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City headed for cliff 

The city government of San Luis Obispo may be headed for financial doom if a five-year forecast report presented to the city council May 4 turns out to be correct.

The report predicts an ever-increasing hole in the city budget—a structural deficit that may grow larger if employee costs continue to increase. It 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 by 2013. If Measure Y, a half a percent sales tax, is rejected when it comes back for voter renewal in 2015, the city could face an $11-million shortfall.

The city’s current general fund budget is $54.4 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 (as of February) compared with the same time last year.

The report’s predictions might be optimistic: the California Public Employees’ Retirement System (CalPERS) is currently reevaluating its long-term actuarial assumptions. It’s widely believed that the reevaluation will lead to an increase in the city’s pension rates.

Several of the city council members pointed out that labor contracts of five of the seven employee unions expire at the end of the year and negotiations for new contracts could bring some relief to the dismal budget situation. Unfortunately, it’s a bad time for such strategy: It’s an election year and unions are usually major players in local elections. The city is also locked into binding arbitration due to a voter’s referendum.

A golden era when the city could do many things has probably passed and a new time of austerity has come, said Mayor Dave Romero.

“I love building things,” said Romero. “We won’t be building much anymore.”

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