Marty: Why it doesn’t work in Hollister

Marty Richman

Put on your green eyeshades and turn off the TV
– you’re going to have to absorb some numbers on this one.
Put on your green eyeshades and turn off the TV – you’re going to have to absorb some numbers on this one.

I used Hollister’s budget handout for data. The city’s last report available online was five years old. All the other cities had their current budgets online. That’s symptomatic of Hollister’s budget reporting problems. Other data comes from the U.S. government’s 2008 interim census. I tried to compare apples to apples; however, I’m not responsible for the budget tricks cities play – the tricks are another problem. I frequently use the term per capita, which simply means, per person.

Hollister’s 12.5-percent budget cut moving toward approval is another stopgap measure in the city’s declining economic fortunes. There will always be fluctuations, but the key is the trend and the trend is definitely bad. These difficulties exist in spite of an additional Measure T and its 1 percent city sales tax.

I believe the reason is the lack of economic stimulus. We are in a position where the traditional organizational and budget structure does not work. A major concern I have is that the city is simply putting the old, failed, structure on hold with the intention of reviving it as soon as funds become available – perhaps from the federal government. If that happens, it will be only a temporary reprieve; without structural change, we will inevitably return to the declining trend line.

That’s the key message. You may stop here or continue for full credit.

We’re both competitors and partners with other cities in our neighborhood. Some, like Monterey and Morgan Hill, are close to our size of 35,000. Others like Watsonville, Gilroy and Santa Cruz are 50,000 to 60,000. San Jose is a big city of about one million people.

If you examine the income in these cities, you see how they compare. Hollister’s per capita annual income is $23,651 (baseline 100 percent), Monterey $36,880 (156 percent of ours), Morgan Hill $37,044 (157 percent), Watsonville $17,193 (73 percent), Gilroy $28,645 (121 percent), Santa Cruz $34,449 (146 percent) and San Jose $33,859 (143 percent).

Five of those six area cities have per capita incomes exceeding Hollister’s. However, there is more to economic activity than personal income; things like sales taxes and hotel occupancy taxes and much of that can come from out of town.

One way to measure those is to examine the budgets amounts supported by those activities. Hollister’s per capita general fund budget equals $410 (baseline 100 percent), Monterey $2,067 (504 percent of ours), Morgan Hill $774 (189 percent), Watsonville $649 (158 percent), Gilroy $675 (165 percent), Santa Cruz $1,269 (309 percent) and San Jose $755 (184 percent).

Comparing the two sets of data, one immediately notes that some locations, like Monterey, have budget differences with Hollister that are much larger than can be explained by personal income. This is not surprising. Monterey’s sales tax and hotel occupancy tax alone bring $20 million to a population of only 28,000. Business license taxes bring in another $3 million. Because their commercial property values are higher, property taxes bring in $8.7 million a year. Just those items provide an added $1,131 per capita, more than half, of Monterey’s general fund revenue. The same situation exists at other locations; Santa Cruz had a per capita general fund budget 309 percent of Hollister’s.

We are losing out in two areas, one is personal income and the other is economic revenue. This double whammy leads to another problem. We must spend a larger percentage of our general fund for public safety. Hollister and Gilroy spend 68 percent, Santa Cruz and San Jose 63 percent, Watsonville 59 percent, Morgan Hill 54 percent and Monterey spends 43 percent. Meanwhile, the richer areas drive our salary and benefit costs up.

The most interesting number is how much remains for all the other general fund services after the public safety bill is paid. Monterey has $1,188 per capita left over, Santa Cruz $690, Morgan Hill $351, San Jose $280, Watsonville $266, Gilroy $215 and Hollister $132. That’s right, the city will have a mere $132 per person for all the non-public safety general fund services. Remember that is per person, so the numbers are equalized for population.

If we had the population adjusted level of income and economic activity of Santa Cruz we would have an added $19 million in the general fund after public safety was paid. If we had the activity of Morgan Hill it would be an added $7.6 million or Gilroy after they cut their budget 17 percent, an added $2.9 million. The numbers tell the story – until Hollister gets significantly more economic vitality, we must change the structure of how we function. If we don’t, there is no chance for a sustained recovery. The current system is far too expensive for our income.

Marty Richman is a Hollister resident.

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