HomeMy WebLinkAbout04-17-2018 Item 11 Adopt a Fiscal Health Plan and provide Strategic Direction for the 2018 -19 Supplemental Budget
Meeting Date: 4/17/2018
FROM: Derek Johnson, City Manager
Prepared By: Shelly Stanwyck, Parks and Recreation Director
Monica Irons, Human Resources Director
Greg Hermann, Interim Deputy City Manager
Alex Ferriera, Budget Manager
SUBJECT: ADOPTION OF A FISCAL HEALTH RESPONSE PLAN AND
STRATEGIC DIRECTION TO THE SUPPLEMENTAL BUDGET
RECOMMENDATION
1. Adopt a Fiscal Health Response Plan; and
2. Provide feedback and direction to staff regarding the application of the Fiscal Health
Response Plan to the 2018-19 Supplemental Budget to be reviewed and considered for
adoption in June 2018; and
3. Provide direction regarding the possible initiation of a cannabis sales tax measure and
direct staff to return with more information for consideration on May 15, 2018.
REPORT IN BRIEF
This report has two sections for Council to receive and provide direction on.
1. Consideration and Adoption of Proposed Fiscal Health Response Plan.
2. Strategic Direction Regarding Application of Fiscal Health Response Plan to the 2018-19
Budget Supplement.
This report a summary of why a Fiscal Health Response Plan (“FHRP or Plan”) is needed and
the components of the Plan based on Council direction on December 12, 2017. This is followed
by a general description of the Plan itself along with highlights of Plan Components. How the
Plan would be applied to the General Fund and Enterprise Funds during its three-year term is
also discussed so that Council can provide strategic direction in preparation of the 2018 -19
Budget Supplement.
DISCUSSION
Background
The City of San Luis Obispo is committed to good fiscal health and the delivery of quality
services to the community. With the development of the 2017-19 Financial Plan, Council
adopted the Fiscal Sustainability and Responsibility Major City Goal with a work program to
address long-term fiscal health. This Major City Goal (MCG) contains five distinct objectives: 1)
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Citizen Task Force, 2) Economic Development and Responsiveness, 3) Fiscal Responsibility
Including Actions to Ensure Structurally Balanced Fiscal Outlook, 4) Long Term Unfunded
Liabilities and 5) Infrastructure Financing. In July 2017, the Council decided not to form a
Citizen Task Force. This report addresses specific work tasks in the third and fourth objectives.
A separate major work area of the goal, relates to the City’s long-term capital improvement
project needs and how to fund them. That work effort is the subject of a separate April 17, 2018
agenda item titled ‘Funding the Future of SLO’.
Last year, in preparing an extended 10-year fiscal forecast to account for rapidly rising pension
costs, a budget problem was identified as it relates to a growing unfunded liability due to
actuarial assumption changes adopted by CalPERS.
The Problem
At its December 12, 2017 meeting, Council received a report titled Budget Foundation: Fiscal
Health Response Plan. This report (Attachment A) articulates the need to reduce ongoing
expenditures by $8.9 million in all funds by 2020 -2021 ($7.5 million in General Fund and $1.4
million from the Enterprise Funds) to address the long-term financial impacts related to pension
costs. As detailed in the report, the need to immediately address these pension costs is the result
of significant policy changes made by the California Public Employees’ Retirement System
(CalPERS) affecting the unfunded liabilities of all PERS member organizations.
The City’s fiscal forecasts are based on the economic conditions and information known at a
particular point in time. Multiple resources are used to develop the forecasts. The City partners
with Beacon Economics to monitor the economic climate and inform financial forecasts by
taking into account macroeconomics at the Federal, State and local levels. The City also
contracts with HdL Companies for detailed analysis of City sales tax and wit h MuniServices on
utility users tax. Given CalPERS December 2016 policy changes, which lowered the discount
rate (or assumed expected rate of return) on investments from 7.5% to 7% over a three-year
period, the City’s 10-year fiscal forecast identified negative impacts to the long-term fiscal health
of the City. The result is that if no change is made to operating budgets, expenditures will begin
to outpace revenues in 2018-19 for all funds.
To address the problem, and to regain a balanced budget, in December 2017, consistent with the
Fiscal Sustainability and Responsibility MCG, Council authorized staff to develop a plan to
provide general strategic direction and a road map to long-term fiscal health and financial
sustainability over a period of three fiscal years, 2018-19, 2019-20, and 2020-21 for all City
Funds – A Fiscal Health Response Plan (FHRP or “The Plan”).
THE PROPOSED FISCAL HEALTH RESPONSE PLAN
Purpose
The purpose of the FHRP is to establish a framework to respond to the long-term fiscal impacts
of the significant increases in required pension contributions to the CalPERS retirement system.
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Outline of Plan Contents
The FRHP contains the following sections and is Attachment B to this agenda report.
Highlights of FHRP’s Elements
The FHRP’s elements contain three key components and two options to maximize the impact of
the City’s payments made to address its unfunded liabilities. The Elements of the Plan will be
applied to the 2018-19 Budget Supplement as discussed further in this report as well as to the
2019-21 Financial Plan process. Here are the Plan’s elements.
Key Components: A Balanced Allocation
Existing financial policies provide the foundation for the Plan. The Plan itself emphasizes three
components with reductions in each to be applied in a balanced manner. Below is how the
allocations of the components are proposed to be applied over the three-year period in the Plan to
the General Fund. The Enterprise Funds (Water, Sewer, Parking, and Transit) will be solving the
problem too but based on their fund type and unique situations.
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How Enterprise Funds are Different
The City’s Four Enterprise Funds: Water, Sewer, Parking and Transit are funded by rates
and/or fees for the services provided. Transit is primarily funded through Federal and State
grants and programs in combination with a 20% match from fares. Increases to rates and/or fees
will not be made to close this budget gap in the Enterprise Funds. Any changes to those rates
and/or fees in the Enterprise Funds during the fiscal periods of this Plan will be due to other cost
increases unrelated to unfunded pension liability cost increases.
New Revenues
The General Fund’s primary sources of revenues are from taxes and fees for services.
Consideration of a General Fund tax on Cannabis, requiring voter approval, is proposed as the
primary new General Fund revenue for this component of the Plan. The Enterprise Funds will
not participate in new revenues in the same way as the General Fund as they are funded by rates
and/or fees for service. Changes to Enterprise Fund rates or fees for service during the term of
this Plan will be for cost increases not associated with the CalPERS discount rate changes.
New revenues stemming from Cannabis would arise from a new general tax on that emerging
industry and any new revenues would only apply to businesses operating within City limits. This
potential revenue stream is discussed below (in the applying the Plan section) and is based on the
assumption that a majority of the voters in the City approve of a Cannabis sales tax for general
purposes. Council will receive detailed information on this topic on May 15th. If Council directs
staff to place a Cannabis tax on the ballot at that time, staff would return to Council in June for
an action to place a revenue measure on the November 2018 ballot. Should a Cannabis tax not be
approved by Council and/or the voters, other new sources of revenue would have to be pursued
or staff would need to return to Council for further direction to adjust the components of the Plan
to balance future revenues and expenditures.
Operating Reductions and New Ways of Doing Business
All funds will participate in this component to varying degrees. The plan contains a list of
operating reduction options to be pursued along with new ways of doing business. These new
ways of doing business focus on energy efficiency and also include thoughtful reorganizations
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that will enable the City to deliver services differently while minimizing impacts to residents and
other customers.
Some operating reductions or new ways of doing business may require meet and confer with
represented employee groups in advance of implementation. Meet and confer along with other
influences on the implementation schedule will be accounted for as the Plan is put into
actionable steps. The concepts are generally as follows.
Concessions – All City Employees and All Funds Over the FHRP Three Year Term
All regular City employees from all Funds participate in the same CalPERS retirement system
with the benefit formula under that system varying based on employee group and hire date .
Council adopted policies including the Financial Responsibility Philosophy, Compensation
Philosophy, and Labor Relations Objectives, all address the concept of “shared responsibility.”
This concept acknowledges the responsibility of the City and its employees to share the burden
of pension and health costs, including addressing unfunded liabilities, while recognizing that
increasing the employee share of this cost may impact the City’s ability to attract and retain well-
qualified employees that ultimately deliver programs and services to the community. With that in
mind, concessions are proposed as a significant component of the Plan.
The Plan recognizes a phased-approach for all reductions, including employee concessions, with
the anticipated ongoing concession amount reaching the objective of $1.9 million for all funds by
fiscal year 2020-21.
The Plan’s three-year term affords the City the ability to negotiate in good faith with its
bargaining units to tailor labor agreements that potentially meet mutual objectives. For example,
funding the CalPERS system to help ensure its future viability is in the interest of the employees
that have service in the system, while maintaining a “competitive” compensation package is in
the interest of the City for attracting and retaining well qualified employees.
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Primary Options to Address Unfunded Liability: Pre-Payments to CalPERS and/or Section
115 Pension Trust Formation
The reduction of budgetary expenditures in all funds allows the City to address the unfunded
pension liabilities created by the CalPERS reduction in the rate of return from 7.5% to 7.0. There
are two options by which a Fund can do this: 1) pre-pay directly to CalPERS, or 2) invest monies
in a separate Section 115 Trust to earn money (at a conservative rate) and continue to make
payments over time. At the June 19, 2018 Council meeting an agenda item on this topic will
address this issue and provide analysis with respect to the General Fund and the Enterprise Funds
regarding which option is the most beneficial to the respective funds. As discussed below, at this
time, both the Parking and the Transit Funds have the ability to “pre-pay” to CalPERS and the
specifics of that will be analyzed at the June meeting and direction given. At that meeting staff
will provide a report with recommendations covering the following as it applies to the General
Fund and the individual Enterprise Funds:
1. Quantitative and qualitative analysis of the pre-payment to CalPERS or investment in a
Pension Trust options, with pros and cons for each option.
2. Advantages and disadvantages of making accelerated/or prepayments to CalPERS and
considerations of the timing of such payments.
3. Advantages and disadvantages of investment policy choices and selection of Section 115
Trust administrator.
4. Legal analysis and documentation as necessary to support recommendations.
5. Recommendations for funding sources and amounts to be prepaid to CalPERS or
deposited in a Pension Trust with the Supplemental Budget Adoption.
External Impacts to the Plan
The plan is based on the fiscal forecast and the projected CalPERS actuarial assumptions that
were outlined to the City Council in December 2017. While the Pl an is based on known
projections and assumptions, there could be future changes which could impact the City’s long-
term fiscal forecast. As noted in the Plan, existing policies and plans are in place to guide the
City if faced with further changes. These policies allow for the City Manager to take immediate
actions to address sudden changes that financially impact the City. The following external
impacts are not incorporated in the Plan and therefore would require further direction from
Council at the time the impact is understood if it occurs: changes in economic conditions; the
closure of Diablo Canyon; further changes to CalPERS contributions, and natural disaster.
STRATEGIC DIRECTION: APPLICATION OF THE FHRP TO THE GENERAL FUND
Application of the Plan
As noted above, the Plan as applied will guide budgetary actions for the 2018-19 Budget
Supplement as well as for the development of the 2019-21 Financial Plan for all Funds. Over the
three-year term, the components in the Plan have been allocated not by specific dollar amounts
but by percentage range. As staff has more fully developed the Plan, each component’s dollar
values have begun to be estimated for allocation over the three-year period based on what can be
accomplished and when.
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Total Concessions for all funds are valued at approximately $1.9 million for the three-year
period of the FHRP. The specific timing of implementation of the Concessions is dependent
upon the bargaining process between the City and its represented employee groups. Variations in
the other two components - revenues and operating efficiencies and new ways of doing business
- may vary in amount and timing also for a variety of reasons, such as updated numbers for
revenues (plus or minus) and the timing of their respective implementation which may be
“lower” in year one of implementation but growing by year three. The following chart illustrates
how the $8.9 million is proposed to be allocated for the General Fund and the Enterprise Funds
over the term of the Plan.
Proposed Plan Application to the General Fund 2018-19 Budget Supplement
Each City Department will apply the policies and guiding principles of the Plan to their 2018-19
Budget submittals. The combination of changes will achieve a balanced budget for 2018-19 for
all funds as described below. With all of the budgetary changes, those options with the least
amount of service level impacts were proposed. The reductions proposed were also achievable
in this first year of the Plan. The 2018-19 Budget can be achieved with the following reductions
and increases to revenues in the General Fund. The details of how this is to be accomplished is
discussed under each Plan Component below. The proposed operating reductions as applied to
the various budget functions are shown in the following graphic for 2018-19.
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General Fund Operating Reductions
New Revenues 2018-19
In engaging the community on new revenue options during March 2018, staff has learned
through a statistically valid customer satisfaction survey that nearly 68% of likely voters would
support a new tax on cannabis. As is noted in the Funding the Future report, that support drops
to 62% if two new tax revenue measures are placed on the same ballot.
At this time, several assumptions have been made to include Cannabis as a new revenue stream
beginning in 2018-19. The primary assumptions include: the adoption of a Cannabis Ordinance
regulating the industry by Council as well as the placement of a ballot initiative in November
2018 for consideration of new taxes on cannabis business activity in the City. The details of this
will be provided to Council on May 15 for specific guidance and direction.
As legal Cannabis sales and production is an emerging industry, staff has worked with two
different consultants, HdL and MunisServices, to develop an estimated amount of revenue to
expect from potential taxation alternatives. Optimistically, cannabis business activities would
begin at the earliest in January 2019. However, it is expected to take some time for the City to
establish its permitting and regulatory protocols, and for businesses to find appropriate properties
and obtain the necessary permits to operate. As a result, tax revenues from Cannabis are not
anticipated until the fourth quarter 2019. Staff has projected $100,000 in revenues from this tax
in 2018-19.
Operational Reductions and New Ways of Doing Business Proposed for 2018-19
The operational reductions and/or new ways of doing business include the refinancing of City
bonds due to current favorable interest rates which will lower the overall cost of debt and annual
payments. A critical step was taken just last week to refinance bonds which will result in
combined savings of over $350,000 primarily for the General and Parking Funds.
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In addition, based on cash flow analysis, the City will exercise the payment option offered by
CalPERS to make its annual required pension contributions as one-time prepayment, which is
offered by CalPERS at a discounted rate, for each fiscal year instead of paying on monthly basis.
