San Luis Obispo City Council
January 14, 2025

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
17 This was mentioned consistently despite the addition of several line positions in the last few years. In part because, as new staff have been added, new programs and responsibilities have been added at the same time providing no new capacity to handle existing workload. Continuous expansion of programs, facilities, and parks, such as the incorporation of protected bike lanes, installation of Farmers Market anti-vehicle barriers, and the impending development of additional parks have been notable.

This growth, however, transpires without a corresponding augmentation in staff or resources. This unbalanced progression not only strains existing resources but also poses challenges to maintaining the newly added amenities and ensuring optimal service delivery. The continuing addition of facilities and programs and increasing community expectations strain current staff, limiting their ability to address nonurgent requests and longer-term projects.

The understaffing is also illustrated in the peer comparison data which show that SLO has fewer FTEs per 1,000 residents and significantly lower expenditures per capita than peer agencies. To exacerbate the strained capacity, four new parks are planned to be completed within the next six to twelve months and one large community park is planned in approximately two to three years. Additional staff will be needed to staff these parks. Because some of these parks are in a Community Facilities District, funding will be provided, which will offset the staffing costs.

Recommendation 4. Analyze the impact on staffing
levels and resources before implementing any
new programs.

Recommendation 5. Incorporate maintenance
requirements (staffing, resources) in all capital
project discussions as part of the Budget Review
Committee process.

Using experienced staff to perform lower-level work tasks is an inefficient use of personnel resources. industry best practice is to assign lower-level work to a technician or aide, creating a developmental pathway for them to progress into higher-level positions as they gain experience. This approach not only optimizes resource utilization but also widens the pool of applicants by requiring a lower skill set for entry-level positions.

However, within SLO we observed numerous instances of highly skilled workers performing lower-level work. For example, in Fleet, trained mechanics are routinely used to transport vehicles from outside vendors and to handle lower-level duties such as oil changes. In Facilities

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
18 Maintenance, journey-level staff are used to perform lower-level work such as changing lightbulbs/ballasts, minor carpentry and plumbing repairs and troubleshooting minor work order requests.

To remedy this situation a Mechanic Helper position and a Facilities Aide position should be added to perform these lower-level tasks. This not only enhances employee development opportunities but also justifies the creation of a Lead Mechanic position, providing day-to-day guidance on the shop floor for improved operational efficiency.

Recommendation 6. Add a Facilities Aide in
Building Maintenance.

Recommendation 7. Add a Mechanic Helper
position in Fleet.

Recommendation 8. Add a Lead Mechanic position
in Fleet.

Additional parks have been added without additional staff. By the end of 2024, the Cityís total park inventory will have grown to 28. These 28 facilities are comprised of 596 acres with 114 acres of improved surfaces.

This growth accounts for the addition of the North Broad Street Park, Parks A, B, and C in Avila Ranch, but not any future parks in Availa Ranch or the community park within the Righetti Ranch development.

The recent additions have not been accompanied by new Parks Maintenance staff to maintain the acreage. The addition of new parks coupled with City Councilís focus on remediating encampments in public spaces, leaves Parks Maintenance staff spread very thin.

Recommended Parks Maintenance staffing varies significantly based on climate, park size and utilization. National Data from the 2021 National Recreation and Parks Association (NRPA) Parks Metrics report suggests that on average one maintenance FTE cares for approximately nine acres of active-use parkland. Actual California staffing ratios reported in the publication ìMunicipal Benchmarks: Assessing Local Performance and Establishing Community Standardsî for Anaheim and Burbank vary significantly from 4.39 per acre in Burbank to 10.52 per acre in Anaheim.

If we take the average of the two California data points reported above, we get a staffing ratio of approximately one FTE for every 7.45 acres of improved parklands.

Based on San Luis Obispoís current maintenance staffing of 15.5 FTE it falls very close to this 7.45 per acre level of staffing for the 114 acres of maintained parkland. However, it also should be noted that SLO has

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
19 several smaller parks that typically require a higher commitment of FTE time, so we would suggest a staffing ratio of closer to 6.5 to 7.0 per acre of maintained parkland be used for staffing maintenance projections.

According to the Parks and Recreation Plan and General Plan Element Update from July 2021, on average, parks costs range from $7,500 annually to $12,000. Adjusting this cost for inflation to the current date yields a range of $8,925 to $14,280. The current parks maintenance costs from the 2022ñ2023 Financial Plan was reported at $3,478,282, which works out to $16,885 per acre. Overall, it appears that the staffing may be somewhat on the low side, but costs are high. Among other factors, this may reflect high costs in California relative to the rest of the United States.

We recommend that given the existing high per acre cost, that it would be better to add contract services for tasks such as mowing, irrigation repairs, if possible, rather than adding lower-skill classifications such as parks maintenance workers until additional parks are added to the system. This strategy provides a scalable solution that can accommodate the current size of the parks system without overburdening it with unnecessary overhead costs.

However, as more parks and landscaped areas are added to the system, approximately one FTE for every approximately 7.00 acres of parks should be added. While the general guideline of one FTE for every 10 acres remains relevant for larger parks, smaller sites may necessitate a more nuanced approach, with staffing levels adjusted based on factors such as anticipated usage patterns, terrain complexity, and specific maintenance requirements. This recommendation of 7.00 acres of park is an approximation and should be adjusted based on the type of park and anticipated use.

Recommendation 9. Add staff to the Parks Division
as parks are added to the system.

To assist in analyzing the tasks in the Parks Division that would be best served by contract staff, maintenance plans should be created for each park. The purpose of maintenance plans is to identify and develop standards and frequency for all City park property and facilities. These standards would be provided to current Parks Maintenance staff and contractors to inform them of the expectation and serve as guidelines in the completion of all park-related maintenance work. The plans should reflect the expectations of City management and maintain flexibility for modifications.

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
20 Recommendation 10. Create a maintenance plan for
the parks system and update the plan as new
parks are brought online.

Homelessness response is a new and necessary function. As mentioned above, one coordinator position being proposed as an addition to Parks staffing is to improve the span of control in Parks operations. This strategic addition aligns with our findings from interviews, where it became evident that homelessness issues were consuming a substantial amount of Parks Maintenance staff time. To address this pressing concern, we recommend one Parks Maintenance Specialist be reassigned to deal with homelessness issues and vandalism. This targeted reassignment will not only contribute to more effective span of control in Parks operations but also directly address the resource-intensive challenges posed by homelessness, aligning operational priorities with the community's evolving needs.

Recommendation 11. Assign one Parks Maintenance
Specialist to specifically respond to homelessness
issues and vandalism in the parks.

Acknowledging the broader impact on staff workload and operational efficiency, it is imperative to recognize that environmental factors play a pivotal role in shaping the working conditions of Parks staff. As part of our comprehensive approach to enhancing staffing and organizational structure, we recommend the implementation of a lockable dumpster ordinance to address the challenge of debris accumulation in public spaces and mitigate the impact of homeless encampments. This proactive measure aims to reduce the availability of debris that can be utilized in makeshift encampments, fostering a cleaner and safer community environment.

The lockable dumpster ordinance should require property owners, businesses, and public entities to secure their dumpsters with lockable mechanisms. This will serve as a deterrent to unauthorized access and scavenging, limiting the resources available for homeless encampments.

Additionally, the ordinance can include guidelines for regular maintenance checks by the business owner to ensure the functionality of lockable mechanisms and facilitate swift action in case of malfunctions.

Recommendation 12. Create a lockable dumpster
ordinance.

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
21 Use of contract versus in-house staff appears to be balanced. Having a reliable base of in-house staff is crucial for ensuring continuity and maintaining high-quality services, and the incorporation of contract coordinators exemplifies a best practice in workload management. To further optimize this balance, we recommend a comprehensive assessment of ongoing tasks to identify areas suitable for contract work. This evaluation should include an examination of specialized tasks, work that can be performed with limited instruction, and tasks where external contract services may offer increased efficiency when available on the Central Coast. By conducting this analysis, the Division can refine its approach to staffing, ensuring that the utilization of both in-house and external contract resources is aligned with the specific demands of various projects and operations. This proactive strategy will contribute to enhanced operational flexibility, efficiency, and overall service quality. This work can be a priority for the recommended analyst staffing.

Recommendation 13. Analyze the tasks within the
Maintenance Division that would be best served
with the use of contract staff.

Consideration should be given to how staffing is assigned to the maintenance of parks. Rather than assigning individuals to specific parks, exploring a team-based approach offers several advantages. In such a model, collaborative efforts among team members foster operational efficiency, allowing for the sharing of skills and resources. A parks employee with specialized skills such as irrigation may be able to assist with other parks. A trial section should be implemented as a preliminary step before adopting this approach citywide. This phased introduction allows for the identification of the most optimal implementation strategy, ensuring that the City leverages the benefits of enhanced collaboration, resource optimization, and improved maintenance outcomes offered by the team-based approach. Most medium and larger cities use this type of maintenance approach to parks maintenance.

Recommendation 14. Evaluate dividing the parks into
sections and utilizing a team-based approach to
parks maintenance.

There may be benefits from the integration of golf maintenance within the Parks Division. Beyond the shared similarities between golf and parks maintenance work, consolidating these functions under one department could uncover numerous benefits. One notable advantage is the potential for combined resources, allowing for the efficient allocation of equipment, tools, and expertise between golf and parks maintenance operations.

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
22 Additionally, a unified structure could enhance operational flexibility, enabling the strategic deployment of workers during peak times across both operations. This recommendation, while requiring further analysis, not only optimizes resource utilization but also streamlines operations and bolsters overall maintenance effectiveness within the integrated framework.

Recommendation 15. Evaluate the consolidation of
golf maintenance with parks maintenance.

The proposed staffing and structural changes detailed above are shown below in Figure 3. The realignment and proposed positions address the span of control and workload capacity concerns, while additional resources ensure the efficiency of the Division. Additional positions recommended immediately are shown in Table 5, but it should be noted that this table does not include those additional positions that will be required as new parks are integrated.

Maintenance Division Organization Review
Organization Structure and Staffing Baker Tilly
23 Figure 3. Proposed Maintenance Division Organization Structure Deputy Director
of Maintenance
Operations

56.5 FTEs
Streets
Maintenance
Supervisor
18 FTEs
Beautification
Gardener (1)
Maintenance Contract
Coordinator (1)
Parks Aid (2.5)
Urban Forester (2)
Functions
Oversees contract
services for janitorial
maintenance of
parks buildings and
landscape
maintenance of
smaller parks and
medians
Reactive tree pruning
Right of way young
tree watering
Tree service request
Young tree care
Parks
Maintenance
Supervisor

19.5 FTEs
Facilities
Maintenance
Supervisor

7.5 FTEs
Signal Technician
(2)
Sweeper Operator
(1)
Functions
Maintains street
furnishings and
signs
Operates and
maintains street
lights
Operates and
maintains traffic
lights
Street sweeping
Fleet Supervisor

6.5 FTEs
Facilities
Maintenance
Technician (5)
Facilities Aide (1.5)
Fleet Specialist (0.5)
Lead Mechanic (1)
Mechanic (3)
Mechanic Helper (1)
Functions
Maintains interior and
exterior maintenance
services for City
buildings
Executes unplanned
repairs
Executes planned and
budgeted building
maintenance
Oversees contracted
HVAC services
Oversees contracted
janitorial services
Oversees fire
suppression
Provides limited first aid
kit service
Inspects elevators
Tests and monitors
alarms
Tests and certifies
sprinkler system
Provides pest control
Functions
Asset procurement
and disposal
Corp yard haz-mat
program
Facility generator
maintenance and
operations
Fuel island
maintenance
Maintains and repairs
vehicles and
construction
equipment
Administration
Corporation Yard
Administrative
Assistant II (1)
Business Analyst (1)
Maintenance
Superintendent

25.5 FTEs
Maintenance
Superintendent
28 FTEs
Legend
Red Text ñ New
employee
Blue Text ñ Moved
employee
Streets Crew
Coordinator
9 FTEs
Street Maintenance
Operator (8)
Streets
Maintenance
Coordinator
5 FTEs
Maintenance
Contract
Coordinator (1)
Maintenance
Worker (3)
Functions
Maintains paved
streets
Maintains
sidewalks
Functions
Picks up trash
downtown
Scrubs sidewalks
Operates traffic
control for events
Public sand supply
Right of way graffiti
abatement
Parks Crew
Coordinator
6 FTEs
Parks Crew
Coordinator
6 FTEs
Parks Maintenance
Specialist (5)
Parks Maintenance
Specialist (5)
Functions
Commemorative
Grove maintenance
Maintains city parks
and landscaped
areas
Functions
Commemorative
Grove maintenance
Maintains city parks
and landscaped
areas
Table 5. Recommended Immediate FTE Additions
Title FTE Count
Business Analyst 1.0
Facilities Aide 1.0
Lead Mechanic 1.0
Maintenance Superintendent1 1.0
Mechanic Helper 1.0
Parks Crew Coordinator 1.0
TOTAL 6.0
1One additional Maintenace superintendent position is recommended to be upgraded from a Maintenance supervisor.

Maintenance Division Organization Review
Performance Measures Baker Tilly
24 Performance Measures
Performance measurement is a vital tool for evaluating service effectiveness, involving continuous data collection and reporting on selected services or programs. Numeric indicators provide a clear picture of accomplishments, costs, value for residentsí tax dollars (or fees), and service quality. These measures also may be used to quantify employee productivity. Currently, the use of performance measurement is not present within the Division.

To enhance service and efficiency, there is a need for the Maintenance Division to optimize the use of Cityworks. While Streets, Parks and Facilities utilize Cityworks for work orders, Fleet uses Asset Works.

Automating metric reporting through Cityworks can significantly streamline the process. However, there does not seem to be a centralized system of collecting the data from Cityworks.

For the budget process, performance indicators such as miles of streets maintained, trees trimmed, square footage of buildings maintained, and the recent inclusion of the number of work orders are utilized. To maximize the benefits, the Maintenance Division should ensure consistent and thorough use of Cityworks through all work units. This approach will facilitate the identification of service gaps and areas requiring improvement. Of course, the Division must first identify and establish relevant metrics focused on the core service areas.

Baker Tilly prepared an outline (Attachment B) of typical performance metrics that are necessary for managing a maintenance division. The City should use this outline to customize a performance measurement program for San Luis Obispo. More specifically, the City should identify the types of reports and data it will need to manage the Division, and then ensure these data points and reports are implemented within the Computerized Maintenance Management System.

Maintenance Division Organization Review
Performance Measures Baker Tilly
25 Recommendation 16. Establish relevant performance
measurements for department operations, collect
data, and create a system for analyzing and
reporting.

Maintenance Division Organization Review
Technology and Tools Baker Tilly
26 Technology and Tools
In the realm of municipal public works maintenance, the effective utilization of technology and tools plays a pivotal role in enhancing operational efficiency and service delivery. San Luis Obispo demonstrates a commendable commitment to technological advancements and customer outreach, as exemplified by the Ask SLO app; however, it is crucial to underscore the importance of thoughtful consideration before deploying new processes and applications.

Our assessment revealed that the integration of innovative solutions, particularly Ask SLO, has significantly impacted workflow, resulting in a substantial increase in service requests. While the app has brought about numerous benefits, it has also presented challenges in managing workload and setting resident expectations effectively.

Ask SLO
Ask SLO, deployed in late 2022, serves as the Cityís resident engagement platform. The platform is available online as an app. The tool is very popular but has had a large impact on the Maintenance Divisionís workload. From November 2022 to the end of October 2023, there were 1,986 public works requests for service logged. Over 80% of the public works requests for service pertained to the Maintenance Division. And, of the top ten public works categories, all but one request type (general parking questions) fall under the maintenance Divisionís responsibilities.

This concentration of inquiries within their domain underscores the heavy demand for maintenance-related inquiries and the strain on the Division's capacity. Table 6 outlines the top public works categories, excluding the single request type outside of the Maintenance Divisionís scope.

Table 6. Top Maintenance Division Requests via the Ask SLO App Request Type Number of Requests Percent of Total Requests Streets Maintenance Program
Street Maintenance 201 10%

Maintenance Division Organization Review
Technology and Tools Baker Tilly
27 Request Type Number of Requests Percent of Total Requests Sidewalk/parkway damage 167 8%
Potholes 112 6%
Defaced or damaged city signs 108 5%
Maintenance Program
Traffic signal issues 175 9%
Trees and Urban Forestry 107 5%
Parks Maintenance Program
Parks Maintenance 87 4%
Encampment in Parks 84 4%
These requests for service are typical for a public works agency that maintains public rights-of-way and parks. While the Ask SLO app brings valuable benefits to the residents and the City, allowing residents to promptly report issues they observe and informing public works of concerns, managing resident expectations poses a significant challenge.

To address this, it is essential to incorporate a strategic communication approach in the Ask SLO marketing effort. Residents should be informed that certain work items follow a routine cycle, and the requested item may be part of that scheduled work. Administrators responding to requests should have a standardized response for items that are part of routine cycles.

Recognizing the varying urgency of requests is crucial. Timely matters such as potholes, malfunctioning traffic signals, or missing signage require immediate attention. On the other hand, tasks like curb painting may be scheduled as part of routine maintenance cycles, potentially spanning up to five years. Strengthening communication strategies and setting clear expectations will contribute to more effective utilization of the Ask SLO app, enhancing the overall resident experience and facilitating a smoother workflow for Public Works.

Enhancing the tracking of Ask SLO service requests through Cityworks is crucial for enhancing workload and staffing management. It is our understanding that this enhancement has been requested from the GoGov company. This integration aligns with the proactive approach of maximizing Cityworksí potential. It also streamlines communication, empowering division leaders to monitor workloads and address staffing needs more effectively. The result is a more responsive and efficient Maintenance Division, poised to meet and exceed community expectations.

Maintenance Division Organization Review
Technology and Tools Baker Tilly
28 Recommendation 17. Develop standardized
responses to work that is done as part of a routine
cycle.

Recommendation 18. Engage GoGov with developing
and implementing software to seamlessly
integrate Ask SLO with CityWorks.

Recommendation 19. Strengthen the Ask SLO app
marketing by clearly articulating expected
responsiveness tailored to the nature of each
request.

Service Level Agreements
Service level agreements (SLAs) are formal agreements between a service provider (in this case, the Maintenance Division or an individual program) and a customer that define the expected level of service. These agreements outline the specific services to be provided, the quality standards to be met, and the metrics used to measure performance. SLAs are commonly used in various industries to ensure that services are delivered in a consistent, reliable, and satisfactory manner. They can also be built to be as prescriptive or as flexible as needed, allowing for customization based on the unique requirements and preferences of the parties involved.

They play a crucial role in many functional areas, serving as essential tools to manage internal or external customer expectations and promote accountability. These agreements encompass a range of parameters including initial response time, priority level, type of issue, escalation processes and guidelines for handling urgent or emergency situations.

While many public sector organizations do not have operational SLAs, SLOís Maintenance Division has demonstrated commendable foresight by already implementing SLAs that cover services to police, fire, community development, stormwater and the Downtown SLO business association. The existing SLAs contribute significantly to the clarity of communication within the Division, preventing potential misunderstandings and fostering a more transparent operational environment. This proactive approach positions the Maintenance Division favorably, showcasing a commitment to delivering services with defined expectations and standards.

While the existence of these SLAs puts the Maintenance Division in a good position, review and potential revisions could further increase their

Maintenance Division Organization Review
Technology and Tools Baker Tilly
29 effectiveness. To further maximize the benefits of these SLAs, it is recommended that a comprehensive review be conducted. This review should involve all employees affected by the conditions outlined in the SLAs, ensuring their perspectives are considered. By engaging the workforce in this evaluation, potential updates and refinements can be identified to strengthen the existing SLAs. In addition, it is suggested to evaluate current operations thoroughly to identify any areas that might not be adequately covered by existing SLAs. This proactive assessment will help in addressing potential gaps and ensuring that all aspects of Maintenance Division operations are appropriately accounted for within the SLAs.

Recommendation 20. Review existing SLAs by all
employees affected by the conditions of the SLA
to evaluate potential updates.

Recommendation 21. Evaluate current operations to
determine if there are areas that are not covered
by existing SLAs.

The Maintenance Division's commitment to operational transparency through SLAs serves as a model for effective service delivery. By actively reviewing and refining these agreements, the division can further enhance its efficiency, foster a culture of continuous improvement, and consistently meet or exceed community expectations.

Strategic Communication
The strategic use of technology extends beyond operational efficiency; it serves as a powerful tool for communicating the Maintenance Division's narrative and justifying budget requests. Leveraging technology enables the Division to transparently showcase its achievements, challenges, and plans to both internal stakeholders and the community. By utilizing datadriven insights and visualizations, the Maintenance Division can effectively communicate the impact of its initiatives, fostering a deeper understanding of the value it brings to the community.

