HomeMy WebLinkAbout6/17/2025 Item 6c, Jackson - Staff Agenda CorrespondenceCity of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: June 17, 2025
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 6c – ADOPTION OF THE 2025-27 FINANCIAL PLAN
Staff received the following questions, regarding the 2025-27 Financial Plan item. The
questions are below with staff’s response shown in italics:
1. Can you provide a little more clarity regarding the $150,000 grant that was
mistakenly put into the Police Grant Fund instead of the General Fund? The
staff report states that this is what has allowed the additional $45,000 to be
allocated in the first year of the financial plan for the CAPSLO hotel voucher
program and addition of $25,000 to fully support the increased cost for the
contract with County for Animal Services to be covered. How was the
additional $80,000 allocated? What are the tradeoffs that staff made in order
to fund the hotel voucher program at $90,000 in FY 2026-27?
Response: The City maintains a Law Enforcement Grants Fund to account for
certain grant funded police department expenditures. Certain other grants and
expenditures are properly recorded within the General Fund. During review of the
draft budget, staff identified that a $150,000 COPS SLESF grant has been
budgeted in the Grant Fund, but recorded in the General Fund, for several years.
Correcting this error and appropriately for this grant in the General Fund covered
the council directed cost increases in both years of the Financial Plan and the
excess was used to reduce revenue risk in the forecast.
2. Can you please provide a line-item list of all the one-time and ongoing
funding that is proposed to provide to CAPSLO, annually during the 2025-27
Financial Plan, whether it is through a larger agreement or through individual
grants? How does this compare to the funds provided to them in each of the
two years of the current financial plan (by line item, again, if possible)?
Response: A CAPSLO funding history by line-item is included in Attachment A to
this agenda correspondence. The summary includes proposed one-time and
ongoing funding for CAPSLO during the 2025 -27 financial plan, as well as prior
investments from FY 2014-15 through FY 2024-25.
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 2
3. Do we receive any data from CAPSLO on the number of families that are
provided shelter with the hotel voucher funds? And, do they report how
many of these families annually receive permanent housing after being
sheltered in a hotel?
Response: CAPSLO submits quarterly funding reports with data on each of the
City-funded programs they provide through 40 Prado Homeless Services Center.
Data on the Hotel Voucher Program is included in the quarterly reports including
individuals and families served and successful housing placements. In the first two
quarters of FY 2024-25, CAPSLO utilized the City’s funding allocation for the Hotel
Voucher Program (Motelling Program) to serve 15 families and 8 individuals, with
15 permanent housing placements for a 65% housing placement rate.
4. In the Significant Operating Budget Change (SOBC) table on page 630 of the
packet, it is noted that staff recommends providing CAPSLO with
approximately $81,000 in FY 2025-26 and approximately $30,000 in FY 2026-
27 for the rotating safe parking program. The Homeless Services Oversight
Committee (HSOC) recently recommended that CAPSLO receive a grant to
fund the rotating safe parking program for $293,000 and this
recommendation will go to the Board of Supervisors on June 17th. Is staff’s
recommendation on page 630 still necessary given this new funding?
Response: In September 2024, SLO County released a request for proposals for
an overnight parking program with supportive services for individuals living in their
vehicles. The funding opportunity utilized earned interest generated from the
Homeless Housing, Assistance and Prevention (HHAP) Program Rounds 1 and 2
from both the CoC and County allocations. The RFP outlined eligible and non -
eligible expenses for the funding opportunity and due to the State’s HHAP funding
requirements, only personnel and services costs were eligible grant expenses
while operational costs (e.g. portable restrooms, trash receptacles, insurance, etc.)
were ineligible. The City’s funding allocations for FY 2025-26 and FY 2026-27 are
intended to cover the operating expenses that are ineligibl e to be covered by the
HHAP funding. As such, staff’s recommendation remains the same.
5. Page 571, includes the following workplan items. Is there a timeline for when
the “ongoing” activities related to item 1d will be completed, or started:
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 3
Response: Following the study session identified in item 1.c. of the work plan
shown above, a number of code amendments will be needed to implement pieces
of the State Fire Hazard Severity Zone updates, in addition to the potential
development and implementation of inspection and enforcement programs
depending in the direction received during the study session.