Public Works has been able to identify significant energy efficiencies and consumption
reductions in its proposed reductions. Consultant services and other agreements have been
renegotiated to realize reductions while not resulting in operational impacts. Some departments
had the opportunity to accomplish or begin thoughtful reorganization through the strategic use of
employee retirements or other transitions. Some of these reorganizations have been completed,
are underway, or will be implemented over the next three years. All departments evaluated
expenditure trends over the past five years to identify operational savings. Three areas of tax and
fee enforcement opportunities for more accurate revenue collections have been identified
including business license tax, Transient Occupancy Tax as it relates to homestay and code
enforcement.
The details of these proposed changes are noted specifically in Attachment C and are
summarized below by Department or by action when organizationally based. Operational
reductions and new ways of doing business total would result in $1,372,000 in 2018-19. Staff is
seeking Council’s response to this information at the meeting of April 17th as it will serve as
Strategic Direction for the presentation of the 2018-19 Budget Supplement.
2019-21 Financial Plan General Fund
Application of the FHRP will also guide the development of the 2019 -21 Financial Plan.
Information about the Plan will be provided via multiple communication channels so that the
public, which is highly engaged in all aspects of that process, including the Major City Goal
setting process, will be aware of the policies, principals, and reductions guiding the next
Financial Plan process. As noted above, the 2019-21 Financial Plan will include General Fund
reductions and new revenues of approximately $4.3 million dollars. In addition to the
Concessions of $1.9 million in ALL Funds to be achieved during the three-year period, the
FHRP guided approach to the Financial Plan for 2019-21 is expected to see reductions generally
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as follows:
New Revenues Efficiencies and New Ways of Doing Business
$2,800,000 $1,500,000
APPLICATION OF THE PLAN TO THE ENTERPRISE FUNDS
While the majority of city services are provided through its General Fund, the City of Sa n Luis
Obispo also has four “enterprise funds.” These proprietary funds have been created to provide
specific services for which the users of the services are charged fees. The financial activity of
each of the enterprise funds is accounted for separately from the General Fund and each of the
funds is governed by laws, regulations, City financial policies and other legal constraints that are
unique to their functions.
The City’s enterprise funds will participate in any employee concessions as the City must meet
and confer or bargain in good faith with represented employee groups that span General and
Enterprise Funds. Each enterprise fund team is tasked with finding its unique solution to funding
the unfunded pension liability due to the discount rate adjustment. These solutions will not
impact rates or reduce previously planned capital project investments.
The application of the Plan to the Enterprise Funds is summarized below. Each Fund is
discussed, as are the solutions each Fund is proposing in 2018-19 and more generally the
reduction components and amounts for the 2019-21 Financial Plan.
The size of the problem for the three-year period to all of the Enterprise Funds totals $1.4 million
dollars
PARKING ENTERPRISE FUND
Proposed Plan Application to the Parking Enterprise Fund 2018-19 Budget Supplement
To achieve the 2018-19 budget reduction objective, the Parking Enterprise Fund must realize a
saving/cost offset of approximately $175,000 over the three-year term of this Plan. The Parking
Fund is in a unique position in that the Fund implemented rate changes in January 2018 (not tied
to the Problem) and Council has already approved another for July 2020, that will provide
adequate revenues to maintain fiscal sustainability. The Fund will parallel the General Fund’s
response to the shortfall and comport with the Plan by achieving an operating reduction in the
amount of $10,000 for more efficient contract services regarding landscape maintenance. This
will not have a service impact to the public. The Parking Fund will participate in all employee
concessions when the General Fund concessions are made.
The Parking Fund is in a unique position based on the health of the Fund and its anticipated
future costs and revenues. As such, an approach of the Parking Fund prepaying its share of the
unfunded liability is being thoroughly analyzed and will be brought back for Council’s
consideration in June 2018 as part of the item on options to prepay or fund a 115 Pension Trust.
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Other Efficiencies and New Ways of Doing Business
Prepayment of Unfunded Liability $10,000
Parking Fund 2019-21
If the unfunded liability is pre-paid, the Parking Fund achieves its total savings during the
2018-19 budget. As discussed, Parking proposes to pay off its entire unfunded liability in 2018-
19. The detailed analysis of this strategy will be the topic of a staff report in June 2018 for
Council’s consideration and direction. However, all parking staff will be subject to the same
concessions as other general fund staff.
TRANSIT ENTERPRISE FUND
Proposed Plan Application to the Transit Enterprise Fund 2018-19 Budget Supplement
To achieve the 2018-19 budget reduction objective, the Transit Enterprise Fund must realize a
saving/cost offset equal to $42,500. The Transit Fund is in a unique position in that the Fund
implemented rate changes in June 2017 (not tied to the Problem) and has working capital that
will provide enough revenue to maintain the health of the Fund and address this problem. The
Transit Fund will parallel the General Fund’s response to the shortfall and comport with the Plan
by achieving an operating reduction in the amount of $42,500 by reducing consumables
including fuel. This will not have a service impact to the public. The Transit Fund will
participate in all employee concessions when the General Fund concessions are made.
The Transit Fund in in a unique position based on the health of the Fund and its anticipated
future costs and revenues. As such, an approach of the Transit Fund prepaying its share of the
unfunded liability is being thoroughly analyzed and will be brought back for Council’s
consideration in June 2018 as part of the item on options to prepay or fund a 115 Pension Trust.
As discussed later in this report, this will result in significant annual savings in excess of the
$42,500 reduction obligation for all three years identified in the FHRP. It also is acknowledged
that this pre-payment does not cover future unknown changes to the unfunded liability share for
this Fund.
Other Efficiencies and New Ways of Doing Business
Prepayment of Unfunded Liability $42,500
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Transit Fund 2019-21
If the unfunded liability is prepaid the Transit Fund achieves its total savings during the
2018-19 budget. As discussed, the Transit Fund proposes to pay off its entire unfunded liability
in 2018-19. The detailed analysis of this strategy will be the topic of a staff report in June 2018
for Council’s consideration and direction However, all Transit staffing will be subject to the
same concessions as other general fund staff.
SEWER FUND
Proposed Plan Application to the Sewer Enterprise Fund 2018-19 Budget Supplement
To achieve the 2018-19 budget reduction objective, the Sewer Enterprise Fund must see
reductions in budget of $80,000. The Sewer Fund will address this objective by reducing
operating expenses in its Water Resource Recovery Facility program by $80,000 which is
achievable through the results of its energy efficiency project and process changes. The Sewer
Fund will also see an annual increase in revenue collections of $20,000 through the water meter
replacement program that provides for more accurate fee collection.
Sewer Enterprise Fund 2019-21
The Sewer Enterprise Fund will need to achieve $341,000 in total savings or new revenue
generation during the 2019-21 budget.
WATER FUND
Proposed Plan Application to the Water Enterprise Fund 2018-19 Budget Supplement
To achieve the 2018-19 budget reduction objective, the Water Enterprise Fund must see
reductions in budget of $100,000. The Water Fund will address this objective by reducing
operating expenses in its Water Source of Supply program by $100,000 which is achievable as
the understanding of the cost of water deliveries from the Nacimiento Project matures and annual
expenditures related to actual pumping volumes are adjusted.
The Water Fund will also see an annual increase in revenue of $100,000 through the water meter
replacement program that more accurately assesses usage for water consumption on all customer
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classes. The program will result in more accurate (increased) fee collection.
Water Enterprise Fund 2019-21
The Water Enterprise Fund will need to achieve $301,000 in total savings or new revenue
generation during the 2019-21 budget.
OTHER FUNDS – WHALE ROCK
The San Luis Obispo City Council does not have budgetary authority over the Whale Rock
budget; this is done by the Whale Rock Commission, a Joint Powers Authority made up of the
City, CalPoly, and California Men’s Colony. The City of San Luis Obispo provides Reservoir
Operations and Administrative staffing for the Whale Rock Commission, therefore any employee
concession-related reductions applied to City employees will be reflected in this fund’s program.
The City as fiduciary agent will recommend that the Whale Rock Fund and Joint Powers
Authority consider a budget that addresses its share of the problem.
Community Outreach and Public Engagement
The City has been - and will continue to be - committed to involving the community and staff in
discussions about solutions to the financial challenges ahead. A number of outreach and
engagement efforts have been completed and will continue throughout the process. Outreach to
date has included:
a. Fiscal Health webpage
b. E-notification category to sign up to receive updates
c. Community Information Session on October 5, 2017
d. Staff Information Sessions on December 6, 2017 and April 12, 2018
e. Several press releases, news items and social media posts resulting in media coverage
f. Open City Hall topic (436 visitors with 120 statements or the equivalent of 6 hours of
public comment)
g. Staff surveys
h. Frequently Asked Questions by topic
i. Regular email updates to staff
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All feedback received through the information sessions and Open City Hall is compiled in
Attachment D.
The City also engaged a firm to complete a statistical survey of residents’ preferences regarding
a cannabis tax measure. The survey had 846 responses and a +/-4.9% margin of error. The results
of the survey are summarized below1:
Over two-thirds (68%) of all voters are in support of passing a cannabis commercial
activity tax measure to generate additional revenue for essential City services.
Initial Support for Cannabis Commercial Activity Tax Measure
Definitely yes
Probably yes
Undecided, lean yes
Undecided, lean no
Probably no
Definitely no
Undecided
43%
20%
5%
3%
5%
17%
6%
Total
Yes
68%
Total
No
26%
ENVIRONMENTAL IMPACT
There is no environmental impact associated with the adoption of the FHRP. However,
components of the plan are focused on increased sustainability and use of less consumable goods
in an ongoing effort by the City to address long-term environmental concerns.
FISCAL IMPACT
Fiscal impacts of the Plan is a balanced budget during each fiscal year from 2018-19 through
2020-20. This report sets forth strategic direction for all City Funds to follow in the
development to the 2018-19 Budget Supplement which will be presented to Council on June 5
for discussion and on June 19 for adoption.
Next Steps
Integration with the Financial Planning process
As noted in the Plan itself, the Fiscal Health Response Plan will be applied to the 2018-19
Budget Supplement as well to the 2019-21 Financial Plan process.
1 A full analysis of survey results is included as Attachment E for the Funding of the Future item.
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For ease of use, and so that Council and the community can review the implementation of this
Plan with respect to solving this problem, this document will be updated with a record of Council
meetings regarding the Plan’s implementation.
Council
Meeting Date
Action Related to FHRP Taken
April 17, 2018
Adoption of FHRP and Strategic Budget Direction for Implementation for
2018-19 Budget Supplement
Upcoming Meetings and Next Steps
June 5
1. Consideration of Placement of Cannabis Tax on November Ballot
2. Presentation of 2018-19 Budget Supplement
June 19
1. Enterprise Fund Reviews
2. Adoption of 2018-19 Budget Supplement
3. Pension Trust and/or Prepayment Analysis and Formation
ALTERNATIVES
1. Reject the Plan. Rejection of the Plan is not recommended as staff has spent the past four
months developing the concepts of the Plan as well as the methods to reduce ongoing costs in an
effort to address the City’s budgetary gap associated with increases to its pension costs
associated with CalPERS rate increases. The purpose of this Agenda item is for Council to
review, and if necessary revise the FHRP. No final budgetary decisions are being made with the
adoption of the Plan – rather strategic budget direction is being provided.
2. Address the Problem Differently. Not having a Plan is not recommended. The City has a
history of identifying Fiscal Challenges early, developing Plans to respond to them, and
maintaining a fiscally sound and sustainable financial planning. Changing course now would not
allow staff sufficient time to address this problem in a thoughtful manner in preparation for the
2018-19 Budget Supplement.
Attachments:
a - Reading File - FHRP 12.12.17
b - FISCAL HEALTH RESPONSE PLAN (1)
c - FISCAL HEALTH RESPONSE PLAN (2)
d - Fiscal Health Open City Hall Public Comments
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Last Updated: April 9, 2018
PLAN PURPOSE
The purpose of this plan is to establish a three -year framework to respond to the long-
term fiscal impacts of the significant increases in required pension contributions to the
CalPERS retirement system. This plan is a specific deliverable and is structured in a
manner to provide guidance for budgetary actions in the 2018 -2019 Fiscal Year as well
as to provide broad strategic budget direction for the 2019-2021 Financial Plan.
THE PROBLEM
The City of San Luis Obispo and the other
3,000-member agencies in the California
Public Employees Retirement System
(CalPERS), are facing significant increases
in required pension contributions. The City's
annual CalPERS costs are projected to more
than double in ten years; growing from $7.8
million in 2014-15 to $19 million in 2024-25
for the General Fund. These costs will
continue to grow through 2031-32 and affect
all funds including the City's Enterprise
Funds (Water, Waste Water, Transit, and
Parking).
To addresses these rapidly rising costs, the
City must address an $8.9 million ($7.5
million from the General Fund and $1.4
million from the Enterprise Funds) budget
gap over the next three fiscal years (2018-
19, 2019-20, and 2020-21). The size of the
problem has been informed using fiscal
forecasting supported by third party
economic models, as well as the City's
outside sales tax advisor and a separate
actuary who specializes in pensions.
The City's fiscal forecasting is based on
assumptions such as:
1. Continuing current levels of service.
2. Continuing the commitment to capital
investment including a slight increase
due to ongoing maintenance needs.
3. Modest long-term revenue growth and
inflation.
4. Continuing Local Revenue Measure
(Measure G) funds.
5. Enterprise Funds revenue projections
based on approved and historic rates and
revenue growth trends.
The City must continue to utilize CalPERS as its
retirement system as it is not feasible for the City
to leave without incurring significant costs. To
exit CalPERS, the City would have 30 days to
meet its projected (worst case) financial
obligations estimated to be from $377 to $495
million at the time of separation. Furthermore,
the current legal framework in California restricts
cities ability to reduce retirement benefits for
current employees, as well as retirees. Lastly,
CalPERS forbids offering alternative retirement
benefits for new employees, different from those
reduced benefits that already have been
legislatively authorized.
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Last Updated: April 9, 2018
GENERAL FUND FOCUS; ENTERPRISE
FUND PARTICIPATION
This Plan is primarily focused on guiding
the General Fund closure of the ongoing
budget gap over the next three fiscal
years.
The Enterprise Funds (Water, Sewer,
Parking, and Transit) are also participating
because the problem of rising pension costs
also affects employees of the Enterprise
Funds as they participate in the same
CalPERS retirement system as General
Fund employees. Each fund, however, will
solve the problem based on the fund type
and its unique situation, as discussed later in
this report.