Technology plays a pivotal role in substantiating budget requests. The ability to present comprehensive data on maintenance activities, their outcomes, and the overall contributions to community well-being enhances the division's credibility during budget discussions. Integrating advanced analytics (using Cityworks and performance measures) and reporting features into the technology toolkit ensures that budget justifications are not only persuasive but also aligned with the Division's strategic goals.

Maintenance Division Organization Review
Technology and Tools Baker Tilly
30 The integration of technology serves as a powerful tool, transparently conveying the Maintenance Divisionís narrative and compellingly justifying budget allocations. This approach strengthens internal communication, builds community trust, and reinforces the Divisionís commitment to excellence in Public Works Maintenance.

Recommendation 22. Implement a strategy to utilize
technology in transparently showcasing the
Maintenance Division's achievements,
challenges, and plans to internal stakeholders and
the community.

Recommendation 23. Leverage advanced analytics
and reporting features to effectively communicate
the impact of maintenance activities and their
contributions to community well-being.

Recommendation 24. Integrate technology to
substantiate budget requests with comprehensive
data, aligning them persuasively with the
Division's strategic goals and enhancing
credibility during budget discussions.

Maintenance Division Organization Review
Conclusion Baker Tilly
31 Conclusion
This organizational assessment underscores the need for targeted improvements to strengthen the Public Works Maintenance Division. By addressing structural and staffing challenges, enhancing operational efficiency, and strategically allocating resources, the proposed recommendations aim to create a more agile, responsive, and effective division. As the city continues to evolve, these recommendations provide a pathway for the Maintenance Division to enhance its already commendable practices, meet growing demands, foster a supportive work environment, and continue to deliver exceptional services to the community. Implementation of these strategies is envisioned to not only resolve current challenges but also position the Division for sustained success and adaptability in the future.

Maintenance Division Organization Review
Attachment A ñ List of Recommendations Baker Tilly
32 Attachment A ñ List of Recommendations
Recommendation 1. Convert one Maintenance Supervisor to a Superintendent and add one Superintendent position to right-size the span of control for the Deputy Director of Maintenance Operations and increase management support for the division.

Recommendation 2. Add a Parks Crew Coordinator position to improve the span of control within the Parks function.

Recommendation 3. Create a Business Analyst position to assist with administrative duties and support the development and tracking of performance measures.

Recommendation 4. Analyze the impact on staffing levels and resources before implementing any new programs.

Recommendation 5. Incorporate maintenance requirements (staffing, resources) in all capital project discussions as part of the Budget Review Committee process.

Recommendation 6. Add a Facilities Aide in Building Maintenance.

Recommendation 7. Add a Mechanic Helper position in Fleet.

Recommendation 8. Add a Lead Mechanic position in Fleet.

Recommendation 9. Add staff to the Parks Division as parks are added to the system.

Recommendation 10. Create a maintenance plan for the parks system and update the plan as new parks are brought online.

Recommendation 11. Assign one Parks Maintenance Specialist to specifically respond to homelessness issues and vandalism in the parks.

Recommendation 12. Create a lockable dumpster ordinance.

Recommendation 13. Analyze the tasks within the Maintenance Division that would be best served with the use of contract staff.

Recommendation 14. Evaluate dividing the parks into sections and utilizing a team-based approach to parks maintenance.

Recommendation 15. Evaluate the consolidation of golf maintenance with parks maintenance.

Recommendation 16. Establish relevant performance measurements for department operations, collect data, and create a system for analyzing and reporting.

Recommendation 17. Develop standardized responses to work that is done as part of a routine cycle.

Recommendation 18. Engage GoGov with developing and implementing software to seamlessly integrate Ask SLO with CityWorks.

Recommendation 19. Strengthen the Ask SLO app marketing by clearly articulating expected responsiveness tailored to the nature of each request.

Maintenance Division Organization Review
Attachment A ñ List of Recommendations Baker Tilly
33 Recommendation 20. Review existing SLAs by all employees affected by the conditions of the SLA to evaluate potential updates.

Recommendation 21. Evaluate current operations to determine if there are areas that are not covered by existing SLAs.

Recommendation 22. Implement a strategy to utilize technology in transparently showcasing the Maintenance Division's achievements, challenges, and plans to internal stakeholders and the community.

Recommendation 23. Leverage advanced analytics and reporting features to effectively communicate the impact of maintenance activities and their contributions to community well-being.

Recommendation 24. Integrate technology to substantiate budget requests with comprehensive data, aligning them persuasively with the Division's strategic goals and enhancing credibility during budget discussions.

Maintenance Division Organization Review
Attachment B ñ Sample Performance Measures Baker Tilly
34 Attachment B ñ Sample Performance Measures
A performance measurement program for the Maintenance Division will help the Division understand if work efforts and financial investment in programs and facilities are having the desired effect. Results provide staff with concrete data that can be used to explain and justify future goals and budget requests. San Luis Obispo would benefit from formalizing a program and taking it from a data collection process to a data driven decision-making process. A program should include the following components:
x Workload measures that focus on the amount of work produced and help to monitor fluctuations in that workload. Workload measures do not assess how efficiently or effectively work is performed.
x Efficiency measures that compare inputs and outputs, e.g., the amount of work produced compared with the cost or staffing required to produce it. x Effectiveness measures that assess how well an organization performs, such as measuring the quality of services it delivers. These measures look at outcomes and include feedback from internal and external customers.

A summary of the performance measurement process is provided in Table 7 below.

Table 7. Performance Measurement Process
Step Summary

1. Identify what to
measure
Identify strategically important aspects of department work efforts. You want to measure those things that help you understand if you are achieving success.

These should align with annual goals.

2. Set target goals Decide on a numeric target such as the number of new participants in a program, attendance level at an event, or time to completion of specific tasks. Set them ambitiously but not so ambitiously that they are unattainable. These can be based on industry metrics such as APWA or developed in-house depending on the measurement.

3. Measure results Have a system in place to collect data regularly and accurately. This should be a combination of report data from recreation management systems, work order systems, city financial systems and resident and participant surveys.

4. Report results The department should have a visually clear dashboard-style report that tracks progress using comparison data for similar periods in previous years. This gives stakeholders a better picture of the department's performance over time.

5. Review regularly You should review performance measures annually to both remove indicators that may no longer be needed and add indicators for new programs to track success.

Suggested Performance Measures are included in Table 8 below.

Maintenance Division Organization Review
Attachment B ñ Sample Performance Measures Baker Tilly
35 Table 8. Sample Performance Measures
Function Effectiveness/Outcome Measures Efficiency Measures Workload Measures Street
Maintenance
x Percent of work orders responded
to within 24 hours
x Average lane miles maintained
per year (or average Pavement
Condition Index)
x Percent of survey respondents
rating streets as good or excellent
x Potholes filled
x Pavement markings
x Sidewalk repairs
x Number of work orders per
FTE
x Number of lane miles
paved per FTE
x Cost per lane mile paved
x Number of potholes filled
within three days
x Number of lanes striped
per FTE
x Number of priority sidewalk
repairs completed per FTE
x Number of work orders
completed
x Number of lane miles
paved
x Number of street miles
swept
x Number of pothole
service order requests
completed
x Pounds of
thermoplastic applied
or lineal feet installed
x Number of priority
sidewalk repairs
completed
Function Effectiveness/Outcome Measures Efficiency Measures Workload Measures Fleet x Percent of work orders responded
to within 24 hours
x Fleet availability ratio
x Percent of repairs needing rework
x Number of work orders per
FTE
x Number of equipment
pieces maintained per FTE
x Amount of downtime per
vehicle
x Number of work orders
completed
x Number of vehicle
repairs completed
Function Effectiveness/Outcome Measures Efficiency Measures Workload Measures Parks x Percent of work orders responded
to within 24 hours
x Average amount of acres mowed
per year
x Percent of survey respondents
rating parks cleanliness as good or
excellent
x Graffiti abatement
x Number of work orders per
FTE
x Number of parks (or acres)
maintained per FTE
x Number of facilities
maintained per FTE
x Cost per acre mowed
x Number of graffiti-related
work orders completed
within two days
x Number of work orders
completed
x Number of trees
trimmed
x Acres of park mowed
x Number of graffitirelated work orders
completed
Function Effectiveness/Outcome Measures Efficiency Measures Workload Measures Facilities x Percent of work orders responded
to within 24 hours
x Square footage of buildings
maintained
x Percent of internal user
respondents rating facilities as
good or better
x Number of work orders per
FTE
x Square footage of buildings
maintained per FTE
x Number of facilities
maintained per FTE
x Number of work orders
completed
x Number of city
facilities maintained

Recommendation FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Fleet
Lead Mechanic* $100,447 $103,460 $106,564 $109,761 $113,054 $116,446 $119,939 $123,537 Fleet Specialist (Half Time to Full Time)* $41,223 $42,460 $43,733 $45,045 $46,397 $47,789 $49,222 $50,699 Facilities
Facilities Technician* $92,325 $95,095 $97,948 $100,886 $103,913 $107,030 $110,241 $113,548 PW Admin
Business Analyst $150,958
Total per FY $233,995 $241,015 $248,245 $255,693 $263,363 $271,264 $279,402 $438,742 Total per FP
* Request titles that are appended by an asterisk (*) indicate the request is considered internal services and support work efforts from different departments and programs within the City. These positions result in partial reimbursement to the General Fund for work that is specific to the Parking, Sewer and Water Enterprise funds.

Implementation Option 1
$475,010 $503,938 $534,628 $718,145
2025-27 Financial Plan 2027-29 Financial Plan 2029-31 Financial Plan 2031-33 Financial Plan

Recommendation FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Fleet
Lead Mechanic* $100,447 $103,460 $106,564 $109,761 $113,054 $116,446 $119,939 $123,537 Fleet Specialist (Half Time to Full Time)* $42,460 $43,733 $45,045 $46,397 $47,789 $49,222 $50,699 Facilities
Facilities Technician* $97,948 $100,886 $103,913 $107,030 $110,241 $113,548 PW Admin
Business Analyst $150,958
Total per FY $100,447 $145,920 $248,245 $255,693 $263,363 $271,264 $279,402 $438,742 Total per FP
* Request titles that are appended by an asterisk (*) indicate the request is considered internal services and support work efforts from different departments and programs within the City. These positions result in partial reimbursement to the General Fund for work that is specific to the Parking, Sewer and Water Enterprise funds.

Implementation Option 2
2025-27 Financial Plan 2027-29 Financial Plan 2029-31 Financial Plan 2031-33 Financial Plan $246,367 $503,938 $534,628 $718,145

Recommendation FY 25-26 FY 26-27 FY 27-28 FY 28-29 FY 29-30 FY 30-31 FY 31-32 FY 32-33 Fleet
Lead Mechanic* $100,447 $103,460 $106,564 $109,761 $113,054 $116,446 $119,939 $123,537 Fleet Specialist (Half Time to Full Time)* $42,460 $43,733 $45,045 $46,397 $47,789 $49,222 $50,699 Facilities
Facilities Technician* $103,913 $107,030 $110,241 $113,548 PW Admin
Business Analyst $150,958
Total per FY $100,447 $145,920 $150,298 $154,807 $263,363 $271,264 $279,402 $438,742 Total per FP
Implementation Option 3
* Request titles that are appended by an asterisk (*) indicate the request is considered internal services and support work efforts from different departments and programs within the City. These positions result in partial reimbursement to the General Fund for work that is specific to the Parking, Sewer and Water Enterprise funds. $246,367 $305,104 $534,628 $718,145
2025-27 Financial Plan 2027-29 Financial Plan 2029-31 Financial Plan 2031-33 Financial Plan

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: January 14, 2025
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 7C – 2025-27 BUDGET FOUNDATION
Staff received the following questions regarding the recommendations included in the staff report for Budget Foundation. The questions are below with staff’s response shown in italics:

1. What is referred to as the “modal split” allocating General Fund transportation funding is presently located in the Land Use and Circulation Element (LUCE). Why is this policy contained in the LUCE, and not the Financial Plan policies, which are updated more regularly? Does the existing policy provide sufficient flexibility?
Staff Response: The Circulation Element includes support for transportation funding proportionality with the “modal split” objectives as detailed in the following:

Circulation Element Section 7.1.4 Transportation Funding: In order to increase support for non-automobile travel, the City shall strive to allocate transportation funding across various modes approximately proportional to the modal split objectives for 2035…
This policy is included in the Circulation Element as a guiding principle but not as a fixed percentage allocation for each budget cycle since there will be variation from year to year based on current project priorities and funding resources. The performance monitoring for this policy is reported as a four-year running average based on the adopted budget of each two-year fiscal cycle and is included in the Active Transportation Plan Progress Report Card. The latest report card shows that transportation funding has been generally consistent with the Circulation Element policy.

Item 7c. 2025-27 Budget Foundation Agenda Correspondence Page 2 Transportation Funding By Mode
(Four-Year Average FY 2019-
2023)
Motor Vehicle 35%
Walk 27%
Bicycle 25%
Transit 12%

2. How did the City establish its policy regarding debt capacity? What is our current debt service level?
Staff Response: The General Fund’s debt service costs were budgeted at $1,757,889 for Fiscal Year 2024-25, or 1.4% of budgeted revenues. This is well within the policy limit of 10%. This limit is intended to allow the City to finance certain high-cost projects with a long useful life while limiting financial risk to the City. The policy also ensures marketability of future debt issuances by maintaining an attractive credit rating. The City set this standard based on experience from prior issuances where it was noted that a ratio of less than 5% is preferable, but more flexibility may be necessary.

3. Attachment C – Financial Plan Policies includes the following language related to factors favoring high cost recovery levels. The highlighted section below could be revised to indicate “the use or overuse of the service…” If Council would like to update the highlighted language above in D4, Council can provide direction to staff when the Budget Foundation item is presented to Council and staff will make the updates and seek adoption of the revised language with adoption of the 2025-27 Financial Plan on June 3, 2025.

Item 7c. 2025-27 Budget Foundation Agenda Correspondence Page 3

4. Will staff provide any written response to the advisory body budget recommendations or these just for our consideration?
Staff Response: The input provided by advisory bodies is included in Attachment I to the 2025-27 Financial Plan Budget Foundation item and is included for Council’s consideration as the City finalizes plans for the upcoming Community Forum on January 23rd and Goal Setting Workshop on February 8th. Staff does not provide responses to advisory bodies relative to the input, but Advisory Body members are welcome to attend both upcoming meetings.

5. The Long-Term Capital Improvement Plan describes the ideal annual asset maintenance budget and sets target funding at $29 million. How much of this would be paid for by the General Fund as opposed to other sources? Staff Response: The Council report describes the ideal annual funding target for asset maintenance at $29 million. While achieving this level of funding is a priority, it is carefully evaluated through the CIP process and reviewed by the CIP Review Committee to ensure alignment with overall City priorities. Of the $29 million, approximately $18 million would be funded by the General Fund, with the remaining $11 million coming from other sources.

6. What are the City’s primary revenue streams and are there any opportunities to increase revenues?
Staff Response: The City’s General Fund is primarily funded by tax revenues; the City’s largest tax sources are (in order) sales tax (including Local Revenue Measure), property tax, and transient occupancy (hotel) tax. Some programs and services in the General Fund provide an “individual benefit” to certain users (ex. permitting for development, business licenses and certain recreation services) and the cost of those services are intended to be offset by user fees charged for those services. Where user fees are not set at full cost recovery, tax revenues subsidize the cost of providing individual benefit services to the community.

Infrastructure costs are partially offset by development impact fee revenue; impact fees will go before Council by the end of FY 2025-26. Similar to user fees, if development impact fees are not set at full cost recovery, tax revenues und a larger share of infrastructure costs (including asset maintenance, asset replacement and development of new assets).

The City’s Enterprise funds (Parking, Transit, Water and Sewer) run more like businesses, and the cost of these programs are covered by rates paid by users and do not rely on general purpose taxes paid by residents and visitors.

Like other cities in California, the City is limited in its ability to increase revenue streams. Following is some additional information about limitations on various sources of revenue:

Item 7c. 2025-27 Budget Foundation Agenda Correspondence Page 4  Property tax revenues are controlled by Proposition 13, which limits increases to taxable assessed property values to 2% a year.  In 2020, voters supported the Local Revenue Measure (G-20) which increased the City’s local sales tax rate by 1%, bringing the local sales tax rate to 1.5%. The City’s Transient Occupancy Tax (TOT) rate is current set at 10%. Sales tax and TOT rates could be increased, but would require voter approval. In considering tax increases, the City needs to seriously consider the impacts to residents and visitors who are also impacted by the macroeconomic conditions that impact the City’s budget.  The City’s Cannabis Tax rate is currently set at 6% of gross receipts for retailers, however, voters in 2018 approved that this tax rate could be set up to 10%. If Council were interested in pursuing an increase to this tax, it could do so via resolution or ordinance.

7. Public Works and the Police Departments presented staffing studies with this agenda item. What is the impact of additional headcount on the City’s funded status with CalPERS?
Staff Response: The impact of adding staff on our pension funded status is difficult to predict. Such an analysis would have to take into account the new employee’s prior years of service, Classic or PEPRA pension plan eligibility, assumptions for future CalPERS investment returns, and more.

The primary drivers of our unfunded liabilities as noted in May 2023 by our independent actuarial consultant are below target CalPERS investment returns, changes to CalPERS contributions policies, especially generous benefits offered prior to PEPRA, and a growing share of retired members relative to members still in the workforce.

8. The language proposed below in Attachment C – Financial Plan Policies relates to cost recovery for planning appeal fees. Were fees for appealing planning decisions set at 15% cost recovery?
Staff Response: With adoption of the FY 2024-25 User Fee Schedule on July 2, 2024 Council set the cost recovery for appeals of planning decisions at 15% in an effort to not discourage applicants or non-applicants from submitting appeals.

Item 7c. 2025-27 Budget Foundation Agenda Correspondence Page 5

9. Attachment C – Financial Plan Policies includes reference to fees for the Skate Park (shown below). Does the City ever collect fees for the Skate Park?
Staff Response: The City does not rent out the Skate Park to individual groups or charge for use of the Park in an effort to support general community use of the facility. As a facility that The Skate Park has historically been included in the fiscal policies as an example of a service or facility that falls within the 0-30% cost recovery category. If Council would like to remove reference to the Skate Park from this list, Council can provide direction to staff when the Budget Foundation item is presented to Council and staff will make the updates and seek adoption of the revised language with adoption of the 2025-27 Financial Plan on June 3, 2025.

10. Attachment C – Financial Plan Policies includes the following language:

Does this mean full-time and part-time regular positions? Staff Response: Yes. A “Full time equivalent” (FTE) includes both full-time and part-time regular positions. FTE measures hours worked rather than the number of employees, allowing part-time hours to be aggregated into the equivalent of fulltime positions for budgeting, forecasting, and staffing purposes. If Council would like to further clarify the meaning of “full time equivalent” in the financial policies, Council can provide direction to staff when the Budget Foundation item is presented to Council and staff will make the updates and seek adoption of the revised language with adoption of the 2025-27 Financial Plan on June 3, 2025.

11. In addition to the questions noted above, staff is recommending renaming a station at the Community Forum:

As noted in the agenda report, the stations for the Community Forum were developed based on input from the community survey. Some of the current Major City Goals encompass multiple focus areas listed in the survey options. The purpose of the survey was to identify and prioritize what is most important to the community at a more detailed level than the existing Major City Goals.

Staff received a question regarding the absence of "Economic Development" as a station topic or a standalone survey option. In the survey, "Strategic Economic Development" was included as an example under the "Fiscal Sustainability and

Item 7c. 2025-27 Budget Foundation Agenda Correspondence Page 6 Responsibility" priority. Because one of the City’s current Major City Goals is titled "Economic Resiliency, Cultural Vitality, and Fiscal Sustainability”, staff recommends that Economic Development be combined with Downtown Vitality for the Community Forum. This station would be renamed to "Downtown Vitality and Economic Development" to better reflect its scope and consistency with existing Major City Goals. This is also the title that was used for that station at the previous Community Forum. The proposed updated stations are listed in the column on the right below:

Stations as noted in the Agenda
Report Revised Station Topic Areas
Homelessness Homelessness
Infrastructure and Sustainable/Multimodal TransportationInfrastructure and Sustainable/Multi-modal Transportation
Downtown Vitality Downtown Vitality and Economic
Development
Housing Housing
Climate Action and Open Space Climate Action and Open Space Fiscal Sustainability (including use of
LRM)
Fiscal Sustainability (including use of
LRM)
Public Safety Public Safety
Other/New Ideas Other/New Ideas

Item 7c
Department: Finance
Cost Center: 2002
For Agenda of: 1/14/2025
Placement: Business
Estimated Time: 90 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Riley Kuhn, Principal Budget Analyst
SUBJECT: 2025-27 BUDGET FOUNDATION

RECOMMENDATION

1. Provide staff with input on the 2025-27 Community Forum and Goal Setting Workshop; and

2. Provide staff with initial input relative to existing Major City Goals; and

3. Review and provide feedback on revised fiscal policies and recommended budget balancing strategies; and

4. Review and discuss the general economic outlook for the 2025-27 Financial Plan development; and

5. Review the long-range Capital Improvement Plan overview; and

6. Review information about CalPERS Additional Discretionary Payments (ADP) and direct staff to recommend allocation of FY 2023-24 unassigned fund balance to increase the ADP as part of the FY 2024-25 Second Quarter Budget Report.

