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City Council to Consider Proposed Approach to Closing Projected $8.9 Budget Gap

Post Date:04/13/2018 11:30 AM

The San Luis Obispo City Council on Tuesday will consider City staff’s proposed approach to closing the projected $8.9 million budget gap. The gap results from increased pension costs mandated by the California Public Employees’ Retirement System (CalPERS).

In alignment with the City’s current major city goal of Fiscal Responsibility and Sustainability, City leadership spent several months developing the recommended Fiscal Health Response Plan (FHRP), guided by community and staff input. Residents will have an additional opportunity to share feedback with the Council at the April 17 meeting.

The recommended plan includes operating reductions, new ways of doing business, new revenues, and employee concessions, while minimizing impacts to the community. The recommendations total $7.5 million from the General Fund and $1.4 million from the City’s Enterprise Funds, including Water, Waste Water, Parking and Transit.

“Guided by thoughtful input from community members, staff’s proposed FHRP takes a balanced approach that preserves the quality of services provided to the community and maintains our commitment to the employees who provide those services,” City Manager Derek Johnson said.

The plan includes a three-pronged approach to close the projected $7.5 million budget gap in the General Fund:

1. 30-40% through Operating Reductions and New Ways of Doing Business

Expected to total approximately $3 million over a three-year period, operating reductions and new ways of doing business will include refinancing City bonds, pursuing energy efficiencies and consumption reductions, renegotiating consultant services agreements and risk management.

2. 20-30% through Employee Concessions

In keeping with the City Council’s adopted Compensation and Financial Responsibility Philosophies and Labor Relations Objectives that include cost sharing of employee benefits such as health insurance and retirement, the recommendation assumes approximately $1.9 million will be achieved through employee concessions. The City is obligated to meet and confer in good faith with its represented employee groups regarding the impacts of changes to wages, hours, and/or working conditions.

3. 30-40% through New Revenue Sources

A general-purpose tax on Cannabis sales, requiring voter approval of a simple majority, will be evaluated for placement on the November 2018 ballot. Should a Cannabis Tax be unsuccessful, either by not receiving voter approval or by underperforming in projected revenues, other new sources of revenue will be evaluated, such as consideration of increased Transient Occupancy Tax (TOT) or a Stormwater Tax.

The Enterprise Fund (i.e. Parking, Transit, Sewer and Water Funds) solutions totaling $1.4 million will be met through various strategies unique to each fund. The primary reliance will be on doing business differently and employee concessions. Enterprise Fund revenues are those revenue projections based on approved and historic rates and revenue growth trends. 

Council’s feedback to the proposed FHRP at the April 17 meeting will guide staff’s preparation of the 2018-19 Supplemental Budget, to be adopted in June 2018. Council direction will also guide the Financial Plan process for the development of the Major City Goals and Financial Plan for 2019-21.

To address the unfunded CalPERS liability and manage future fiscal uncertainty, the City will evaluate two options in June 2018. The first option is prepayment of unfunded liabilities by prepaying PERS. An alternative option is the funding of a Section 115 Pension Trust to make future payments to PERS. The use of each method may vary by Fund.

CONTACT:         Derek Johnson, City Manager

(805) 781-7114; djohnson@slocity.org

 

 

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