KEY CITY POLICIES AND GUIDING
PRINCIPLES FOR THIS PLAN
• The City’s existing financial policies
provide the foundation for this Plan and
include a balanced, sustainable budget
based on conservative investment practices
and diversified revenues.
• Specific policies which support this Plan
include: the 2001 Fiscal Health Contingency
Plan, the 2014 Financial Responsibility
Philosophy, the Compensation Philosophy
and the 2017 Long-Term Liabilities and
Maintenance of Infrastructure.
• Ongoing Fiscal Health Monitoring
including modeling of economic trends and
incorporation of new data will occur through
the budgetary process and three years of this
Plan.
• Budgetary changes in response to the Plan
will minimize service level impacts.
• Budgetary reductions will be implementable
and monitored during the three years of the
Plan.
• Sustainability principles will be
incorporated into changes in the ways the City
“does business” where possible.
• Capital Improvement Project investment
will not be diminished in the General Fund
and is projected to increase slightly during the
Plan’s effective period.
• The City’s Organizational values will be
considered when evaluating budgetary
reductions so that employees, programs,
departments, and the organization can
continue to support and implement these
values.
• The maintenance of facilities, infrastructure,
and equipment will continue, and reductions
will have the least amount of maintenance
impacts as possible.
• The application of unassigned fund-balance
due to one-time expenditure savings or one-
time increase in revenue will continue to be
applied to paying down long-term unfunded
liabilities and investment in infrastructure
and/or critical equipment.
• Ongoing increases in revenue will be
carefully evaluated and will also be
considered as a means to speed up the
paydown of unfunded liabilities. The City will
carefully evaluate the tradeoffs of expanding or
adding new programs, rather than paying down
unfunded liabilities.
• The City will work closely with its elected
representatives and others (including the
League of California Cities) in ongoing efforts
to address long-term changes to the CalPERS
system.
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INTEGRATION OF THE PLAN WITH THE FINANCIAL PLANNING PROCESS
The Fiscal Health Response Plan will be applied to the 2018-19 Budget Supplement as well
to the 2019-21 Financial Plan process. The 2019-21 Financial Plan will include Major City Goals
informed by public participation. However, the Fiscal Health Response Plan sets forth the
framework by which the 2019-21 will need to close the structural budget gap of $8.9 million over
the term of this Plan.
For ease of use, and so that Council and the community can review the implementation of this
Plan with respect to solving this problem, this document will be updated with a record of Council
meetings regarding the Plan’s implementation.
Council Meeting Date Action Related to FHRP Taken
April 17, 2018
1. Adoption of FHRP
2. Strategic Budget Direction for 2018-19 Budget Supplement
To be completed as meetings
occur.
Scheduled meetings include June 5 and 19, 2018 Council meetings on
the 2018-19 Budget Supplement and primary options to address
unfunded liabilities.
ELEMENTS OF THIS PLAN
There are three key components to this Plan. These components create savings and
revenue necessary to address the unfunded liability. In addition, there are two primary
options for reducing the increased costs of the City’s unfunded liability.
THREE KEY COMPONENTS PRIMARY OPTIONS TO ADDRESS THE
UNFUNDED LIABILITY
1. New Revenues
2. Operating Reductions and New Ways
of Doing Business
3. Employee Concessions
1. Prepayment of both normal and
unfunded PERS Costs
2. Section 115 Pension Trust Formation
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KEY COMPONENTS OF THIS PLAN
The City must address an $8.9 million ($7.5 million from the General Fund and $1.4 million from
the Enterprise Funds) budget gap over the next three fiscal years (2018-19, 2019-20, and 2020-
21). There are three key components that have been identified to accomplish this Plan: 1) new
revenues, 2) operating reductions and new ways of doing business, and 3) employee
concessions. These will be apportioned as follows for the General Fund:
NEW REVENUES
30-40% of the solution is proposed through new revenues. Only the General Fund will
participate in this component.
• A General Fund Cannabis Tax. The General Fund’s primary sources of funding are taxes
and fees for services. A general-purpose tax on Cannabis sales, requiring voter approval of a
simple majority, will be evaluated for placement on the November 2018 ballot.
Should a Cannabis Tax be Unsuccessful? Should a Cannabis Tax be unsuccessful,
either by not receiving voter approval or by underperforming in projected revenues, other
new sources of revenue will be evaluated, such as consideration of increased Transient
Occupancy Tax (TOT) or a Stormwater Tax. Additional revenue from taxes and any
recommended would require further direction from Council prior to implementation.
• The Enterprise Funds will not propose new revenues to solve this problem. The
Enterprise Funds are funded by rates and/or fees for the services provided. Transit is primarily
funded through Federal and State grants and programs in combination with a 20% match from
fares. Increases to rates and/or fees will not be made to close this budget gap in the Enterprise
Funds. Any changes to those rates and/or fees in the Enterprise Funds during the fiscal period
of this Plan will be due to other cost increases or a result of enhanced fee recovery unrelated
to unfunded pension liability cost increases.
30 -40%
20 -30%
30 -40%
Revenues
New Ways of Doing Business
Operating Reductions
Concessions
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OPERATING REDUCTIONS AND NEW WAYS OF DOING BUSINESS.
30 to 40% of the solution is proposed from operating reductions and/or new ways of doing
business. All Funds and Departments will participate in this component to varying degrees.
OPERATING REDUCTIONS
1. Proactive Fiscal Management.
a. Refinance City Bonds. Eligible City
bonds will be refinanced to reduce debt
rates.
b. Pay CalPERS Required Contribution
in One-Lump Sum Once A Year. Based
upon the City’s cashflow analysis, the City
will exercise the option to pay
contributions to CalPERS in one lump
sum resulting in ongoing savings.
CalPERS offers two options of payment,
annual and one-lump sum.
c. Evaluate other Fiscal Efficiencies.
For instance, credit card bank charges
will be evaluated so that any cost
reductions which do not diminish
customer service are implemented. Other
fiscal management efficiencies will be
explored for cost savings.
2. Pursue Energy Efficiencies and
Consumption Reductions. Departments
will evaluate budgets to identify energy
efficiencies which could save both costs and
energy. Fuel and other consumables usage
will be reduced through fuel efficiency
vehicles and/or use pattern improvements.
3. Consultant services agreements. When
possible, consultant services agreements
will be renegotiated for better value and/or
budgeted amounts will be adjusted to reflect
service levels needed.
4. Other Agreements. The City has multiple
agreements for a myriad of purposes ranging
from the purchases of goods to the provision
of City services and/or use of City facilities.
Those agreements subject to renewal will be
evaluated for the opportunities to decrease
costs or to increase cost recovery while at
the same time balancing the value of
community partnerships.
5. Tax and Fee Enforcement. The City will
continue to proactively seek compliance with
business license, Transient Occupancy Tax
(TOT) Homestay, Code Enforcement, and
other activities which could result in more
accurate revenue collections.
6. Long-term liabilities. Consistent with the
City’s fiscal policies, the City will continue to
utilize one-time funds to pay down unfunded
liabilities and to invest in infrastructure.
7. Risk Management. The City will continue
to actively implement its “30% in 3” risk
management program to reduce liability and
worker’s compensation expenditures.
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NEW WAYS OF DOING BUSINESS
1. Sustainability.
The City will pursue increased
investment in sustainable infrastructure
with positive and short-term paybacks on
investment.
2. Enhanced Efficiency & Effectiveness.
a. Energy Efficiency.
Including the use of solar power will
be explored and implemented when
possible for short and long-term cost
savings. Other energy efficiencies
will be evaluated as well.
b. Enterprise Resource System.
The Motion project, consisting of
business process re-engineering and
implementation of an Enterprise
Resource System, will result in
decommissioning of several older
systems and will create opportunities
for employee efficiencies and
effectiveness.
c. Equipment Replacement.
Equipment replacement will result in
energy savings, more accurate data
collection, and more accurate
revenues will be identified.
3. Thoughtful re-organizations.
Staff transitions will be used to evaluate
current staffing levels and service
provision. The City will evaluate cross-
departmental operations, service levels,
and contracted services for re-
organization opportunities.
EMPLOYEE CONCESSIONS.
20% to 30% would be contributions via employee concessions. All Funds, General and
Enterprise, will participate in employee concessions.
• In addressing unfunded pension liability as it relates to employee concessions the City’s
adopted Fiscal Sustainability Philosophy, Compensation Philosophy and Labor Relations
Objectives will provide guidance.
• The City will meet and confer in good faith with its represented employee groups regarding
the impacts of changes to wages, hours, and/or working conditions.
PRIMARY OPTIONS TO ADDRESS THE UNFUNDED LIABILITY
The City will evaluate each of the options in June 2018: Prepayment of unfunded liabilities by pre-
paying PERS and/or funding a Section 115 Pension Trust to make future payments to PERS.
The use of each method may vary by Fund.
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COMMUNICATIONS STRATEGIES
The following identifies communication strategies with the Community and employees.
COMMUNITY ENGAGEMENT
As is the City’s practice the Community will
be engaged consistent with the City’s Public
Engagement and Noticing (PEN) Manual.
There will be multiple methods of
communications used to inform and educate
the community as well as receive feedback
and address questions and concerns. In
addition to the PEN methods of
communication and public engagement will
include:
• Public Notification of Council
Meetings on the Plan.
• What’s New in SLO and other
website informational postings.
• E-notification, social media posts
and press releases.
• Community forums and
workshops in conjunction with the
financial planning process.
• Presentations to City Advisory
Bodies and interested community
groups.
• Open City Hall topics.
EMPLOYEE ENGAGEMENT
As is the City’s practice all employees will be
engaged in the financial planning process
and the application of this Plan to that
process. There will be multiple methods of
communications to inform and educate
employees as well as receive input and
address questions and concerns.
• Briefings with City Manager,
Department Heads and Budget
Manager.
• Updates via emails and
SLOWhat Monthly publication.
• Briefings with employee
associations’ representatives.
• Surveys to Employees
• Organization-wide briefings.
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IMPLEMENTATION OF THE PLAN
• The Plan will guide staff’s preparation of the 2018-19 Budget Supplement for Council’s
consideration and adoption in June 2018.
• The Plan will guide the Financial Plan process for the development of the Major City Goals
and Financial Plan for 2019-21.
EXTERNAL IMPACTS TO PLAN
This plan has been based on assumptions made in the fiscal forecast in December 2017. It is
based on fiscal forecasts which have multiple inputs from multiple economic resources both
external and internal to the City. However, a forecast is an estimate at a point and time and during
the life of this Plan there could be significant external forces which further impact the City’s fiscal
forecast. There are other fiscal policies and plans in place to help guide such a change. The
following could have impact to the City’s overall budget through either expenditures or revenues
and would result in staff returning to Council for further direction.
• Changes in Economic Conditions. The nation continues to be in an unprecedented
economic expansion following the Great Recession. This is unlikely to continue for the
entire period of this Plan. Additionally, changes in federal fiscal policy and grant funding
may result in a slowing of the national and local economies.
• Diablo Closure
The closure of Diablo Canyon presents an uncertain economic impact to the City and
County of San Luis Obispo. At the time of this Plan’s creation, the mitigation of that
impact is uncertain. The City will continue to have a lead role in addressing this problem
and preparing an economic and financial analysis of the impacts of this closure. This
analysis will be incorporated into the 2019-21 Financial Plan.
• Further CalPERS Changes. Required contributions to CalPERS are based on actuarial
assumptions and further changes may occur if approved by the CalPERS Board.
Examples of past significant changes in assumptions include changes to amortization
periods, changes to expected rate of return, and changes to demographic assumptions.
Future changes in actuarial assumptions may once again result in significant fiscal impacts
to the City.
• Natural Disaster. All municipalities are vulnerable to natural disasters be it earthquake,
fire, or flood. The City maintains reserves for these unfortunate circumstances but in
recent years the magnitude of disasters seen in neighboring cities north and south have
been at unprecedented economic levels.
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
Administration Contract Services
Other Operating
Expenses
Ventures &
Contingencies
Networks Services,
Community
Promotion,
City
Administration,
Economic
Development,
Administration &
Records,
Contract Services
Support Services
Support Services
Subtotal
$64
$6
$45
$115
Reductions in contract services will
result in increased inhouse network
services, less opportunity for the
PCC to fund last minute projects,
improved value of contract
performance, lower contingencies in
contracts, and an adjustment in the
budget for services not used.
An analysis in operating expenses
has identified that there are annual
savings and this budget can be
reduced.
A reduction in V&C results in less
available funding for special projects
of a Citywide nature.
Finance Contract Services
Operating Expenses
Accounting
Accounting
Subtotal
$5
$10
$15
The City has been preparing its AB
1600 report annually and the
contract for service will be adjusted
downward to reflect that.
An analysis of operating expenses
identified historical annual savings
and this budget can be reduced.
City Attorney Contract Services &
Operating Reductions
Subtotal
$19
$19
The City Attorney has reduced its
budget to provide temporary staff via
contract services and an analysis in
operating expenses has identified
that there are annual savings and this
budget can be reduced. Should a
legal matter arise that requires
additional staffing it will be address
on a case by case basis with Council.
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
Human
Resources
Training
Tuition
Reimbursement
PACE
Contribution
Appointed
Officials
Subtotal
$19
$6
$3
$2
$30
Elimination of budget for
unanticipated trainings, majority of
City training offered through
contract with the Centre for
Organization Effectiveness.
Reduction in budget to historical
average.
City's investment in the Centre for
Organization Effectiveness makes
PACE investment redundant.
Reduction through contract
negotiation for Appointed Officials'
Evaluations facilitator.
Parks &
Recreation
Youth Services
Recreation
Administration
Youth Services
Staffing,
Contract Services
&
Operating Budget
Re-Organization
$49
$82
Eliminate the SLO Teens Program
and use City Buses for local Summer
Camp Field Trips. The Teen
Program was not staffed during
2017-18 and will therefore not
impact current students nor a filled
position. Elimination of this funding
limits the department's ability to
engage teens in positive activities in
the future. To reduce liability
consistent with the City's "30 in 3"
initiative, Youth Services will no
longer contract for bus trips outside
of the region.
The Department has completed a re-
organization across multiple
programs to increase efficiencies.
Additionally, the reduction of a
vacant Administrative Assistant 1
position focused on customer service
and public counter duties is
proposed. As a result, the
Department's public counter hours
will be reduced but users may still
register online 24 hours a day and/or
make appointments. The use of part
time supplemental employees is
required to continue to provide in
person customer service six hours a
day.