REPORT-IN-BRIEF
Development of the 2025-27 Financial Plan officially began on December 10th, when staff presented the “Setting the Stage” budget item. That item included broad contextual information on year-to-date financial results, state legislation impacting cities, a report on macroeconomic conditions and how they influence the City’s finances, and a discussion on how the growth of the community impacts the budget.

This item continues the discussion from Setting the Stage and includes:
 A review of Community Survey results and the upcoming the goal setting process;  Recommended changes to fiscal policies;
 Recommended Budget Balancing Strategies to provide further guidance to staff in development of the City’s annual budgets;
 A review of the long-term Capital Improvement Plan;
 A discussion of additional discretionary payments (ADPs) to CalPERs; and  A curated package of third-party economic forecasting materials and a revisit of the City’s Long-Term Forecast for the Geneal Fund to provide additional context for 2025-27 budget development.

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POLICY CONTEXT
Development of the City’s budget is required and guided by State law, the City’s Municipal Code, City Charter, and the fiscal policies which are reviewed and reaffirmed by the City Council every two years.

California State Law

1. Article XIIIB of the California Constitution and California Government Code Sec. 7910 requires that cities establish appropriations limits1 by resolution annually. The City of San Luis Obispo complies with this requirement through adoption of its annual budget.

2. California Government Code Section 53901 requires each local agency to file its budget with the county auditor within 60 days after the beginning of its fiscal year.

City Charter

1. 801. Fiscal Year – establishes that the City’s Fiscal Year commences on July 1 of each year.

2. 802. Annual Budget – requires that the City Manager shall provide the Council a careful estimate, in writing, of the amounts, specifying in detail the objects thereof required for the business and proper conduct of the various departments, offices, Boards and Commissions of the City, over which the office has control, during the next ensuing year.

3. 803. Public Hearing – sets forth the requirement for a public hearing to adopt the annual budget.

4. 804. Adoption of Budget – requires the Council to adopt the budget and allows that after adoption of the budget, the Council may amend or supplement the budget by motion adopted by a majority vote of the Council.

DISCUSSION
Two-year Financial Plan Process
The City has long used a two-year financial plan along with annual budgets. The benefits of the two-year plan include:

1. Reinforcing the importance of long-term thinking

2. Aligning resource allocation decisions with significant council directed priorities

3. Establishing realistic multiyear timeframes for achieving objectives The fundamental purpose of the City’s budget process is to link, through public engagement and strategic discussions, the priorities of the community to the available

1 The City’s appropriation limit is based on the Gann Spending Limit Initiative, a State constitutional amendment adopted by the voters on June 6, 1979 and amended in 1990 with Proposition 111. It is anchored in the State Constitution under Article XIIIB. The limit restricts appropriations from tax revenues by State and local governments. Under its provisions, no local agency can appropriate proceeds of taxes in excess of its “appropriation limit”. Excess funds may be carried over into the next year. However, any excess funds remaining after the second year must be returned to taxpayers by reducing tax rates or fees; a majority of the voters may approve an override to increase the limit.

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resources in order to achieve the desired outcomes. The process allows the City Council to engage the community in identifying Major City Goals while also providing information regarding the City’s basic functions, including the day-to-day work programs and responsibilities carried out by City employees to support resident quality of life and community well-being.

Goal-Setting Process
A detailed Financial Plan Calendar was approved by the City Council on October 1, 2024 and is posted on the City’s website. There are a variety of opportunities to provide input to the City Council as they work to establish Major City Goals with the community’s needs and interests in mind. These opportunities are highlighted in the following graphic:

Community engagement efforts began in October and are ongoing. In addition to this Budget Foundation item, which includes the results of the Community Survey and Advisory Body goals, the two principal elements of the City’s goal setting process are the Community Forum, to be held at the Ludwick Center on Thursday, January 23rd at 6:00 PM, and the Council Goal Setting Workshop, to be held at City Hall on Saturday, February 8 th 2025.

Community Priorities Survey
The Community Priorities Survey was open for one month and closed on December 13th, 2024. Community members were notified with their utility bills in the mail or attached as a PDF for paperless customers. The City also notified the public with social media posts, on its website, at various advisory body meetings, and at the October 1st and December 10th City Council meetings.

The survey gathered input from 1,629 community members and will help guide discussions and decisions in the budget process. Participation increased by 25% compared to two years ago, reflecting strong community engagement. While not statistically representative, the survey results indicate that the community’s priorities for

Item 7c
the next two years align closely with the City’s current priorities and work programs.

Attachment A includes a summary of the results; for a deeper understanding of the community's perspectives, readers can reference all of the survey responses which are included as a reading file. The top five priorities identified in the survey were homelessness, infrastructure maintenance, downtown vitality, housing supply and affordability, and open space. The survey also included an optional open-ended question for respondents to identify how the City might adjust funding current projects or services to accomplish any new priorities. Approximately 45% of respondents provided input to that question, with recurring suggestions for prioritizing basic services, addressing homelessness, improving cost efficiency, and balancing priorities.

Staff is not seeking specific direction regarding the community survey results at this time and are providing the results to begin informing future discussions regarding Major City Goals for the 2025-27 Financial Plan. For more information, please see Attachment A.

Community Forum
The Community Forum, scheduled for January 23, 2025, serves as a vital platform for community engagement, allowing residents, stakeholders, and City Councilmembers to collaboratively shape the City’s Major City Goals for the 2025-27 Financial Plan. This interactive event invites participants to review and provide input on existing plans and policies while exploring new ideas. The forum also fulfills the requirements for the Revenue Enhancement Oversight Commission (REOC) to hold a Citizens’ Oversight meeting for the use of the Local Revenue Measure funds. Attachment B includes details about the Community Forum, including the key topics for interactive stations and a draft agenda.

Insights from the forum will guide the City Council during their February 8, 2025 GoalSetting Workshop, where they will refine long-term objectives and discuss how to prioritize the use of limited resources to align with the services most valued by the community. In early January, staff will provide Councilmembers with pre-work instructions to help prepare for the facilitated discussion on February 8.

Staff is seeking feedback regarding any requested changes to the Community Forum format, agenda, or identified topics for the interactive stations, which have been developed based on the outcome of the community survey. For more information, please see Attachment B.

Fiscal Policies
One purpose of the Financial Plan is to set clear fiscal policies that support sound financial decision making. The City’s Fiscal Policies are typically included in the reference section of the Financial Plan and cover a broad range of fiscal topics, including:

1. General Revenue Management

2. User Fee Cost Recovery Goals

3. Enterprise Fund Fees and Rates

4. Revenue Distribution

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5. Investments

6. Appropriation Limitations

7. CalPERS and Unfunded Liability Management

8. Capital Improvement Management

9. Debt Management

10.Human Resources Management

11.Contracting for Services

12.Productivity
With each financial plan, the City reviews its fiscal policies to determine if any updates are necessary. Changes are generally intended to create consistency amongst various City policies, reflect current practices, and create a system that is effective and efficient to administer.

Staff is seeking input from Council on the changes to the Fiscal Policies that are recommended as shown in Attachment C. The most significant changes to the Fiscal Policies reflect Council’s action on July 2, 2024 to adopt a new user fee schedule. Other notable changes include clarification of Capital budgeting practices and modernizing the Human Resources Management policies to reflect current and best practices.

Budget Balancing Strategies
Staff has developed a set of Budget Balancing Strategies that are intended to serve as a playbook for sound fiscal management in both good times and bad. This document incorporates guidance included in other Council adopted documents including the Fiscal Health Contingency Plan, Financial Responsibility Philosophy, Fiscal Health Response Plan and Compensation Philosophy and provides strategies to operationalize many of the ideas in those plans. While development of the document was prompted by the deficit forecasted in later years of the current 5-year forecast, this document is flexible enough to provide guidance to staff not only in times of budget difficulty, but also in times of fiscal recovery and growth.

Staff is seeking input from Council on the proposed strategies provided in Attachment D.

Financial Plan Organization
The organization of the Financial Plan has been incrementally improved with each budget cycles and closely aligns with industry standards and best practices. Based on a careful review, staff is planning to make minimal changes to the organization of the document in order to improve readability and more effectively communicate the important information it contains.

Staff is seeking input from Council on other changes it would like to see to the structure and content of the Financial Plan document; for more information, please see Attachment E.

Item 7c
Economic Outlook
Macroeconomic conditions have always been difficult to predict and economists have had an even more difficult time forecasting the trajectory of the post-COVID economy. While economic developments can have a significant impact on the City’s finances, staff hesitates to speculate about macroeconomic conditions and seeks to recommend budgets that are most prudent in an uncertain environment.

Attachment F to this report includes links to a number of reputable sources of economic materials including the Federal Reserve’s Summary of Economic Projections, the Central Coast Economic Forecast materials presented by Beacon Economics, HdL’s statewide sales tax analysis, and materials from the State of California’s Legislative Office and Employment Development Department. These materials provide broad context for the current economic conditions nationally, statewide, and regionally.

The consensus of these reports is that despite numerous recession indicators including an inverted yield curve, increased unemployment rates, and ongoing geopolitical strife, a recession is no longer expected. This consensus points to a return to growth in cyclical revenues for the City including sales tax, transient occupancy tax, and development review fees.

This report also includes a revisit of the City’s long-term forecast for the General Fund, which was previously presented to Council and projects deficits in future periods.

Staff is not seeking any guidance from Council on the Economic Outlook. For additional information, please see Attachment F.

CalPERS and the City’s Unfunded Pension Liabilities
The City of San Luis Obispo, like many other California municipalities, is a participant in the California Public Employees’ Retirement System (CalPERS) pension system, which provides retirement benefits to City employees. The City identified addressing unfunded pension liabilities as a priority with the Fisal Year 2018-19 Supplemental Budget and the Fiscal Health Response Plan recommended Additional Discretionary Payments (ADPs) to reduce the City’s unfunded liability. The most recent actuarial evaluation showed that the City's unfunded pension liabilities have continued to grow.

To address unfunded liabilities, the City has made at least $2 million in annual discretionary payments to CalPERS from the General Fund and larger payments when resources allow. Unfortunately, the investment losses experienced by CalPERS have decreased the impact that the City’s ADPs have had on the funded status of the City’s pension plans. Attachment G to this report includes an analysis of how the $2 million payment would need to increase in order to keep up with growth in staffing expenditures over time.

Staff is seeking guidance from Council on a recommended increase to the annual ADP amount. For the current year, staff recommends that Council direct staff to recommend

Item 7c
allocation of FY 2023-24 unassigned fund balance to increase the ADP with the FY 2024- 25 Second Quarter Budget Report. For more information, please see Attachment G.

Long-range Capital Improvement Plan
Development of the Capital Improvement Plan (CIP) for the 2025-27 Financial Plan is in its early stages. The CIP serves as a critical roadmap for addressing the City’s immediate and long-term infrastructure needs. This financial plan builds on lessons learned from past cycles and introduces significant process improvements to enhance clarity, transparency, and accountability in project prioritization and funding allocation.

For 2025-27 Financial Plan, the approach focuses on aligning resources with realistic project delivery timelines, ensuring fiscal responsibility, and maintaining the City’s existing assets. This foundation is vital as the City navigates evolving challenges and opportunities in managing infrastructure investments.

One significant change for the 2025-27 Financial Plan is the shift to fully budgeting for out-years in the CIP, moving away from planning without clear resource constraints beyond the immediate financial plan. This change fosters more intentional long-term decision-making in response to escalating project costs and numerous infrastructure commitments. It also helps set clearer expectations for when projects can realistically be delivered, ensuring greater transparency and alignment between planning and execution.

Staff is not seeking any guidance from Council on the Long-Rage Capital Improvement Plan. For more information, please see Attachment H.

Previous Council or Advisory Body Action
Various Advisory Bodies have submitted recommendations for Council’s consideration in the 2025-27 goal setting process. These recommendations can be found in Attachment I, which are provided for consideration as part of the Major City Goal and work plan development process.

Public Engagement
Public engagement on this item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. This item continues the extensive public engagement processes to support development of the 2025-27 Financial Plan as discussed above.

CONCURRENCE
The City’s internal Financial Plan Steering Committee concurs with the recommendations included in this report.

ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended action in this report because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378.

Item 7c

FISCAL IMPACT
Budgeted: N/A Budget Year: 2025-27
Funding Identified: N/A
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ $ $ $
State
Federal
Fees
Other:

Total $N/A $N/A $N/A $N/A
The recommendations included in this report have no immediate fiscal impact but are part of the financial planning process which is intended to ensure that the City is able to provide the maximum benefit to the community with the resources available.

ALTERNATIVES

1. Council could direct staff to continue with Additional Discretionary Payments to CalPERS in the same amount as prior years. This would provide flexibility to address other priorities, but would slow progress in paying down pension liabilities.

2. Council could modify the proposed Goal Setting activities. The Council could direct staff to pursue a different process for goal-setting. This action is not recommended because there is value to the community in conducting consistent processes year to year to ensure resident engagement. Should modifications to the Goal Setting activities be made, staff recommends incremental adjustments to the activities planned.

3. Council could direct further changes to the recommended financial plan policies provided in Attachment C. Council may direct modifications to the financial plan policies, which will be incorporated into the 2025-27 Financial Plan document.

4. Council could direct further changes to the recommended budget balancing policies provided in Attachment D. Council may direct modifications to the budget balancing policies, which will be incorporated into the 2025-27 Financial Plan document.

5. Council could direct modifications to the Financial Plan Organization, described in Attachment E, or direct other changes to the financial plan. Council may direct modifications to the financial plan organization or content, which will be incorporated into the 2025-27 Financial Plan document.

Item 7c

ATTACHMENTS
A - Community Survey Responses
B - Plans for Community Forum and Goal Setting
C - Review of Financial Plan Policies
D - Budget Balancing Strategies
E - Review of Financial Plan Organization
F - Review of Economic Conditions
G -CalPERS Pension Plans and Funded Status
H - Long-Range Capital Improvement Plan
I - Advisory Body Goals

Attachment A – Community Survey Results
2025-27 Financial Plan
Community Priorities Survey
Community feedback and input is a cornerstone of the City's budget process and an integral part of the decision-making on Major City Goals. In addition to encouraging participation in the Financial Plan process, the community survey asks the City's residents to share their priorities for the City to accomplish over the next two years in addition to the core services already provided.

Survey Distribution
The 2025-27 Community Priorities Survey was conducted via the City’s online engagement platform, Open City Hall, and was open for one month from November 12, 2024 to December 13, 2024. To make the survey accessible to as many community members as possible, the City created a Spanish version of the survey; however, Open City Hall also automatically translates the survey into the language set on the user's browser. The City utilizes several outreach methods and distribution channels for the survey including:

1. Utility invoice inserts

2. City website (Open City Hall)

3. City news & e-notification

4. Press releases

5. Social media

6. Outreach to over 100 community groups
Survey Participation
A total of 1,629 individual survey responses were received by December 13, 2024, representing 81 hours of public comment. This reflects a 25% increase in participation compared to the same survey conducted two years ago.

Survey Results
While the survey is not a "scientific survey" or “statistically representative," the feedback received through this process for over five budget cycles has helped to align the City’s funding and work plan decisions with the community’s priorities.

All of the survey responses have been published as a reading file here:
https://opengov.slocity.org/WebLink/DocView.aspx?id=202968&dbid=0&repo=CityClerk The reading file includes:
i. Summary of Responses from the OpenGov Survey Platform ii. Survey questions (for reference)
iii. All individual responses (1,629) in order of date received iv. Responses to Question #2 “Other” priority selection v. Responses to Question #3: Given the current fiscal constraints, new projects or services may require prioritization and potential trade-offs unless they can generate offsetting

revenue. How might the City adjust current projects or services to accomplish any new priorities?
The following charts summarize the top priorities from the questions asked. Together with an ‘Other' question that was open-ended, it provided participants with up to five responses. The ‘Other’ responses were reviewed by staff and grouped into themes, where possible. These themes help to identify areas for further consideration and discussion. All survey responses to the ‘Other’ response can be found on page 486 of the reading file. 0 200 400 600 800 1000 1200
DEI
Cultural Vitality
Safe Housing and Neighborhood…
Childcare
Public Safety
Sustainable and Multi-Modal…
Other
Climate Action Plan
Fiscal Sustainability and…
Open Space
Housing Supply and Affordability
Downtown Vitality
Infrastructure Maintenance
Homelessness
Count of Survey Responses
Table A-1: Priorities Identified
See Table A-2 for themes from ‘other’
category

Question #3 Budget Offsets - Response Summary
Because the City is faced with financial constraints in the years ahead, an optional survey question was added to allow the respondents to share how they might recommend adjusting current projects or services to accomplish new priorities. About 45% of respondents chose to answer this question. Staff used an AI tool to help summarize the main themes from the 731 survey responses. Although the information has been reviewed by staff for accuracy, readers are encouraged to refer to the complete set of responses included on page 504 of the reading file for a full understanding of community sentiment on these themes. The main themes include:

Infrastructure and Public Services
0 5 10 15 20 25 30 35 40 45 50
More Bikelanes and Infrastructure
Permitting Process Improvements
Laguna Lake Dredging
Accessibility for Seniors & Disabled…
Infrastructure Maintenance
Prioritize Righetti Park Construction
Public Safety Issues
Rental Protections
Tobacco Concerns & Second Hand Smoke
Downtown Vitality & Cleanliness
Broad Street Corridor Improvements
Adobes & Historic Preservation
Housing Supply and Affordability
Less Bikelanes and Infrastructure
Neighborhood Wellness & Code…
Healthcare Access and Medical System
Addressing Homelessness
Transportation/Traffic Improvements
Parking Rates and Policies
More Parks & Rec Facilities
Count of Survey Responses
Table A-2: Top 20 Themes from "Other" Category

 Prioritize Basic Services: Emphasis on maintaining roads, public safety, and infrastructure before expanding to new projects or services.  Transportation Adjustments: Suggestions to prioritize spending on road maintenance and traffic flow rather than other multi-modal transportation improvements.  Efficient Project Management: Focus on completing existing projects rather than initiating new ones.

Homelessness and Affordable Housing
 Address Homelessness: Many respondents view homelessness as a top priority and suggest solutions ranging from stricter law enforcement to supportive housing initiatives.  Affordable Housing: Calls to streamline zoning, encourage high-density housing, and ensure low-income housing options.

Fiscal Strategies
 Revenue Generation: Proposals include increasing taxes on tourism, luxury goods, and high-end property, along with leveraging grant funding.  Cost Efficiency: Recommendations to cut non-essential programs and administrative costs.

Environmental and Social Issues
 Climate Action: Opinions are mixed; some emphasize prioritizing climate initiatives, while others suggest reducing investments in environmental programs.  Equity and DEI: Opinions are mixed; some responses support funding for DEI initiatives while others feel it should be reduced.

Downtown Vitality
 Enhancing Downtown: Suggestions to lower parking rates, attract businesses, and revitalize downtown spaces.

Community Engagement
 Community Participation: Proposals to involve local organizations and volunteers to complement city services.

Attachment B – Plans for Community Forum and Goal-Setting 2025-27 Financial Plan
Community Forum
A cornerstone of the community engagement process is the Community Forum (Forum) where the community can engage in person and give voice to the desired programs and initiatives for the City Council to consider as part of the Major City Goal plans. The forum is intended to solicit feedback from residents, community groups, stakeholders, and interested individuals on tasks and projects to support the priorities identified through the Community Priorities Survey. The Forum is also intended to meet requirements of the City's local sales tax ordinance to hold an annual community forum by providing an opportunity for the Revenue Enhancement Oversight Commission (REOC) to receive input on the use of the revenue generated by the Local Revenue Measure1.

The Community Forum is scheduled for January 23, 2025, from 6:00-9:00 pm Iat the Ludwick Community Center. There will be a supervised children’s room for ages 4+ and the bike valet will be on site for those who choose to bike to the Forum. Bilingual staff will be available at the Forum to help translate for Spanish-speaking community members.

This year’s Forum will be led by internal staff instead of an external facilitator to promote cost efficiency and foster trust through consistent communication. A third-party consultant will facilitate the goal-setting workshop as has occurred in past financial planning processes to provide specialized expertise.