The California Building Code, California Fire Code and the new California WUI
Code will be released on July 1st to local jurisdictions. This release is part of the 3-
year code cycle for the respective codes (except the WUI code, for which this will
be the first time California has adopted the WUI code ). During the code adoption
process, Building and Fire will assess their respective codes and review
collaboratively the WUI code. In the WUI code, staff expects to see further
clarification on a host of questions relevant to the hazard maps, specifically
defensible space, but also with regards to restrictions around development and
other areas. During the code adoption cycle, staff will also be reviewing
opportunities for local amendments to the code based on specific concerns within
the San Luis Obispo community. It is anticipated that the new code, with
amendments, will take effect January 1, 2026. Additionally, the Zone 0 (0-5' from
a structure) ember resistant zone regulations are currently scheduled to take effect
January 2026 and would be addressed in the proposed code amendments .
In addition to code development and adoption, significant outreach and education
efforts will be undertaken on what is necessary for compliance with the new
requirements within the Fire Hazard Severity Zones, which will be ongoing
throughout the Financial Plan period. If inspection and enforcement programs are
directed during the study session that will be held in Fall 2025, those programs will
also be developed and implemented over the course of the Financial Plan, with
additional information presented as part of the 2 026-27 Budget Supplement if
resources are needed at that time.
6. Can you explain a little more about what the Debt Service Fund is. Where do
the revenues come from for this fund and how often are additions made to
the fund, or expenditures made?
Response: The Debt Service Fund was established to account for payment and
accumulation of resources related to long-term debt incurred by the General Fund.
The Debt Service Fund’s sole revenue source is the annual transfer in from the
General Fund. Expenditures from this fund are made according to the various debt
service schedules for each issuance, generally in June and December.
7. On page 593, it is indicated that a substantial increase in Local Revenue
Measure (LRM) allocation toward Creek and Flood Protection is
recommended for FY 2026-27 over FY 2025-26. Can you provide some
context on this large increase?
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 4
Response: The significant increase in Creek and Flood Protection funding in FY
2026-27 compared to FY 2025-26 reflects the Capital expenditure transition from
design to construction on several major projects. Year 1 of the Financial Plan (FY
2025-26) focuses primarily on design, while Year 2 (FY 2026-27) includes
construction activities for four substantial projects in this category. Some of these,
like the Mitigation Planting effort, are required by state mandates.
8. There doesn’t appear to be any funds set aside in this financial plan for
Below Market Rate (BMR) housing production. Are funds currently set aside
for this objective?
Response: The City has an Affordable Housing Fund (AHF) that is used to assist
in the production of BMR housing units. The AHF is funded through revenue
incurred from the inclusionary housing in-lieu fee and commercial linkage fee that
are charged to new residential and commercial development projects. One -time
funds from state and federal sources, are also placed in the AHF. The AHF is
used to pay the City’s Below Market Rate Administrator, fund a regular yearly
contribution to the SLO Housing Trust Fund, cover administrative costs of the AHF,
and then to assist affordable housing projects through loans approved by Council.
Due to a decline in in-lieu and commercial linkage fee revenue, as well as the lack
of new federal and state funding sources, the AHF is not in a position to make any
new loans to BMR housing projects at this time. The Prohousing Incentive Program
funding, which is a reimbursement program from the state is being used to assist
several BMR housing projects.
9. On page 601 of the packet, the General Fund Long-Term Forecast appears
to be projecting a deficit of $376,000 in FY 2025-26 and $246,000 in FY 2026-
27. Do we anticipate having the fund balance to cover these deficits, or will
we require the use of reserves or another funding source?
