Arroyo Grande mulls being a charter city

The Arroyo Grande City Council considered a slew of ideas this week, including becoming a charter city and dipping into sales tax funds normally earmarked for local projects in order to reduce an estimated $900,000 shortfall in next fiscal year’s budget.

City employees, who last year agreed to a combination of furlough days and increased pension costs to save the city about $410,000, may be asked to make up the difference if some of the ideas don’t bridge the gap.

City officials had anticipated a $656,000 shortfall for the 2012-13 fiscal year, which starts July 1.

The statewide dissolution of redevelopment agencies as of Feb. 1 adds an additional $250,000 expenditure to the general fund.

The council reviewed a number of cost-saving measures but won’t make a final decision until April or May.

In the past few years, the city’s revenues have declined while its medical and pensions costs for employees grew, according to City Manager Steve Adams.

To cut costs, city officials restructured city departments, eliminated 18 full- and part-time jobs through layoffs and an early retirement program, and negotiated with employee unions to make changes to medical and retirement plans.

The council also requested more information on one of Adams’ proposals — to put a ballot measure before voters in November to change Arroyo Grande from a general-law city to a charter city.

Currently, San Luis Obispo is the only charter city in the county, which allows it to establish its own policies regarding purely municipal affairs.

General-law cities are governed under California’s Local Government Code.

One of Arroyo Grande’s primary objectives is to exempt the city from paying prevailing wages per state law on public works projects over $1,000.

Doing so could save the city $200,000 a year, Adams said.

However, the California Supreme Court is considering whether public works projects awarded by charter cities, paid solely with city revenue, are subject to state prevailing wage requirements. The outcome of that case could determine whether Arroyo Grande moves forward with its proposal.

Other cost-saving ideas discussed Tuesday include: Requesting that the Five Cities Fire Authority, the joint fire-protection agency with Grover Beach and Oceano, negotiate with its union to make changes to pension plans to save $50,000.

Sending Grover Beach a proposal to consolidate its public safety dispatch services or its police department with Arroyo Grande. Officials estimate a joint dispatch could save Arroyo Grande up to $70,000 a year and a combined police department could save about $400,000.

Stop funding increases to employee medical insurance and seek additional savings by reducing employee compensation.

Use $250,000 in local sales tax funds and $200,000 in reserve funds to cover a portion of the shortfall.

Police station bond

The council also agreed to place a measure on the June ballot seeking to sell $6.7 million in bonds to finance construction of a new police station.

The measure requires a two-thirds vote to pass and would generate an estimated $180,000.

The city would avoid raising property taxes by relying on financing through the U.S. Department of Agriculture, and retiring the 2003 fire station bonds to use the property tax revenue associated with that measure, plus sales tax revenue, to make annual bond payments.

The council delayed action on a second possible ballot measure asking voters to authorize the city to purchase state water. Adams proposed deferring some of the capital costs of bringing in new water and later covering some costs through fees on new developments.

The council, particularly Councilwoman Caren Ray, was concerned about the cost to developers and new customers and requested more information before moving forward.