The forum will feature a presentation from staff and leadership, followed by an interactive breakout session and a chance for public comment. During the breakout session, attendees will have the opportunity to visit various stations, engage with staff, and participate in interactive prioritization of tasks and projects. Staff recommends limiting the number of stations to no more than nine, aligned with the current Major City Goals and the priorities identified in the Community Priorities Survey (see Attachment A in the Council Agenda Report). The proposed stations include:

1. Homelessness

2. Infrastructure and Sustainable/Multi-model Transportation

3. Downtown Vitality

4. Housing

5. Climate Action and Open Space

6. Fiscal Sustainability (including use of Local Revenue Measure funds)

7. Public Safety

8. Diversity, Equity, Inclusion

9. Other/ New Ideas

1 Code 2.14.040(D), Annual Citizen Oversight Meeting: The REOC shall hold an annual community services and investment measure community forum for the purpose of taking input from residents and community members on preferences for the use of the revenues generated by the community services and investment tax.

Staff with expertise in each selected topic will be present at the breakout areas to answer questions, discuss the City's current initiatives, and gather feedback on potential new items to include in the work plan. Each topic area will feature a list of proposed projects or work program efforts tied to the identified priority. Community members will have the opportunity to rank these items digitally through their phones and view the rankings in real-time. They may also suggest and rank any additional they or other communities have. Staff will assist individuals who are unable to use the digital process or would prefer to hand-write their responses.

A finalized list of proposed tasks and projects for each station will be published one week before the Community Forum, allowing the public time to brainstorm their responses. For those unable to attend in person, feedback can be submitted via email at [email protected] and will be incorporated into the results from the forum.

Staff recognizes that some projects may overlap across multiple priorities. For instance, an active transportation project might align with both “Infrastructure” and “Climate Action.” While these stations are not designed to be an exact science, they aim to provide community members an opportunity to share their perspectives on what programs or projects are most important to them.

The insights gathered from the forum will be used by the Council during the Goal-Setting Workshop to establish the City’s Major City Goals for the 2025-27 Financial Plan.

Draft Forum Agenda
5:30-6:00 Individuals Welcomed at the Door

1. Agenda with instructions on how to participate

2. Ice Breaker Dot-Exercise

3. Booths are staffed to allow individuals to begin pre-conversations with staff

4. Informational flyers about various aspects of the City are available. 6:00-6:10 Welcome by Mayor
6:10-6:15 City Manager’s Opening Comments
6:15-6:35 2025-27 Financial Plan Process by Finance Director 6:35-6:45 Presentation on Themes from Pre-Survey and Instructions for Forum 6:45-7:45 Open House/Workshop with Breakout Stations
7:45-8:15 Reconvene for Public Comment

1. Attendees will be encouraged to post all ideas and concepts during the open house/workshop and do not need to stay for public comment.

2. Members of public who desire to directly address the Council and REOC or elaborate on an idea or concept will complete public comment cards and indicate the topic. a. Where a group has several members present, we encourage them to select a spokesperson and have others in their group indicate support for the same position with a show of hands.
8:15-8:30 Closing Remarks & Adjournment
Goal-Setting Workshop and Council Pre-work
Based on the feedback and input received, Councilmembers will be asked to complete some prework by 9:00 a.m. on Wednesday, February 5, 2025, for consideration during the Goal-Setting

Workshop on February 8, 2025. Templates and specific instructions for Councilmembers will be distributed via Council correspondence in early January. This pre-work will involve submitting proposed edits to existing goals, suggesting new goals, and recommending adjustments to current programs and services to help meet the City’s priorities.

Without identifying who submitted the statements, staff will compile the feedback, compose lists, and organize feedback by common topics. The lists will be distributed to all Councilmembers and made available to the community by the close of business on Wednesday, February 5, 2025.

Based upon pre-work submittals provided by the Councilmembers, the facilitator will guide the Council in discussion of the goals by category and the relationship of those goals to current projects and services. The discussion intends to capture tangible steps that can be taken in the next two years to get closer to reaching overarching goals. Because the City anticipates tighter financial constraints in the coming years, the discussion of goals and work plan items will likely be different from previous budget cycles and goal-setting workshops that supported service expansions. The Goal-Setting Workshop will provide the City Council with an opportunity to collaborate on prioritizing the use of existing resources to align with the services most valued by the community.

The outcome of the goal-setting workshop will help guide staff’s development of the draft budget which will be presented to Council in April 2025.

City Council Guidance
Staff is seeking input and guidance from the City Council relative to the upcoming Community Forum and GoaI Setting Workshop.

Fiscal Policies
Section 1. GENERAL REVENUE MANAGEMENT
A. Diversified and Stable Base.  The City will seek to maintain a diversified and stable revenue base to protect it from short‐term fluctuations in any one revenue source.

B. Long‐Range Focus.  To emphasize and facilitate long‐range financial planning, the City will maintain current projections of revenues for the succeeding five years.

C. Current Revenues for Current Uses.   The City will make all current expenditures with current revenues, avoiding procedures that balance current budgets by postponing needed expenditures, accruing future revenues, or rolling over short‐term debt.

D. Interfund Transfers and Loans.   In order to achieve important public policy goals, the City has established various special revenue, capital project, debt service and enterprise funds to account for revenues whose use should be restricted to certain activities. Accordingly, each fund exists as a separate financing entity from other funds, with its own revenue sources, expenditures and fund equity.

Any transfers between funds for operating purposes are clearly set forth in the Financial Plan, and can only be made by the Finance Director in accordance with the adopted budget.  These operating transfers, under which financial resources are transferred from one fund to another, are distinctly different from interfund borrowings, which are usually made for temporary cash flow reasons, and are not intended to result in a transfer of financial resources by the end of the fiscal year.

In summary, interfund transfers result in a change in fund equity; interfund borrowings do not, as the intent is to repay the loan in the near term.

From time to time, interfund borrowings may be appropriate; however, these are subject to the following criteria in ensuring that the fiduciary purpose of the fund is met:

1. The Finance Director is authorized to approve temporary interfund borrowings for cash flow purposes whenever the cash shortfall is expected to be resolved within 45 days.   The most common use of interfund borrowing under this circumstance is for grant programs like the Community Development Block Grant, where costs are incurred before drawdowns are initiated and received.  However, receipt of funds is typically received shortly after the request for funds has been made.

2. Any other interfund borrowings for cash flow or other purposes require case‐by‐case approval by the Council.

3. Any transfers between funds where reimbursement is not expected within one fiscal year shall not be recorded as interfund borrowings; they shall be recorded as interfund operating transfers that affect equity by moving financial resources from one fund to another.

Section 2. USER FEE COST RECOVERY GOALS
A. Ongoing Review
Fees will be reviewed and updated on an ongoing basis to ensure that they keep pace with changes in the cost‐of‐living as well as changes in methods or levels of service delivery.

In implementing this goal, a comprehensive analysis of City costs and fees should be made at least every fivethree years.  In the interim, fees will be adjusted by annual changes in the Consumer Price Index.  Fees may be adjusted during this interim period based on supplemental analysis whenever there have been significant changes in the method, level or cost of service delivery.

B. User Fee Cost Recovery Levels
In setting user fees and cost recovery levels, the following factors will be considered:

1. Community‐Wide Versus Special Benefit.  The level of user fee cost recovery should consider the community‐wide versusspecial service nature of the program or activity.  The use of general‐ purpose revenues is appropriate for community‐wide services, while user fees are appropriate for services that are of special benefit to easily identified individuals or groups.

2. Service Recipient Versus Service Driver.   After considering community‐wide versus special benefit of the service, the concept of service recipient versus service driver should also be considered.  For example, it could be argued that the applicant is not the beneficiary of the City's development review efforts:  the community is the primary beneficiary.  However, the applicant is the driver of development review costs, and as such, cost recovery from the applicant is appropriate.

3. Effect of Pricing on the Demand for Services.  The level of cost recovery and related pricing of services can significantly affect the demand and subsequent level of services provided.  At full cost recovery, this has the specific advantage of ensuring that the City is providing services for which there is genuinely a market that is not overly‐stimulated by artificially low prices.

Conversely, high levels of cost recovery will negatively impact the delivery of services to lower income groups.  This negative feature is especially pronounced, and works against public policy, if the services are specifically targeted to low ‐income groups.

4. Feasibility of Collection and Recovery.  Although it may be determined that a high level of cost recovery may be appropriate for specific services, it may be impractical or too costly to establish a system to identify and charge the user.  Accordingly, the feasibility of assessing and collecting charges should also be considered in developing user fees, especially if significant program costs are intended to be financed from that source.

C. Factors Favoring Low Cost Recovery Levels
Very low‐cost recovery levels are appropriate under the following circumstances:

1. There is no intended relationship between the amount paid and the benefit received.  Almost all "social service" programs fall into this category as it is expected that one group will subsidize another.

2. Collecting feesis not cost‐effective or willsignificantly impact the efficient delivery of the service.

3. There is no intent to limit the use of (or entitlement to) the service.  Again, most "social service" programsfit into this category as well as many public safety (police and fire) emergency response services. and the ability to appeal planning decisions.  Historically, access to neighborhood and community parks would also fit into this category.

4. The service is non‐recurring, generally delivered on a "peak demand" or emergency basis, cannot reasonably be planned for on an individual basis, and is not readily available from a private sector source.  Many public safety services also fall into this category.

5. Collecting fees would discourage compliance with regulatory requirements and adherence is primarily self‐identified, and as such, failure to comply would not be readily detected by the City.

Many small‐scale licenses and permits might fall into this category.

D. Factors Favoring High Cost Recovery Levels
The use of service charges as a major source of funding service levels is especially appropriate under the following circumstances:

1. The service is similar to services provided through the private sector.

2. Other private or public sector alternatives could or do exist for the delivery of the service.

3. For equity or demand management purposes, it is intended that there be a direct relationship between the amount paid and the level and cost of the service received.

4. The use of the service isspecifically discouraged.  Police responsesto disturbances or false alarms might fall into this category.

5. The service is regulatory in nature and voluntary compliance is not expected to be the primary method of detecting failure to meet regulatory requirements.  Building permit, plan checks, and subdivision review fees for large projects would fall into this category.

E. General Concepts Regarding the Use of Service Charges The following general concepts will be used in developing and implementing service charges:

1. Revenues should not exceed the reasonable cost of providing the service.

2. Cost recovery goals should be based on the total cost of delivering the service, including direct costs, departmental administration costs and organization‐wide support costs such as accounting, personnel, information technology, legal services, fleet maintenance and insurance.

3. The method of assessing and collecting fees should be as simple as possible in order to reduce the administrative cost of collection.

4. Rate structures should be sensitive to the "market" for similar services as well as to smaller, infrequent users of the service.

5. A unified approach should be used in determining cost recovery levels for various programs based on the factors discussed above.

F. Low Cost‐Recovery Services
Based on the criteria discussed above, the following types of services should have very low‐cost recovery goals.  In selected circumstances, there may be specific activities within the broad scope of services provided thatshould have user charges associated with them.  However, the primary source of funding for the operation as a whole should be general‐purpose revenues, not user fees.

1. Delivering public safety emergency response services such as police patrol services and fire suppression.

2. Maintaining and developing public facilities that are provided on a uniform, community‐wide basis such as streets, parks and general‐purpose buildings.

3. Providing social service programs and economic development activities.

4. Appealing planning decisions.  Appeal fees are charged based on a tiered system and fees for all tiers should be at 15% cost recovery for both applicants and non‐applicants, based on the cost of responding to appeals initiated by the applicant.

G. Recreation Programs
The following cost recovery policies apply to the City's recreation programs:

1. Cost recovery for activities directed to adults should be relatively high.

2. Cost recovery for activities directed to youth and seniors should be relatively low.   In those circumstances where services are similar to those provided in the private sector, cost recovery levels should be higher.

Although ability to pay may not be a concern for all youth and senior participants, these are desired program activities, and the cost of determining need may be greater than the cost of providing a uniform service fee structure to all participants.  Further, there is a community‐wide benefit in encouraging high‐levels of participation in youth and senior recreation activities regardless of financial status.

3. Fees for golf activities should be comparable to other communities.

3.4. Cost recovery goals for recreation activities are set as follows:

High‐Range Cost Recovery Activities ‐ (60% to 100%)
a. Adult athletics
b. Banner permit applications
c. Major commercial film permit applications
c. Child care services
d. Facility rentals (indoor and outdoor; excludes use of facilities for internal City uses) Mid‐Range Cost Recovery Activities ‐ (30% to 60%)
e.d. Triathlon
f. Golf
g.e.Summer and Spring Break Camps
f. Junior Ranger camp
g. Child care services
h. Classes
i.h. Major commercial film permit applications
Low‐Range Cost Recovery Activities‐ (0 to 30%)
j.i. Aquatics
k.j. Community gardens
l. Junior Ranger camp
m.k. Minor commercial film permit applications
n.l. Skate park
o.m. Parks and Recreation sponsored events (except for
Triathlon)
p.n. Youth sports
q.o. Teen services
r.p. Senior/boomer services

4.5. For cost recovery activities of less than 100%, there should be a differential in rates between residents and non‐residents.  However, the Director of Parks and Recreation is authorized to reduce or eliminate non‐resident fee differentials when it can be demonstrated that:
a. The fee is reducing attendance.
b. And thereThere are no appreciable expenditure savings from the reduced attendance.

5.6. Charges will be assessed for use of rooms, pools, gymnasiums, ball fields, special‐use areas, and recreation equipment for activities not sponsored or co‐sponsored by the City.  Such charges will generally conform to the fee guidelines described aboveshould be based upon comparability with other communities.  However, the Director of Parks and Recreation is authorized to charge fees that are closer to full cost recovery for facilities that are heavily used at peak times and include a majority of non‐resident users.

6.7. A vendor charge of at least 10 percent of gross income will be assessed from individuals or organizations using City facilities for moneymaking activities.

7.8. The Director of Parks and Recreation is authorized to offer reduced fees such as introductory rates, family discounts and coupon discounts on a pilot basis (not to exceed 18 months) to promote new recreation programs or resurrectrevive existing ones.

8.9. The Parks and Recreation Department will consider waiving fees only when the City Manager determines in writing that an undue hardship exists.

H. Development Review Programs
The following cost recovery policies apply to the development review programs:

1. Services provided under this category include:
a. Planning (planned development permits, tentative tract and parcel maps, re‐zonings, general plan amendments, variances, use permits).
b. Building and safety (building permits, structural plan checks, inspections). c. Engineering (public improvement plan checks, inspections, subdivision requirements, encroachments).
d. Fire plan check.

2. Cost recovery for these services should generally be very high.  In most instances, the City's cost recovery goal should be 100%.

3. However, in charging high cost recovery levels, the City needs to clearly establish and articulate standards for its performance in reviewing developer applications to ensure that there is “value for cost.”

4. Building Permit Plan Check Services – The City of San Luis Obispo offers building permit plan check services through consultants at a set price, not to exceed 65% of the City’s fee for the service.

Building Permit Plan Check Services are offered by the City on a 100% cost‐recovery basis, and the service is provided after the fee is paid in full. As a result, the Finance Director is authorized to make appropriations from the related revenue account to cover the cost of the services provided.

I. Services Supporting Sustainability Goals of the City Fees for services that support the sustainability goals of the City should be set at 50% cost recovery.

These include:

1. Building permits for:
a. Electric Car Charging System
b. Graywater System

c. Graywater/Rainwater Harvesting System
d. Heat Pump
e. Insulation/Energy Update
f. Photovoltaic Systems
g. Photovoltaic Unit Installation – Residential
h. Residential Photovoltaic System
i. Solar/PV System ‐ Commercial BLDG
j. Solar/PV System – Multifamily BLDG
k. Solar Water System Fixtures ‐ BLDG
l. Doors/Windows
m. Electric Service Upgrades
n. New/Altered Circuits
o. Window Retrofit

2. Pedicab Fee and Pedicab Renewal Fee
J. Concealed Carry Weapon Permit fee
The Concealed Carry Weapon Permit fee should be based upon comparability with other communities.

I.K. Comparability with Other Communities
In setting user fees, the City will consider fees charged by other agencies in accordance with the following criteria:

1. Surveying the comparability of the City's fees to other communities provides useful background information in setting fees for several reasons:
a. They reflect the "market" for these fees and can assist in assessing the reasonableness of San Luis Obispo’s fees.
b. If prudently analyzed, they can serve as a benchmark for how cost‐effectively San Luis Obispo provides its services.

2. However, fee surveys should never be the sole or primary criteria in setting City fees as there are many factors that affect how and why other communities have set their fees at their levels.  For example:
a. What level of cost recovery is their fee intended to achieve compared with our cost recovery objectives?
b. What costs have been considered in computing the fees? c. When was the last time that their fees were comprehensively evaluated? d. What level of service do they provide compared with our service or performance standards? e. Is their rate structure significantly different than ours and what is it intended to achieve?

3. These can be very difficult questions to address in fairly evaluating fees among different communities.  As such, the comparability of our fees to other communities should be one factor among many that is considered in setting City fees.

Section 3. ENTERPRISE FUND FEES AND RATES
A. Water, Sewer, and Parking.  The City will set fees and rates at levels which fully cover the total direct and indirect costs—including operations, capital outlay, and debt service—of the following enterprise programs:  water, sewer, and parking. For Waterwater and Sewersewer, the rate setting process will be in accordance with Proposition 218 and its notification requirements.

B. Transit.  Based on targets set under the Transportation Development Act, the City will strive to cover at least twenty percent of transit operating costs with fare revenues.

C. Ongoing Rate Review.  The City will review and adjust enterprise fees and rate structures asrequired to ensure that they remain appropriate and equitable.

D. Cost of Service Fees. The City will treat the water and sewer funds in the same manner as if they were privately owned and operated. This means assessing reasonable cost of service fees in fully recovering service costs.

The purpose of the cost of service fee is reasonable cost recovery for the use of the City’s services such as street rights‐of‐way and public safety. The appropriateness of charging the water and sewer fund a reasonable cost ofservice fee for the use of the City streetsisfurther supported by the results of studies from Arizona, California, Ohio, and Vermont which concluded that the leading cause of street resurfacing and reconstruction is street cuts and trenching for Utilities.

Section 4. REVENUE DISTRIBUTION
The Council recognizes that generally accepted accounting principles for state and local governments discourage the “earmarking” of General Fund revenues, and accordingly, the practice of designating General Fund revenues for specific programs should be minimized in the City's management of its fiscal affairs.   Approval of the following revenue distribution policies does not prevent the Council from directing General Fund resources to other functions and programs as necessary.

A. Property Taxes.  With the passage of Proposition 13 on June 6, 1978, California cities no longer can set their own property tax rates.  In addition to limiting annual increases in market value, placing a ceiling on voter‐approved indebtedness, and redefining assessed valuations, Proposition 13 established a maximum county‐wide levy for generalrevenue purposes of 1% of market value.  Under subsequent state legislation, which adopted formulas for the distribution of this countywide levy, the City now receives a percentage of total property tax revenues collected countywide as determined by the State and administered by the County Auditor‐Controller. The City receives 14.9% of each dollar collected in property tax after allocations to school districts.

Accordingly, while property revenues are often thought of as local revenue sources, in essence they are State revenue sources, since the State controls their use and allocation.

With the adoption of a Charter revision in November 1996, which removed provisions that were in conflict with Proposition 13 relating to the setting of property tax revenues between various funds, all property tax revenues are now accounted for in the General Fund.

B. Gasoline Tax Subventions.  All gasoline tax revenues (which are restricted by the State for street‐ related purposes) will be used for maintenance activities.  Since the City's total expenditures for gas tax eligible programs and projects are much greater than this revenue source, operating transfers will be made from the gas tax fund to the General Fund for this purpose.  This approach significantly reduces the accounting efforts required to meet State reporting requirements.

C. Transportation Development Act (TDA) Revenues.  All TDA revenues will be allocated to alternative transportation programs, including regional and municipal transit systems, bikeway improvements, and other programs or projects designed to reduce automobile usage.  Because TDA revenues will not be allocated for street purposes, it is expected that alternative transportation programs (in conjunction with other state or federal grants for this purpose) will be self‐supporting from TDA revenues.

D. Parking Fines.  All parking fine revenues will be allocated to the parking fundParking Fund, except for those collected by Police staff (who are funded by the General Fund) in implementing neighborhood wellness programs.

Section 5. INVESTMENTS
Link to the City’s Investment Policy & Management Plan:

POLICY STATEMENT
The City of San Luis Obispo shall invest public fundsin such a manner asto comply with state and local laws; ensure prudent money management; provide for daily cash flow requirements; and meet the objectives of the Investment Policy & Management Plan in priority order of Safety, Liquidity, and Return on Investment.

