SLO’s $74 million portfolio draws leery eyes

June 14, 2011


A group of local property owners are aggravated to learn San Luis Obispo is sitting on more than $74 million in cash and investments but despite that will soon be asking them to pay more for water, sewer and parking to help fix a $4.4 million budget shortfall in its general fund.

“To me it means they have been kind of pulling the wool over everyone’s eyes to complain and cry that the sky is falling and we are so broke when in fact they’ve got $74 million in various investments,” said Leslie Halls, member of San Luis Obispo Property Owners Association (SLOPOA) to a KVEC 920 AM radio audience.

While the fact that San Luis Obispo has banked $74 million is information that is accessible to the public, until recently, it was not common knowledge. It even slipped by SLOPOA after more than five years of digging into the city’s finances.

The information became public at a June 2 SLOPOA board meeting where members of the San Luis Obispo City Council and the County Board of Supervisors discussed possible effects of recent budget cuts.

Facing at least a $4 million deficit in the general fund for each of the next several years, San Luis Obispo’s preliminary 2011-2013 financial plan budget for all funds, at just under $100 million, calls for some cuts to employee salaries and concessions.

But the main part of the budget balancing strategy is to increase water, sewer and parking rates even though those funds currently have “healthy” surpluses.

As the new budget is proposed, San Luis Obispo residents will be assessed 10 percent more for water beginning in July and an additional 9 percent more starting July 2012.

City officials say the rate increases were motivated by downed water revenues as a result of successful water conservation efforts by its residents. Some feel they are being punished for saving water, especially after the city asked them to.

City Councilman Dan Carpenter says that while it seems residents are getting docked for their successful conservation efforts, the cost of the infrastructure to deliver water remains the same regardless of the volume used. And while the water enterprise fund has $15.4 million, city leaders say its part of long term planning, as they will have to replace many aging pipes in the near future.

The same goes for the sewer fund which, as proposed, will see additional revenues despite a current $11.6 million fund balance. The council is considering assessing an additional 7 percent on San Luis Obispo residents beginning in July and a 6 percent rate increase the following year.

Carpenter says the revenue will be needed for an estimated $65 million sewer project within the next few years, although funds are not currently earmarked. He says generating revenue is part of saving for the future as they need to accumulate the money first so it’s there when they need it, rather than having to borrow.

The cost to park in San Luis Obispo will also be higher beginning next month, including a new charge for Sunday afternoons as well as an increase in parking meter rates in core areas of the downtown. The city’s preliminary financial plan is also considering fine increases for violations in commercial and residential zones and fee increases for some residential permits even though the city has $8.9 million in the parking fund.

“We are paying more for services and getting less while the city sits on top of this pile of money that came from us in the first place,” Halls said.

Critics of the city’s financial plans contend the city should make further cuts to employee salaries and concessions rather than raising rates on an already financially strapped citizenry.

A close look at San Luis Obispo’s $74 million cash and investment accounts reveals the city has much more than the 20 percent it is required to keep in its reserves. While the city Finance Manager Debbie Malicoat could not say how much exactly is considered reserves, she estimates that based on the current budget and policy requirements, at least $15 million to $16 million is reserves.

An additional $32 million plus is earmarked for specific capital improvement projects—jobs waiting to be completed. The remaining $26 million or so is invested or part of the city’s cash flow for day-to-day bills and operations.

SLOPOA wants the city to move forward on its planned capital improvement projects as those projects will only become more expensive in the future. It could also be a move to stimulate the local economy.

The $74 million in cash and investments “has been created for the benefit of their clients, the city taxpayers and ratepayers and property owners,” said SLOPOA Treasurer Stephen Barasch. “At some point maybe they should get some benefit to some of the surpluses that are in some of these accounts.”

The bulk of the city’s general fund operating budget—79 percent—typically goes to pay for employees.

“Our money has been siphoned into personnel,” Councilman Dan Carpenter said. “We need to get that back so we can put it back into the infrastructure of our city.”

Local government salaries are not in line with the county’s private sector employees. When San Luis Obispo pay scales and levels of compensation were established, San Luis Obispo surveyed other cities of similar scale and demographics rather than the local public sector.

“It shocks me that any public employee would make over $100,000 a year,” said former council member Paul Brown.