Response: This variance between revenue and expenditures is not considered a
deficit since it is offset by cancellation of assigned fund balances. The $376,000 in
FY 2025-26 and $246,000 in FY 2026-27 are included as budgeted operating
expenditures in the Long-Term Forecast, but are not proposed to be funded with
the general purpose revenues (tax and franchise revenue or user fees) that
support most programs and services budgeted in the General Fund. The forecast
reflects that expenditures exceed revenues by the amounts noted above, and the
“use of fund balance” reflects that fund balance from the Economic Development
designation and Development Services designation will be used to offset the cost
of Significant Operating Budget Changes from the Administration & IT and
Creek and Flood Protection 294$ 4,833$
Mitigation Planting 100$ 1,583$
Pismo Street Retaining Wall Adjacent to Vista Grande 100$ 1,900$
Bridge Maintenance 94$ -$
Drainage Infrastructure Replacement -$ 750$
Laguna Lake Golf Course Bridge Replacement -$ 600$
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 5
Community Development departments on a one-time basis. In both cases, these
assigned fund balances are being used for their originally intended purpose.
10. On page 669, there notes an SOBC for a Heavy Equipment Mechanic. Is that
proposed to be funded 100% via General Fund or can some of it be offset by
enterprise funds to account for work on heavy equipment required for those
purposes.
Response: This position is entirely funded by the General Fund. To the extent that
this position works on fleet assets operated by the Enterprise Funds, the General
Fund will be reimbursed through the Cost Allocation Plan.
11. On page 849, it seems that there is more funding allocated to ATP
implementation in some years than others, but it seems inconsistent (FY
2028-29, FY 2030-31, FY 2031-32, FY 2033-34). Are there particular projects
this extra funding is being planned for? If so, what?
Response: The additional ATP funding in FY 2028-29, FY 2032-33, and FY 2033-
34 ($200,000 each year) is allocated to the Complete Streets components of the
City’s Pavement Maintenance Projects. This supports the integration of ATP
elements—such as enhanced pedestrian and bicycle infrastructure—into paving
projects.
In FYs 2030-31 and 2031-32, the additional funding ($150,000 each year) is
directed toward the implementation of the Tier 1 Active Transportation Plan
Network. These funds support planning and scoping for future ATP projects not
yet identified in the current 10-Year CIP.
12. The memo states that there is significant uncertainty over sales tax receipts
so we will not be using the consultant’s projection of an additional loss of
about $1 million in revenue. Can you say more about this decision and
implications for end of the year finances if its turns out to be correct?
Response: The sales tax forecast for the upcoming financial plan was prepared by
the City’s consultants in February. Since then, changes to Federal trade and
immigration policies have created significant uncertainty for the global economy
that staff believe will impact the City’s budget, including its sales tax revenue.
Because policy has changed so frequently, staff do not feel confident forecasting
revenue impacts based on policies currently in effect.
While there is risk to the sales tax forecast, other revenue lines are generally
forecasted more conservatively and could offset the shortfall. Staff will monitor all
revenue streams and, if staff believe an overall shortfall is to be expected, amend
the budget mid-year. In a worst case scenario, the General Fund is well capitalized
and maintains a $2 million revenue stabilization reserve which could be utilized to
offset any shortfalls.
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 6
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 7
13. It appears the City is currently below the General Fund debt policy limit (staff
report page 713-714). As the City anticipates additional debt for large scale
capital projects, how would that effect the debt ratio and how might it effect
the bond rating?
Response: Currently, the Prado Road Interchange is the only project identified in
the 10-year Capital Improvement Plan requiring debt financing. The total cost of
the project, availability of other funding sources, marketability of the City’s
securities, and interest rates at the time of issuance are unknown. Based on a set
of reasonable assumptions, the General Fund’s pro-forma debt ratio after financing
the Prado Road Interchange would be roughly 5% of revenue, well below the 15%
policy threshold.
It is difficult to predict any specific impact on the City’s credit ratings, but it is
generally true that higher debt levels lead to lower ratings.
14. Under the Diversity, Equity and Inclusion Major City Goal, task 4e states that
staff will report out on demographic data for City job applicants (staff) and
paid advisory body members and use that information to address potential
equity gaps. Won’t a portion of this work also happen as a part of the scope
for the Council Compensation Committee?
