SLO considers raising taxes and marijuana to cover budget deficit

December 12, 2017

Mayor Heidi Harmon, council members Dan Rivoire, Carlyn Christianson, Aaron Gomez and Andy Pease.

San Luis Obispo City staff is recommending that city officials agree to raise property taxes, promote marijuana businesses, reduce services and increase employee benefit contributions in an attempt to address an $8.9 million budget deficit. [Cal Coast Times]

Amid declining interest rates, SLO’s unfunded pension liabilities hit $148 million in June 2016. As pension costs have shot up, so has the city’s budget expenditures.

In 2002, SLO’s general fund budget was approximately $35 million. General fund expenditures, the majority of which are staffing costs, are projected to rise to approximately $85 million by 2022, according to the five-year forecast.

City officials presented the deficit issue to the public at a forum in October, in which they offered potential solutions that included charging residents more for city services, cost-cutting measures and employee concessions.

On Dec. 12, city staff plans to provide the SLO City Council with a report that addresses the projected budget gap. The plan includes implementing offsets totaling $8.9 million annually by fiscal year 2020-21 that could allow money to be set aside for increased payments to CalPERS.

The report recommends a three-pronged approach to close the projected budget gap in the general fund:

“1. Cut 30 to 40 percent through operating reductions and new ways of doing business.

“Expected to total approximately $3 million over a three-year period, operating reductions and new ways of doing business could include operational efficiencies, staff reorganizations, proactive fiscal management, and improved debt and investment management.

“2. Cut 20 to 30 percent through employee concessions.

“In keeping with the city council’s adopted compensation and financial responsibility philosophies and labor relations objectives that include cost sharing of employee benefits such as health insurance and retirement, the recommendation assumes approximately $1.7 million will be achieved through employee concessions. The city is obligated to meet and confer in good faith with its represented employee groups regarding the impacts of changes to wages, hours, and/or working conditions.

“3. Cut 30 to 40 percent through new revenue sources.

“Two areas that would generate additional revenue would be:

“Cannabis taxation: $500,000 growing to $3 million annually by 2020-21. The estimates are preliminary and based on all the uses allowed by state regulations. Actual revenues collected would depend on the range and scale of activities allowed in the city, as directed by council and guided by public feedback.

“Storm water parcel tax: $1.5 million. A parcel tax would generate approximately $1.5 million annually and would require two-thirds voter approval with the first revenue collection realized in fiscal year 2020-21.”

After the bottom fell out of the housing market, the majority of cities in California tightened their budgets to work under reduced tax revenues while a few increased staffing and fees to residents, temporarily masking the growing debt. Over the past 10 years, SLO has budgeted for an additional 47 full-time staffer and has the highest ratio of employees to citizens in the SLO County.

City staff points primarily at CalPERS declining rate of investment returns as the driving factor in the city’s budget shortfall.

“The staff report notes while CalPERS is the driver for the current fiscal challenge, it is not practically feasible for the city to leave CalPERS,” city staff said in a press release. “To exit CalPERS, the city would be required to meet its projected worst-case financial obligations within 30 days of the time of separation. That obligation is currently estimated to be between $377 million and $495 million. There are other legal barriers to reducing benefits for current employees and retirees.”







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20 Comments

  1. c.d.cox says:

    There was an old saying in the Army if it moves salute ir if it don’t move paint it.Paint SLO town Red more reasons than one.

    (4) 6 Total Votes - 5 up - 1 down
    • Jorge Estrada says:

      I saw that great movie, The High Plains Drifter. The town sign, which was also painted red, “Hell”. Outstanding Clint Eastwood movie.

      (3) 3 Total Votes - 3 up - 0 down
  2. Jon Tatro says:

    The answer is in the article you need to let some of these employees go. Highest rate of employee to citizen ratio in the county should be a clue. While other municipalities were cutting costs SLO added 47 positions and is the highest paid in the county.