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
Subtotal $131
Community
Development
Operational
Efficiencies
Re-organization
Community
Development
Admin.,
Development
Review, Long
Range
Planning, Human
Relations
Development
Review,
Housing
Assistance,
Building
& Safety
Subtotal
$21
-$11
$10
Reorganization of the Department
utilizing current and future
anticipated vacancies to obtain a
sustainable business model should
have little to no effect on service
levels but will require the use of
supplemental resources during times
of high development activity. In
addition, the reorganization relies on
procedural changes, and “delivering
service differently,” with respect to
the path that certain projects take
through the entitlement process.
These procedural changes are being
pursued as part of the Zoning
Regulations update.
The savings comes from the
reclassification of an Associate
Planner to a Planning Technician
and reducing historically underspent
operating budgets. A Code
Enforcement Technician I position
will also be reclassified to a Code
Enforcement Supervisor as-a-result
of the determined Code Enforcement
priorities per Council direction and
the Housing Programs Manager has
been reclassified to a Senior Planner.
The reclassification of the Code
Technician is an increase to
operating cost, however, total cost
reductions yield a net savings.
Public Works Energy Efficiencies
/Consumption
Reduction
Building
Maintenance,
Swim Center,
Fleet, Parks
Maintenance,
Street
Maintenance,
Traffic Signals
$293
Energy conservation at City facilities
is projected to reduce electricity
usage resulting in. Reductions in
fuel driven by historical trends and
the City is replacing its older fleet
with energy efficient vehicles which
has reduced their overall
consumption. The replacement of
the existing turf at Damon Garcia
sports complex with a more robust
species is expected to reduce the cost
of fertilizer. New technologies in
irrigation controls will also mean an
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
Operational
Efficiencies
PW
Administration,
Traffic Signals,
Street
Maintenance,
Transportation &
Engineering
Subtotal
$21
$314
overall reduction in water use. Staff
also projects a decrease in water use
should the area receive an above
average rain fall during the rainy
season. A decrease in the cost of
asphalt will result in overall cost
savings. Replacement of older
traffic signals with energy efficient
models will result in a projected
savings in electricity use.
Due to operational efficiencies in
consolidating office supplies,
replacing hard copy reports with
electronic copies, will result in
savings in office supplies and print
& reproduction. Reduction in
contract services and operation
materials for traffic signals and
transportation & engineering can be
absorbed with existing staff and the
program's budget. Education and
training reductions will be offset
because for those staff that do attend
trainings, they will present key
messages and materials to remaining
staff upon their return.
Fire Consumables/Utilities
Education & Training
Operating Reductions
Fire
Administration
Fire Admin., Fire
Apparatus
Services, Fire
Prevention
Hoses and Fittings
Subtotal
$4
$11
$14
$29
Result of installation of sustainable
landscaping.
Reductions are accomplishable and
will require sharing of information in
a train the trainer format and more
focused selection of training
opportunities.
An analysis in operating expenses
has identified that there are annual
savings and this budget can be
reduced.
Police Operating Reductions
Police Admin,
Neighborhood
Services
$23
Reductions are possible due to
operating changes, a no longer using
software that was ineffective, use of
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
Contract Services
Police Admin,
Patrol,
Investigations,
Support Services,
Neighborhood
Services, Traffic
Safety
Subtotal
$10
$33
an existing citywide communications
contract for efficiencies, more
targeted disbursement of educational
materials.
Contract service reductions are
possible due to operating changes, a
no longer using software that was
ineffective, use of an existing
citywide communications contract
for efficiencies, more targeted
disbursement of educational
materials.
Expenditure
Reductions
New Ways of Doing
Business
Concessions
Debt Refinancing
CalPERS
Prepayment
Business License
Cannabis
New Ways of
Doing Business
Code Enforcement
TOT
$83
$323
$150
$100
$20
$50
$50
$700
This is the real savings in year 1
based on cash flow schedule. Y2 is
$364k and Y3 is $366k.
Prepay Unfunded Liability in July of
each year in place of on-going
monthly payments.
The expected results of business
license enforcement and collections
Conservative estimate in Year 1 due
to business ramp up period.
New revenue from Cal Poly contract
re-negotiation.
The expected results of the City’s
Code Enforcement Program
Increase enforcement of homestay
collections.
Grand Total
$1,102
$370
$2,172
Expenditure Reductions
New Ways of Doing Business
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Appendix A 2017-2018 Fiscal Health Response Plan- Proposed Reductions
Department Reduction Type Amount
(thousand) Service Level Impact
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Fiscal Health Response Plan – Comments and Suggestions
October 5th, 2017 Informational Session
On October 5th, 2017, City staff held an informational session about the City’s projected $8.9
million budget gap and potential solutions to maintain a balanced budget in the future. Members
of the public and City staff were encouraged to attend the event, as well as provide written
comment/Suggestions. The comments below are the written suggestions of those who chose to
participate and provide feedback about the Fiscal Health Response Plan.
When the state had a financial crisis, it relied on furloughs to help. City employees have been
willing to do this, but have been denied every time. Good enough for the state…but not for SLO?
Offer a “golden handshake” or an early retirement incentive. Yes, it’s a short term, one-time only
solution but it will reduce the number of Tier One employees and increase the number of Tier
Two and PEPPA level employees.
1) Increase retirement age into the 60’s. All retirement (full age should be moved to 62-> 64)
2) Stop all “perks” such as employee free or reduced parking
3) Provide free/secure bicycle parking and reduced bus/RTA rates for staff all
The states pension reform in 2012 was incomplete, a political compromise. Suggestion: City
should continue to work with other cities, The League of California cities, and to the state
(Governor + State Representatives). Develop a Statewide approach to this “local government
crisis” which ultimately could result in reduced services to citizens.
How about floating or producing a ½% sale tax in the City for transportation such as measure J
last year. This could be specified for maintenance and CIP transportation issues. There by freeing
General Funds to pay CalPERS.
Thanks for providing more info/background
1) Make the CalPERS program like that in the private sector. (employee contribution, vacation,
health benefits, etc)
2) Police Chiefs, Fire Chiefs, City Managers, etc. should not have it so easy to come and go
from City to City. This is a drain.
3) I am not sympathetic to your list of reasons for why costs are increasing. All of these have
affected us in the private sector too. Where does all the “Fixed Expenses” CalPERS money
go?
Find & utilize local (or non-local) benefactors to sponsor existing programs/events with their
private funding. Community fundraisers towards general fund…would that money go into
CALPERS funding? Televised dance-a-thon?? Parks & Rec. would host it!! ☺
1) Cancel Cola for Current Retirees.
2) Plan ahead for budget shortfalls
3) Don’t take large payouts
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More volunteers (unpaid).
Note: It is not just CalPERS that was affected by lower returns. The General Population was
equally affected—whether their savings were in investments or in a bank savings account.
Additional employee contributions to retirement and health plans.
Although probably a drop in the bucket, consider employee rather than City funding any 401k—
type retirement plan. Rationale: City employees receive retirement checks from CalPERS. Any
supplemental retirement can be (should be) established and funded by the individual concerned.
If citizens & rate payers are to bear part of this burden, then so should some (if not all) of the
non-profits that receive City funding. There are other funding mechanisms that can pick up the
difference.
1. Stop street sweep in residential areas—they sweep the middle of the street not the gutters.
2. Stop getting all consultants.
1. Sell/rent/lease unused water allocation i.e. unused naci water to communities that need water.
2. Cal Poly/Cal Poly students use 2 lot of City resources at expense or tax paying residents.
Some sort of compensation from poly/students.
3. Like it or not Marijuana sales are coming-City should consider cashing in on that reserve.
4. Use Diablo closure $ dollars to make lump sum PERS payment.
• Consider parks, recreation, OS & Cultural Resources consolidate-bring Nat Res/ OS &
Adobe/facil. Mgmt. into P&R. Consider all P&R svcs-parks maintenance as well-&park
planning-similar to transp. planning and utilities.
• Why not use some City contingency funds?-> to pre-fund a retirement trust fund?
• Consider consolidation/re-org of CDD -> Why 2 Div. Directors + Principle Planner in Dec.
Rev—Need that many supervisors/mgmt? Consider other structures—less sloed.
• Homestay registration = $ Make it easy to legally provide.
• Consider increasing TOT -> Easy for public to support b/c $ comes from visitors?
• Retirement (early) incentives fir staff who are “close”?
• Corporate sponsorship for Daman Garcia sports fields.
• How to make legalization of cannabis net revenue positive for the City?
• Increase parking fees/ allow more overnight pking in structures for $$,
Move one time surplus dollars into a trust fund to hedge the City’s unfunded liability “moving
target”
Increased fees for public noticing for large development projects.
Use the City’s yearly “surplus” money to help pay down deficit.
Retirement incentive (pay flat amount to retire by specific date)
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Private citizens (homeowners) save hundreds of $ a month by putting solar panels on their
roof…why not the City? Lots of open space…in the corpyard, for starters—the City’s large
investment in equipment could be protected from sun & rain…
Parking spots & spaces in structures and on the street that offer vehicle charging for additional
payment enhancing electric vehicle use & providing revenue.
Stop hiring expensive consultants. Let staff do work.
Open City Hall Forum
In addition to the October 5th meeting date, an online forum through Open City Hall, has been
available for members of the public to provide feedback and comments/suggestions regarding the
Fiscal Health Response Plan. The comments below are the results of 120 participants answering
the following two questions: 1. What feedback do you have about the potential components of
the Fiscal Health Response Plan? 2. What ideas do you have for workable solutions to address
the problem? The answers to these questions are organized below by question.
1. What feedback do you have about the potential components of the Fiscal Health
Response Plan?
How embaressing that this situation has been permitted to evolve into the mess that it is.
I would rather see smarter decisions, and trimming of the fat first. Be more responsible with the
public trust (money).
OPERATIONAL REDUCTIONS or less expenses for questionable builidnig projects: Forget the
Prado Rd. Fwy interchange (at least for the time being)
My feedback is extreme concern… concern about being in this position now… and worry that
overspending will continue to happen w/o lessons being learned.
The problem is a balance sheet problem – the underfunded pension pool is an asset that is
smaller than the pension liability. Treating the problem as an annual expense problem is going to
result in inadequate action.
New ways of doing business: How do you get back to why a COMMUNITY CHOOSES to
become a City in the first place? It is not to form a corporation that will become the largest
employer in town with the best benefits and salaries in town (although there would be nothing
wrong with that if it were sustainable), it's for more localized representation compared to
remaining in the County - Period. It's cityofslo.org not cityofslo.com, the residents and
businesses are not shareholders who receive dividends when the City pats itself on the back
("fiscal responsibility") for 10's of Millions in reserves (e.g. Santa Barbara; while the County has
to hawk it's fire engines). A City should not operate like a normal corporation making decisions
based on increasing IT's revenues and decreasing IT's liabilities, it (supposedly) represents the
needs and desires of THE COMMUNITY that elected to form it. Decisions from the elected
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leadership should always include a step back to these fundamental facts of 'why' the City in the
first place. 2. Operational reductions: Well let's see, we're talking about 1/5 of the general fund
to work with here? Eliminate all operations? Increase efficiency? Our water bills doubled in
return for the town rallying in water conservation - if we (City- the place - not Inc.) really tried
hard to be the best at conservation could we shoot for tripling our bills!? Are we talking about
reducing operations such as the cost of new rangers to give tickets for dogs off leash or hiking
(on public land) at night, or any of the other super new rules (= violations = revenues) imposed
on our 'laid back' community in the last 5 years? leading to... 3. Revenue options: Well we all
know whose pockets this will come from. Watch the street sweeper, who really cares (often
observed) to go over and over the hard to get spots, change from a service to a revenue generator
like Santa Barbara, with multiple parking patrol vehicles racing in tandem (play flying monkey
music from wizzard of oz) up to a half hour ahead of the sweeper (now charging along in a cloud
of dust) to shower the residents with violations for forgetting to move their cars (to another 'zone'
not close by), for thinking that they still were living the hard to find, real, relaxed pace(?), SLO
Life. We could permit more hotels (for visitors) on any remaining parking lots in a downtown
that the locals still love and frequent (unlike Santa Barbara), and increase parking patrols there as
well. Maybe the City (Inc.) could take credit for our 'happiest place' status and in view of that
'service', impose a new residential happy tax - instead of just raising the run of the mill taxes
(per the other 3,000 cities 'just like us'). 4. Employee concessions: Everyone else takes a pay cut
for the pleasure and privilege of living in SLO, but the City (Inc.) bases it's compensation on
other average City's where the primary reason to move there is jobs, not quality of life. What
other jobs (anywhere or any kind other than government) offer pensions - or binding arbitration
for that matter? The City (Inc.) will always attract great talent for every position because people
wan to live here, and raise a family in a place with an authentic core. We are in this situation
(can kicked for a decade) because the City (Inc.) took care of itself, leaving the community on
the hook for the completely unsustainable debts. The City (Inc.) needs to clean it's own house,
or something much stronger than Measure A is coming, regardless of the team of salaried
attorneys at the governments bequest. I hear that the law is on the side of the City, but the City
needs to get on the side of the community who created their organization - by law - by choice.
Maybe we should have stuck with the County - they may be "broke", but there's no 'pension
crisis' either.
Just like our social security potential shortfall will be born by the recipients, the undunded
Pension should be born by staff & current retirees benefits and not services to citizens.
The City negotiated in good faith, so
We are in deep trouble. The City has made financial promises they cannot keep.
From what I’ve been able to see here, it is very hard to tell what the “plan” actually is.
1. New Ways of Doing Business - suggest an ongoing, continuous review of the services city
government provides. Compare costs incurred (inclduing pension liability, health benefits,
vacation time, etc.) with costs of contracting services out to the private sector. Where
comaprable services could be provided by the private sector at a savings to the taxpayers, these
services should be outsourced to the private sector. This would keep employment and associated
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revenues within the city, but reduce the city's costs. 2. Operational reductions - I think the hiring
chill is a good first step. Every department should do a thorough review of services and revenue
generated with a goal of trimming costs and becoming more efficient. The goal of each
department should be to continue providing excellent service but reduce costs wherever possible.