The purpose of the Investment Policy and Management Plan is to establish policies, practices, and procedures to be used in administering the City's investment portfolio in accordance with the City's Statement of Investment policy.

PRIMARY INVESTMENT OBJECTIVE
The City's primary investment objective is to achieve a reasonable rate of return on public funds while minimizing the potential for capital losses arising from market changes or issuer default. Although the generation of revenuesthrough interest earnings on investmentsis an appropriate City goal, the primary consideration in the investment of City funds is capital preservation in the overall portfolio. As such, the City's yield objective is to achieve a reasonable rate of return on City investments rather than the maximum generation of income, which could expose the City to unacceptable levels of risk.

In determining individual investment placements, the following factors shall be considered in priority order: 1) Safety   2) Liquidity   3) Yield – (Return on Investment).). The City will also take into account Environmental, Social, and Governance (ESG) objectives, the City’s Socially Responsible Investment Policy, and other qualitative considerations as directed by Council and required by the Investment Policy & Management Plan.

Section 6. APPROPRIATIONS LIMITATION
A. The Council will annually adopt a resolution establishing the City's appropriations limit calculated in accordance with Article XIII‐B of the Constitution of the State of California, Section 7900 of the State of California Government Code, and any other voter approved amendments or state legislation that affect the City's appropriations limit.

B. The supporting documentation used in calculating the City's appropriations limit and projected appropriations subject to the limit will be available for public and Council review at least 10 days before Council consideration of a resolution to adopt an appropriations limit.   The Council will generally consider this resolution in connection with final approval of the budget.

C. The City will strive to develop revenue sources, both new and existing, which are considered non‐tax proceeds in calculating its appropriations subject to limitation.

D. The City will annually review user fees and charges and report to the Council the amount of program subsidy, if any, that is being provided by the General or Enterprise Funds.

E. The City will actively support legislation or initiatives sponsored or approved by League of California Cities which would modify Article XIII‐B of the Constitution in a manner which would allow the City to retain projected tax revenues resulting from growth in the local economy for use as determined by the Council.

F. The City will seek voter approval to amend its appropriation limit at such time that tax proceeds are in excess of allowable limits.

Section 7. FUND BALANCE AND RESERVES
Link to the City’s Fund Balance & Reserve Policy
This policy establishes guidelines and procedures for allocating and reporting the City’s fund balances in the financial statements in accordance with Governmental Accounting Standards Board (GASB) Statement No. 54 and as committed by the City Council effective beginning fiscal year ending June 30, 2021.

Additionally, the policy establishes the City’s reserve levels to address protection from risk and unexpected situation that require financial resources. The City of San Luis Obispo faces risks such as revenue shortfalls during recessions and losses from extreme events, like earthquakes, wildland fires, flooding, and other natural disasters. Prudent reserve levels help make sure that the City of San Luis Obispo can respond quickly and decisively to those events.

Reserves also support vital public services during revenue declines.

As such, the City’s reserve policy describes how much the City will retain in the reserves and stipulates activation and acceptable uses of the reserves.

Since reserve levels need to be considered when establishing fund balances, both are addressed within this policy.

Section 8. CalPERS & UNFUNDED LIABILITIES
With the 2018‐19 Financial Plan Supplement, the City adopted its Fiscal Health Response Plan (FHRP); a three‐year plan to address the City’s escalating unfunded pension liability stemming from the CalPERS’ changes under the Public Employees’ Pension Reform Act (PEBRA). PEBRAPEPRA). PEPRA prescribe that a member agency’s pension liability had to be paid down over a 30‐year period which triggered annually escalating contributions through 2045.

The FHRP therefore targeted a realignment of revenues and expenditures to allow for additional payments to CalPERS, negotiated additional contributions toward pension payments for employee groups, and prioritized the use of unassigned fund balance once the City’s Financial Statements had been audited and accepted by the City Council. The goal of thisrealignment wasthe payment of the unfunded liability (UFL) over a reduced timeline therefore securing pensionsfor City employees and saving the City considerable interest payments.

Given the long‐term ramifications of the deliverables put in motion through the FHRP, this section addresses the City’s long‐term commitment to payment of the UFL, annual additional discretionary payments (ADPs), and the needed prioritization to hold the shortened timeline.

1. The City sets the following prioritization of unassigned General Fund balance:
a. Additional discretionary payments to CalPERS
b. Infrastructure investments
b.c.Emerging Health and Safety needs of the community
c.a.Infrastructure investments

2. The City commits to ADPs to CalPERS and adding an annual inflator equal to increases in payroll whenever CalPERS reaches its discount rate or larger rates of return based on FY2022‐23 assumptions as follows:what is presented in the latest five‐year forecast. a. $2 million from the General Fund
b. $400,000 from the City’s Enterprise Funds

3. Whenever CalPERS does not reach its adopted discount rate, the City commits to first use any unassigned fund balance to counteract the investment loss CalPERS experienced. It will add the loss to the committed ADP as outlined above to safeguard the investment already made toward the early repayment of the UFL.

Section 9. CAPITAL IMPROVEMENT PROGRAM MANAGEMENT
A. CIP Projects: $25,000 or More.   Construction projects which cost $25,000 or more will be included in the CIP and are accounted for the in the Capital Outlay Fund.  Minor capital outlays of less than $25,000 will be included with the operating program budgets.

B. CIP Purpose.   The purpose of the CIP is to systematically plan, schedule, and finance capital projects to ensure cost‐effectiveness as well as conformance with established policies.  The CIP is a five‐year plan organized intoby the same functional groupings used forcategories as the City’s operating programs.  The CIP will reflectreflects a balance between capital replacement projects —those that repair, replace, or enhance existing facilities, equipment or infrastructure; and— with capital facility projects that significantly expand or add to the City’s existing fixed assets.

C. CIP Project Type.  Projects are categorized by type, including:

1. Asset Maintenance – Reoccurring and annual needs that maintain existing assets.

2. Asset Replacement – Periodically reoccurring and/or annual needs that replace existing assets with similar assets.

3. New Asset – Periodic needs to expand the number of assets that serve the community.

Asset maintenance projects and costs should be considered before recommending funding for projects to replace existing assets or construct new assets.  Asset Maintenance projects are not ranked by the CIP Review Committee.

D. CIP Project, Project Manager.   Every CIP project will have a “project manager” who will be responsible for managing the project scope, budget, and timeline.   Project managers will be responsible for ensuring that required phases are completed on schedule, authorizing all project expenditures, ensuring that all regulations and laws are observed, regularly communicating with project proponents and other stakeholders, and reporting on project status.   Project management will primarily be performed by staff in the Public Works Department, but staff from other departments may also manage projects.

E. CIP Review Committee.  The CIP Review Committee provides governance of the CIP by evaluating and prioritizing capital projects based upon an established set of criteria to ensure alignment with Major City Goals, the General Plan, strategic growth objectives and needs for services provided within the City.  The Assistant City Manager serves as Chair of the Committee and the Director of Public Works is Vice Chair; other members include: Deputy City Manager, Director of Community Development, Director of Finance, Director of Parks and Recreation, Director of Utilities, and a public safety department head (rotating between the Fire Chief and Police Chief).  The CIP Administrative Manager, City Engineer and, Principal Budget Analyst, DEI Manager, and Sustainability Manager provide staff support to the Committee.  The Committee is responsible for:

1. Assessing the City’s fiscal and staff capacity to deliver projects so that the recommended CIP represents what can realistically be accomplished; and

2. Recommending to the City Manager the projects and associated budgets that should be included in the biennial financial plan; and

3. Considering requests for new projects that may be requested outside of financial plan development to address emergent needs; and

4. Evaluating the re‐prioritization of projects as needs and conditions change in order to ensure consistency with project evaluation criteria, ability to deliver projects, and City priorities.

F. Project Request Forms.   The CIP Review Committee requires that departments submitting a request for aan Asset Replacement or New Asset project to be funded in the Five‐Year CIP cycle submit a Project Request Form (PRF) to formally document the project request.   The PRF is intended to ensure that the Committee has necessary information to evaluate and prioritize projects for funding.  In addition to completion of the PRF, the Committee may also request a presentation from the requesting department to gather additional information.  The content of the PRF shall include, but not be limited to the following:

1. Proposed project title

2. Proponent (Client) department

3. Proposed managing department or division

4. Project function (Major City Goal Alignment)

5. Project type

6. City priority alignment

7. Project scope
i. Purpose and Need (including approved planning documents or mandates) ii. Consistency with Climate Action Plan
iii. Consistency with DEI
iv. Impact to Operations

8. Proposed project schedule/delivery

9. Estimated project budget and funding source(s) (if any) G. Creation of Projects.  New projects shall only be considered during development of the biennial financial plan.  Requests Staff requests for projects outside of the financial plan development process will be considered only if they are intended to address an emergency need.  Staff may create new projects as directed by the City Council at any point.

H. CIP Phases.  The CIP will emphasize project planning, with projects progressing through at least two and up to ten of the following phases:

1. Designate.   Appropriates funds based on projects designated for funding by the Council through adoption of the Financial Plan.

2. Study.   Concept, site selection, feasibility analysis, schematic design, environmental determination, property appraisals, scheduling, grant application, grant approval, specification preparation for equipment purchases.

3. Environmental Review.  EIR preparation, other environmental studies.

4. Real Property Acquisitions.  Property acquisition for projects, if necessary.

5. Site Preparation.  Demolition, hazardous materials abatements, other pre‐construction work.

6.5. Design.  Final design, plan and specification preparation and construction cost estimation.

7.6. Construction.  Construction contracts.

8.7. Construction Management. and Special Inspections.  Contract project management and inspection, soils and material tests, other support services during construction.

9.8. Equipment Acquisitions.      Vehicles, heavy machinery, computers, office furnishings, other equipment items acquired and installed independently from construction contracts.

10.9. Debt Service.   Installment payments of principal and interest for completed projects funded through debt financings.  Expenditures for this project phase are included in the Debt Service section of the Financial Plan. Generally, it will become more difficult for a project to move from one phase to the next.   As such, more projects will be studied than will be designed, and more projects will be designed than will be constructed or purchased during the term of the CIP.

I. CIP Appropriation.   The City’s annual CIP appropriation for study, design, acquisition and/or construction is based on the projects designated by the Council through adoption of the Financial Plan.  AdoptionUpon adoption of the Financial Plan CIP appropriation does not automatically authorize funding for specific project phases.  This authorization generally occurs only after, the preceding project phase has been completed andCapital Improvement Program (CIP) is concurrently approved by the Council and costs for the succeeding phases have been fully developed.

I. Accordingly, project, authorizing appropriations for projects with allocated funding in the designated fiscal year. Appropriations are generally made when contractsprocessed at the start of the fiscal year, ensuring that funds are awarded.  available in the project account within the City’s financial management system.

If project costs at the time of bid award are less than the budgeted amount, the balance will be unappropriated and returnedreappropriated to fund balancethe CIP reserve, or be allocated to another project.  If project costs at the time of bid award are greater than budget amounts, five basic options are available:

1. Eliminate the project.

2. Defer the project for consideration to the next Financial Plan period.

3. Rescope or change the phasing of the project to meet the existing budget.

4. Transfer funding from another specified, lower priority project.

5. Appropriate additional resources as necessary from fund balance.

J. Cost of CIP Program Management and Project Delivery. The Capital budget shall reflect the projected cost of staff time within the Public Works Department spent on management of the CIP and delivery of projects budgeted in the Capital budget.

6. CIP Budget Carryover.Appropriate funding from the Capital Reserve.

K.J. CIP Project Lapse.   Appropriations for CIP projects lapse three years after budget adoption.

Projects which lapse from lack of project account appropriations may be resubmitted for inclusion in a subsequent CIP.  Project accounts, which have been appropriated, will not lapse until completion of the project phase.

L.K.CIP Reporting.  Staff shall publish reports on the progress of delivering the Capital Improvement Plan at least quarterly, as part of Quarterly Budget Reports provided to the City Council.  These reports shall include a summary of project budgets, a status update on projects in progress, and a listing of projects completed within the quarter.

M.L. Public Art.  CIP projects will be evaluated during the budget process and prior to each phase for conformance with the City's public art policy, which generally requires that 1% of eligible project construction costs be set aside for public art.   Excluded from this requirement are underground projects, utility infrastructure projects, funding from outside agencies, and costs other than construction such as study, environmental review, design, site preparation, land acquisition and equipment purchases. It is generally preferred that public art be incorporated directly into the project, but this is not practical or desirable for all projects; in this case, an in‐ lieu contribution to public art will be made.  To ensure that funds are adequately budgeted for this purpose regardless of whether public art will be directly incorporated into the project, funds for public art will be identified separately in the CIP.

N.M. General Plan Consistency Review.   The Planning Commission will review the Preliminary CIP for consistency with the General Plan and provide its findings to the Council prior to adoption.

O.N. Climate Action Plan Implementation.  Council adopted Resolution No.  11159 (2020 Series) establishes a goal of community‐wide carbon neutrality by 2035 and municipal operations carbon neutrality by 2030. The City’s Capital Improvement Program is a critical implementation tool, and every CIP will be evaluated for alignment with these climate goals. Examples of ways projects or project components can align the with goals include (but are not limited to):

1. Elimination or reduction of vehicle miles traveled (e.g., active transportation and transit improvements),

2. Elimination or reduction of fossil fueled appliances, vehicles, and equipment,

3. Reduced energy consumption (e.g., efficient mechanical equipment, efficient lighting, etc.)

4. Carbon storage through tree planting or landscape management, and

5. Solid waste/ green waste diversion
P.O. Diversity, Equity and Inclusion.   In 2020 the City Council declared diversity, equity, and inclusion (DEI) as integral aspects of their City Mission and Meta Goal, ensuring that through policies, programs, and projects, San Luis Obispo will foster a community that is welcoming, equitable, safe and inclusive for all.     The City’s Capital Improvement Program is a critical component of achieving these goals by ensuring that capital projects are designed to be accessible, inclusive, and safe for diverse populations.   Capital Improvement Projects can advance diversity, equity, through project design and accessibility, diverse representation in art

components of projects, ensuring there are programs to subsize costs for low‐income communities to access the project, providing opportunities to diverse populations and stakeholders for community input, including DEI as a priority in RFPs or project scope, and ensuring the project does not disproportionately burden one community over another.

Section 10. CAPITAL FINANCING AND DEBT MANAGEMENT
Link to the City’s Capital Financing & Debt Management Policy

POLICY STATEMENT
The City of San Luis Obispo (City) will maintain, at all times, debt management policies that are fiscally prudent, consistent with State and Federal law, and reflective of the most opportune financing strategies to deliver on the needs and goals of the community and the City organization. The Debt Management Policy establishes objectives, parameters, and guidelines for responsibly issuing and administering the City’s debt. Prudent management of the City’s debt program is necessary to achieve cost‐effective access to the capital markets and demonstrate a commitment to long‐ term financial planning and sustainability.

DEBT MANAGEMENT OBJECTIVES
The policy sets forth key objectives for the City in issuing and administering the City’s debt, which are to:
 Maintain the City’s sound financial position.
 Minimize debt service and issuance cost.
 Maintain access to cost‐effective borrowing.
 Achieve and maintain highest reasonable credit rating.  Ensure full and timely repayment of debt.
 Maintain full and complete financial disclosure and reporting including voluntary disclosures.  Ensure compliance with State and Federal laws and regulations.

SCOPE
This policy establishes the framework for when the City of San Luis Obispo should consider issuing debt and the overall acceptable debt burden. Long‐term debt is an effective way to finance capital improvements by matching the term of the debt with the useful life of the asset being financed. Properly managed debt provides flexibility in current and future operating budgets and provides the City with the long‐term assetsrequired to deliverservices, programs, and public infrastructure to the community. The City recognizes that effective debt management practices require a comprehensive Debt Management Policy that details the use of capital debt to support the capital infrastructure in the community while maintaining a stable and prudent fiscal outlook.

DEBT CAPACITY

1. General Purpose Debt Capacity. The City will carefully monitor its levels of general purpose debt. Because the City’s general‐purpose debt capacity is limited, it is important that the City only use general purpose debt financing for high‐priority projects when it cannot reasonably use other financing methods for two key reasons:
a. Funds borrowed for a project today are not available to fund other projects tomorrow. a.b. Funds committed for debt repayment today are not available to fund operations in the future.

In evaluating debt capacity, general‐purpose annual debt service payments should generally not exceed 10% of General Fund revenues; and in no case should they exceed 15%. Further, direct debt will not exceed 2% of assessed valuation; and no more than 60% of capital improvement outlays will be funded from long‐term financings.

2. Enterprise Fund Debt Capacity. The City will set enterprise fund rates at levels needed to fully cover debt service requirements as well as operations, maintenance, administration and capital improvement costs. The ability to afford new debt for enterprise operations will be evaluated as an integral part of the City’s rate review and setting process.

Section 11. HUMAN RESOURCE MANAGEMENT
A. Regular Staffing

1. The budget will fully appropriate the resources needed for authorized regular staffing and will limit programs to the regular staffing authorized..

2. Regular employees will be the core work force and the preferred means of staffing ongoing, year‐ round program acƟviƟes that should be performed by regular full‐ or part‐Ɵme City employees rather than limited‐term employees or independent contractors. The City will strive to provide compeƟƟve compensaƟon and benefit schedules for its authorized regular work force. Each regular employee will:
a. Fill an authorized regular position.
b. Be assigned to an appropriate bargaining unit, unless designated as an unrepresented management or confidential classification.
c. Receive salary and benefits consistent with labor agreements or other compensation plans.

3. To manage the growth of the regular work force and overall staffing costs, the City will follow these procedures:
a. The Council will authorize alland approve funding to increase headcount for regular full time equivalent positions.
b. The Human Resources Department will coordinate and approve the hiring of all regular and supplementaltemporary staff.
c. All requests for additional regular positions will include evaluations of:
 The necessity, term, and expected results of the proposed acƟvity.  Staffing and materials costs including salary, benefits, equipment, uniforms, vehicles, clerical support, and faciliƟes.
 The ability and cost of private industry to provide the proposed service.  AddiƟonal revenues or cost savings, which may be realized.

4. Periodically, and before any request for addiƟonal regular posiƟons, programs will be evaluated to determine if they can be accomplished with fewer regular employees. (See ProducƟvity Review Policy)

5. Staffing and contractservice cost ceilings will limit totalTotal expendituresfor regular employees, supplemental , temporary, and contract staff, and independent contractors hired to provide operaƟng and maintenance services. will be limited to approved budgets for regular, temporary, and contract salaries and benefits.

B. SupplementalTemporary Staff

1. The hiring of supplementaltemporary staff  will not be used as an incremental method for expanding the City's regular work force.

2. SupplementalTemporary staff  include all employees other than regular employees, elected officials, and volunteers. SupplementalTemporary staff  include seasonal or occasional employees, employees with irregular schedules, limited benefit employees, temporary employees, limited‐term contract employees, CalPERS reƟred annuitants, and leased employees.

SupplementalTemporary staff  may work on a full‐time or part‐Ɵme basis and will generally augment regular City staffing. SupplementalTemporary staff may be used as extra‐help during peak workloads, as coverage during extended absences of regular employees, seasonal workforce, as a means to assess ongoing staffing needs, or as the staffing method for program delivery that is most effecƟvely staffed using part‐Ɵme hours to ensure adequate coverage.

3. The City Manager and Department Heads will encourage the use of supplementaltemporary staff rather than regular employees to meet peak workload requirements, fill interim vacancies, and accomplish tasks where less than full‐Ɵme, year‐round staffing is required.

4. Under this guideline, supplementaltemporary staff  hours will generally not exceed 50% of a regular, full‐time position (1,000 hours annually). , or about 50% of a fullƟme posiƟon. There may be limited circumstances where the use of supplementaltemporary staff on an ongoing basis in excess of this target may be appropriate due to unique programming or staffing requirements.

However, any such excepƟons must be approved by the City Manager based on the review and recommendaƟon of the Directors of Finance and Human Resources Director..

1. ContractLimited‐term contract employees are defined as supplementaltemporary staff, eligible for defined benefits, with wriƩen employment contracts that have a defined end‐date and are approved by the Director of Human Resources Director and City AƩorney who may receive approved benefits. Contract. Limited‐term contract employees will generally be used for medium‐term (generally between six months and two years) projects, programs, or acƟviƟes requiring specialized or augmented levels of staffing for a specific period.

5. Leased of Ɵme. The services of limited‐term contract employees will be disconƟnued upon compleƟon of the assigned project, program, or acƟvity. Accordingly, limited‐term contract employees will not be used for services that are anƟcipated to be delivered on an ongoing basis and as such, a determinaƟon as to the expected need will be made at the end of each contract term and prior to extending or renewing a contract.

