San Luis Obispo city officials gave the second annual “State of the City” address Thursday. Mayor Heidi Harmon and City Manager Derek Johnson touted plenty of accomplishments in 2018, but also shared some financial uncertainty about the year ahead because the city is facing a liability of $150 million.
The theme of the address was “Community Connections.” Harmon and Johnson highlighted partnerships the city had made throughout the year. They were also proud of several initiatives, such as creating the largest bank of electric vehicle charging stations in the state at a downtown parking garage. But Johnson expressed uncertainty about San Luis Obispo’s fiscal future.
“If there were two words that I had to characterize where the city is [they would be] cautionary and encouraging,” Johnson said. “I think we’ve developed a fiscal forecast that is going to require a tremendous amount of discipline by the community and by the council and by the staff, in order for us to deliver the services and capital improvement projects, and keep our focus on paying down our unfunded liability.”
Johnson said the liability is $150 million in pensions the city is responsible for but doesn’t have. He explained the lack of funds as "a result of the market losses during the great recession.” He also said, "people are living longer and...public employees were not seeing the wage increases that were forecasted," so employers were tasked with making additional contributions to fill the gap.
All this comes as a large number of city employees may be getting ready to cash out.
“For example, the utilities department: nearly 40% of that department is ready for retirement in the next few years,” Johnson said.
Both Johnson and Harmon said they remain optimistic about the coming year. Both officials said the city has continued to see revenue increases from sales, property and transient occupancy hotel taxes. And Harmon says new increased development impact fees are promising.
"We partnered with the development community to pay for the services we need,” Harmon said. “Transportation, infrastructure, parks, public safety, water, and sewer… all of these things are so important to the city’s future and quality of life.”