3. Revenue options - I think the city should charge just and reasonable fees for services
renderred, but not increase fees for water and sewer or add more taxes. These utility services
have skyrocketed in the last decade and this basic necessity should not be used to generate more
revenue; nor should increased taxes be assessed to raise revenue. 4. Employee concessions - I
think employees need to bear an even greater portion of the unfunded pension liability. A
miscellaneous employee retiring at age 62 with 35 years of service, for example, would receive a
pension = 70% of his or her highest annual salary - for life. This is an enormous benefit that
fewer and fewer people in the private sector receive. The costs are huge and the employees
should pay a larger portion of these costs. Secondly, I believe current employees under the
pension formula Tier 1 or Tier 2 should have their contracts renegotiated so as to reduce future
benefits to the Tier 3 formula. Pension benefits accrued to date would remain intact, but on a
going forward basis future benefits should accrue at the Tier 3 rate. This would be an enormous
cost savings to the city and to the employees as it would reduce the need for bigger increases of
the employee's share of pension costs. This is a negotiable item, just like vacation days, medical
benefits, etc. There is nothing 'sacred' about one's pension benefits being accrued in the future.
The components proposed seem fine but I'm more interested in the process to develop the
content, especially "new ways of doing business" and "revenue options." There's no doubt that
current operations and services could be become more efficient. It's not clear the City's current
system of governance supports approaches that challenge the status quo. We should aim not to
reduce services, especially those services that are aligned with our goals set through our 2 -year
budget process.
Increase property taxes (Please know that I also own 3 rentals and still support incremental
increases over the 10 year period)
Glad to see some changes in the way of doing business may be working their way into this
project. The few middle class families that remain in SLO are in danger of being completel y
driven out if City Policy continues down the road leading to an exclusive wealthy retirement
community. Somewhere the City lost the fact that they work for us and developed an incredible
self entitlement program based on keeping up with the Jones's in any other nearby entitlement
Cities.
This is a problem we'll all be facing eventually, either because our own pensions or retirement
funds are at risk or because, as taxpayers, we are paying contributing to pension costs. I'm not
exactly sure what the answer is but I think all PERS employees need to be made aware that their
money may not be there when they retire.
taxpayer money should not be used to transfer money from lower incomes to upper income
retirees.
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Actively working to generate revenue from marijuana sales is a start along with tourism which
seems to be on the rise.
Sorry, insufficiently familiar w/ the current plan to comment.
So far so good, but don't over due it either. City always seems to have a surplus and construction
and housing prices are booming
The components are fine.
The proposed changes look like they're not drastic enough.
Don't want to see our water and/or sewer rates or any other fees for essential services being
raised. If our city truly wants to provide affordability, then raising fees to residents will exclude
more workforce and low income residents.
The issue must be addressed now as it will only get worse. I recommend a variety of approaches
to solve the problem. First, address the root cause by negotiating with the employee unions.
Retiring at 100% of salary is totally unreasonable and must change. Look at enhancing revenue
streams.
people paid into the plan confident that future bills would be paid; it would be stealing to keep it
from them!
Follow the rule of 80. Years of service plus age must equal 80 before an employee can collect his
or her pension. This is the statewide system in Texas.
Lacks specifics and dollars. How can we judge?
sounds like we're in a pickle
Pull out of PERS and provide pensions in line with what private companies provide. Work with
other cities to creat a new pension program that is reasonable.
These shortfalls have been considered/predicted for years. Staff recommendations need to
reflect entrepreneurial thinking and belt-tightening on all levels. Every effort should be made
to maximize income by going after all business licenses (including rental owners) and seeking
every opportunity for legitimate new income streams. As Water and Parking fees are enterprise
funds, they have no impact re: general fund needs.
Not enough.
X
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I think there needs to be some adjustment to salary schedules for fire and police. When you
look at salaries of City of San Luis Obispo employees One notices that fire fighters and police
officers dominate the first five pages of the sallaries of employees. Lets face it San Luis is not
that "rough" of a place to work. It is not like LA or Chicago etc. Additionally, the number of fires
we have in SLO is not high, again not like a big city. I think we could increase age of retirement
of many public safety officers to decrease Cal pers payments.
Reduction of services is unacceptable. Claw back excessive pensions from every "pensioner"
taking in more than $100K.
GREATER EMPLOYEE CONTRIBUTION TO THEIR OWN PENSIONS IS A MUST.
SLO is a member of the CA League of Cities, right?? All members are dealing with this problem
!! Whatever “best practices ” are being developed within that group should be considered for
adoption here!!
We need to stay fiscally viable; so we may have a future for ALL of the visitors revenue
Cut back on the non- essential budget items. Buying open space, re-signage in the City
because someone liked the new font, etc. Focus on working with the employees to come up
with solutions. The employees are the experts, listen to them. Holding the retirement system
over the heads of the employees is just not right. Both sides negotiate and both sides agree on
contracts. The employees just gave back 7.5% a few years ago. I would like to see us stop
blaming someone and start resolving the issues.
Have the City merge with County to create a Health Plan, ie a local Single Payer.
I am concerned that this will be insufficient to really address the issue of the unfunded liabilities.
I do not believe that tax payers in the state have been given a clear explanation on how these
pensions became so severely under funded. Before we funnel more and more money into this
we need a complete accounting of this program. Unfortunately our state legislature can not be
trusted to appropriately manage our tax dollars.
Retirement benefits don't exist for the vast majority of City residents yet we are forced to pay for
the wealthy City Staff to live happily ever after. Hardly equitable.
Just like citizens, government should learn to live within its means. Do not spend money you do
not have, and don't mortgage the future.
None
I am sorry this has been handed off for so many years we all new this was coming.
The problem here as I see it is not the employees in this situation but the continued
mismanagement of city funds by the administrators. The city continues to spend money on pet
projects like buying open space, public art, rebranding, bike boulevards, fighting against plastic
straws and other time and money wasting ideas. Government is supposed to provide services to
the city....water, public safety and public works. Our city though thinks that they can spend
money on whims to appease the vocal minority. Why not ask the city a very simple
question.....When the pension system was super funded and the city was not paying its
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contribution, where did that money go? It is apparent the city mismanaged that part of it and
instead of saving it in a fund for later they spent it.
Government is a farce
Operational Reductions and employee consessions are the way to go.
I do not understand this question.
We are not alone, as other cities face the same issues with PERS rate increase- which likely will
come down again in near future as PERS recovers in the booming stock market, when all other
City revenue levels are at record or near record highs-drastic measures are not prudent or fair
to the citizens and businesses in town.
Stop spending money
Curtail 'feel good' programs. Highest priorities should be clean water, sewers, solid waste, and
road maintenance.
The city must look closely at the cause of this problem - primarily pensions plans. While steps
have been taken to mitigate the future impact of pension plans, the city must look closely at
drastic cuts in this area. Very few private employers are providing any sort of pension. While
cutbacks have been made with the tiered pension plans, further cuts must be made in this area.
Use the 'increase employee contribution' plan first and see how well it addresses the shortfall.
Relunctantly, I recommend raising the SLO city sales tax
See below
Increase employee contributions
This survey makes no sense
The City should look for ways to decrease it's Pension Obligation, not just raise taxes and fees,
or reducing public services. Government pensions are outrageously lucrative to the employee,
and are an unfair burden to place on the taxpayers and citizens of SLO. Current City employees
and retirees need to be asked to take a significant cut to their pension plan, period
reduce expenses to balance budget, employees pay greater share of benefits
Employees need to finance their own retirement accounts, the taxpayers cannot afford any
more money for pensions for past employees, many of whom no longer live in the area
The city is spending millions on new financial software. I'm not sure that software going to
greatly improve staff efficiency and reduce resources usage; they'll have to prove it to me by
showing the fewer number of employees in those roles. Who comes up with these ideas?
It's the pensions. If nothing is done about that the problem with grow with time. Other solutions
are band aids.
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I like that the city pays retirement and every business should
I support operational reductions
Not enough.
I think any solution should leverage wealthy SLO community members vs low-middle income
people and students living in the community.
I have no real experience or understanding of city government or finances, but I LOVE this city,
and want to protect it from falling apart, so...
The plan lacks a realistic view of what the economy will do within the next couple years, and the
ancillary consequences of each option.
The City must first solve the issue of a defined benefits plan which cannot be funded properly.
You must move to a defined contribution plan where employees manage their own retirement
and annual operating costs are known and fixed. unions must be brought to the table and
benefits redefined. it is the only fair solution.
Increased revenue via operations and increased employee contributions to retirement plans are
the only ones that make any sense.
overpaid staff, overtime allowances, pension out of control. it seems obvious
Think more outside the box
I would form a "consulting group" by aggressively consulting with 3-4 other similar size CA-cities
who are dealing with the same issue. SLO does not have to reinvent the "wheel" here
reduce spending for city employee salaries, benefits, etc.. It appears the spending level for city
employees is not sustainable, and the city cannot provide needed services due to the drain of
high city employees benefits and salaries.
Pension plans must be renegotiated people retire younger live longer and make more money
doing so on the back of the rest of the population
City has plenty of revenue. Focus on cost management measures.
City services are already lacking. It is not fair to punish residents for this problem. I will likely
move as will other high earning families.
The City is out of normals with private business which changed years and years ago. This is
why there is a budget issue. The city never earned its money, and thus wastes money
Cut capital improvement projects. Cut open any future open space acquisitions. Cut the plans
and allocations and any work done on the bike master plan.
I'm not sure what this questions means. I don't think I'm alone since a lot of responders ignored
this one.
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Stop letting builders and developers buy off the City Councilmans and Board of Supervisors!
This town has been ruined with all the building and traffic- drive the 101 at anytime and enjoy
the parking lot it has become!
Let all person's take some responsibilty for there own issues, take care of YOURSELF
The plan is ultimately on the right track but it needs more stringent and aggressive goals in
order to produce change.
Avoids the real problem of over spending.
Do the right thing for the people you work for,
Prioritize employees and their promised pay and benefits before spending millions on extra and
less priority items with surplus funds, such as a giant skate part, new million dollar park, or sub
par repaving of LOVR. Time to prioritize the core services and start saying ‘no’ to those who
want everything without being able to afford it.
Operate the city like a private business would.
Unfortunately this train has been on the tracks for a long time and the City is standing directly in
front of it.
It's kind of a cop out to blame it all on pensions. They aren't going up $9 million next year. The
budget cites capital improvement projects
Spend more on double decker busses, $40M buildings (gov center, airport, pet shelter, women's
jail). Spend more on city managers, lawyers, studies, and on bothering the existing businesses
that are trying to make a living.
You need to do a better job.
Cut the pensions
Cut pensions
Separate the pension fund and bankrupt it. Or force concessions.
Reduce their benefits
Multi pronged solutions of equal weight is essential to minimize adverse effects while avoiding a
punitive character.
Stop spending so much money
1. New ways of doing business..Yes! As in, stop throwing around phrases like "Fiscal
Responsibility" if you don't man them. The city needs to re-evaluate its priorities when it comes
to spending. The city employees are not owners of a company who are entitled to the 'excess'
from a few good years, unless they are willing to put up the capital in the bad years. The
decision makers should not have written checks they can't cash. 2. Revenue Options....I don't
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agree with the City seeking additional revenues from residents because it made obligations it
can't meet. 3. Operational Reductions...The residents shouldn't have to experience reductions in
basic services. The city needs to re-evaluate its spending priorities. As example of reduction in
services that doesn't directly negatively impact residents, would be reducing funds put toward
attracting tourists. 4. Employee Concessions...Yes.
The costs are in salaries- you have to cut salaries. You cannot "fix" your problems hoping on the
mythical "pot of gold" at the end of the development rainbow
2. What ideas do you have for workable solutions to address the problem?
It is too late to rearrange the deck-chairs on the Titantic. Ignorgant financial management has
created a scenario where significant adjustments and cut-backs must be made.
Look to privatize departments that are ineffective. Think outside of the box when developing
new properties. The numbers I have seen tossed around for the new police station are crazy.
How about converting an existing underused facility outside the core of the city? Keep part of
the old location, but move the main station to a more affordable part of town. How about out on
Prado Road?
It is scientifically proven that the interchange costs more than the benefits we get from it
(Caltrans Hwy 101 Corridor Study by Kittelson Ass.). It has many problems like environment,
flood protection. It is no more a scenic highway corridor. We need more creative Transportation
Demand Management (TDM) as practised by Cal Poly or the Cities of Davis CA or Boulder CO.
EJ, Fellow Institiute of Transportation Engineers ITE after 56 years of professional experience in
Europe, USA, Mexico. and Middle East. Many thanks for your efforts.
cut the bike master plan entirely. everyone i talk to thinks it can't work in this large of an area
AND puts even more bicyclists and auto drivers in physical danger on roads unable to
accomodate both. stop funding tourism marketing, this area attracts plenty w/o precious
taxpayer money being thrown at it.
Need a plan to close the gap between the pension fund and the liability (calculated using real
and reasonable rates of return.) Maybe a 10 year recovery plan such that by 2027 current
employees and taxpayers are paying pension benefits only for current employees and not for
past employees' past service.
This is a 'crisis' is caused by around 500 individuals (so far)? Here's an idea - the City can
change their retirement plan to the same system as the County, or a similar scale re-structuring
required for a broken system. The new local leadership is in my view the most promising in a
long time, and has been exemplary in reaching out to residents for their concerns, and therefore
the situation is not hopeless. MAYBE this won't be a Pro Forma survey where the expected
outcome will be "well we reached out but nothing came of it so 'we' are forced to bite the bullet
and .....(wait for it)". When you get railroaded the tracks are always greased by waiting until the
last hour - " 'crisis' management". A starter then would be to expand on this outreach, use the
technology and media available to add more transparency to the problem for more residents to
engage in (rather than the .0001% who can stop working or tending their families long enough
to make it to one or two meetings). This is one of the last "real" places this far south on the
coast according to my friends who visit and I agree. There is an irreplaceable intangible at
stake here. I don't like to expound about this place and what makes it such a breath of fresh air,
the easy going community vibe, the last remnants of understatement in a highly desirable
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coastal cal town, but we have to talk about it now if we don't want be talking about what we
gave up.
Eliminate street sweeping in residential areas; it's pointless due to curbside parking and leaf
drop. Consolidate the Planning Commission and the ARC into a five-member "Development
Review Commission," with occasional ad hoc committees for General Plan updates.
If all CALPERS agencies stood united against CALPERS reckless & goofy accounting, we could
fix the problem by reducing the promises to everyone as underfunded private sector pensions
do/have. It would take courage. We need to create a stop-loss amount where we push back and
refuse to pay more. If all agencies stood together, we could resolve this and nor be held
hostage by CALPERS ever again. We can change the rules at the ballot box with legsislation.
