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City Council adopts 2025–27 financial plan and FY 2025–26 budget after multi‑month process
Summary
After months of public engagement and a constrained budgeting exercise, the council adopted the two‑year 2025–27 financial plan and the FY 2025–26 budget. The plan funds major city goals, a 10‑year fiscally constrained CIP, and establishes further budget review steps to address a structural deficit in later years.
The San Luis Obispo City Council adopted the 2025–27 Financial Plan and the fiscal year 2025–26 budget in a 5–0 vote on June 17 after a multi‑month public process that included goal setting, workshops and strategic budget direction.
City Manager McDonald and staff said the plan is designed for a transitionary fiscal period marked by flattening revenues (notably sales tax and fees) and ongoing cost pressures. The two‑year plan balances the FY 2025–26 budget while identifying a longer‑term structural deficit that will require additional reductions or other actions in later years. To manage the immediate shortfall, the plan recommends constrained operating budgets, a modest increase in staffing savings assumptions and a one‑time shift of roughly $1 million per year from local revenue measure funds toward operations.
The adopted plan includes $217.6 million in total recommended expenditures across general, enterprise and other funds for the two‑year period; a general fund recommendation of about $117.6 million; and a fiscally constrained 10‑year capital improvement program (CIP) totaling roughly $660 million with $112 million programmed in the first two years. Major investments in the first two years include the Water Resource Recovery Facility completion, the first phase of the Righetti community park, continued active‑transportation and complete‑streets projects (including Higuera Complete Streets work), and continued homelessness response funding (hotel vouchers, rotating safe parking, licensed psychiatric technician staffing in outreach) among other work plan items tied to the council’s major city goals.
Staff reported several technical adjustments and council‑directed changes since the April strategic direction session: additional funding for CAPSLO’s hotel voucher program (an added $45,000/year), $25,000 to cover a county contract increase for bridal (school resource officer) services to police, and reallocation of some grant revenue corrections into the general fund that created capacity for small augmentations without offsetting reductions elsewhere. The budget adds 6.25 FTE citywide across funds (3.4 in the general fund), including two police officers partially offset by a COPS grant and a communications coordinator position to support capital and transit communications (the coordinator was previously a contract role).
The plan acknowledges notable uncertainties—pending grant awards, federal/state budget changes and the timeline for some major projects—and staff said they will activate the fiscal health contingency plan and pursue a careful reduction strategy if revenue shortfalls widen. That process will include department reduction targets, scenario planning and quarterly reporting to council; staff said reductions would be presented for council consideration at the latest as part of the FY 2026–27 supplement.
Councilmembers commended staff for outreach and the document’s readability. After deliberation, Councilmember Marks moved to adopt the financial plan and the FY 2025–26 budget; Councilmember Francis seconded. Roll call was unanimous (Councilmembers Francis, Boswell, Marks, Vice Mayor Shoresman and Mayor Erica A. Stewart voting yes) and the motion passed 5–0.
