San Luis Obispo is holding a steady course as the city moves into the second half of its two-year 2013-15 budget, but the City Council must now prepare for a possibly bleaker future.
The city’s revenues are healthy now, but the council will soon have to make contingency plans to cut the budget by 12 percent if voters don’t approve the extension of a half-percent sales tax that has been levied since 2006.
The council unanimously passed a $134.2 million budget for the 2014-15 fiscal year on June 17 that includes $62.8 million in expenditures from the general fund.
The city anticipates $133 million in revenue in the upcoming year, plus a carryover of more than $1 million from the 2013-14 budget. The city will offset a $159,000 gap by using various program reserves.
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Key revenues such as property taxes, transient occupancy taxes and utility user taxes continue to grow.
Developer fees from development project applications also continue to increase.
In the 2013-14 fiscal year that just ended, the council had originally anticipated $2.4 million in revenue from permits, but a surge of growth actually brought in $4.2 million.
Based on that information, the council revised the 2014-15 budget upward, with $3.4 million in estimated permit revenues for this year instead of the $2.2 million originally budgeted.
However, sales tax revenues, which account for 26 percent of the city’s general fund revenue, are forecast to remain level with 2013 at about $15.3 million because vehicle sales and fuel sales are anticipated to decrease this year.
The budget includes $6.7 million in anticipated Measure Y revenue, the city’s half-percent sales tax passed by voters in 2006. The measure has brought an additional $36. 2 million into city coffers since it was passed.
Measure Y revenue now accounts for 12 percent of the city’s general fund. If voters don’t approve a new measure, called Measure G, in November, the half-percent sales tax will expire on March 31, 2015 and result in a loss of about $1.7 million for the last quarter of the 2014-15 fiscal year.
Earlier this year the council approved a $1.7 million contingency fund to offset the loss through the end of the 2015 budget.
The council will now begin preparing a contingency plan should voters not approve Measure G. In essence, the City Council would have to eliminate about $6.7 million in the first year of the two-year 2015-17 budget and then carry those cuts over into the second year.
On Tuesday the council will consider three options for offsetting the potential loss: reducing the operating budgets of departments by the amount of Measure Y funds they currently receive; requiring all city departments to make reductions; or making a 33 percent reduction to capital improvement projects, operating programs and personnel costs.
The third option includes a 5.9 percent employee compensation cut to save $2.2 million. The council will discuss the varying impacts of those options at its meeting on Tuesday.