6/22/16 – What Diablo Canyon’s closure will mean for SLO County’s economy
Publish Date: 6/22/2016
Author: Stephanie Finucane, Kaytlyn Leslie and David Sneed
Publication: The Tribune
The shutdown of Diablo Canyon in 2025 will bring sweeping changes to San Luis Obispo County’s economy in the years to come and will impact almost every resident here — from lost funding for county projects to lost property tax revenue at schools.
“The future closure of Diablo Canyon nuclear plant is shocking news and marks the loss of an employer that contributes an economic impact of over $1 billion to our local economy every year, touching nearly every aspect of our community,” said Mike Manchak, executive officer of the county’s Economic Vitality Corp.
The plant employs nearly 1,500 people with an average annual salary of $157,000, according to 2014 figures.
In property taxes alone, schools and other government agencies will likely lose about $26.75 million in annual revenue once the plant closes — including a $9.5 million loss for the San Luis Coastal Unified School District, and $8 million a year to the county. Smaller agencies such as the Port San Luis Harbor District will also be hit by the closure, with about 7 percent of their operating budget disappearing.
Impacts on schools
County school districts were pondering their options in the wake of PG&E’s announcement Tuesday that Diablo Canyon will close in less than a decade, which will mean a large loss of property tax revenue for one district and a potential loss of students in others.
County K-12 school districts received about $12.9 million in property taxes from PG&E in the current fiscal year ending June 30.
County Superintendent of Schools James Brescia said Tuesday that the department will work with school districts to help them adjust in light of anticipated lost revenue.
“Our office will work directly with the local school districts that may experience a reduction in tax revenue,” Brescia wrote in an emailed statement. “Our office is grateful for the continued community support PG&E has provided over the years and the nine-year notice for phaseout of their production. We are confident that local school leadership will address potential reductions in tax revenue and implement plans to continue serving the students of our community.”
The San Luis Coastal Unified School District will be the agency hardest hit in the county; it receives about $9.5 million a year in property tax revenue from PG&E — about 11 percent of the district’s total revenue.
Due largely to Diablo Canyon revenue, it’s been financially advantageous for San Luis Coastal to remain a basic-aid school district, meaning it derives most of its income from local property taxes rather than relying on the state for revenue as most other districts do. (Coast Unified and Cayucos Elementary are also basic-aid districts.)
That may change in a post-Diablo economy.
“As a speculation, I have to assume we’ll fall out of basic-aid status,” San Luis Coastal Superintendent Eric Prater said Tuesday.
Other factors may play a role in that decision, however.
“Gov. (Jerry) Brown is not a big fan of basic aid,” Prater said. “It may not be Diablo Canyon that forces this issue. It may be Sacramento.”
A change in funding wouldn’t necessarily mean a devastating monetary loss for the district.
“The state of California is infusing more money into schools,” Prater said. “The distance between basic-aid and state-funded districts has become smaller.”
More will be known in the coming months, Prater added.
The decision didn’t come as a total surprise to the district.
“I’ve been brought up to speed because of certain groups that reached out to me over the past year,” Prater said.
It could have been worse, he added, pointing to a last-minute decision in 2012 to close San Onofre Nuclear Generating Station south of San Clemente.
“I really appreciate PG&E at least making a decision that allows me and our board to plan accordingly,” Prater said.
San Luis Coastal Unified School District board president Marilyn Rodger echoed Prater.
“The other shoe has fallen,” she said Tuesday. “It gives us an opportunity to plan.”
Rodger also said it’s far too early to say whether there will be a need for layoffs or other cuts, saying instead that the district will “go into planning mode” as it gathers more information.
The district, which serves about 7,500 students, has a healthy, unencumbered reserve of about $14 million. On top of that, it may be eligible to receive some of the $50 million that PG&E has set aside for community aid.
At the rest of the county’s schools, the losses won’t likely be felt as hard because most of the money they receive is based on enrollment, not from property taxes as basic-aid districts do.
This fiscal year, Diablo Canyon paid about $670,000 in property taxes to Lucia Mar Unified School District, according to county records.
Assistant Superintendent of Business Services Andy Stenson said when that revenue source disappears, the state will be required to step in and backfill the missing amount — meaning the county’s largest school district probably won’t see an immediate fiscal impact from the plant’s closure. This is true for the county’s other nonbasic-aid school districts, as well.
He did note that the closure of a plant that employs 1,500 people could have an impact on enrollment, however, by reducing the number of head-of-household jobs and possibly forcing some families out of the area. If that were the case, districts could see fewer enrolled students, and therefore have less money, though Stenson said he didn’t think that would be likely.
“It’s hard for me to imagine homes and apartments sitting empty,” he said.
Lucia Mar serves about 10,600 students.
Atascadero and Paso Robles school district representatives did not respond to requests for comment Tuesday.
PG&E also paid about $2 million in property taxes to the San Luis Obispo Community College District in the current fiscal year ending June 30. Cuesta College representatives did not return request for comment Tuesday.
Impacts on county finances
San Luis Obispo County officials say they’re not expecting great financial hardship when Diablo Canyon nuclear power plant closes in 2025.
The county receives about $8 million a year in property taxes from PG&E, most of that coming from Diablo Canyon. That’s between 1 and 2 percent of the county’s annual budget of $574 million, said Guy Savage, assistant county administrative officer.
PG&E has promised to pay nearly $50 million to offset declining property taxes through 2025.
“The plant’s closure will be a significant hit to the county in general, but there will probably be a greater impact to the schools in the county,” Savage said. “I think we can absorb the loss of tax revenue without much impact on our public services.”
During the Great Recession, the county lost about $80 million in total revenue and was able to make adjustments to cover it, so an $8 million annual loss is manageable, Savage said.
“We have been planning for this possibility for many years,” he said.
Port San Luis Harbor District is among several agencies, school districts and local governments that benefit from Diablo Canyon property taxes. Port district manager Andrea Lueker said the district receives about $440,000 in property taxes from the power plant — about 7 percent of the port’s $6 million annual budget.
Lueker said she is unsure how the district will recoup those losses, though she expects the Harbor Commission will look into how much of the promised $50 million in aid it will be eligible for.
“Certainly it’s a pretty large number, but we have time to look into it and how we will address it as more details become available,” she said.
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