There's a recession coming, SLO officials say. And the city wants to sock away $1 million

San Luis Obispo officials think a looming recession is likely to impact the city over the next few years, and they want to stash away $1 million to offset a potential economic downturn.

That ominous fiscal forecast is slated to be one of the topics discussed when the City Council meets Tuesday to address midway tweaks to its 2017-19 budget.

"The national economy has been in the largest period of economic expansion in our history," City Manager Derek Johnson wrote in an email to The Tribune. "A recession would have typically happened by now."

He said the $1 million would act as a stabilizer should the city need to make budget adjustments and/or if revenue from an expected cannabis tax doesn't materialize as quickly as anticipated.

The money could be spent on general needs ranging from infrastructure to paying down pension costs or filling needed city positions as seen fit. The $1 million would be invested along with other cash reserves, earning interest until it's used.

The city projects its revenue from cannabis sales, if city voters approve a related tax expected to be considered on the November ballot, could bring in $100,000 in 2019 and then about $3 million annually within a few years.

"Although it is not known, and cannot be known, when a recession will occur, predictions are that one will come during the term of this forecast given the unprecedented growth experienced at the national and local level," city staff members wrote in a report.

The city in 2017-18 has collected about $6.5 million over its requirement to maintain 20 percent of its budget for reserves, despite the prediction of an economic downturn, mostly from taxes in a relatively strong local economy with low unemployment.

Additionally, other proposed expenditures include a one-time payment of $4.2 million to help pay down the city’s pension costs and $1.3 million to fund safety bollards — or posts — downtown to protect pedestrians from cars at the Farmers’ Market.

The city has tallied more than $140 million in unfunded pension liability. That’s the difference between the estimated cost to pay retirement obligations and the market value of the city’s assets currently set aside to fund them.

Over the next few years, the city also plans to reduce its spending by $8.9 million to cover pension-related costs. City officials say pension costs will continue to balloon in future years if they aren’t paid down at a higher rate than they have been in recent years.

Cost-cutting measures include replacing the grass at Damon Garcia Sports Complex with turf and old traffic signals with energy-saving models, among other energy efficiencies estimated to save the city $293,000.

The city also plans to eliminate a vacant recreation administrative assistant position assigned to handle customer service, while still allowing the public to register for activities and make appointments online 24 hours a day, helping the department save $82,000.

This story was originally published May 31, 2018 at 4:04 PM with the headline "There's a recession coming, SLO officials say. And the city wants to sock away $1 million."