The San Luis Obispo City Council agreed Tuesday to institute a freeze for all hiring, staff training and travel to help reduce the city’s projected $1.5 million budget shortfall.
Sales and hotel taxes, major revenue sources for the city, have continued to decline at a steeper rate than anticipated.
Additional cuts will have to be made, including likely delays to some of the city’s planned capital improvement projects.
“The first rule of holes is, when you find yourself in one, you stop digging,” Finance Director Bill Statler said.
The cuts will enable the city to maintain a 20 percent reserve — especially necessary during troubled economic times, Statler said.
Sales tax revenue is expected to fall further from prior estimates by $1.1 million this fiscal year and decrease an additional $1.5 million in the 2010-11 fiscal year, totaling $2.6 million more in lost revenue than in prior estimates.
The transient occupancy tax is down 10 percent, meaning a decrease of more than $450,000 annually compared with the prior fiscal year.
Development review fees have also decreased, costing the city an estimated $476,300 in the current fiscal year and an estimated $249,600 next year.
One increase was property taxes, which are expected to increase by 3 percent this fiscal year, leading to a modest increase of $82,800.
The $1.5 million gap followed $11.3 million in total cuts last year. More than two dozen full-time positions were eliminated through attrition or retirement to help fill that shortfall.
The city’s total budget for 2010-11 is proposed at $99.6 million. The City Council is slated to review suggested cuts to close the deficit in June.
Reach AnnMarie Cornejo at 781-7939.