5.6. Temporary Agency Employees are employed during short‐term, peak workload assignments to be accomplished using personnel contracted through an outside employment agency (OEA).

In this situaƟon, it is anƟcipated that City staff will closely monitor the work of leased employees and minimal training will be required. However, they will always be considered the employees of the OEA and not the City. All placements through an OEA will be coordinated through the Human Resources Department and subject to the approval of the Director of Human Resources Director..

The services of contract employees will be discontinued upon completion of the assigned project, program or activity.   Accordingly, contract employees will not be used for services that are

anticipated to be delivered on an ongoing basis and assuch, a determination asto the expected need will be made at the end of each contract term and prior to extending or renewing a contract.

C. OverƟme Management

1. OverƟme should be used only when necessary and when other alternaƟves are not feasible or cost effecƟve.

2. All overƟme must be pre‐authorized by a department head or delegate unless it is assumed pre‐ approvedpreapproved by its nature. For example, (e.g., overƟme that results when an employee is assigned to standby and/or must respond to an emergency or complete an emergency response.).

3. Departmental operaƟng budgets should reflect anƟcipated annual overƟme costs and departments will regularly monitor overƟme use and expenditures.

4. When considering the addiƟon of regular or temporary staffing, the use of overƟme as an alternaƟve will be considered. The department will take into account:
a. The duration that additional staff resources may be needed. b. The cost of overtime versus the cost of additional staff. c. The skills and abilities of current staff.
d. Training costs associated with hiring additional staff. e. The impact of overtime on existing staff.

D. Independent Contractors
Independent contractors are not City employees. TheyIndependent contractors are used in construcƟon of public works projects and delivery of operaƟng, maintenance, or specialized professional services not rouƟnely performed by City employees. Such services will be provided without close supervision by City staff, and the required methods,skills, and equipment will generally be determined and provided by the independent contractor. Contract awards will be guided by the City's purchasing policies and procedures. (See ContracƟng for Services Policy)

Section 12. CONTRACTING FOR SERVICES
A. General Policy Guidelines

1. Contracting with the private sector for the delivery of services provides the City with a significantan opportunity for cost containment and productivity enhancements.  Assuch, the City is committed to using private sector resources in delivering municipal services as a key element in our continuing efforts to provide cost‐effective programs.

2. Private sector contracting approaches under this policy include construction projects, professional services, outside employment agencies, and ongoing operating and maintenance services.

3. In evaluating the costs of private sector contracts compared with in‐house performance of the service, indirect, direct, and contract administration costs of the City will be identified and considered.

4. Whenever private sector providers are available and can meet established service levels, they will be seriously considered as viable service delivery alternatives using the evaluation criteria outlined below.

5. For programs, services, and activities currently provided by City employees, conversions to contract services will generally be made through attrition, reassignment or absorption by the contractor, after fulfilling required meet and confer obligations.

B. Evaluation Criteria
Within the general policy guidelines stated above, the cost‐effectiveness of contract services in meeting established service levels will be determined on a case‐by‐case basis using the following criteria:

1. Is a sufficient private sector market available to competitively deliver this service and assure a reasonable range of alternative service providers?

2. Can the contract be effectively and efficiently administered?

3. What are the consequences if the contractor fails to perform, and can the contract reasonably be written to compensate the City for any such damages?

4. Can a private sector contractor better respond to expansions, contractions or special requirements of the service?

5. Can the work scope be sufficiently defined to ensure that competing proposals can be fairly and fully evaluated, as well as the contractor's performance after bid award?

6. Does the use of contract services provide us with an opportunity to redefine service levels?

7. Will the contract limit our ability to deliver emergency or other high priority services?

8. Overall, can the City successfully delegate the performance of the service but still retain accountability and responsibility for its delivery?

Section 13: ProductivityPRODUCTIVITY
Ensuring the “delivery of service with value for cost” is one of the key concepts embodied in the City's Mission Statement (San Luis Obispo Style— Quality With Vision).  To this end, the City will constantly monitor and review our methods of operation to ensure that services continue to be delivered in the most cost‐effective manner possible.

This review process encompasses a wide range of productivity issues, including:

A. Analyzing systems and procedures to identify and remove unnecessary review requirements.

B. Evaluating the ability of new technologies and related capital investments to improve productivity.

C. Developing the skills and abilities of all City employees.

D. Developing and implementing appropriate methods of recognizing and rewarding exceptional employee performance.

E. Evaluating the ability of the private sector to perform the same level of service at a lower cost.

F. Periodic formal reviews of operations on a systematic, ongoing basis.

G. Maintaining a decentralized approach in managing the City's support service functions.  Although some level of centralization is necessary for review and control purposes, decentralization supports productivity by:

1. Encouraging accountability by delegating responsibility to the lowest possible level.

2. Stimulating creativity, innovation and individual initiative.

3. Reducing the administrative costs of operation by eliminating unnecessary review procedures.

4. Improving the organization's ability to respond to changing needs and identify and implement cost‐saving programs.

5. Assigning responsibility for effective operations and citizen responsiveness to the department.

H. Maintaining City purchasing policies and procedures that are as efficient and effective as possible.

Budget Balancing Strategies
The City’s Fiscal Policies guide staff in the management of the City’s finances and provide a foundation for budget balancing strategies to ensure the long-term financial sustainability of City operations, regardless of financial condition. In July 2014, the City Council adopted the Fiscal Responsibility Philosophy to ensure a focus on the long-term health of the organization. The components of the Philosophy provide clear guidance for ensuring fiscal responsibility, and the Budget Balancing Strategies serve to operationalize that guidance. These budget balancing strategies are subject to at least bi-annual review and are approved by the City Council with adoption of the two-year Financial Plan every other June.

Consistent with adopted fiscal policies, staff provides quarterly budget updates to the City Council which provides the opportunity to identify budgetary issues and implement corrective measures if needed. These strategies guide both development and management of the budget, both in times of budgetary growth and contraction. One of the overarching objectives of the City’s Budget Balancing Strategies is to strike a balance between ensuring fiscal sustainability and continuing to provide programs and services to the community.

This section provides an overview of the City’s Budget Balancing Strategies and is divided into two parts outlining the City’s preferred strategies and approaches in times of (1) budgetary contraction and (2) budgetary growth.

In Times of Financial Difficulty
When faced with financial difficulty, the City should identify budget balancing strategies that address both short and long-term budget gaps, while also minimizing the impact of budget reductions to the community and employees. It also becomes increasingly important to focus on employee retention as the cost of turnover can outweigh savings produced by vacancies.

Focusing on creative and cost neutral or low-cost options to keep turnover at sustainable levels is crucial for maintaining and delivering core services to the public during challenging times.

Depending on the level or type of financial difficulty being experienced, short and long-term budget balancing strategies may be needed over multiple years. An important consideration in developing and implementing budget balancing strategies is identifying the timeframe for fixing the problem and bringing about structural balance. Utilizing reserves and other short-term budget balancing solutions can soften the impact of reductions to programs and services. However, it is imperative that these short-term solutions be used judiciously to maintain the City’s overall fiscal health.

Relying too heavily on short-term solutions can delay implementation of strategies to address budget deficits and may increase deficits in the long-term.

Following is an outline of the City’s preferred budget balancing strategies and approaches in times of financial difficulty:

Long term budget balancing strategies:

1. Priority Driven- Development of recommendations to balance the budget should be based upon consideration of legal mandates, community health and safety, basic service needs, Council’s identified Major City Goals and other identified priorities.

Proposed budget reductions should take into consideration funding requests for

programs that are discretionary and for programs that are mandated by state, federal, or local legal requirements and/or health and safety needs.

2. All Departments Participate- While departmental budgets vary significantly due to the services provided, identified priorities, expected levels of service, and departmental revenue sources (amongst many other variables), all departments should participate in the closing of a budget gap. More specifically, no department should be exempt from consideration of budget reductions.

3. Long-Term Budget Reductions- At the guidance of the City Manager, the Finance Department should require departments to incorporate a prioritized list of expenditure reductions into their annual budget submittals. Potential reductions submitted by departments should not impact the City’s ability to meet legal mandates, and should reflect consideration of basic service needs, community expectations and the Council’s identified Major City Goals. If reductions are necessary, targeted reduction amounts should be included as part of the detailed budget instructions provided to departments. If needed, reduction lists will generally be required during development of the two-year Financial Plan or Supplemental Budgets,

4. Mid-Year Budget Reductions- Mid-year reductions may be necessary in any given fiscal year depending upon general economic conditions, recently passed legislation, or unanticipated action by other levels of government at any particular point in time.

The intent of the mid-year reductions is to help keep the current year budget in balance and to create additional unassigned fund balance at year-end for use as a funding source in the subsequent budget year.

5. City Share of Cost- Some City programs are funded wholly or in part by external funding sources including Federal allocations, grants, and user fees. These funding sources may not cover the entirety of program expenditures, requiring a contribution from the City. Staff should carefully monitor external funding sources over time to ensure that they keep pace with the cost of providing the related service to ensure that the City’s share of cost does not increase over time. If external funding sources decrease or are eliminated, the associated expenditures should be considered for reduction or elimination as well. If staff believes that continuation of externally funded programs should continue despite a loss of funding, staff should inform the City Council of the loss of external funding sources and request appropriation of identified City dollars and funding sources to continue the program in full or in part.

6. Engage Employees and Employee Associations- Labor costs account for the majority of the City’s operating budget. City staff and negotiators are obligated to meet and confer in good faith with employee associations to negotiate labor agreements that are fiscally sustainable and aligned with the Council adopted Compensation Philosophy and Labor Relations Objectives.

7. Revenue Generation- Addressing budget shortfalls requires an evaluation of both revenues and expenditures. While the City is limited in its ability to generate new

revenue, there is opportunity within existing City processes to ensure that the City is able to maximize existing revenues. In order to do this, the City should:
 Conduct fee studies at least every three years, consistent with Section 2 of the City’s Fiscal Policies related to User Fee Cost Recovery Goals to ensure that the cost of services that provide an individual benefit are offset by fees for those services. As a part of the regular fee studies, Council should also consider policies around fee cost recovery and make adjustments if needed.  Focus on enforcement of requirements in the City’s Municipal Code to ensure that the City is recovering its costs for providing services. It should be noted that proactive enforcement of Municipal Code requirements requires a considerable investment of staff time which may limit the City’s ability to make significant progress in this area.
 Revisit existing agreements with outside agencies to ensure that the City is maximizing recovery of costs for specific services provided through those agreements.
 Explore opportunities to increase rates for specific taxes, where the tax rate being charged is under the maximum authorized by the City Council.

The City should carefully consider the impact on the community when taking any action to increase revenue, as general economic conditions impacting the City’s budget also impact members of the community.

8. Revisit Capital/Operating Split of Local Revenue Measure Expenditures. In November 2020, City voters passed a Local Revenue Measure (LRM), authorizing a

1.5% local sales tax to protect and maintain services and public infrastructure. The sales tax that the City collects due to the LRM funds both capital and operating expenses. Historically, the City has allocated 75% of LRM revenues to capital costs and 25% to operating costs. Staff should revisit the capital/operating split to ensure that the City is able to use LRM dollars to fund priority needs and minimize operating budget reductions to the greatest extent possible.

Short-term solutions that do not address a long-term structural budget gap:

1. Hiring “Chill”- The purpose of a hiring “chill” is two-fold: to contain costs in the current year by slowing the recruitment of vacant positions or holding certain positions vacant so that additional unassigned fund balance is available for the subsequent budget year and to allow for attrition with respect to the reduction of positions (i.e. reduce or eliminate the need for layoffs). The decision about which positions to hold vacant or slow recruitments for should also be based upon priority and need, which a focus on minimizing impacts to the community to the extent possible. Attrition is a helpful tactic but should not be the driving strategy in reducing costs.

2. Defer capital improvement and information technology projects that rely on the General Fund- This option saves money in the near-term but if these types of projects are continuously deferred, City facilities and systems may deteriorate and the cost of repairs may increase over time.

3. Minimize building and information technology maintenance expendituresSimilar to deferring capital improvement and automation projects that require General Fund, this option saves General Fund in the near-term. However, over time, if maintenance is deferred, City facilities and automation may deteriorate, leading to higher repair costs.

4. Early Retirement- Early retirement programs may be offered on a case-by-case basis.

The intent of an early retirement program is to reduce the number of potential layoffs by enticing individuals who are considering retirement to retire sooner rather than later in order to create attrition opportunities. Depending upon the specifics, an early retirement program may or may not provide cost savings. In instances where the program does not provide a cost savings (or is cost neutral), the sole benefit would be to reduce layoffs.

5. Use of One-Time Reserves- The City has set aside money in reserves, some of which is not designated for a specific purpose. This money is budgeted every year and has historically been used to help pay for unexpected costs or to help fund one-time projects. Some of these reserves are available to help address a budget gap. However, since reserves are one-time in nature, the use of reserves to fund ongoing operational expenditures should be limited and not considered to be a long-term operational funding source.

Other unlikely strategies:

1. Furloughs- This approach has not historically been used by the City because it is challenging to implement without significant impacts to services provided to the community.

2. Eliminate Training- Maintaining a skilled workforce is important for every organization, especially one as labor intensive as the City. This approach should not be included in the budget balancing strategies because in times of budget reductions, additional demands are placed upon employees and, during these times, it will be more important than ever to maintain and enhance the performance of the workforce in order to successfully manage an increased workload. While training plans and expenditures may be cut back in times of financial difficulty, they should not be eliminated.

In Times of Financial Recovery and Growth
The goal of the recovery process is to assure that the City remains adaptable to changing conditions. To ensure long-term fiscal stability, the City must prioritize funding existing financial and operating deficits over the addition of new programs and projects.

In times of financial recovery and growth, the City aims to strike a balance in the following areas:
 Financial security
 Programs and services
 Employee compensation and workforce investment

Following is an outline of the City’s approach:

Financial Security
In times when the City has funds available to support expansion of the budget, there should be a balance between the restoration of programs and services and the funding of the reserves, contingencies and designations that have been reduced to balance the budget in prior years. The City aims to maintain healthy reserves and low debt levels in order to allow for future organizational stability and continuity of services. Consideration of financial security includes a review of the following:
 Ratio of reserves to the City’s General Fund operating budget- The City’s goal is to maintain a prudent level of savings that allows the City to plan for future needs and “weather” economic downturns. The industry standard target is to have a 20% reserve as a percent of the operating budget.
 Debt Ratios- The City’s Debt Management policy is to generally keep the ratio of general fund debt service costs below 10% of General Fund revenue and never exceed 15%. A ratio under 5% is considered to be favorable by credit rating agencies.
 Asset Maintenance and Replacement: These costs are often first to be cut in hard times and, if left unfunded, will create significant liabilities. The City should ensure deferred maintenance is prioritized by setting aside funding for asset replacement as funds become available.

Programs and Services
Development and delivery of new programs and services or modification to existing programs and services provided to the community are based on an evaluation of need thorough an annual process that invites submittal of Significant Operating Budget Changes (SOBC’s) by Department Heads to the City Manager. The SOBC provides the City Manager with a written proposal for adding resources to a department’s budget. The written proposal must include:
 A summary of the current situation and need that the SOBC will address and any relevant background to support the request.
 A description of how the requested resources will address the identified need.  Identification of intended results in terms of efficiency, quality of service, outcomes, and key performance indicators.
 A description of how additional resources will address a high priority City service need or Major City Goal.
 An analysis of alternative solutions to address the identified problem.  The expected timeline for implementing the request, including major milestones along the way.

SOBCs that are recommended by the City Manager are dependent upon Council priorities, existing service needs, the availability of funding, consistency with existing policies and

budget balancing strategies, and the anticipated results or outcomes that will be achieved by adding the resources.

Requests for new capital projects are evaluated bi-annually by the CIP Review Committee as part of the development of the two-year Financial Plan. Proposals for new projects require submittal of a Project Initiation Form which must include:
 Proposed project title.
 Project function (community and neighborhood livability, community safety, culture and recreation, environmental health and open space, fiscal health and governance, or infrastructure and transportation).
 Identification of project as being annual asset maintenance, asset replacement, a new asset or a non-asset project.
 Identification of project alignment with related City priorities (Local Revenue Measure, Major City Goal, adopted planning documents, or other important objective,).
 A description of the project purpose and need, including a detailed scope of work.
 Identification of project consistency with the Climate Action Plan or Diversity, Equity and Inclusion considerations.
 Information about project schedule and delivery, including planning or design phase services and any expected permit needs, advisory body reviews, or anticipated public outreach.
 Project cost estimates and identified funding sources. As a part of this, departments should also identify ongoing costs to maintain assets, including staffing and needs.

Employee Compensation and Workforce Investment
The City is committed to providing competitive compensation as part of an overall strategy to attract and retain highly qualified employees. City staff and negotiators work to develop and maintain positive employee relations while also ensuring that negotiated labor agreements are fiscally sustainable and acceptable to the community. The City Counciladopted Compensation Philosophy and Labor Relations Objectives establish the intent of and guide the City’s approach to labor relations.

The City Council adopted a Compensation Philosophy in 2011 which indicates that the City should require the following in evaluating competitive compensation:
 Financial sustainability
 Community acceptability
 The relevant labor market
 Internal relationships
 Other relevant factors, including changes in economic condition, natural disasters, states of emergency, changes in City services, and changes in regulatory or legal requirements

The City Council also adopted the following Labor Relations Objectives in 2014, which were revised in 2018 to operationalize the Compensation Philosophy and guide labor negotiations with employee groups:
 Maintain fiscal responsibility by ensuring that fair and responsible employee compensation expenditures are supported by on-going revenues. (Theme – Fiscal Responsibility)
 Continue to make progress in the area of long-term systemic pension cost containment and reduction, including reversing the unfunded pension liability trend and other actions consistent with State law. (Theme – Cost Containment/Reduction)
 Continue to effectively manage escalating health benefit costs through balanced cost sharing and other means while maintaining comprehensive health care coverage for all eligible employees. (Theme – Cost Containment)  As necessary to attract and retain well qualified employees at all levels of the organization, provide competitive compensation as articulated in the City’s Compensation Philosophy, including relevant local, statewide or national labor markets. (Theme – Recruitment and Retention)
 Employee labor agreements will be negotiated in good faith, in a timely manner that avoids retroactivity provisions unless there is a compelling need. (Theme – Cost Containment)
 Contract provisions shall take into consideration the City’s ability to effectively and efficiently implement and administer them using the City’s financial and human resources systems to ensure accuracy and compliance with federal, state, and local laws. (Theme – Best Practices and Compliance) The City recognizes that improvements to and success of programs and services for the community is dependent upon recruiting and maintaining a talented and skilled workforce.

Budget Foundation – Financial Plan Organization
2025-27 Financial Plan
Summary
The organization of the Financial Plan has been incrementally improved with past budget cycles and closely aligns with the Government Finance Officers Association (GFOA) best practices. The City has been recognized by GFOA’s Distinguished Budget Presentation Award Program, reflecting the City’s commitment to preparing a budget document of the very highest quality. For the 2025-27 Financial Plan, staff has identified several areas for improvement to the document to increase transparency and ease of understanding for readers.

The 2023-25 Financial Plan can be found here.

Overarching Goal
The budget document serves many purposes. According to GFOA best practices, the document should be a Financial Plan, a Policy Document, an Operations Guide, and a Communications Device.

To serve all of these goals effectively, the budget document also needs to be concise and transparent. The changes staff is planning to make are all intended to improve the ability to communicate the important information contained in the document and improve the experience for the reader.

Department Summaries
Balancing the level of detail provided with the ease of finding information is challenging. For the 2025-27 Financial Plan, in line with the City’s overarching goal of transparency and experience for the reader, staff plans to shift the emphasis on financial tables in department summaries from the more granular division (cost center) level to the department level.

The primary reason for this focus shift is that budgetary control has historically been implemented at the department level. Department heads have discretion on how to allocate resources between their various programs. Further, many departments collaborate across programs to deliver on their work products. As an illustrative example, the Finance Department’s Budget Division has a headcount of one Full Time Employee, but others in the Finance Department contribute to budget activities. As a result, the division’s expenditures do not necessarily reflect the Finance Department’s true cost of preparing and administering the budget.

Specifically, staff plans to prioritize financial tables and summaries at the department level so that the reader is not forced to add up multiple program level tables on their own. In addition to financial summaries at the department level, staff also plans to include tables to identify costs at the division (cost center) level in order to provide two views of departmental budgets. The below tables illustrate how this information will be presented in the Financial Plan:

Expense Categories
Expenditures can be identified in many ways. For accounting purposes, they are identified by a General Ledger Account Number, which is an unique numeric code with a specific meaning.

