The San Luis Obispo City Council has two months to overcome a projected $4.4 million shortfall in the city general fund for the 2011-2012 fiscal year or be forced to operate on limited reserve money.
In advance of a June 21 deadline to adopt the 2011-2013 budget, which goes into effect July 1, the council must erase a deficit that grew from $3 million in December to the current $4.4 million mark in March.
Much of the growth in the budget gap can be attributed to plans to increase expenditures on operating programs by $2 million and on capital improvement by $1.5 million. Specifically, the capital improvement section of the budget includes $1.7 million for street cleaning, $350,000 for storm drain replacement and $175,000 for open space acquisition.
To overcome these increases in expenditures, the council plans to cut spending, primarily by slashing city employee salaries.
A $2.1 million reduction in salaries has already been proposed, but city council member Andrew Carter does not believe that is enough.
“Two point one million dollars is way too small and not nearly aggressive enough,” Carter said. “The number I came up with was $3.2 million.”
Council member Kathy Smith agrees.
“I think the number 2.1 (million) is timid,” Smith said. “We need to take a look at it being closer to 3.5.”
Though spending cuts remain the focus of deficit reduction efforts, the council also opted to infuse a sizable total into the general fund by dipping into reserves.
Foregoing standard practice, the council decided to include the use of a one-time $1.6 million reserve to ease the spending cuts and advancement of various city projects.
Continuous spending on “pet” projects, however, is creating concern about long-term durability of the city budget. Currently, two projects receiving significant attention are City Hall renovation and Laguna Lake dredging. Despite the present shortfall, the council is prepared to spend at least $100,000 on refurbishing the City Hall steps.
Mayor Jan Marx is adamant about doing so.
“When we had this recent rainy period, about 4 to 5 days afterward, water was leaking through those steps,” Marx said. “I think it’s a good time to do it now rather than wait for some kind of failure of those steps in the future.”
Marx also said renovating the steps will demonstrate civic pride.
“It would be a great thing to do to celebrate the 60th anniversary of this building,” Marx said.
Vice mayor John Ashbaugh said he supports not only rebuilding the steps, but also an overall redesign of City Hall including a landscape plan for the City Hall plaza and modified entrances to both levels of the building.
“The opportunity should not be limited just to a replacement of our steps,” Ashbaugh said. “I would like to see us spend … for a comprehensive redesign of our entrance, which may include wheelchair access from Osos Street.”
Ashbaugh said he supports a plan to spend close to $6 million during the next five years on dredging Laguna Lake. Dredging is required to prevent an eventual transformation from lake to swamp due to increasing buildup of sediments underneath the water.
Though this project may require residents surrounding the lake to raise a significant portion of that cost, the council wants to proceed with the dredging, Ashbaugh said.
Council member Dan Carpenter said he is fairly supportive of dredging Laguna Lake, but his concerns about excess spending and budget sustainability are mounting.
Carpenter said he acknowledges the possibility of the termination of Measure Y, the half-cent sales tax, as well as the chance of reduction in city employee concessions due to binding arbitration.
“I really want to look further down the line than one or two or five years (because of) this unfunded liability we’re going to have to face,” Carpenter said. “We’ve got to have some sort of contingency plan in place.”
Carpenter, who said he considers himself a fiscal conservative, does not approve of the developing trend of placing biyearly “Band-Aids” on a broken budget process.
“If we just try to close the gap every two years, how are we ever going to address the big picture down the line?” Carpenter said.