City council members Carpenter and Kathy Smith said they are challenged to work with the city’s seven bargaining units to adjust wages. They said two August ballot measures will be critical for bargaining, if residents vote to eliminate binding arbitration and support pension reform.

The next budget workshop is scheduled to begin Tuesday, June 14, at 7 p.m. in the council chambers at city hall. The adoption of the preliminary 2011-2013 financial plan is scheduled for June 21.

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Monies in these kinds of accounts — reserves, Capital Improvement Funds, etc… — can be spent on anything a city council wants to spend it on with a 4/5ths vote. Money that is set aside for a specific project can always be reallocated should a different priority come up.

What I’d like to see is a city investing its extra money locally. Why not take some of it and started a small business incubator program, offer loans to businesses to expand, bring on line new products and services.

Put the money to work right here instead of being sent off to “Wall Street” where they pay peanuts in interest and use our money to make a killing.

By law California Cities are very limited what they can invest a City’s taxpayers money in. SLO has, as does every other CA city, a formal investment policy that is approved by the state that dictates what the city is allowed to invest the taxpayers’ dollars in. You can get a copy of it at city hall. A small business incubator program is not a CA State approved investment vehicle for cities.

So far it seems that this is just the City’s investment portfolio the same as every other city has. It is just most people never thought about what a city does with its money before it is needed. The City Treasurer is responsible to keep enough money in the City’s checking accounts to pay for immediate bills and costs, such as this month’s payroll. The rest is put in the City’s investment portfolio and is “layered” into various investment vehicles that have different maturity dates so the money is available when it is needed, but maximizes the interest the city receives. These investment vehicles, such as bank CDs pay a higher interest rate than a checking account does.

I simply have not seen anything here out of the ordinary — certainly the dollar numbers and the allocation mentioned of reserves, capital improvemnt fund, and working cash flow in the story are normal for a City the size of SLO.

There seems to be the feeling these might be secret, undeclared funds because they were found to be in an “investment accout”, but it appears to be the City’s regular monies invested normally for a city.

Well… when times get tough we dig into our pockets to pay for the things we need. The fact that this vault of money remained hidden from public view for so long does not reduce the justifiably large number of raised eyebrows.

The city needs a change of elected officials as a start… and I would think that interested parties should beginning looking for a slate of folks who will remake the city and stem this picking the taxpayer’s pockets every time they need to update their cell phones… I mean the iPhone 5 is coming out and every little bureaucrat needs one….

So, here it is… maybe there is a group out there that would like to put together a ‘slate’ ( oooou, this is a ‘bad word’ for those who love it the way it is) in each election that the rest of us could vote FOR. I am so tired of choosing between the lesser of two evils.

BTW… the pipe to the lake is a dream to keep ‘hope alive’… millions were paid… and I understand we are still paying — for ‘state water’ that drives on by us…. this is a project that won’t work… and is designed not to work…. in my humble opinion.

So, there has got to be some public spirited locals who want to reduce, reuse and recycle government waste???


The problem with that (at this time) Roger, is there ain’t nuthin’ in dem pockets for some folks (i.e. the ones not working for the gubmint).

To think I heard that dingleberry dis-Honorable Mayor Marx on the radio this morning saying that the water rate hikes were for the Nacimeinto upgrades and repairs and NOT because of less consumption. What a dunce. She just seems to regurgitates whatever she is told to, no matter how ridiculous the latest spin is.

I swear, every time she opens her mouth, it feels like the average IQ of the City drops…

I don’t understand the issue here. If $15-$16 million is reserve, $32 million is earmarked for specific capital improvement projects and $26 million is to pay for day-to-day operations why is there a question? Is it the fact that people didn’t realize that every city invests their money while they are waiting to spend it? These numbers do not seem out of line at all for a City the size of SLO. Take a look at Paso Robles. It has a large investment portfolio, but is still in financial trouble.

As an example, a water company is required by law to have a capital reserve fund to pay for future replacement of equipment such as pipes and well pumps, etc. I believe people need to get the details of what this money is for before jumping to any conclusions here. While the City of SLO has really screwed up their finances, it is very possible this City investment portfolio is normal and proper.

I thought the earmarked water fees and incomes have completely funded the water utility for both maintenance and distribution.