    (21) 25 Total Votes - 23 up - 2 down
    • jimmy_me says:

      SLO is top-heavy. Let go of the highest paid people; retain the people actually doing the work. Anyone with a six-figured salary pays their full retirement.

      (17) 21 Total Votes - 19 up - 2 down
  3. SLOBorn says:

    Considering that alcohol sales are a constant and far exceed that of the non-lethal cannabis maybe a city wide tax on it would help. Just a suggestion from a proud and healthy pot consumer of some 45 years that is all too happy to pay taxes on a substance that doesn’t harm anyone who consumes it, and who thinks maybe it’s time that alcohol consumers, like tobacco consumers, should bear some of this tax burden too. With that in mind put a city tax on tobacco products as well. Increase taxes on non essential items, like cannabis, tobacco and alcohol, and leave home owners alone. Just a thought (or two).

    (2) 32 Total Votes - 17 up - 15 down
    • CentralcoastRN says:

      I concur. Let’s not stop there!!!

      Let’s tax more:
      tax per pound. (Slim up if you want to save!)
      tax per year of age. (I mean, you are lucky to be alive, let’s tax that)
      tax per breath (hold it if you want to save, darn it!)

      Please, tax me MOOOORRRRREEEE.

      (13) 27 Total Votes - 20 up - 7 down
      • SLOBorn says:

        Right On! But not really, you take something practical and make it into something obtuse. Maybe I shouldn’t have used the words “non essential items”, which of course could be dependent on your definition of essential and non, and just said pot, tobacco products and alcohol. Maybe the nurse in you would have agreed with the cigarettes and alcohol?

        M\y point was that I think property owners are taxed to death as it is, and raising taxes on pot doesn’t bother me one bit as a consumer of the good weed. I do think that there is a wealth of taxes that can still be garnered from the two deadliest substances known to be such, tobacco products and alcohol, and still sold as a consumer items to be eaten, drank or smoked, and at huge profits,. With the number of bars, liquor stores and retailers that sell tobacco products and alcohol, combined with the consumption I know goes on in the Happiest Place on Earth, placing a city tax on those items would be helpful at the least and maybe a windfall at most. Tax the retailers as well, have them match the city tax charged to consumers. Win, win!

        (1) 15 Total Votes - 8 up - 7 down
  4. Robert1 says:

    reduce services and increase employee benefit contributions in an attempt to address an $8.9 million budget deficit. Amid declining interest rates, SLO’s unfunded pension liabilities hit $148 million in June 2016. As pension costs have shot up, so has the city’s budget expenditures.
    GET OUT NOW!

    (19) 23 Total Votes - 21 up - 2 down
  5. nunsense says:

    the schools want a parcel tax too due to the loss of Diablo revenue. taxes are going up! stand by.

    (13) 25 Total Votes - 19 up - 6 down
  6. Jorge Estrada says:

    It is a sorry state of affairs that our FDA is pushing their approved drugs but now our local city, too, is pushing drugs to mitigate their bad spending habit? Maybe SLO should sell their real-estate holdings that are not within the city limits? The other option, which is overdue, is to charge tuition for living in San Luis Obispo so that the reality of impacts will be addressed.

    (9) 25 Total Votes - 17 up - 8 down
    • SLOBorn says:

      I like the tuition idea Jorge, I do. You already pay a premium for less in California living (less privacy, less open area, less public lands, less choices in housing, etc.) so why not a tuition on less? And just to be in The Happiest Place On Earth where everyone seems to be miserable as hell? Yea, why not a tuition?!

      The “drug” thing though? Just a bit overstated considering what the FDA allows to be pushed kills people minutely in this country, causes more problems with side effects then what it helps, is usually a gateway drug to others and with some the expectation of long term addiction is all but certain. The prices? Talk about drug cartels! Those cartels located south of us just have to be jealous, don’t you think? The other drug, weed? Not so much!

      I’ve smoked for almost 45 years and the only side effect it has on me is an occasional overwhelming need for a package of Zingers and a pint of milk. Right now I’m without, will be until I can get into town in two weeks, and I don’t feel the need to do anything other than wait, try that with some of the FDA approved stuff. To date, no overdoses causing death from cannabis, so how do you compare it with the FDA approved stuff?

