Closed to the public 

The city manager of San Luis Obispo has assembled a group of employee representatives and “stakeholders” to advise her in planning for the next city budget. Though the group advising the recently hired city manager, Katie Lichtig, has been portrayed as representing a wide cross-section of city stakeholders, it is comprised mostly of business leaders and representatives of municipal employees.

The list of the members reads like a who’s who of the city establishment: company presidents and CEOs including bank heads; builders and developers; and staff from the Chamber of Commerce and Downtown Association. More than half of the task force does not live in San Luis Obispo. City employees amount to one third of the task force, 11 of the 33 members.

The first meeting of the Financial Sustainability Task Force, as it is formally known, occurred June 24 and was closed to the public; press were barred. Because the task force reports to the city manager it is not subject to the Brown Act, the California law that ensures open government meetings.

Why was the meeting closed to the public?

“I wanted to create an environment where people feel open and honest about the topic at hand,” said Lichtig. “I want to create a group dynamic without people coming in and out.” She turned down the offer by a New Times reporter who pledged to attend every meeting from beginning to end.

The subject at hand is the worsening shortfall in city revenue. Meetings twice a month will be divided into three topics: revenue sources, expenditures, and the Measure Y sales tax.

At least one high-ranking city decision- maker feels having city workers on the taskforce is a good idea, because city employees could influence how bad the city’s financial predicament gets. Salaries and benefits are going up faster than the consumer price index.

The make-up of the task force worries some SLO political observers, including Peg Pinard, a former SLO mayor and county supervisor. “The primary purpose of city government is to get input from and represent the wishes of city residents,” she said. “While it’s good to get business stakeholders’ input, for fundamental equity and balance there must be equal input from a committee whose focus is protecting the city’s great natural resources, which are so highly valued by its residents, and another [committee] preserving the quality of life in our residential neighborhoods. Of course, these committees should be primarily city residents.”

The presence of so many city employees on the list also raises eyebrows. Most of the city’s labor contracts run out at the end of the year and the results of negotiations could be key to the city’s financial health. Some city council members hope employee unions will agree to concessions in upcoming contract negotiations to alleviate future budget shortfalls. But that may be unlikely because union support carries weight in city council elections, and this is an election year.

Employee salaries and benefits consume more than two thirds of the city’s budget. Thanks to a public referendum, the city must engage in binding arbitration with the police and fire unions.

The finance department estimates the city will face a $3-million annual shortfall for the 2011-13 fiscal years. Add scheduled pension payment hikes to the mix, and the budget gap rises to $5 million in 2013. If Measure Y, a half-percent sales tax, is rejected when it comes back for voter renewal in 2014, the city will face an $11 million shortfall.

The city’s current general fund budget is $52.1 million. Sales tax income for the city fell 4.9 percent in the last quarter of 2009 and hotel occupancy taxes are down 10.1 percent compared with last year.

The city’s main retirement fund, the California Public Employees’ Retirement System, CalPERS, is reevaluating its long-term actuarial assumptions. That reevaluation may lead to an increase in the city’s pension contributions.

Municipal budgets take a long time to develop and are a product of many parents. According to Debbie Malicoat, acting finance head for the city, the process starts later this summer when the 13 city advisory bodies, ranging from architecture to planning committees, provide input on what the city priorities should be.

The task force does not have a formal responsibility in establishing the budget but it does have the ear of the city manager. Lichtig is emphatic the task force is simply a way to help her understand better how to deal with the financial challenges facing the city.

“The intent of this team is to really understand the data, policies, constraints, and opportunities for the city’s financial sustainability long into the future,” Lichtig explained. “I am hopeful that the task force will come to a place where it is possible to jointly make suggestions and recommended measures to me for inclusion in future financial plans. This effort is intended to compliment the two-year financial planning process, not in any way be a substitute for the budget process.”

Staff Writer Robert A. McDonald can be reached at [email protected].