On top of the city’s existing .5 percent sales tax, San Luis Obispo officials are putting forward the idea of a 1 percent sales tax and additional property taxes, in order to fund infrastructure projects that are said to require $400 million in fresh capital.
Currently, San Luis Obispo has a 7.75 percent sales tax rate, the same rate as the other six cities in SLO County, each of which have also adopted half-cent sales taxes. Raising San Luis Obispo’s sales tax a full percent would bring it to 8.75 percent, or 1.5 percent above the state of California rate of 7.25 percent that also exists in unincorporated areas of SLO County.
In 2014, San Luis Obispo voters renewed the city’s half-cent sales tax, previously known as Measure Y and now called Measure G, with 70 percent approval. As a general purpose tax, Measure G generates revenue that can be spent on any expenditure within the city’s general fund.
City officials say Measure G primarily funds maintenance of existing city facilities. However, for years, critics of the city government have alleged SLO has used half-cent sales tax money to backfill salary and pension costs.
San Luis Obispo currently has an unfunded pension liability of about $150 million, a figure that could be estimated at nearly $190 million when factoring in a city side fund and upcoming reductions in the state retirement system’s discount rate. Last year, city management said CalPERS’s change to the discount rate left SLO with a projected budget shortfall of $9 million over the next three years.
Nonetheless, Public Works Director Daryl Grigsby said none of the new tax proposals would have anything to do with funding pension costs, according to the Tribune.
Currently, city officials say they are trying to implement a variety of infrastructure projects that have been planned, but for which funding does not exist. The projects include renovating Mission Plaza with a redesigned amphitheater, a restored restroom, a new café and extensive new safety provisions.
The city is also considering building new or renovating its police station and fire stations. Likewise, the city plans to expand its network of bike paths.
San Luis Obispo officials say $400 million in additional revenue is needed to fund the infrastructure projects that the city is planning and that are required to deliver residents the services and experiences they desire.
According to a report city staffers are circulating online, options for funding the infrastructure projects include a 1 percent sales tax, a citywide community facilities district and a general obligation bond. Both the community facilities district and the bond could be funded through a parcel tax.
Each of the funding options would require voter approval. While city officials have not endorsed any of the options, the staff report does cite a 2014 study suggesting 70 percent of sales tax revenue comes from visitors to SLO.
Thus far, the city has received about dozen online responses from residents to the tax and infrastructure spending proposals. Most of the responses have been opposed to the proposed tax increases, with residents stating that San Luis Obispo ought to live within its means.
Over the course of March, the city plans to continue conducting outreach on the matter. Then on April 17, the San Luis Obispo City Council will receive input from staff and community members and provide direction on the tax and infrastructure spending proposals.