to develop infrastructure in the Railyards, arguing that the city hasn't bargained hard enough for affordable housing or union agreements - and that the deal comes as the council is expected to finalize budget cuts and fee increases.

Sacramento officials have pushed for decades to clean and develop the Railyards - a large swath of land north of downtown that has remained mostly vacant since railroad operators pulled out in the 1990s. The area is often described as one of the country's largest urban infill projects, and economic development leaders see it as a means of doubling the size of Sacramento's downtown.

But union leaders and housing advocates argued, Wednesday, that the city should push developers to commit to more affordable housing before expanding a special financing district for the project.

"We all love Sacramento Republic," Aamir Deen, president of UNITE HERE Local 49, said during a news conference Wednesday morning at Cesar Chavez Plaza. "We all want to see the Railyards developed. We all love Sacramento. But this city is in a crisis right now. My members and the residents are experiencing that crisis. And this development plan will make it worse."

The city of Sacramento is not on track with its goals for developing housing in general and affordable housing specifically. In 2024, 407 new housing units were built for extremely low or very low-income tenants, compared to the city's goal of 1,308 units.

Proponents of the project, meanwhile, argued that the area won't be developed without the special district. Delays, they said, could cost Sacramento a long-awaited opportunity to see the land filled with housing and entertainment.

"I can't think of another project that has been discussed for longer," said Councilmember Phil Pluckebaum. "We've been working on this forever, and it's time to get it across the finish line."

Representatives from UNITE HERE Local 49, the Sacramento Central Labor Council and Sacramento Investment Without Displacement cast the deal as a giveaway to developers, and a financial burden for the city.

They said the project should include more affordable housing. Of the first 6,000 housing units built in the Railyards, 500 will be affordable, or about 8%, Denton Kelley, the president and CEO of Downtown Railyard Venture, said in an email.

Fabrizio Sasso, executive director of the Sacramento Central Labor Council AFL-CIO, said he believed the rate should be closer to 20%.

Deen said he would like to see neutrality agreements for the planned soccer stadium and any hotels that might be built in the district, wherein the employer agrees to voluntarily recognize a union if the majority of workers sign union cards, rather than requiring organizers to hold an election overseen by the National Labor Relations Board.

But Deen said his main concern was affordable housing for people like his union members, who work in casinos, hotels, food service and airports.

"There is this argument that if you just build housing, if you just add to the supply, it will solve the problem," Deen said in an interview. "But market-rate housing is just not achievable by working class people. Certainly not achievable by our members."

Other concerns stem from the costs of the project, particularly with the city's growing budget deficit that could reach close to $100 million in the coming years.

Sacramento is not expected to profit on the project until 2035, said Jamie Gomes, the managing principal with Economic & Planning Systems, Inc. at an April 18 meeting of the Railyards Public Financing Authority. The consulting firm is contracted with the city to prepare the infrastructure financing plan.

Over the next 10 years, Gomes said, the city's revenues on the Railyards' special taxing district will not match expenditures. As of 2030, the annual deficit of the project is projected to be roughly $920,000.

By 2034, revenues and expenditures are expected to be the same. In 2040, the surplus is expected to be $1.4 million. Those are projected to increase to about $6 million by 2075.

"A 10-year period of deficits is outweighed and surpassed by 40-plus years of surpluses," Gomes said.

Councilmember Karina Talamantes noted Sacramento's structural budget shortfall at the April 18 meeting, saying the city must explain this investment to its taxpayers.

"It's important to, like, say, ‘Hey, we're making cuts, and then also we're making investments," Talamantes said. "And how do you connect the two pieces together?"

Talamantes did not respond to a request for comment Wednesday, though she and Councilmember Rick Jennings expressed support for the project at the meeting.

"The only thing I'm disappointed in is you potentially will move me out of my district to a new location right where I can have a hospital right down the street from me, all the shopping that I want to go to, and then I can go to all the games that I want to go to, or entertainment that I want, and it's all in walking distance," said Jennings, who also did not respond for a request for comment.

Proponents of the project argued that long-awaited development in the Railyards won't move forward without the special district.

Developers will only build in the Railyards if they can recoup certain costs, said Barry Broome, president and CEO of Greater Sacramento Economic Council. The increased property taxes that will repay the developers, he said, wouldn't exist without the development itself.

"It will be empty another 33 years without this," Broome said. "No one's building in the Railyards without this tool."

Broome called the tribe and the team's investment in the site "borderline philanthropy." And while more affordable housing would be great, he added, it simply "isn't penciling in California."

Sacramento Republic FC President and General Manager Todd Dunivant said the city's obligations toward the construction of roads, sidewalks, parks and other infrastructure are crucial for the project.

"For 12 years, we've pursued a downtown stadium that will jumpstart development in The Railyards - 244 acres that have sat vacant for decades," Dunivant said in a statement. "We now have all the pieces in place to make this dream a reality."

Dunivant added that the team is open to dialogue with unions.

Kelley, of Downtown Railyard Venture, said the financing plan allows for the public infrastructure needed to support housing, jobs, transit and amenities in the district.

"The impact will reach far beyond the site itself, driving long-term economic growth and regional prosperity for Sacramento," Kelley said in a statement.

Representatives for Wilton Rancheria had not responded to requests for comment, as of publication.

Pluckebaum, the councilmember, said the panel is expected to vote on the agreement Tuesday. At the same meeting, the City Council is expected to finalize its $1.65 billion budget for the upcoming fiscal year, which will include fee increases and reduced funding in some departments.

Twelve layoffs were proposed in the first version of the proposed budget released in April.

The council has spent months deliberating the budget and, most recently, decided to restore funding for a residential parking program, youth events and immigrant legal aid. The city's budget deficit is expected to increase in the coming years and reach $92 million by 2029.

Pluckebaum said Wednesday that he didn't have any qualms about the financing agreement. Delaying the vote and pushing for more community benefits, he said, would add time and cost to the project.

"We can always advocate for a better project, a mix of housing types, or affordability, cost levels. But if we keep pushing back on projects, and not building, waiting, we'll never get anything out of the ground," he said. "You've got to move forward with whatever is good enough."

Pluckebaum cautioned against comparisons between the Railyards financing agreement and that of Aggie Square, UC Davis' research center at Second Avenue and Stockton Boulevard. The groups involved with the Aggie Square project reached an agreement, following a lawsuit by activists, for the city and developers to invest at least $50 million to build affordable housing nearby, and raise another $5 million for efforts to prevent nearby residents from being displaced by gentrification.

"When you're negotiating against a public partner like a hospital, it's a very different kind of conversation than negotiating against a private partner," he said. "The opportunities and leverage that each party has in that negotiation is different. In this instance, we are at a crossroads with the Railyards, that if we don't pursue this project as negotiated by the mayor last year, we will lose the project. That wasn't necessarily the case with Aggie Square."

Councilmember Mai Vang said, Wednesday, that she was reviewing the term sheet and meeting with community members, labor groups and developers ahead of the Tuesday vote.

"A development of this size can bring real opportunities for our city - but only if it's done in a way that supports all of our residents and neighborhoods," Vang said in a statement.