SLO ponders vote on sales tax renewal

Passing a half-cent tax would mean a future budget surplus

acornejo@thetribunenews.comDecember 21, 2012 

San Luis Obispo’s financial future can go two ways: It can enjoy a surplus of unallocated money at the fingertips of the City Council for future spending or face a more than $7 million budget shortfall.

The deciding factor will be whether voters approve renewing a half-cent increase in the sales tax. Originally approved by voters in 2006, it’s set to expire in 2014.

The City Council has yet to decide whether it will put the renewal of that measure on the ballot. A five-year fiscal forecast of the city’s $54.8 general fund paints a picture of arecovering economy as key revenue sources such as sales tax and transient occupancy tax rebound and property tax stabilizes.

After a year of grueling negotiations with employee groups that will result in a $3.2 million annual savings, the city will enter the 2013-14 fiscal year with $5 million more than budgeted.

If revenues continue to grow, that surplus will increase to $6.6 million by fiscal year 2017-18 — but only if voters renew Measure Y, the half-cent increase. If not, the added sales tax will cease April 1, 2015.

The city, as the budget is projected now, would then be spending $7.3 million more a year than it is bringing in. That budget shortfall would grow to a cumulative $19.7 million in the 2017-18 fiscal year.

Currently about $2.6 million of Measure Y funds are spent annually on operating costs related to employees including police staff and the fire marshal.

City Manager Katie Lichtig said those staff members are tied directly to services that would not have otherwise been an option if the added sales tax didn’t exist.

The five-year budget forecast, presented to the City Council this week, is meant to provide an overview of the budget in coming years as the city prepares to adopt the 2013-15 budget.

“We are trying to provide context to the council and the community about the trade-offs that will be necessary and the magnitude of them if Measure Y sunsets,” Lichtig said.

Councilman Andrew Carter praised the 2011 passage of Measures A and B that changed how pay and benefits for San Luis Obispo employees are decided as a critical tool in getting the city budget into the black.

Carter said one noteworthy achievement was reducing employee costs to 75 percent of city operating costs versus the 80 percent it was before.

A community forum will be held Jan. 8 at the Ludwick Community Center to set spending goals for the next two-year budget.

Reach AnnMarie Cornejo at 781-7939. Stay updated by following @a_cornejo on Twitter.

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