Watch for Gov. Brown's lobby efforts to allow these changes.
Get needed revenue by allowing from brick and mortar pot businesses.
Stop hiring anybody, sub-contract out all services and eliminate all new hiring. You have no
choice at this point. The hole that has been dug is too deep.
Keep a hiring and travel “chill”; altogether too many city employees right now. Reduce the
rediculously high salaries of the city police, and again, SLO seems to have way more police
than any other city of its size. I'd get rid of at least half of them.
As stated above in the last point, I strongly believe ALL current employees should be brought
under the Tier 3 (PEPRA) pesnion benefit formula. Benefits accrued would be maintained, but
benefits earned going forward would be under a lower benefit formula. This is required in order
for the city and its taxpayers to get a handle on the pension situation which is only getting worse
day by day.
Fiscal impacts should be a determining factor in evaluating different service changes. For
example, Cal Poly students recently petitioned SLO Transit to increase service. SLO Transit
accomodated their requests. They chose to do so in a way that had the "greatest financial
impact on our operating budget." (Refer to the Minutes from the 9/13/17 Mass Transportation
Committee meeting). When we are facing this fiscal crisis, staff should implement changes that
have the LEAST impact on their operating budgets. Each department making decisions with
fiscal impacts on the forefront would go a long ways towards fiscal sustainability.
Employee contributions and retirement age should be increased for ALL employees, especially
public safety. We need to ensure that we do not repeat costly past mistakes in negotiating
contracts with public safety unions. That said, the City should just not stop hiring or filling
essential positions that support City goals. It's likely that we have unnecessary positions or
redundancy in some departments, but "chilling" hiring and limiting open positions to internal
recruiting hurts our City. We need to bring in new talent from outside of the region to br ing
greater diversity and expertise. The current approach to staffing isn't helping us to hire smart,
creative, and innovative thinkers and doers.
I think that we should update the property taxes with present value of homes. Some old homes
that haven't been sold in many years have a value that is many times their present assessed
value, so their taxes are lower than what others are paying.
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Run the city more like middle class families have to run their families. No more massive new
vehicle replacements programs or shiny new buses. Look forward enough to know not to hire
staff for programs the residents are dead set against like the housing inspection ordinance and
when the program is cancelled those employees should be cancelled as well. The City is not a
high end jobs program. Top tier City management has been grossly overpaid and should not be
hired from outside but from withing the existing ranks when possible. We don't have to be the tip
of the spear on every issue if it is going to cost us. Fix the things we have now before adding to
our responsibilities with more acquisitions and more hires. The bottom line is that until the City
wages and pensions drop to reasonable levels matching the levels of those they work for (Us)
we are doomed for failure. We need to educate the residents against becoming the sheep
willing to follow the "Let's just increase fees on somebody else and move on".
Perhaps CalPERS could become more of an investment banker - employees can designate the
amount of their own wages they want to invest and then collect it upon retirement. The
employees make contributions from their own income and assume the risks and benefits
associated therewith.
reduce PERs contributions and benefits to be in line with an index that includes comparable
jobs and also includes a limit on redistributive effects.
I believe that overtime all pensions should be reduced or eliminated to new hires but at the
same time a livable wage should be paid during employment. Make volunteerism a bigger
factor in supporting the city in areas that would keep additional personnel at or reduced levels.
Use innovative office practices that work learned from other cities of same size.
An effective way to prevent future problems along this line is to promise to pay to Cit y Council
and top City Management a significant bonus at 5, 10, 15 and 20 year intervals if the pension
cost estimate goals are met or exceeded. Similarly a small portion (7.5%) of current City Council
and top City Management salary should be withheld and be payable with interest to the
individuals involved (or their estates) at 5, 10, 15 and 20 year intervals ONLY IF pension goals
are met or exceeded.
Make it a fair, and balanced, system - for the pensioners, for current employees, for the
community, using the four options identified.
I would like to see a modest reduction in salaries across the board for all city employees. A
freeze on any increase of city employee salaries and hiring until CALpers can be funded and
city budget covers the cost.
Reduce our Staff through attrition. We have increased our Staff to the point where we are
paying far too much out to salaries and pension.
Negotiate changes with the unions. For the parking structures, eliminate the free first hour,
people will still use them. Consider adding a half percent increase to the bed tax.
arbitration w/ a committee of 5-6 responsible retirees
See above. People earn their pensions but being eligible to collect as early as 50 is bankrupting
our communities.
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Contract out Fire Protection to Cal Fire as other Cities in the County do. You can set you own
Level of protection and supply Stations and Equipment. Only the personnel and their
management is supplied by Cal Fire. and at a LOWER COST.
maybe a city gas tax of one cent or two?
Reduce pension benefits, change to a defined contribution plan.
Staffing is the #1 SLO City expenditure (like 80 or more % of budget). Cutting hours and
benefits are critical. Some staffers welcome shorter work days. If program costs are
approached, SLO should begin with Parks & Rec and other services considered "nice to have"
while maintaining those vital to daily living . . . vis a vis road maintenance.
I have several friends who have absurdly generous pensions. I have suggested having those
folks agree to a 2- 3% cot to fund future pension costs. The was much less horror than I
imagined. Some pensioners are actually working in the private sector or have second pension.
No one wants to give up money they already receive but even I, as a very low cost pensioner
would give up a few bucks to help out my pension plan. Better than having my plan go belly up
and end up with nada.
First of all, do what Obama did in January 2016. He announced there would be NO COST OF
LIVING increase on Social Security that year. The reason? He said that it was because the
price of gas was low. SLO can do the same thing for the pensions.
Salaries are bloated. Cut salaries, or bring new people in at lower salaries. Pension costs will
decrease also.
I think there needs to be some adjustment to salary schedules for fire and police. When you
look at salaries of City of San Luis Obispo employees One notices that fire fighters and police
officers dominate the first five pages of the sallaries of employees. Lets face it San Luis is not
that "rough" of a place to work. It is not like LA or Chicago etc. Additionally, the number of fires
we have in SLO is not high, again not like a big city. I think we could increase age of retirement
of many public safety officers to decrease Cal pers payments.
AA monetary cap on size of pensions. They should be good pensions, but fire and police with
pensions greater than $100K is just wrong, also for administrators. Cap pensions at $xx and
adjust for inflation from there.
I HAVE ALWAYS BELIEVED THAT CITY EMPLOYEE "COMPENSATION" (INCLUDING ALL
PENSION, HEALTH BENEFITS, ETC.) SHOULD BE ON A PAR WITH THE PRIVATE
SECTOR. AS A PROFESSIONAL IN THE CITY FOR 30 YEARS, I HAD TO PUT AWAY ALL
OF MY OWN MONEY TO FUND MY RETIREMENT. A SIMILAR APPROACH SHOULD BE
TAKEN WITH CITY EMPLOYEES. TO CONTINUE WITH A DEFINED BENEFIT APPROACH
TO RETIREMENT (WHICH HARDLY EXISTS IN THE PRIVATE SECTOR) SHOULD NOT
EXIST IN THE PUBLIC SECTOR (MUCH AS THE PRIVATE SECTOR REALIZED DECADES
AGO). ALL OF US HAVE TAKEN A FINANCIAL HIT TO LIVE IN SLO, ESPECIALLY AS
COMPARED TO THE COST OF LIVING HERE. PUBLIC EMPLOYEES SHOULD NOT BE AN
EXCEPTION.
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THIS Might be far fetched: Charge for farmers market: lots of outta-towners visit!!!!!!!!!
Collaborate for ideas
Hire out our current employees’ expertise. Why can’t we have our building department, police,
fire, water, offer classes in which we charge a fee. How about getting restitution for fire and
police calls that are deemed intentional? How about advertising on our vehicles? Who wouldn’t
want to sponsor the Fire Dept’s medical department or their hose compartment? I’m sure ABC
Bailbonds would love to advertise on a Police car. That’s all “free” money.
Since the elite have restricted taxes on income the City should raise revenues in commercial
areas. Have the City lend money to collect interest. Have the City act as developer for land
converted to housing collecting rent on affordable housing. The City should supply internet
services charging fair amounts for broadband.
Further changes to pensions for new employees. Moving to a defined contribution program.
Lower the cap on pension payout. Give employees the option to contribute for a larger
retirement benefit. Address the issue of waste in these agencies - Overstaffing, outdated
policies that waste money, government red tape that only causes inefficiency, actually
terminating employees who do not perform. Money saved could be used to address the
shortfall. As individuals we have all had to make concession and tighten our belts as we are
taxed again and again. Maybe it's time for the state to do the same thing.
City employees are overpaid when compared to the residents that they serve. They have
become the rich robbing from the poor. General lack of accountability and efficiency.
Whatever changes the city staff comes up with for you (the council) to consider, keep in mind
that the stock market is approaching the end of a 10 year expansion. The likelihood of a
recession in the next year is extremely high. This will have negative effects on the calpers
investments and compound the pension debt SLO will be faced with. So when hearing the city
staff's recommendations for how to handle the pension debt, keep in mind that we are due for a
pension crisis. I would recommend getting a free 14 day trial of Real Vision TV if you want to
understand what state the economy is in, and make more educated/drastic changes than what
the city staff presents to you. Good luck.
City jobs should be paid based on competitive market rates, not comparisons with adjacent
counties. Wage increases should not be 'automatic' but based on merit.
I don't understand why local government thinks they need to provide higher wages and higher
benefit levels than the private sector. Benefit levels should be cut immediately to match what
typical private employers are paying, not phased in over several years. Employees won't quit.
They are not likely to find a better deal anywhere else in the county. If this is not handled
appropriately, when the city goes bankrupt, there will be even more drastic cuts to be made.
Better to make smaller ones now.
I thinks there are 3 solutions: you can raise fees for everything connected to the city 2) you can
spend proposition G money that was promised to the citizens. 3 I thinks it s time we bring the
cost of our city goverdown and I mean the cost in all areas from newly hired park rangers
maybe 1 of 2 or 3 rental inspectors cut to 2 cut salaries and redo the pension plan new hires. I
am not not sure this city council has the stomach for what should be done.
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Fiscal Health Response Plan – Comments and Suggestions
The reality is that a lot of people on this survey just do not get it. PERS pensions are not going
away and the city will not be going to a 401K system. It would take law at the legislature to
make that happen and to leave PERS would cost the city dearly. The employees negotiated
these benefits fairly based on industry standards to blame them is irresponsible and more blame
needs to be put on the administration and their continued mismanagement of funds.
Furthermore you have an elected body who cannot make a decision due to the fact that the
Chamber of Commerce board think that they should have a say in city business, employee
contracts and governing of the city. Too many of our elected officials need to think for
themselves and if they cannot then they need to be held accountable by being recalled or
thrown out of office. The employees already pay their share of the costs and its time for the city
to cut out the fat throughout the city and get back to back essential services period.
Allow marijuana stores in the city
People are willing to work for less to live in SLO. It happens in the private sector, the same
should be true for the City Gov. We don't have to pay the same amounts as other cities.
It's time to start charging for parking. The zoning update should establish a parking maximum
for developers. By reducing parking and realistically pricing parking, you will reduce traffic
congestion while creating a sustainable revenue source. Do not eliminate transit service.
A thoughtful and well balanced approach, increasing revenues by allowing Marijuana sales in
town is a no brainer. Temporarily reducing spending on non essential services for the next
budget cycle. Make policy to utilize future budget surpluses and/or windfalls that the City comes
by be dedicated to paying down PERS obligation. Consider offering older employees some
reasonable early retirement incentives and freeze position if non essential and refill with new
employee in new PERS tier when appropriate. Work cooperatively with current employees to
increase their contributions- within reason of what other city's are doing so not to create and
exodus of quality work force who make this city the great place it is. Thank you for your
consideration
Stop spending money
Significant employee contributions to their retirement programs. They already receive higher
compensation than equivalent private sector employee
Legalize and tax marijuana
Reduce number of employees; cut back on all non-guaranteed pensions (for example, long term
employees should get what is already promised but future payments into their plans should be
reduced); reduce exorbitant public safety overtime; focus only on essential services such as
road maintenance and public safety)
I am a member of a public employee union, and I have to pay about 45% of the total
contribution (11% of my salary) to that system. The city pays nearly 80% of the total contribution
to STRS? Crazy!! Also, reduce the 3% formula for public safety, why do they get 50% mor e than
other employees, and retire earlier. They are great employees with dangerous jobs but that is
just too much of a perk.
Also, ask employyes to contribute more to their retirement...and maybe have a two-tiered
system where new employees have a less-generous pension plan.
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Fiscal Health Response Plan – Comments and Suggestions
1. Base all pensions only on base salary, not any adders due to overtime or unused sick leave
and vacation. 2. Freeze existing pensions (no annual increases). 3. Increase contributions by
current employees. 4. Future employees use 401k type benefit only.
Reduce the city government payroll by cutting positions & departments that constitute
unnecessary luxuries.
Increase employees contributions and reduce operational costs
City manager should be required to take a course in basis mathematics, with the goal that they
learn to understand the true cost of pension plans , discount rates, etc. If prior management
truly understood the math, no one would have ever agreed to the current pension scheme, as it
is not sustainable even at a planned average rate of return of 7.5% (now 7%).
reduce number of employees, utilize contract workers, modify retirement program, eliminate
defined "benefit" plan, employees responsible for benefits, no OT.
Increase employee contributions to retirement. Decrease employee wages to more properly
reflect the value of the service performed. Stop setting salaries based on similar cities. The
wage should be established as what is best for the citizens, not what is best for the employees.
We should establish a citizen group to negotiate all future salary and benefit packages for city
employees.
Quit following stupid industry guidelines such as replacing computers every couple of years.
Replace them when necessary. Buy used vehicles instead and make use of them longer.
Nobody cares about you're brand new shiny vehicles. Lower salaries. There is no proof one city
manager at 300K is any better than a city manager at 100K. Heck, you can have 3 city
managers for 300K and I'm pretty sure 3 is better than one. I'm sure nothing will change except
taxation of the people. It's the only thing government knows.
Increase worker pension contributions significantly.
Increase taxes to pay for the city. The city is great and everyone wants to live here. Assess
each home $100,000 and have rent control put in so the renters don't pay for it. Fine businesses
$10,000 per year for each location if they do not pay living wages and provide retirement. That
way, the city can hire more people who can live here if the current businesses do not pay a fair
wage. It is such a great place, everyone should be able to live and retire here.