These account numbers can also be grouped into broader categories. For example, the accounts for salaries, healthcare, and retirement contributions are condensed into a category called “Staffing.” Budgets are still prepared at the more granular account level for internal tracking and purposes, but financial tables in budget documents report at the category level to enhance readability and align with budgetary controls. Staff plans to examine the categories currently used to determine how to consistently display financial information across all departments in a manner that clearly identifies budgetary trends for similar types of expenditures.

Fund Balance Reporting
Previous budgets have reported revenues separately from expenditures. As a largely tax funded organization, the City’s revenues generally cannot be linked directly to expenditures. In addition to being reported separately, revenues and expenditures historically have not equaled one another. The difference between revenues and expenditures has always been equal to the addition to or use of fund balance. For the 2025-27 Financial Plan, staff plans to present consolidated financial tables that include use of, or contribution to, fund balance and clearly demonstrate to the reader that the recommended and adopted budgets are in balance.

City Council Guidance
In addition to the changes noted above, staff welcomes input and guidance from the City Council on other desired updates to the format of the 2025-27 Financial Plan document.

Budget Foundation: Long-term Economic Forecast
2025-27 Financial Plan
Recent years have seen tremendous change and uncertainty in macroeconomic conditions. The pandemic caused a recession and introduced profound change in the lives of people locally and worldwide. Few predicted the economic expansion that would follow. Many economists thought that inflation would be transitory, before shifting to a consensus that recession was imminent. This experience shows that while the economy can have a significant impact on the City’s financial performance, it is very difficult to predict.

Economic analysis and projections are available from a number of reputable sources and are compiled and made available to Council and the public through the Financial Planning process.

Links to these materials can be found below:

General Economic Outlook:

Federal Reserve Summary of Economic Projections
 https://www.slocity.org/home/showpublisheddocument/36914/638702921327023469 Central Coast Economic Forecast – Beacon Economics
 Dr. Chris Thornberg:
https://www.slocity.org/home/showpublisheddocument/36899/638696971080670761  Dr. Kodaverdian:
https://www.slocity.org/home/showpublisheddocument/36897/638696971068527986 Statewide Sales Tax Trends:

HdL California Consensus Forecast
 https://www.slocity.org/home/showpublisheddocument/36901/638696971089253554 Other Statewide Economic Data:

California Legislative Office (LAO) Fiscal Outlook:
 https://www.slocity.org/home/showpublisheddocument/36895/638696971057953639 EDD California Labor Market Info
 https://labormarketinfo.edd.ca.gov/
California Department of Tax and Fee Administration Interactive Data Visualizations  https://www.cdtfa.ca.gov/dataportal/visual.htm

While the links above provide useful information about macroeconomic conditions that could impact the City’s budget, the City’s General Fund Long-Term Forecast considers known factors (local conditions, existing City practices, and upcoming needs) to identify changes in the City’s financial condition. The forecast supports long-term financial planning by enabling the organization to identify issues and put plans in place to mitigate against them.

The forecast is generally updated twice annually and was last updated in September 2024, following Council’s adoption of new user fees on July 2, 2024. The current forecast was initially presented to Council on October 1, 2024, along with the FY 2023-24 Year End Budget Report to provide context for Council’s review of the survey tool that was used to gather community input as part of the upcoming public engagement process for development of the 2025-27 Financial Plan.

At this time, staff has not made any updates to the forecast, but it is included in this report as a reminder of the overall financial condition of the General Fund as the City prepares for the Community Forum on January 23, 2025, Goal Setting Workshop on February 8, 2025, and development of the 2025-27 Financial Plan. As noted in staff’s October 1, 2024 presentation, significant assumptions in this forecast include:
 Continued economic growth
 3% cost of living adjustments
 Continuation of annual Additional Discretionary Payments (ADPS) to CalPERs There continue to be a number of items that staff is tracking closely and staff expects that updates to the forecast will be made with more information is available on the following items:
 Revenue forecasts for major revenue streams, as provided by the City’s consultants  Upcoming labor negotiations
 Costs to support a growing population
 Emergency storm expenditure reimbursement
Additional information on each of these items can be found in the October 1, 2024 report to Council.

Budget Foundation – Increase to Additional Discretionary Payment Amount to Address Unfunded Pension Liabilities
2025-27 Financial Plan
Summary
The City of San Luis Obispo, like many other California municipalities, is a participant in the California Public Employees’ Retirement System (CalPERS) pension system, which provides retirement benefits to City employees. The City identified addressing unfunded pension liabilities as a priority with the Fisal Year 2018-19 Supplemental Budget and the Fiscal Health Response Plan recommended Additional Discretionary Payments (ADPs) to reduce the City’s unfunded liability. The most recent actuarial evaluation (presented in May 2023) showed that the City's unfunded pension liabilities have continued to grow due to various factors, especially the volatility of investment returns and changing actuarial assumptions.

To address this issue and reduce the long-term financial burden on the City, staff recommends increasing the annual ADP to CalPERS. These payments, if approved, would be in addition to the required contributions to the pension system and would be specifically aimed at reducing the City's unfunded liability more quickly than required.

Last Actuarial Review
In 2023, the City engaged Foster & Foster, an independent national actuarial consulting firm, to perform a review of the City’s progress in paying down unfunded pension liabilities. That analysis attributed the City’s unfunded liabilities to recent investment losses, CalPERS policies designed to smooth contribution rates, enhanced benefits contained in legacy City pension plans, and a growing share of retired members relative to active members.

Foster & Foster’s report showed that the City’s largest plan, Miscellaneous, should reach 80% funded status by 2034 and 100% funded by 2044. Despite market volatility since the report was issued, staff believe the recommendations in that report are still valid and that continued ADPs are both necessary and sufficient to reduce the City’s unfunded liabilities.

The report from Foster & Foster can be found at the link below:
https://opengov.slocity.org/WebLink/DocView.aspx?id=176986&dbid=0&repo=CityClerk Funded Status
The City’s funded status with CalPERS is determined based on the market value of assets relative to the funding target produced by the entry age actuarial cost method and actuarial assumptions adopted by CalPERS. The actuarial cost method allocates the total expected cost of a member’s projected benefit to individual years of service. The value of the projected benefit that is not allocated to future service is referred to as the accrued liability and is the plan’s funding target on the valuation date. The unfunded liability equals the funding target minus the assets. The unfunded liability is an absolute measure of funded status and can be viewed as employer debt. The funded ratio equals the assets divided by the funding target. The funded ratio is a relative measure of the funded status and allows for comparisons between plans of different sizes.

The table below includes the metrics described above for each of the City’s pension plans:

In addition to the Public Employees’ Pension Reform Act (PEPRA) Safety plans, 70% of active members on the Miscellaneous plan, which includes all non-safety employees, will receive benefits limited by PEPRA. These limitations include reduced benefit formulas, increased retirement ages, a cap on pensionable compensation, potentially higher employee contribution rates, and more. All but one City bargaining group also make additional employee contributions to offset City costs. These reductions in benefits were intended to improve funded ratios throughout the CalPERS system, but it may take many years to see improvements to the City’s unfunded liabilities as a result of PEPRA alone.

Investment Returns
CalPERS is one of the largest institutional investors in the world and manages a total portfolio of over $500 billion on behalf of its members. CalPERS invests these funds to maximize returns without taking on excessive risk to ensure that funds are available when needed to make required payments to retirees.

The portfolio is constructed to meet its target returns, which are also used as the discount rate in actuarial models. As shown in the table below, actual investment returns vary dramatically from year to year and have underperformed the target rate in four of the last six years.

Plan Assets Accrued Liability Unfunded Liability Funded Ratio Miscellaneous $ 176,888,182 $ 280,827,234 $ 103,939,052 63.0% PEPRA Safety Fire 1,107,320 1,228,175 120,855 90.2%
PEPRA Safety Police 6,335,275 7,125,194 789,919 88.9%
Safety 148,020,550 236,750,071 88,729,521 62.5%
Safety Fire 2nd Tier 4,482,657 5,808,518 1,325,861 77.2% Safety Police 2nd Tier 2,675,761 3,142,868 467,107 85.1% Total $ 339,509,745 $ 534,882,060 $ 195,372,315 63.5%
FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 Net Investment Return 6.7% 4.7% 21.3% -6.1% 5.8% 9.3%
Target 7.0% 7.0% 6.8% 6.8% 6.8% 6.8%
Variance -0.3% -2.3% 14.5% -12.9% -1.0% 2.5%

Inflation with Staffing Costs
Since adoption of the Fiscal Health Response Plan with the FY 2018-19 budget, total wages citywide have increased significantly due to headcount increases and cost of living adjustments in an inflationary era. The table below details the recommended ADP increase in line with wage growth from FY 2018-19 to FY 2023-24.

City Council Guidance
Staff is seeking guidance from Council on a recommended increase to the annual ADP amount.

For the current year, staff recommends that Council direct staff to recommend allocation of FY 2023-24 unassigned fund balance to increase the ADP with the FY 2024-25 Second Quarter Budget Report.

ADP Current Recommended % increase
General Fund $ 2,000,000 $ 2,660,859 33%
Water Fund 164,840 245,418 49%
Sewer Fund 169,419 250,875 48%
Parking Fund 61,003 97,543 60%
Transit Fund 12,555 15,973 27%
Whale Rock 21,417 27,324 28%
TBID 7,976 10,879 36%
Total $ 2,437,210 $ 3,308,870 36%

Long-Range Capital Improvement Plan
2025-27 Financial Plan
The development of the Capital Improvement Plan (CIP) for the 2025-27 Financial Plan is in its early stages. The CIP serves as a critical roadmap for addressing the City’s immediate and longterm infrastructure needs. This financial plan builds on lessons learned from past cycles and introduces significant process improvements to enhance clarity, transparency, and accountability in project prioritization and funding allocation.

For 2025-27 Financial Plan, the approach focuses on aligning resources with realistic project delivery timelines, ensuring fiscal responsibility, and maintaining the City’s existing assets. This foundation is vital as the City navigates evolving challenges and opportunities in managing infrastructure investments.

Rationale for CIP Development
The development of the CIP for this financial plan centers on ensuring that project funding is aligned with available staffing resources. A primary goal is to establish a CIP that can realistically be delivered within the constraints of existing resources while avoiding overextension. This deliberate alignment fosters more effective project management and improves the City’s ability to meet deadlines and budgetary targets.

One of the key challenges addressed in this financial plan is the transition from a two-year constrained and three-year unconstrained model to a fully constrained 10-year CIP. With the 2023-25 Financial Plan, only the first two years of the CIP were constrained, while outyears were left unconstrained. For example, during the current financial planning process for 2025-27, year one of the CIP began with a projected $12 million deficit—even before considering new departmental requests. This approach was used with 2023-25 Financial Plan, as Capital Project needs were dynamic due to address economic recovery needs from the pandemic and the need to fund and complete infrastructure repair projects due to the 2023/2024 winter storms.

Regardless, this issue underscored the need for a more structured and long-term approach to capital project budgeting.

By including all 10 years of projects within the constrained CIP, departments gain better visibility into the long-term planning horizon. This approach ensures that larger planned projects, such as those tied to specific plans, are reflected in the outyears. It also allows for improved budgeting and resource allocation, setting realistic expectations for project delivery timelines. This shift represents a significant improvement in how the City plans for and manages its infrastructure investments.

Balancing Short-Term and Long-Term Needs
The CIP must strike a balance between addressing short-term priorities and planning for long-term infrastructure needs. The 2025-27 Financial Plan will place an emphasis on:

1. Maintaining Existing Assets and Supporting Critical Needs:

A substantial portion of the CIP budget is allocated to maintain existing infrastructure. The table below details ongoing maintenance accounts and the ideal funding requested in the 2025-27 Financial Plan to support those needs. These capital projects include existing commitments such as traffic management, roadway paving, building maintenance, parks repairs, utility maintenance, the CIP reserve, IT replacements, fleet replacements, and more.

Annual Maintenance and Reoccurring CIP Needs
Asset Ideal Annual Funding Description Example Projects Traffic Management $ 500,000 Maintenance and upgrades of traffic signals, signs, striping.

Replace traffic signals that have been damaged, ADA
upgrades to crosswalks, replacement of street signs
Roadway Paving $ 7,000,000 Annual roadway paving project which is partially funded through SB1 Grants.

Every-other year a repaving or slurry sealing project
throughout the City.

Parking Lot Maintenance $ 760,000 Maintenance of city-owned parking lots. Resurfacing, signage, striping, lighting repairs.

Pedestrian and Bike Path
Maintenance $ 500,000 Maintenance of bike paths and
pedestrian walkways. Paving, striping, signage, and minor repairs.

Curb, Gutter, Sidewalks $ 500,000 Minor repairs to curbs, gutters, and sidewalks.

Various locations of sidewalk require replacement
typically due to uneven surface.

Building Maintenance $ 2,500,000 Repairs and upgrades for city-owned buildings.

Painting, HVAC repairs, fire safety upgrades, roof and
flooring repairs.

Parks Maintenance and
Repairs $ 1,100,000 Maintenance of park facilities.

Soft fall replacement, fencing, irrigation repairs, park furniture replacement, minor upgrades - not including
major park replacements.

Urban Forest Maintenance $ 450,000 Tree planting, trimming, and vegetation management.

Tree replacement, pruning, vegetation management,
goat vegetation control.

Storm Drain System
Replacement $ 1,500,000 Replacement and upgrades of
stormwater infrastructure.

Pipe and catch basin replacement, infrastructure
upgrades.

Sewer Maintenance $ 4,073,000 Maintenance and repairs of the sewer system.

Sewer line replacements, lift station upgrades, treatment facility improvements.

Water Maintenance $ 3,633,500 Maintenance of water distribution systems.

Pipe replacements, treatment plant improvements,
infrastructure upgrades.

IT Replacements $ 1,485,000 IT system upgrades and compliance. Hardware/software replacements, system compliance upgrades.

Fleet Replacement $ 1,500,000 Vehicle replacements per the city fleet policy.

Electric/Hybrid vehicle replacements, car-share
programs, fleet efficiency upgrades.

CIP Reserve $ 4,000,000 Reserve fund for unforeseen CIP projects.

Emergency repairs, unanticipated rises in project costs (supports entire CIP)
Total $29,501,500

This is the first time the CIP Reserve, IT Replacements, and Fleet Replacements have been included in the funding table above. Including these items offers a more complete view of the ongoing needs that must be addressed within the CIP, in addition to the projects that increase the number of assets managed by the City or involve replacing existing assets. The table aims to provide a clearer understanding of the significant resources required to sustain existing commitments. It also highlights the funding limitations for new and replacement projects. With a significant share of resources devoted to ongoing needs, the City often has to schedule new or replacement projects in outer years. This approach ensures that both staff and funding resources are allocated effectively while addressing the most pressing needs first.

The CIP Reserve, currently budgeted at $4 million, is essential for supporting projects within the Capital Improvement Plan. It serves as a contingency fund to address unforeseen circumstances, such as emergency projects, and to cover funding gaps when project bids come in over budget. By maintaining this reserve, the City ensures it can respond quickly to unanticipated needs and keep critical projects on track without delays.

The total ideal annual funding for asset maintenance and recurring CIP needs is $29,501,500. This amount is considered optimal to address the City’s infrastructure needs, including roadway paving, sewer and water systems, pedestrian infrastructure, and fleet replacements. Enterprise funds contribute to projects related to water, sewer, parking, and transit. The City also leverages grants to supplement General Fund allocations. For example, annual paving projects benefit from Senate Bill 1 (SB1) funding, formally known as the Road Repair and Accountability Act of 2017. SB1 provides dedicated state funding for local roadway maintenance and rehabilitation, enabling the City to address critical street repairs and improvements. Development impact fees can also provide funding for projects that support community growth and infrastructure improvements. These fees are applied to qualifying projects, helping to mitigate the effects of new development while reducing reliance on the General Fund.

The passage of Measure G-20 allowed the City to roughly triple its capital budget, with the Local Revenue Measure now providing more than 80% of the budget for General Fund projects. This funding has significantly enhanced the City’s ability to advance critical infrastructure projects and maintain essential services, reducing reliance on other limited revenue streams.

The Importance of Maintaining Roadways
A key measure of roadway conditions is the Pavement Condition Index (PCI), which assesses pavement quality on a scale of 0 (poor) to 100 (excellent). Without consistent maintenance, PCI scores decline, resulting in exponentially higher repair costs over time.

For example, deferred maintenance on roadways can escalate costs from minor resurfacing to full reconstruction, significantly impacting long-term budgets.

By proactively maintaining roadways and utilizing SB1 funds, the City aims to sustain PCI levels while maximizing the value of available resources.

2. Thoughtful Approach to Adding New Assets:

Capital Improvement Plan projects have a direct impact on future maintenance, operations, and capital replacement needs. Projects that add new assets—such as parks, facilities, or infrastructure—increase the resources required for their upkeep and eventual replacement. As the community continues to grow, the City’s asset inventory expands, driven by adopted plans and development agreements. For example, the Orcutt Area Specific Plan includes the construction and maintenance of the Righetti Ranch Community Park. In addition, the annexation of the Avila Ranch Development into the City under the Avila Ranch Development Agreement has introduced additional essential services such as water, sewer, roadway paving, and park maintenance. The agreement also calls for a 5 th Fire Station to meet the future emergency response needs of the area. Ensuring the resources required to support the City’s expansion is essential for the long-term sustainability and maintenance of its assets.

The 2025-27 Financial Plan Capital Improvement Plan is expected to include several large-scale projects requiring significant financial investment. Staff will pursue all available cost sharing and grant funding opportunities and for certain projects, debt financing may be necessary. Debt financing constrains future budgets for long periods, typically 30 years, and introduces financial risk. Issuances also require significant staff time and, since all debt is paid back with interest, increase the total cost of projects dramatically. Upcoming large projects, such as the Prado Interchange and the Public Safety Center, will be evaluated to determine whether debt financing is required to support their construction.

Before pursuing debt financing, staff will carefully evaluate all alternatives, the priority of the project relative to others in the payback period, and the City’s debt capacity.

3. Addressing Rising Costs:

The typical practice for funding capital projects involves allocating design dollars in one year and construction dollars in the following year. While this approach provides a sequential funding structure, it does not always allow sufficient time to refine construction cost estimates based on more developed designs. To address this, the City is implementing a phased funding approach for larger and more complex projects. Under this model, funding for design occurs in one financial plan, with construction funding deferred to the next financial plan. This additional time allows for the development of more accurate construction cost estimates, often based on 50% or 90% engineering design completion.

Inflation further underscores the importance of this approach. While the Consumer Price Index (CPI) measures general household spending habits, the California Construction Cost Index (CCCI) reflects the rising costs of construction, which have outpaced the CPI at nearly double the rate over the past decade (see figure below). By allowing for more precise construction cost estimates, this phased funding strategy reduces the risk of budget overruns and improves project delivery outcomes.

CIP Review Committee Progress
To prepare the CIP for the FY 2025-27 Financial Plan, the CIP Review Committee has met five times to date, engaging in a comprehensive evaluation process. These meetings included presentations from various departments and staff to discuss proposed projects, their alignment with City priorities, and their feasibility within the constrained budget framework.

This high level discussion is intended to provide the City Council with a sense of the projects currently on the list. It is important to note that the CIP will undergo substantial revisions as new Council goals and priorities are established. Additionally, while staff have worked diligently to align the CIP with the available budget, final numbers and adjustments are still forthcoming. This flexibility ensures that the CIP can adapt as needed to meet emerging challenges and opportunities.

Process Improvements and Expectations
To address past challenges, the CIP team has taken several steps to enhance the planning process for the FY 2025-27 Financial Plan:
 Improved Communication with Departments: Clear communication with departments is critical to setting realistic expectations. Projects previously scheduled in outyears of the last financial plan (e.g., year three) are not automatically funded in year one of the current financial plan, as the 2023-25 Financial Plan included an unconstrained CIP in years 3-5 that left year 3 significantly overbudget. Departments have been informed of this shift, and the CIP review committee is working diligently to realign resources accordingly.  Enhanced Scoping and Feasibility Analysis: Policies and procedures have been implemented to require additional time for scoping individual projects before budgets and schedules are finalized. This includes utilizing on-call cost estimating firms to develop fully inclusive budget estimates and conducting feasibility studies for larger projects.  Phased Funding for Accuracy: For larger projects, the City has adopted a phased funding approach, intentionally leaving a year between design and construction funding.

This allows more accurate construction cost estimates to be developed based on

advanced design stages, helping to address project funding needs during the financial planning process.
 Transparent Review and Prioritization: The CIP Review Committee has been proactive in communicating the financial constraints of this plan and setting clear prioritization criteria. This includes focusing on maintaining existing assets, funding mandates, and addressing urgent needs while considering long-term planning objectives.

