Rebounding tax revenue helps SLO boost its budget. Here’s what it’s doing
With tax revenue and tourism improving, along with careful spending during the pandemic, the San Luis Obispo City Council has made some mid-year budget adjustments designed to help “pay down pension debt sooner, advance major city goals, support existing public services, and address emerging community needs,” according to city officials.
The council approved a $24 million mid-year budget adjustment that targets priorities that include supporting a new live theater venue and pension paydown.
As part of its meeting Tuesday, the City Council also directed staff to return with recommendations to prioritize one-time funding of $4.5 million from the American Rescue Plan Act toward housing and homelessness, as well as $100,000 for additional assistance to local nonprofits.
“We’ll likely hold a public study session at a council meeting prior to the June discussion related to the supplemental budget (taking into consideration the housing and homeless spending),” said Whitney Szentesi, the city’s public communications manager.
On the revenue side, “we have largely good news,” said Brigitte Elke, SLO’s finance director.
The city cited gains in hotel and sales taxes, with boosts of more than 30% in key economic sectors “driven by a switch from services to goods, inflation and available savings,” a staff report noted. That’s along with increased tourism due to lifting of COVID-19 restrictions.
“We anticipate strong revenue growth to continue to 2023,” Elke said.
The city has seen lower-than-expected cannabis revenues, down about 26% from budget projections, because “only one of the three retailers (allowed citywide) is open and operational,” Elke said, along with two delivery businesses.
The city expects to add another retail storefront and a new delivery business in the early part of this year.
Budget adjustments
Due to its revenue sources and priorities, the council’s mid-year changes to the city’s two-year budget include a $12.4 million payment toward its pension debt, the single largest additional payment to date.
The source of the available funding is a mix of both revenue increases and expenditure savings, with a “prudent City Council decision to retain 2018-19 and 2019-20 available fund balance to secure the city’s finances during the height of the COVID-19 pandemic,” said Assistant City Manager Greg Hermann.
“This payment puts the city on track to paying down its unfunded liability 10 years ahead of schedule, saving taxpayers $19 million in the long run,” a SLO news release noted.
The council also earmarked a $3.94 million grant from one-time funds to assure the construction of the new SLO REP Theatre, approved by the City Council after planning review in 2019.
“Once fully operational, the new theatre could generate an economic impact of more than $3 million annually, according to a SLO REP Economic Impact Report,” the city said.
The city additionally is also committing to raising salaries for its workers, saying the base pay is 8.55% below the median.
“As a general industry standard and consistent with the city’s labor relations objectives, a classification that surveys within 5% of the market median is considered competitive,” a city staff report said.
The exact amount of increases is still being assessed.
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