San Luis Obispo faced with $1.5 million sales tax shortfall

San Luis Obispo faces a $1.5 million budget shortfall because of a higher-than-anticipated decline in sales tax revenue.

As a result, city staff will recommend to the City Council tonight during a midyear budget review that a hiring freeze be continued and that all travel and training requests be approved by City Manager Katie Lichtig on a case-by-case basis.

Future saving options include delaying capital improvement projects such as road improvements. A list of recommended projects has not yet been issued.

The city’s total budget for 2010-11 is proposed at $99.6 million.

Finance Director Bill Statler said that revenues from sales and transient occupancy taxes are down considerably. Both are essential sources of the city’s income, making up more than 40 percent of the general fund.

Statler anticipates the declining revenues to “hit the bottom soon” and that a slow recovery will follow.

The estimated $1.5 million shortfall may fluctuate slightly after the city gains a clear picture in April of last quarter’s sales tax revenue, which includes Christmas sales, Statler said.

“The bad news is that even with the best of reasonable assumptions, we still have about a $1.5 million problem to get our reserves back to where we want them to be,” Statler said.

The City Council is slated to review suggested cuts to close the deficit in June.