The 2025-27 CIP represents a significant step forward in how the City plans for, funds, and delivers its infrastructure projects. By prioritizing the maintenance of existing assets, aligning resources with realistic project delivery timelines, and addressing rising construction costs, the City is better positioned to meet the needs of the community today and in the future. The shift to a fully constrained 10-year CIP ensures fiscal responsibility and sets a sustainable foundation for future financial plans.

2025-27 Financial Plan Proposed Goals & Objectives
Human Relations Commission (HRC)
Background
The HRC 2025-27 Financial Plan Proposed goals and objectives are derived from careful analysis and consideration of current strategies and tactics within the DEI Strategic Plan and its long-term impact in the community, as well as Council’s vision on addressing DEI and centering key community issues.

Goals

1. Increase funding allocation to grant programs
a) For the Human Services Grant (HSG) a substantial increase should be considered since many underserved and underrepresented communities and services are underfunded due to shifting City Council’s guidance. These additional funds should be allocated to secondary funding priorities.
b) Establish the DEI SLO Business Grant as an annual ongoing project led by the Office of DEI and Office of Economic Development & Tourism.
c) Request funds to establish a grant program for middle and high school students centered on improving human relations and addressing issues of injustice in the San Luis Obispo community (i.e. homelessness prevention, access to health care; and diversity, equity, and inclusion).

2. Funds to establish resources to address Hate Crime and Incidents a) Request funding to establish community resources that align with the DEI Strategic Plan and offer outreach and engagement opportunities for the community to be involved and learn about proper reporting.

3. HRC Community Outreach & Engagement
a) Request funds to enhance public engagement and participation by increasing promotional awareness campaigns for city engagement opportunities.

4. Address CVRA needs through outreach and engagement
a) Request funds to address the City’s efforts in expanding services and resources about electoral and voting participation.
b) Request funds to establish live interpretation and captioning in City Council meetings.

5. Expand investment in training
a) Request funds to provide tailored trainings to advisory bodies as it relates to expanding knowledge and skills regarding diversity, equity, and inclusion.

Please provide as many goals as seem reasonable considering that resources are limited.

2025-27 Financial Plan Proposed Goals & Objectives
Planning Commission
Background
On December 11, 2024, the Planning Commission updated goals for City Council consideration for the 2025-27 Financial Plan. The Planning Commission prioritized the following goals based on the evaluation of the completion status for the 2023-25 Major City Goals; community need, and input received over the past two years; special and urgent conditions that need to be addressed; and the availability of City resources to accomplish the identified goals and work programs within the financial plan timeframe.

Goals

1. Housing
Emphasize affordable housing programs, encourage flexible use and non-traditional housing product types to facilitate development of housing options of all types (deed restricted affordable housing, multi-family, senior and mixed-use). Continue to work with Cal Poly on aligning enrollment with additional housing for students and faculty. Prioritize projects that develop transitional and supportive housing options for unhoused community members.

Continue to partner with the County of San Luis Obispo and local service providers to prevent and address homelessness.

2. Sustainability & Multi-Modal Circulation
Implement the Climate Action Plan, Multi-Modal objectives identified in the LUCE and the Downtown Concept Plan by encouraging density and in-fill development that includes and prioritizes non-automobile alternatives to access commercial, services and recreational opportunities. Review the Upper Monterey Area Plan, Margarita Area Specific Plan and MidHiguera Enhancement Plan with the intention of providing more housing options of all types and encourage project designs that promote accessible, convenient, and safe pedestrian, bicycle, and transit access.

3. Livability and Interagency Collaboration
Continue to collaborate with partner agencies on regional issues to improve the quality of life for community residents. Address neighborhood issues associated with fraternities and sororities and encourage Cal Poly to build on-campus fraternity and sorority houses.

2025-27 Financial Plan Proposed Goals & Objectives
Personnel Board
Background
The Personnel Board requests the City Council consider the following goals for the 2025-27 Financial Plan.

Goals

1. Diversity, Equity, Inclusion
The City is committed to policies, practices, and structures that support the well-being and empowerment of all residents, marginalized communities, and its employees. a. More fully utilize the expertise of the Personnel Board in providing input and oversight into the organizational diversity, equity, and inclusion (DEI) policies, programs, and practices.
b. Ensure sufficient City resources (staff, consultant, and budgetary) are provided in the 2025-27 Financial Plan to support changes to current human resources processes to align with best practices in DEI in hiring, training, and promotional policies, practices, and programs identified in the Office of DEI’s 5-year strategic plan.

2. Fiscal Sustainability
As the City navigates through uncertain economic times, ensure the City prioritizes employee engagement to reduce turnover and avoid costs associated with hiring and onboarding staff. a. Support employee engagement, wellness, and resiliency through various avenues including employee surveys, adaptation of work policies, and resources that support employee mental health.
b. Ensure appropriate resources are allocated to fund employee wages and benefits with inflation in mind while remaining fiscally sustainable in alignment with the Council adopted compensation philosophy and labor relations objectives. c. Consider additional flexibility in ways projects are funded. d. Ensure appropriate resources are allocated for the above in the 2025-27 Financial Plan.

3. City Employee Workforce Development
Employees who understand how their work connects to the City’s mission, vision, values, and goals are empowered to make a difference through serving the community of San Luis Obispo. a. Support and prioritize employee development and growth through investing in resources to lead, train, and develop all employees and onboard new and transitioning employees.
b. Maintain open communication throughout all levels of organization to share progress on and impacts of staff projects and Major City Goals.
c. Establish, encourage, and facilitate pathways to career development.

2025-27 Financial Plan Proposed Goals & Objectives
Cultural Heritage Committee
Background
The Committee would like to continue with previously recommended goals from Fiscal Year 2023-2025, with minor amendments:

Goals

1. Historic Inventory & Historic Preservation Ordinance Update – Allocate additional funds and resources to further advance the in-progress comprehensive update of the City’s inventory of historic resources and associated updates to the Historic Preservation Ordinance as recommended by the consultant led preliminary phase assessment and recommendations completed by historic consultant Page and Turnbull.

2. City Owned Adobes – Support efforts with additional funding to improve the structural condition, historic integrity, and appropriate cultural interpretation of the four City-owned adobes in light of the City’s Diversity, Equity and Inclusion goals. In particular, continue to support efforts to stabilize, restore, and rehabilitate the La Loma Adobe and provide funding in support of the rehabilitation of the Rosa Butron Adobe.

3. Public Information - Provide information to increase awareness and support of the Historic Preservation Program and Historic Resources Inventory update project including opportunities for participation; and, pursue opportunities for appropriate cultural interpretation of historic resources with a focus on including City goals to advance Diversity, Equity, and inclusion. Incorporate digital technology in the city's interpretive program, and seek additional funding from Transient Occupancy Tax (TOT) for a "plaque program".

2025-27 Financial Plan Proposed Goals & Objectives
Architectural Review Commission
Background
State Housing Laws do not allow the City to utilize subjective design guidelines (i.e. Community Design Guidelines) for many new residential developments. In response, the ARC, in 2021, helped draft the City’s current Objective Design Standards (ODS) (Municipal Code Chapter 17.69). However, additional state housing laws have exposed the need for more objective design standards for more types of residential developments (i.e. single family, duplexes, triplexes, multifamily, mixed-use, etc.). To continue to support more housing units that are compatible with the City’s unique character, the ARC’s goal is to expand the City’s ODS to provide additional design requirements for all types of residential development. While the ODS will regulate residential development, there is also a need to provide a comprehensive update of the Community Design Guidelines (CDG) to focus the Guidelines specifically on commercial development and remove subjective residential design guidelines.

Goals

1. Expand the Objective Design Standards to provide additional design requirements for more types of residential developments to include standards and definitions for:
• Specific types of residential developments (single family, duplexes, triplexes, multifamily, mixed-use, etc.).
• Overall site design (parking areas, outdoor spaces, landscaping, pedestrian access, lighting, privacy, etc.).
• Transitions between residential and commercial zones and high-density residential and lowdensity residential zones. • Conversion of commercial buildings into residential development. • And include images and reference photos.

2. Complete a comprehensive update of the Community Design Guidelines for Commercial developments and other design guidelines including:
• Strengthen and more clearly define guidelines for storefronts and windows in commercial areas to maintain transparency and prevent the installation of opaque film and interior signs and displays that obstruct views into stores.
• Update CDG for neighborhood compatibility to address transitions between neighborhood commercial development and adjacent residential neighborhoods (LUCE §3.5.7.9). • Overall site design (pedestrian scale, walkability, bicycle infrastructure, outdoor spaces, landscaping, etc.)
• Include more images and reference photos to highlight guideline language.

DATE: November 27, 2024
TO: Emily Jackson, Director of Finance
FROM: Adam Fukushima, Staff Liaison to the Active Transportation Committee SUBJECT: FY 2025-27 Active Transportation Committee Recommended Goals On November 21, 2024 the Active Transportation Committee recommended its FY 2025-27 goals for Council consideration which are represented in the following table. Projects are ranked in order of importance from most to least desired to fund based on proposed projects identified in the Active Transportation Plan.

Recommended Goal Why Goal is Important
ACTIVE TRANSPORTATION PLAN TIER 1

PROJECT DEPLOYMENT
Higuera Complete Streets Project
-Provide necessary matching funds for this
state funded project
-Complete design and construction
Broad Street (South to Orcutt) Quick Build
Project
-Design and construct
Foothill Blvd Quick Build Project
-Complete design and Construction
Pedestrian Crossing at South/King
-Construct project
Roundabout at California/Taft
-Complete design and construct
Railroad Safety Trail Gap at Bullock Lane
and Railroad Crossing Improvements
-Acquire approvals from Union Pacific and
construct
Shared Use Path on Madonna Road
Overpass
-If supported by Council, advance design and
construction
This project improves north-south cross-town
connectivity for active transportation and Safe
Routes to School improvements to Hawthorne
Elementary and Laguna Middle Schools
Improves connectivity and safety along this
wide arterial street
Improves east-west connectivity between Cal
Poly, residences, and activity centers along
Foothill
Improves connectivity to Hawthorne Elementary
School, Meadow Park, and residences
Improves the connection to the Railroad Safety
Trail across California Blvd
Fills a gap in the RRST between the existing
portion north of Orcutt Rd and new segment
south to Tank Farm Rd
Fills a gap on Madonna Rd between the shared
use path and Higuera Street
Active Transportation Committee

Tank Farm Rd Shared Use Path
-Initiate a City-led capital improvement project
to advance construction as an initial phase of
larger corridor improvements

COMPLETE STREETS ELEMENTS OF

ANNUAL PAVING PROJECTS
Tank Farm Road (Broad to Orcutt)
Sacramento Drive (Industrial to Via Esteban)
Johnson Ave (Bishop to Buchon)
Mill St (Chorro to California)
Broad St (Pacific to Tank Farm)
Industrial Rd (Broad to Railroad Tracks)
Pavement Areas 2 and 3
Misc. Pedestrian Facility ImprovementsMaintain $100,000 in annual funding for misc. projects such as safe routes to school, signing
& striping projects ideally incorporated into
other construction projects
Misc. Bicycle Facility ImprovementsMaintain $100,000 in annual funding for misc. projects such as safe routes to school, signing
& striping projects ideally incorporated into
other construction projects.

Ped/Bikeway Maintenance:

Maintain annual funding for shared use path
maintenance
Sidewalk Replacement and Installation:

Maintain annual funding for curb ramp and
sidewalk upgrades
Improves a low stress, east-west connection for
active transportation
Completing these projects as part of other
construction projects results in substantial cost
savings.

Completing these improvements as part of other
construction projects results in substantial cost
savings.

Completing these improvements as part of other
construction projects results in substantial cost
savings.

Performing pavement maintenance on
pedestrian and bicycle paths will increase the
life of these facilities and reduce the risk of
collisions.

Completing these improvements as part of other
construction projects results in substantial cost
savings.

PROGRAMS
Active Transportation Education:

Continue and increase education regarding
Active Transportation in partnership
with non-profit organizations and agency
partners about safety topics and use of new
facilities.

Ensure the community knows how to use new
active transportation facilities as they are
constructed and address high priority safety
topics.

STAFFING
Active Transportation Manager and
Transportation Planner/Engineers:

Maintain positions.

The City has made a commitment to complete
a Tier 1 network identified in the Active
Transportation Plan. The Active Transportation
Manager and Transportation
Planner/Engineers are critical in sufficiently
implementing the Tier 1 network projects and
preparing grant applications.

2025-27 Financial Plan Proposed Goals & Objectives
Promotional Coordinating Committee
Background
With economic growth expected to moderate, and inflation, workforce challenges and supply chain issues continuing to pose challenges, it will continue to be vital to improve the quality of life for all City residents and visitors.

Open space access, diversity, equity, inclusion, and carbon neutrality should continue to be primary considerations in all our goal work. The City of San Luis Obispo should strive to attain these goals with the support of the stakeholders and community members.

Top 5 Proposed Goals

1. Sustain the economic vitality of downtown and other business districts:
● Continue to fund Economic Development promotional programs like Support Local including Buy Local Bonus and explore new opportunities to activate the downtown core in cost effective, unique and creative ways. Give our locals continual opportunities to explore and reconnect with our downtown.
● Continue to work with TBID to support their programs to bring visitors to our city. ● When funding is available, support one-time promotions to support a thriving downtown and expand the support of neighborhood business districts, that can be supported by the local community.
● Connect existing and new businesses to resources to help them thrive and thus supporting both jobs and the quality of life for our community members. ● Advocate for ease of access to downtown, reengaging locals and inspiring ownership of the heart of our city while creating a sense of belonging with consideration around smart growth and affordability.

2. Community Engagement and Quality of Life:
● Support placemaking efforts by promoting Public Art programs and identifying additional opportunities for public art throughout the city. ● Raise the awareness of San Luis Obispo being an “arts” destination by seeking opportunities to improve the quality and quantity of arts available to the community members and visitors of SLO. The promotional efforts of arts should include visual, performing, culinary and permanent/temporary public art installations. ● Continue to emphasize the quality of life for all the community members and visitors to San Luis Obispo through the support of programs and grants which focus on this goal. ● Continue implementation of the Monterey/Mission Plaza downtown concept plan. ● Explore options that expand childcare, after school classes, and Parks and Recreation programs so families have a better opportunity to earn a livable household income.

2025-27 Financial Plan Proposed Goals & Objectives

3. Diversity, Equity and Inclusion:
● Expand support for programs which provide opportunities to include all community members in a safe and welcoming way.
● Continue to work with a wide-ranging group of nonprofits and community organizations to ensure that all community members of San Luis Obispo have access to diverse cultural opportunities.

4. Climate Action and Destination Stewardship:
● Support implementation of the City of SLO Climate Action Plan which has the goal of carbon neutrality by 2035 including the work of sustainable tourism. ● Support enhanced bike and pedestrian infrastructure throughout the city. Continue planned buffered and green-striped bike lanes while seeking new opportunities for additional pedestrian safety measures.
● Support access to shared bike programming which would make e-bikes more accessible to community members and visitors.
● Support the improvement of public transportation to provide safe access for community members to employment, shopping and community resources without long waits and route changes. Explore public and private partnerships with locally owned and operated transit routes to expand services provided.
● Support investment in improvements to the city recycling program including compostable containers, coated papers and more plastics so more items can be recycled leading to less waste.
● Advocate for continuing the traffic calming measures on all major streets in town, including Johnson, Foothill and the South Broad Street corridor. ● Continue to educate new businesses on our current policies and priorities so that community members are aware of and following the City’s programs. ● Consider major changes to downtown thoroughfares like those adopted in Lancaster, CA.
o Pedestrian involved collisions have decreased by 78%
o Motor vehicle collisions decreased by 38%
o 57 new businesses have opened on Lancaster BLVD
o Retail sales of increased by 57%
o Revenue from the downtown area has increased 119% from 2007 to 2012

5. Homelessness Support: Mental Health + Safety:
● Support the continuation to increase the support of programs to address the concerns of the community members and how it relates to the unhoused community. ● Support the expansion the support of local programs and organizations which offer resources for the unhoused community including: reunification efforts, outreach, mental/health care access, education, shelter and housing opportunities.

2025-27 Financial Plan Proposed Goals & Objectives
Closing
The Promotional Coordinating Committee is tasked with improving the quality of life for the community members of San Luis Obispo and we thank you for the opportunity to provide our perspective into your goal setting process. The PCC will take direction provided by Council and write our goals to fit the finalized objectives so that we are working together to reach our mutual goals of continuing to make the city of SLO an even better place to live, work and play.

2025-27 Financial Plan Proposed Goals & Objectives
Tourism Business Improvement District
Background
The Tourism Business Improvement District (TBID) Board recommends that City Council continue with the existing adopted Major City Goals for 25-27 as these goals continue to align with the priority values and needs of the community. However, the TBID recommends the addition work program as outlined below.

Goals

1. Economic Development & Fiscal Sustainability: In collaboration with local partners, continue to support economic development and a thriving local economy by supporting local businesses, arts and culture, downtown vitality, practicing fiscal responsibility, paying down unfunded pension liabilities, and investing in critical infrastructure. • Proposed Work Program Focus Areas + Additions:
• Foster economic development to support the vitality of downtown and outlying business districts. Support and provide programs for the business community + beautification so SLO remains a vibrant and attractive place to live, work and visit.
• Continuance of a conference center feasibility study. • Support efforts to drive more midweek corporate business demand in the city. • Streamline permitting for future development.
• Evaluate parking needs downtown, at sports venues and elsewhere to accommodate added demand and encourage visitation.
• Expand the economic development commitment of the city to support new ways of doing business and reduce business development barriers. Economic recovery supports local jobs and the local economy.
• Prepare for the increase in overall hotel rooms in the county by supporting and growing the awareness of San Luis Obispo as a leisure and small meetings destination.
• Ensure that the City and Cal Poly, as well as other large employers are aligned and ready to collaborate.

2. Diversity, Equity & Inclusion: In response to our commitment to making San Luis Obispo a more welcoming and inclusive city for all, continue to develop programs and policies to support diversity, equity and inclusion initiatives and advance the recommendations of the Office of DEI.

2025-27 Financial Plan Proposed Goals & Objectives
• Proposed Work Program Focus Areas + Additions:
• Expand engagement and education to support and foster safe and welcoming opportunities throughout the community.
• Continue to work with a wide-ranging group of nonprofits and community organizations to ensure that the residents of San Luis Obispo are exposed to diverse opportunities to all segments of our local community. • Build connection between diverse community populations (Cal Poly, Business, Residents, Visitors).

3. Housing and Homelessness: To expand housing options for all, continue to facilitate the production of housing, including the necessary supporting infrastructure, with an emphasis on affordable and workforce housing. Collaborate with local nonprofit partners and the county, the state, and federal governments to discover and implement comprehensive and effective strategies to reduce chronic homelessness.
• Proposed Work Program Focus Areas + Additions:
• Prioritize helping alleviate unhoused population issues as much as possible. • Getting the unhoused population housed and/or relocated from high-traffic areas like downtown to benefit tourism through the visitor experience. • Addressing safety concerns from the general population related to the impacts from the unhoused population so residents and tourists can feel safe while enjoying activities in San Luis Obispo.
• Address affordable housing as an economic issue and barrier to resource retention and business attraction.
• Encourage smart growth in housing and other services that make San Luis Obispo a place where people want to be.
• Continue to facilitate the production of affordable and workforce housing so our workforce doesn’t have to live so far away. Support and encourage affordable, on campus student housing options to free up rental housing. • Implement comprehensive and effective strategies to reduce chronic homelessness.

4. Climate Action, Open Space & Sustainable Transportation: To proactively address the climate crisis, continue to update and implement the Climate Action Plan for carbon neutrality, including preservation and enhancement of open space and the urban forest, alternative and sustainable transportation, and planning and implementation for resilience. • Proposed Work Program Focus Areas + Additions:

2025-27 Financial Plan Proposed Goals & Objectives
• Expand regional transportation options in collaboration with Visit SLO CAL and other partners to encompass a more regional approach (to/from Santa Maria to working centers in San Luis Obispo and airport/train station to key SLO locations including downtown, Cal Poly, and hotels).
• Continue to ensure the city has places for people to gather for events, but also to experience the nature and beauty of the central coast. • Develop a comprehensive plan related to the increased likeliness of extreme weather events (fire, flooding, etc.), to help encourage a healthy city and keep insurance costs down for residents and businesses.
• Consider economically supporting buildings that install solar and other offsetting components.

2025-27 Financial Plan Proposed Goals & Objectives
Tree Committee
Background
The Tree Committee recommends the City Council consider the following goals that support effectively managing the City’s urban canopy.

Goals

1. Update the Tree Regulations in the Municipal Code based on Ordinance review, Advisory Body Case Study Report, and recent California State Laws.

2. Implement near-term Community Forest Plan goals as feasible and lay groundwork for achieving mid- and long-term goals.

3. Foster community engagement for trees in public places.