      This year, here in Oregon, taxes on cannabis products will pull in $85 million in taxes (that’s up from $60 million last year), which are allocated for schools, public health, police and local governments, kinda cool, huh? Just think of what California with 9 times the population of Oregon could garner in taxes, wow! Maybe some of that could actually go to REAL affordable housing…

      (0) 12 Total Votes - 6 up - 6 down
      • Jorge Estrada says:

        SLOBorn, I’m just a middle class want to be renaissance man. While I get the financial benefits to the jurisdictions in line for the cannabis payola, I would have to believe their altered reasoning is what has us in the financial mess we are in. Taxes are what we pay to support the benefits of government and not to be regarded as a renewable resource for growth in government jobs, pay and pensions. To counter this evolution, the majority of voters (not the sheople) would have to attend every public meeting that has a hint of financial consequences / liabilities. Since most can’t we have a bubble that is ready to burst, notice that there is enough tax money for paychecks but little for pavement. So back to your financial examples, the last thing we need is more of that lofty thinking to gets us in trouble. That is not to say all smokers make lofty bad choices, but truly, ingesting smoke is not good and for many that results in another bad choice. Think of the decades it took to stop promoting cigarettes and getting the warning label on each pack. I would never support promoting poor air to balance any budget.

        (4) 8 Total Votes - 6 up - 2 down
        • SLOBorn says:

          Lofty thinking to get us in trouble? I don’t get it, especially after seeing all the good cannabis taxation has done here in Oregon. It also has saved millions when you consider police can actually investigate actual crimes with actual victims, courts aren’t overflowed with simple possession cases and jails are actually housing real criminals.

          The problem isn’t with taxes it’s with those who administer its uses, period. I could go on-and-on about that but you know exactly what I’m referring to. If we could ever find those who actually have the publics best interests in mind you’d probably find taxes not only being used in manners that benefit all but less taxes to do so.

          Also, cannabis is consumed in many manners, it’s not only for smoking but also can be cooked into food items (my favorite is cannabis butter), it’s called “edibles”. You got gummy bears, you got suckers, you got the forever favorite brownies, cookies and so many other ways of ingesting it other than smoking. The only real difference is the effect is slower when eating it than when smoking. It’s a matter of choice, something tobacco products can’t really copy.

          Read this and then think about it cannabis again….
          https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1277837/

          (0) 8 Total Votes - 4 up - 4 down
          • Jorge Estrada says:

            I had a busy productive weekend and there is definitely a correlation between hard work and good rest. I feel great, just think how we could solve our budget problems through feeling great for the right reasons.

            (-1) 1 Total Votes - 0 up - 1 down
  7. TaxMeAgain says:

    The DOW is up over 30% since Trump was elected. Just because CalPers can’t manage to make money on their investment in this market doesn’t mean that I you schmucks can come to me for the money. Pound sand.

    (20) 32 Total Votes - 26 up - 6 down
  8. copperhead says:

    Liberals, spending and tax increases…that train is never late!

    (7) 21 Total Votes - 14 up - 7 down
    • SLOBorn says:

      Conservatives, spending and tax cuts for the rich and corporations…that train should never leave the station!

      (-5) 23 Total Votes - 9 up - 14 down
      • r0y says:

        Actually, the rich and corporations did far better under Obama than they did under Bush. I know most people have been conditioned to react to either of those “names,” but it does not change the fact that the most wealthy among us got even wealthier when a “liberal” was in charge.

        (3) 5 Total Votes - 4 up - 1 down
    • Ben Daho says:

      The conservatives just voted for 41.5 Trillion deficit.

      (1) 3 Total Votes - 2 up - 1 down
  9. George Bailey says:

    Folks,

    I think SLO City Mayor Heidi Harmon ought to set up a table and sell weed at Farmer’s Market.

    That would help.

    (22) 26 Total Votes - 24 up - 2 down

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