Get over it and make $ from marijuana sales
overall, if a transition to 'portable' 401K style retirement plans could be implemented
immediately, transitioning away from the current PERS system, that would be helpful. Fix a
percentage of city payroll budget for safety employees and the associated PERS costs.
Immediate hiring freeze, stop approval of multi-use with minimal bottom floor comercial,
promote storefront marijuana shops near Poly and downtown where tourists frequent.
Policing is an incredibly expensive program to run in any city, and San Luis Obispo is no
different. There is a national movement, led by the likes of Black Lives Matter, Fight for 15,
DAPL, and BDS to divest from institutions that cause our communities danger, and invest in
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Fiscal Health Response Plan – Comments and Suggestions
what keeps us healthy. To take these movement seriously would be to take divestment from
policing seriously. This is not a radical policy idea--in fact, its happening all over the country
(look at Rikers Island, for example!). This would be a perfect opportunity to put progressive
politics into action: divest from policing, invest in health care pensions!
I love the idea of partnering with other small cities facing this, or who have successfully
navigated it already. Taxing weed sounds like a great plan. Solar/wind options that would lower
costs over time; more pay in by employees, raising sales tax, (is there a way to raise it on tourist
focused industries?), and raising property tax on homes not being occupied by the owner (if you
want to own a large portion of our town, pay into it).
Allow recreational marijuana dispensaries in town.
Stop the improvements for frivolous projects, stop giving breaks to residential projects, start
listening to residents and pay in full the pensions earned by last workers.
Tax the rich! Stop taking from people who can barely afford to live here.
Defined contribution plan to replace defined benefits. no other solution will work.
The compensation structure of city employees for a city with our tax revenue is highly
disproportionate. We either need to increase the half cent sales tax to a full penny or really
restructure the benefits packages of employees with 20+ years
the city has indulged its employees for too long; your retired employees ... retire at younger and
younger ages, live here when no young people can afford to and where persons employed in
non city jobs cannot as well. it should be obvious. it should have been obvious decades ago.
start here first, then approve marijuana and tax it , but not before you end the greed of the city
employees here.
Cannabis Taxes
Contract Fire Services w/SLO County/CAL Fire will save MILLIONS & PROVIDE THE SAME
LEVEL OF SERVICE.
Yes. Raise employee contribution to pers. It's an excellent retirement program, but employee
contribution have always been too low for the return. They should be more vested.
Also look at how medium size for-profit companies employing unionized-staff are dealing with
these same issues. Most have switched to 401K plans.
Pay city employees lower salaries and benefits. These items are too a large portion of the city's
budget, and this spending expense is not sustainable relative to city revenues
Cost is mostly payroll, so need to reduce it. Cut police and fire staffing. Their cost is outrageous
due to overly generous pensions. Eliminate overtime where possible. Increase employee
contributions across the board. Cut management salaries. We don't need to pay City Manager
in line with Beverly Hills and other "comparable" cities. Of course, you will not do any of this, so
this outreach effort is just another waste of money.
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Fiscal Health Response Plan – Comments and Suggestions
Increase employee contributions, reduce future pensions, band with other cities to force
CALPERS and the state to live up to their obligations
instead of comparing to other cities, which got SLO in trouble, compare to normal private
business. No pension. Stop it now. 401K. Bring the salaries in line with private business
Cut costs, increase revenue- Raise taxes, Hiring freeze. Limit work on any capital improvement.
Employees should pay more into the system. After all, they are really just paying their future
selves. The City should contribute more to the system. This will make it more difficult to give
City employees future raises thus making their payout at retirement less. The City could curtail
wasteful spending such as poorly designed bike plans (yes, Chorro Street) that residents living
on those streets feel is unsafe.
Stop giving the Board of Supervisors raises! Bloated salaries and benefits need to end!
Easy Fix, do not allow double dippers to collect a dime
Offer those who are close to collecting on CalPers another few year so of work with an incentive
to spread the timeline of payment. Insure that overtime is not paid on all levels, this is simple
scheduling to insure overtime does not occur. Implement expectations of performance, and
make sure there is transparency between the city manager and council. Maximize city property
as best possible to insure property is being utilized to its fullest. Reasses salaries offered by the
city. As a local business owner we cannot compete with the rates offered by the city in many of
the positions. In addition, the expectation of productivity in the workforce is laughable. There are
no performance goals, there are no pressures for the city staff/employees to perform. In fact, it
still holds true the stigma of getting hired by the city equates to a well paying easy going job. A
typical business hires based on experience and has expectations of deliverables. If not met,
people are fired. The city needs to reasses what current job positions are held and where there
might be overlap where salaries can be modified.
While interest rates are low, float a long term bond that covers the entire shortfall. Mandate a
cut in the budget.
The city is crawling with unpermitted construction. Not just the little things but whole houses
being remodled with no permits. I reported one but the city did nothing. Note these can be seen
from the street yet crickets.....
Make Marijuana sales legal. Tax it
It's easy cut spending like we have to do. Cut benefits. Give higher medical copays or less
coverage for a 5 year period. It's what we do have to do with our post tax money.
Cut jobs. I see no other way. Cut waste where can.
Prioritize government and create a hierarchy for services provided. Realize surplus funds as a
way to pay down debt, rather than splurge on added burdens
Cut from the top. The waste is almost always at the management level.
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Fiscal Health Response Plan – Comments and Suggestions
1. Reduce/eliminate unnecessary expenses. 2. Create new forms of revenue by tapping into
areas not yet capitalized on. For example: 1. Retrofit all parking garages with smart automated
tech. Eliminate staff and double the rates. Current rates are too cheap relative to the value of a
downtown parking garage. Consumers will pay as long as checkout is FAST and easy. 2. Make
sure all equipment using up water/energy is as efficient as possible to ensure best rates and
utility expenses. 3. Sell or lease under utilized city owned property to private parties at market
rate.
The only way to truly address this situation is to reduce services and cap the amount of allotted
overtime. Those that remain on staff should be asked to take a voluntary pay cut (especially the
police department as they are the highest paid department in the county).
Hold off on some capital improvements until an infrastructure bill is passed. Focus on
maintaining what we have. Seek grants. Increase enterprise ventures
Spend and tax.
You need to do a better job.
Cut the pensions
Embrace recreational marijuana and thereby increase tax revenue
Cut pensions
As above, it is not fair that the citizens have to pay for an inflated pension. This is worse than
simple bureaucratic red tape. Young tax paying families will suffer while non tax paying retired
people benefit... Perfect way to kill an economy
Reduce their benefits
The problem must be recognized as a temporary demographic one as baby boomers retire.
Reducing certain services may go unnoticed by residents. Certain types of fines should be
increased in areas where compliance has not been satisfactorily achieved according to police
logs and especially where the quality of life is impacted, meaning not parking fine which are
already too high. More city sponsored events which generate revenue may be considered while
other sacred events such as Concerts in the Plaza should remain free. Prudent investment of
city funds to generate growing revenue will be essential
Stop spending so much money
Having the City re-evaluate its priorities with regard to spending of available resources.
Cut salaries for employees making above 150k by 20%, between 100k-150k 18%, between
85K-100K 15%, 55k-85K 10%
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4/17/2018
1
Fiscal Health Response
Plan
1
Recommendation
1. Adopt a Fiscal Health Response Plan.
2. Provide Feedback and Direction Regarding
Application of the Plan to the 2018-19 Budget
Supplement.
3. Provide Direction on Cannabis Sales Tax Measure
for possible May 15, 2018 Return.
2
Staff Presentation - Item 11
4/17/2018
2
Presentation Overview
1 Review the Problem we are
trying to solve with the Fiscal
Health Response Plan
2 Discuss the Fiscal Health
Response Plan
3 Review the proposed
application of the Fiscal Health
Response Plan to the 2018-19
Budget Supplement
What is the Problem we
are Trying to Solve with
the Plan?
4
Staff Presentation - Item 11
4/17/2018
3
What is the Problem?
Similar to 3,000 other agencies
in California, the City faces a
significant increase in
required pension
contributions.
The City’s annual costs to
CalPERS will more than double
in 10 years.
To address these increases, the
City needs to reduce
expenditures by $8.9 million in
the General Fund & Enterprise
Funds over the next three years.$7.8 million$19 million2014–15
ANNUAL
CALPERS COST
2024–25
PROJECTED
CALPERS COST
6
Staff Presentation - Item 11
4/17/2018
4
San Luis Obispo is committed
to…
Good Fiscal
Management
& MCG
Public
Engagement
Quality
Services
The City’s Fiscal Forecasting
Assumptions
1.Based on continuing current levels of service.
2.Continued the commitment to capital investment
including a slight increase due to ongoing
maintenance.
3.Modest long-term revenue growth and inflation.
4.Continuing Local Revenue Measure (Measure G)
funds.
5.Enterprise Funds revenue projects are based on
approved and historic rates and revenue growth
trends.
Staff Presentation - Item 11
4/17/2018
5
Retirement Benefits Basics
The California Public Employees Retirement System
(“CalPERS”) is an agency in the state’s executive
branch that manages pension and health benefits for more
than 1.6 million employees, retirees and families.
The City contracts with CalPERS to provide a “defined
benefit” pension; meaning the retirement benefit is set
based on years of service, final compensation, age, and a
multiplier in the benefit formula.
City employees do not participate in Social Security.
Benefits to retirees are based on tiers which are determined
by the type of work and when they were hired.
How are CalPERS pensions funded?
Employees and the City contribute various amounts of the
total payment each year into the CalPERS investment fund
CalPERS then invests that contribution, and the combination
of the contribution and interest earned are used to pay
retirement benefits that employees have accrued
CalPERS uses actuarial analysis to determine the funding
needed to pay contractually obligated benefits.
Retirement Benefits Basics
Staff Presentation - Item 11
4/17/2018
6
Managing CalPERS costs
through the years
Benefit levels
Enhanced in 2000
Reduced in 2013
Demographic changes
Retirees living longer
Investment losses during the Great
Recession
Creating the unfunded liability
Reduced rate of return
New Lower Benefit Retirement Tiers established
Employees pay a greater share of the total pension costs
Retirement age increases
Paying down unfunded retirement liabilities
What Has the City Already
Done to Address Costs?
City Tier 1 Tier 2 PEPRA
Miscellaneous 2.7% @ 55 2% @ 60 2% @ 62
Police Safety 3% @ 50 2% @ 50 2.7% @ 57
Fire Safety 3% @ 50 3% @ 55 2.7% @ 57
Staff Presentation - Item 11
4/17/2018
7
In FY 2014–15,
$7.8m in actual
pension expense,
Looking ahead,
pension costs are
forecasted to
more than double
by 2024–25
How Pension Costs Grow
If we do nothing:
Expenditures exceed revenues
Staff Presentation - Item 11
4/17/2018
8
If we implement The Plan
December 12th Council Meeting
Solving
the
Problem
Direction on
use of one-
time funds
Direction on
the FHRP
Direction on
10-Year
CIP
Staff Presentation - Item 11
4/17/2018
9
Operational
Reductions
December 12th Council Meeting
New Ways of
Doing Business
Employee
Concessions
Revenue
Options
17
The Fiscal Health
Response Plan
18
Staff Presentation - Item 11
4/17/2018
10
Purpose of the Plan
Affecting all City Funds – the purpose of the
Plan is to establish a framework to respond to
the long-term fiscal impacts of the significant
increases in required pension contributions to
the CalPERS retirement system over three-years.
19
Plan Sections Include 20
Problem
General &
Enterprise
Funds
Key Policies and
Principles
Integration with
Financial
Planning
Process
Elements of Plan New Revenues New Ways of
doing Business
Employee
Concessions
Prepayment or a
Trust
External Impacts
to Plan Communication Plan
Implementation
Staff Presentation - Item 11
4/17/2018
11
Key Policies and Guiding Principles
Existing City policies provide
foundation.
Specific Policies supporting the plan
include:
2001 Fiscal Health Contingency
2014 Financial Responsibility
Philosophy
Compensation Philosophy
2017 Long-Term Liabilities
Ongoing Fiscal Health monitoring will
occur.
Budget changes proposed minimize
service level impacts.
Budget reductions proposed are
implementable in three years.
Sustainability principles incorporated
into solutions.
Capital improvement project investment
will not be diminished.
The City’s organizational values
considered so it can continue to support
and implement these values.
Maintenance of facilities, infrastructure
and equipment will continue.
Application of unassigned fund balance to
pay down debt will continue.
Ongoing increases in revenue will be
evaluated.
City will work with the League and others
to address long term changes to CalPERS
21
Elements of this Plan 22
Key Components To Achieve
a Structurally Balanced
Budget
•New Revenues
•Operating Reductions
and New Ways of
Doing Business
•Employee
Concessions
Options to Address Unfunded
Liabilities
•Prepayment of
CalPERS
•Section 115 Pension
Trust Formation
Staff Presentation - Item 11
4/17/2018
12
A Balanced Approach to Key
Components of the Plan
23
30 - 40%
20 - 30%
30 - 40%
General Fund
Revenues
New Ways of Doing Business
Operating Reductions
Concessions
New Revenues
30-40% of the solution to the problem is proposed
through new revenues.
Only the General Fund will participate in this
component in the traditional sense.
The General Fund’s primary sources of revenues
are from taxes and fees for services.
The Enterprise Funds will not participate in new
revenues in the same way as the General Fund as
they are funded by rates and/or fees for service. Any
changes to Enterprise Fund rates or fees for service
during the term of this Plan will be for cost increases
not associated with the CalPERS pension problem.
24
Staff Presentation - Item 11
4/17/2018
13
Operating Reductions & New Ways of
Doing Business – 30 to 40% of solution
Operating Reductions
Debt Refinancing
Energy Efficiency and Less
Consumption
Renegotiated Agreements with
Vendors
Proactive Compliance with
Collections
Improved Risk Management
Proactive Fiscal Management
New Ways of Doing Business
Energy Efficiency
Enterprise Resource
System
Equipment Replacement
Thoughtful Re-
Organizations
Employee Concessions
20% to 30% are proposed as contributions via
employee concessions as part of the solution.
ALL Funds, General and Enterprise, will participate.
In addressing unfunded pension liability as it relates to
concessions – the City’s adopted Fiscal
Sustainability Philosophy, Compensation
Philosophy, and Labor Relations Objectives will
provide guidance.
The City will meet and confer in good faith with its
represented employee groups regarding the impacts
of changes to wages, hours, and/or working
conditions.
26
Staff Presentation - Item 11
4/17/2018
14
Primary Options to Address
Unfunded Liability
City will evaluate two options.
