SLO’s $74 million portfolio draws leery eyes

June 14, 2011

By LISA RIZZO

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.