Response: Correct. Staff currently plans to include demographic data for City job
applicants as a part of the required AB 2561 public hearings where vacancy data
is also reported. Those hearings are planned for Q3 of each year.
At the May 20th Council meeting, Council also provided direction to create a
Council Compensation Committee to review compensation for City Council and
Advisory Body members. That committee’s work will include equity considerations
for advisory body members as it relates to compensation. As such, staff proposes
to modify task 4e to also include the work of the Council Compensation Committee
as follows:
15. Staff recommends modifying the completion date of task 3d of the Open Space,
Climate Action and Resilience Major City Goal regarding a study session to
consider options for funding stormwater and / or creek maintenance and flood
preparedness in support of CASE programs. Currently this work item is proposed
to occur in FY 2026 Q2. Staff recommends modifying this timeframe to FY 2027
Q3 to better align with timelines for other projects.
ITEM #6C – ADOPTION OF THE 2025-27 FINANCIAL PLAN Page 8
16. Community Development’s performance measure related to customer
service (below) includes targeted performance in 2025-27 that is significantly
lower than FY 2023-23 actuals and what is projected for FY 2024-25.
Shouldn’t the department be targeting to continue to maintain existing
customer satisfaction rates, rather than a decrease?
Objective: Provide Excellent Customer Service
Strategic Goal: Other Department Objectives
2023-24
Actual
2024-25
Projected
2025-26
Target
2026-27
Target
Measure: Customer survey response positivity rate 90% 91% 85% 85%
Notes: Customers in Community Development are provided with a survey to gauge satisfaction and collect feedback
to inform continual improvement efforts.
Response: Staff agrees that the target should be adjusted upward to reflect a goal
to maintain the approximately 90% customer satisfaction levels that the
department achieved in FY 2023-24 and is on track to achieve in the current year.
The table below will be included in the adopted 2025-27 Financial Plan.
Objective: Provide Excellent Customer Service
Strategic Goal: Other Department Objectives
2023-24
Actual
2024-25
Projected
2025-26
Target
2026-27
Target
Measure: Customer survey response positivity rate 90% 91% 90% 90%
Notes: Customers in Community Development are provided with a survey to gauge satisfaction and collect feedback
to inform continual improvement efforts.
ATTACHMENT
A – CAPSLO Funding History by Line Item
FY14-15 FY17-18 FY19-20 FY20-21 FY21-22 FY22-23 FY23-24 FY24-25 FY25-26 FY26-27
40 Prado Homeless Services Center -
Design and Construction Costs $250,000
40 Prado Safe Parking Program $10,000.00 $10,000.00 $10,000.00 $65,424.00 $10,000.00 $17,000.00 $17,000.00 $26,000.00 $26,000.00
Operational Support $123,500.00 $123,500.00 $63,826.00 187,326.00$ 186,826.00$ $186,826.00 $186,826.00 $186,826.00
Warming Center $10,000.00 $10,000.00 $64,633.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00 $10,000.00
Railroad Safe Parking Program
40 Prado Hotel Voucher Program $25,000.00 $45,000.00 $90,000.00 $90,000.00
Strategic Planning & Organizational
Assessment (Koble Collaborative)$30,000.00
Rotating Overnight Safe Parking Program $80,984.00 $29,864.00
HRC - GIA $7,500.00 $9,000.00 $12,000.00 $20,000.00 $10,000.00
HRC - HSG $10,000.00 $10,000.00 $20,000.00 TBD
Childcare Grant $54,000.00 $54,000.00 $50,000.00 $50,000.00 TBD
CDBG $68,054.00 $74,453.00 $70,963.00 $74,132.00 $63,614.18 $58,220.00 $64,357.00 TBD
ANNUAL TOTAL $250,000.00 $17,500.00 $220,554.00 $229,953.00 $338,846.00 $345,458.00 $362,440.18 $357,046.00 $528,167.00 $342,690.00
Key
* Amounts in Red Pending Council Approval
TBD Grant allocations still to be determined for FY26-27
CAPSLO Funding History by Line-Item