Pre-paying directly to PERS
Funding a Section 115 Trust to make
conservative investments which fund future
payments to PERS
Use of method may vary by Fund.
Parking and Transit Funds have the
ability to “pre-pay” the specifics of this
will be analyzed and presented to
Council in June.
27
Primary Options to Address
Unfunded Liability
28
June 19, 2018 Council will Consider
• Quantitative and Qualitative analysis of pre-
payment to CalPERS or Investment in Trust.
• Advantages and disadvantages of
accelerated pre-payments.
• Advantages and disadvantages of of
investment policy choices and Trust
Administrator.
• Legal analysis and documentation.
• Recommendations for funding and
amounts.
Staff Presentation - Item 11
4/17/2018
15
Communications Strategies
Community Engagement
Follows the PEN Manual.
Multiple methods use to inform, educate, and
receive feedback.
Employee Engagement
All employees are engaged in the Financial
Planning Process.
Multiple methods used to inform, educate, and
receive input from employees including
emails, SLO What articles, presentations, and
briefings with represented groups.
29
External Impacts to the Plan
Plan based on fiscal forecast assumptions with multiple
inputs and multiple economic resources. However, it is
an estimate and there could be external forces which
impact it in the future.
30
Changes in
Economic
Conditions
Diablo
Closure
Further
CalPERS
Changes
Natural
Disaster
Staff Presentation - Item 11
4/17/2018
16
Implementation of the Plan
The Plan is intended to guide the
preparation of the 2018-19 Budget
Supplement.
Departments have provided operating
reductions and new ways of doing business
that will be discussed next.
The Plan will guide the Financial Plan
process for the development of the City’s
Major City Goals and Financial Plan for
2019-21.
31
Strategic Direction Re:
Application of the Plan to
the Budget Supplement for
2018-19
32
Staff Presentation - Item 11
4/17/2018
17
Application of the Plan to:
General Fund 2018-19 Supplement
Each Department applied the polices
and guiding principles of the Plan to
their 2018-19 Budget submittals.
Changes; reductions, are proposed.
Reductions proposed are those:
With the least amount of service level
impacts
That are achievable in the first year of the
Plan
Application of the Plan to:
General Fund 2018-19 Supplement
• $100,000
New
Revenues
• $1,102,000
Operating
Reductions
• $270,000
New Ways of
Doing
Business
34
Staff Presentation - Item 11
4/17/2018
18
Operating Reductions as applied to
Budget Functions
$90k
$10k $208k
$576k $78k
$140k
New Revenues - $100,000
Cannabis Tax
• March 2018
customer
satisfaction survey
68% of likely voters
support
• Support drops to 62%
if two new tax
measures on same
ballot
•May 15th Council
item on this topic
Assumptions
•Adoption of a
Cannabis
Ordinance
• Placement of a
ballot initiative
November 2018
•New revenues 4th
quarter 2019 of
about $100,000
36
Staff Presentation - Item 11
4/17/2018
19
Operating Reductions & New Ways
of Doing Business - $1,372,000
Refinancing
Operational Savings
More accurate revenue collections
Energy Efficiency
Renegotiated Agreements
Thoughtful Reorganizations
37
Department Reduction
Administration $115,000
Finance $15,000
City Attorney $19,000
Human Resources $30,000
Parks & Rec $131,000
Community Development $10,000
Public Works $314,000
Fire $29,000
Police $33,000
Total $696,000
Operating Reductions and New Ways
of Doing Business by Department
Staff Presentation - Item 11
4/17/2018
20
Operating Reductions and New Ways
of Doing Business by Organization
39
Action Reduction in Costs or
Increases in Revenues
Debt Refinance $83,000
CalPERS Lump Sum Payment $323,000
Business License $150,000
Contract Renegotiation $20,000
TOT Homestay $50,000
Code Enforcement $50,000
Total $676,000
Concessions $1.9 million
ALL Funds over three-years
40
All regular employees participate in the same retirement
system - CalPERS
Adopted policies address the concept of shared responsibility
Phased approach for concessions with the objective amount
of $1.9 million for all funds by fiscal year 2020-21
City will negotiate in good faith with all bargaining units
City will tailor labor agreements to meet mutual objectives.
Staff Presentation - Item 11
4/17/2018
21
Enterprise Funds
Combined the
Enterprise Funds have
$1.4 Million share of
problem over the 3-year
term of the Plan.
Differ from the General
Fund in that they are
funded by rates and
fees for services.
Accounted for separate
from General Fund.
All Enterprise Funds will
participate in employee
concessions.
Solving the problem will
not impact rates or reduce
previously planned capital
improvement projects.
41
Parking Transit
Sewer Water
Parking Fund
Share of problem over Plan’s 3 year term is
approximately $175,000.
Unique position, rate changes (not tied to the
problem) provide adequate resources to address
fiscal sustainability.
Application of the plan to 2018-19 Supplement
propose more efficient contract services and
prepayment of unfunded liability (to be reviewed
and considered in detail on June 19, 2018)
42
Parking Fund 2018-19
Other Efficiencies and New
Ways of Doing Business
Pre-payment of unfunded
liability
$10,000
Staff Presentation - Item 11
4/17/2018
22
Transit Fund
Share of problem over Plan’s 3 year term is
approximately $42,500.
Unique position, rate changes (not tied to the
problem) and working capital that provide adequate
resources to address fiscal sustainability.
Application of the plan to 2018-19 reducing
consummables purchases and prepayment of
unfunded liability (to be reviewed and considered
in detail on June 19, 2018).
43
Transit Fund 2018-19
Other Efficiencies and New
Ways of Doing Business
Pre-payment of unfunded
liability
$42,500
Sewer Fund
Share of problem over Plan’s 3 year term is
approximately $441,000.
2018-19 propose operating expense reductions at
Water Resource Recover Facility through energy
efficiency project and process changes -
$80,000 in savings.
2018-19 propose continued water meter
replacement program which results in more
accurate fee collection due to improved readings
at approximately $20,000,
44
Sewer Fund 2018-19
Revenues Efficiencies and New
Ways of Doing Business
$20,000 $80,000
Staff Presentation - Item 11
4/17/2018
23
Water Fund
Share of problem over Plan’s 3 year term is
approximately $443,000.
2018-19 propose reducing operating expenses in
its water source of supply program $100,000.
2018-19 see continued water meter replacement
program which results in more accurate usage
readings resulting in more accurate fee
collections of about $100,000 in added revenues.
45
Sewer Fund 2018-19
Revenues Efficiencies and New
Ways of Doing Business
$100,000 $100,000
Whale Rock Fund
Whale Rock Commission, a Joint Powers
Authority of the City, Cal Poly and California
Men’s Colony is supported by City Staff.
Any employee concession related reductions
will be reflected in this Fund’s program.
The City will make recommendation to the
Commission that it consider a budget that
addresses its share of the problem.
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Staff Presentation - Item 11
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Next Steps 47
Council Meeting Action Related to FHRP
April 17, 2018 1. Adoption of FHRP.
2. Application of FHRP to 2018-19 Budget
Supplement and Strategic Direction.
Upcoming Meetings
June 5, 2018 1. Consideration Placing Cannabis Tax on
November Ballot
2. Presentation of 2018-19 Budget Supplement.
June 19, 2018 1. Enterprise Fund Reviews.
2. Adoption of 2018-19 Budget Supplement.
3. Pension Trust and/or Pre-payment Analysis
and Formation
Summer 2018 Begin 2019-21 Financial Plan Process using the
FHRP as a Guide.
Recommendation
1. Adopt a Fiscal Health Response Plan.
2. Provide Feedback and Direction Regarding
Application of the Plan to the 2018-19 Budget
Supplement.
3. Provide Direction on Cannabis Sales Tax Measure
for possible May 15, 2018 Return.
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Staff Presentation - Item 11
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25
QUESTIONS?
49
Appendix
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Department: Administration
Reduction Amount Service Level Impact
Contract Services Networks Services,
Community Promotion,
City Administration,
Economic Development,
Administration &
Records,
Contract Services
$64,000 Reductions in contract services will
result in increased inhouse network
services, less opportunity for the PCC
to fund last minute projects, improved
value of contract performance, lower
contingencies in contracts, and an
adjustment in the budget for services
not used.
Other Operating
Expenses
Support Services $6,000 An analysis in operating expenses has
identified that there are annual savings and
this budget can be reduced.
Ventures &
Contingencies
Support Services $45,000 A reduction in V&C results in less
available funding for special projects of a
Citywide nature.
Total $115,000
FHRP
Department: Finance
Reduction Amount Service Level Impact
Contract Services Accounting $5,000 The City has been preparing its AB 1600
report annually and the contract for service
will be adjusted downward to reflect that.
Operating Expenses Accounting $6,000
An analysis of operating expenses identified
historical annual savings and this budget can
be reduced.
Total $15,000
FHRP
Staff Presentation - Item 11
4/17/2018
27
Department: City Attorney
Reduction Amount Service Level Impact
Contract
Services &
Operating
Reductions
$19,000 The City Attorney has reduced its budget
to provide temporary staff via contract
services and an analysis in operating
expenses has identified that there are
annual savings and this budget can be
reduced. Should a legal matter arise that
requires additional staffing it will be
address on a case by case basis with
Council.
Total $19,000
FHRP
Department: Human Resources
Reduction Amount Service Level Impact
Training $19,000 Elimination of budget for unanticipated
trainings, majority of City training offered
through contract with the Centre for
Organization Effectiveness.
Tuition Reimbursement $6,000 Reduction in budget to historical average.
PACE Contribution $3,000 City's investment in the Centre for
Organization Effectiveness makes PACE
investment redundant.
Appointed Officials $2,000 Reduction through contract negotiation for
Appointed Officials' Evaluations
facilitator.
Total $30,000
FHRP
Staff Presentation - Item 11
4/17/2018
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Department: Parks & Recreation
Reduction Amount Service Level Impact
Youth Services Youth Services Staffing,
Contract Services &
Operating Budget
$49,000 Eliminate the SLO Teens Program and use
City Buses for local Summer Camp Field
Trips. The Teen Program was not staffed
during 2017-18 and will therefore not impact
current students nor a filled position.
Elimination of this funding limits the
department's ability to engage teens in positive
activities in the future. To reduce liability
consistent with the City's "30 in 3" initiative,
Youth Services will no longer contract for bus
trips outside of the region.
Recreation
Administration
Re-Organization $82,000
The Department has completed a re-organization
across multiple programs to increase
efficiencies. Additionally, the reduction of a
vacant Administrative Assistant 1 position
focused on customer service and public counter
duties is proposed. As a result, the Department's
public counter hours will be reduced but users
may still register online 24 hours a day and/or
make appointments. The use of part time
supplemental employees is required to continue
to provide in person customer service six hours a
day.
Total $131,000
FHRP
Department: Community Development
Reduction Amount Service Level Impact
Operational
Efficiencies
Community Development
Admin., Development
Review, Long Range
Planning, Human
Relations
$21,000 Reorganization of the Department utilizing
current and future anticipated vacancies to
obtain a sustainable business model should
have little to no effect on service levels but will
require the use of supplemental resources
during times of high development activity. In
addition, the reorganization relies on
procedural changes, and “delivering service
differently,” with respect to the path that certain
projects take through the entitlement process.
These procedural changes are being pursued
as part of the Zoning Regulations update.
Re-
organization
Development Review,
Housing Assistance,
Building
& Safety
-$11,000 The savings comes from the reclassification of
an Associate Planner to a Planning Technician
and reducing historically underspent operating
budgets. A Code Enforcement Technician I
position will also be reclassified to a Code
Enforcement Supervisor as-a-result of the
determined Code Enforcement priorities per
Council direction and the Housing Programs
Manager has been reclassified to a Senior
Planner. The reclassification of the Code
Technician is an increase to operating cost,
however, total cost reductions yield a net
savings.
Total $10,000
FHRP
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Department: Public Works
Reduction Amount Service Level Impact
Energy
Efficiencies
/Consumption
Reduction
Building
Maintenance,
Swim Center,
Fleet, Parks
Maintenance,
Street
Maintenance,
Traffic Signals
$293,000 Energy conservation at City facilities is projected to
reduce electricity usage resulting in. Reductions in
fuel driven by historical trends and the City is
replacing its older fleet with energy efficient
vehicles which has reduced their overall
consumption. The replacement of the existing turf
at Damon Garcia sports complex with a more
robust species is expected to reduce the cost of
fertilizer. New technologies in irrigation controls
will also mean an overall reduction in water use.
Staff also projects a decrease in water use should
the area receive an above average rain fall during
the rainy season. A decrease in the cost of asphalt
will result in overall cost savings. Replacement of
older traffic signals with energy efficient models
will result in a projected savings in electricity use.
Operational
Efficiencies
PW Administration,
Traffic Signals, Street
Maintenance,
Transportation &
Engineering
$21,000 Due to operational efficiencies in consolidating office
supplies, replacing hard copy reports with electronic
copies, will result in savings in office supplies and
print & reproduction. Reduction in contract services
and operation materials for traffic signals and
transportation & engineering can be absorbed with
existing staff and the program's budget. Education
and training reductions will be offset because for
those staff that do attend trainings, they will present
key messages and materials to remaining staff upon
their return.
Total $314,000
FHRP
Department: Fire
Reduction Amount Service Level Impact
Consumables/Uti
lities
Fire
Administration
$4,000 Result of installation of sustainable landscaping.
Education &
Training
Fire Admin., Fire
Apparatus Services, Fire
Prevention
$11,000 Reductions are accomplishable and will require
sharing of information in a train the trainer format
and more focused selection of training opportunities.
Operating Reductions Hoses and Fittings $14,000 An analysis in operating expenses has
identified that there are annual savings and
this budget can be reduced.
Total $29,000
FHRP
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Department: Police
Reduction Amount Service Level Impact
Operating
Reductions
Police Admin,
Neighborhood
Services
$23,000 Reductions are possible due to operating changes, a
no longer using software that was ineffective, use
of an existing citywide communications contract
for efficiencies, more targeted disbursement of
educational materials.
Contract
Services
Police Admin, Patrol,
Investigations, Support
Services, Neighborhood
Services, Traffic Safety
$10,000 Contract service reductions are possible due to
operating changes, a no longer using software that
was ineffective, use of an existing citywide
communications contract for efficiencies, more
targeted disbursement of educational materials.
Total $33,000
FHRP
Staff Presentation - Item 11