Basically, I am betting the increased rates will be tagged on as special “fees” that are exempt from earmarking for the water utility, and instead transfered into general funds. AKA, subverting the process and doing an end-run around the tax payers who will not vote for yet another tax rate hike.

I’m sorry, but 79% of the general fund is to pay employees says it all. Maybe we can reduce personnel costs to that of a successful business – or at least a break-even non-profit?

When I give to a charity, I expect more than 11 cents to go to the cause… just saying…

I wish for municipal financial responsibility as anyone else. However, Whatisup makes a reasonable case here. I wonder the amount of reserves other local cities possess. There are a number of things that come to mind that might necessitate use of such reserves, including unforeseen circumstances and emergencies related to infrastructure. Perhaps the City could help educate the general public as to how this capital might be used before the folks plan a torch run to City Hall.

I think people should be more outraged about the sweetheart deals that the city of SLO has given exclusively to big developers at the expense of the rest of us. The city is saying it wants to increase its parking revenue, yet it agreed to sell one of its prime downtown parking lots (behind SLO Brew) to a big developer for a fraction of its value and didn’t even require that developer to replace any of those parking spots. The city council will bend over backwards for these big developers while bending over the average resident of SLO.

This is all done with the claim that eventually the huge subsidies that these developers are given will eventually be paid back through increased sales tax revenue. Unfortunately, this extreme trickle down economics theory has never paid off in the history of our city. Even if it did pay off, don’t forget it is us the average citizen that pays the sales tax, so these subsidies represent a massive wealth transfer from the citizens to the developers (courtesy of the city of SLO’s sales tax.)

One just has to witness the monument to developer incompetence that is the failed “Vaquero” project at the corner of Marsh and Nipomo that now sits as an example of one of the worst urban blight eyesores right in the downtown core of our city. Had the city required that this developer actually had a clue about real estate development, required them to put up a reasonable bond before construction, and had not massively relaxed regulation and fees for them, this abomination would never have occurred.

If anything, the $74 million investment reserve that the city is keeping is a rare glimmer of financial prudence in a city council otherwise devoid of any sort of fiscal responsibility.

Trickle down does actually work, unfortunately when the City gives away MILLIONS, it takes a LONG time for that trickle to make it up. But I see your point. It also doesn’t help that our illustrious mayor was (and probably still is) in bed with that “big developer” (ok, Copelands) does it?

I think the city thinks downtown is it, and the rest are just the boonies and the sticks. They’re so sophisticated, what would us plebes know? I cannot imagine why anyone would want a business in downtown. Sure there’s foot traffic, but the costs are so prohibitive; hell, just trying to do business in SLO city is a joke. We seem doomed to forever remain that corrupt little quaint town that Opera once liked.

Complaining in the media threads isn’t going to fix this problem. People need to get out from behind their computers and show up at city hall. How many complainers go to meetings and tell it like it is to their elected leaders?

As long as I’m at this, how many people in Atascadero know what’s going on behind closed doors at Atascadero City Hall tonight? Check out Dave Broadwater down in the opinion section of this site. He has more than an opinion, he has cold hard facts that are rather interesting. I’ll be at City Hall tonight.

Are you kidding me? Government isn’t a for profit business, what in the world is it doing hoarding 75 million? That money belongs to the people. What is the possible justification for hoarding such a large sum?

How dare they talk about raising taxes on citizens when they are the entity that is bloated with bureaucrats and loaded with money.

Let’s cut local government by 20% and get back to basics. Anyone who ever works with a government agency knows how it is. They act like you owe them rather than the other way around.

Well, not wanting to defend the city, but the article did mention “$32 million plus is earmarked for specific capital improvement projects” – but the rest is fair game. Often, though, the “public” is not privy to how staff really wants to spend their “free money” – I mean, how council will be ‘advised” in spending.

I doubt if Mayor Marx even has a clue. Finances are not her strong point.

Marx’s only strong point was her liberal democratic party pedigree. Apparently, that is enough for many people.

Let’s see. $74 million invested and earning only 6% would yield $4.4 million per year. Can you say “balanced budget?” Seems as if the citizens of SLO have been overcharged for years and will be charged even more now. What a wonderful leadership.

ummmm…. no. Interest money cannot be STOLEN and transferred to other accounts like the general fund. That’s illegal. What they can do is downsize like the rest of the world, and quit trying to raise water fees since they don’t need it.