Budget shortfalls, flood control, new city hall all topics of
discussion
While Morgan Hill may be the little pig in the brick house, as
city councilman Greg Sellers characterized the city’s financial
position vis-
à -vis the faltering economy, he and the other city leaders know
that their comfortable reserves are going to come under increasing
pressure.
Budget shortfalls, flood control, new city hall all topics of discussion
While Morgan Hill may be the little pig in the brick house, as city councilman Greg Sellers characterized the city’s financial position vis-Ã -vis the faltering economy, he and the other city leaders know that their comfortable reserves are going to come under increasing pressure.
Foremost in their minds at a two-day goal-setting retreat last weekend was the effect of Gov. Gray Davis’ budget, which gives cities and counties more responsibilities but less money to carry out programs and projects.
If there was any consolation, it was the knowledge that all local governments are in the same situation. Reaction was instantaneous, resulting in a meeting in Mountain View on Monday of area legislators and representatives of every city and the county to take stock of their situation and present a unified front to the state.
“We want to make sure that these losses are one-time cuts and not ongoing ones, and make it known that it’s time to for structural reforms in the tax system,” said Mayor Dennis Kennedy, who attended the session at Mountain View City Hall.
During their two-day retreat, held in the brand new community center, council members discussed numerous topics, including redevelopment, economic development, restoration of medical services, a construction schedule for new municipal buildings, flood control, the upcoming budget and the extent to which they are willing to dip into reserves.
They also scheduled a half-day workshop for Jan. 24 to begin considering Round Two projects such as crime, a policy on public art, the sister city program, plans for downtown and a new “visioning” process proposed by Mayor Dennis Kennedy that goes beyond the series of public discussions that gave the city capital projects such as the community center and still-to-be-built aquatic and indoor recreation centers.
Morgan Hill will be hardest hit over the next 18 months by loss of revenue from three major sources, City Manager Ed Tewes told council members. The city would lose $647,000 this fiscal year and $2 million during the year beginning July 1 in vehicle licensing fees. It also stands to lose $1.5 million annually from property taxes and redevelopment funds taken for education and $100,000 in a number of smaller state subventions.
But even as council members considered upcoming fiscal demands — including covering the loss of state revenue, the cost of capital projects, upcoming salary negotiations with employee unions and a request for increased retirement benefits from former city firefighters now working for the county — some of them called into question the size of the city’s reserve fund, saying it is too large.
City policy requires reserving 40 percent of each year’s estimated revenue to cover unexpected outlays, which are divided into three categories – general contingencies, emergencies and cases of economic uncertainty.
The policy has served Morgan Hill well. The city started the current fiscal year with $11.2 million. Revenue is estimated at $15.7 million and expenditures at $16.4 million, leaving it with a $10.5 million balance on June 30. With $3.3 million already spoken for, the city has $7.1 million of uncommitted funds.
Greg Sellers, who on other occasions has questioned the need for such a strong reserve, said the council is “breaking faith with taxpayers” in keeping so much money on hand.
Larry Carr concurred.
“We’ve asked for two reductions in spending so far. If we’re not willing to use reserves on a rainy day, we’re holding too much public money,” Carr said.
Carr was referring to spending cuts requested by the council in anticipation of budget problems. Staff efforts at mid-year produced 7 percent savings in fiscal 2001-02, a success that was followed by a request in October that City Manager Ed Tewes find ways to save 4 percent during the current year. Council members will take up the matter again at a Feb. 5 budget workshop.
Kennedy supported using reserves for one-time emergencies, saying that “a steady reduction in reserves is not a prudent path to follow.”
Kennedy recalled the city’s situation of a decade ago when a rosy budget picture resulted in unrestrained spending, including the hiring of employees. An economic downturn resulted in layoffs, including firefighters and police officers, and the elimination of the parks and recreation department.
“We used too much money for ongoing expenses,” Kennedy said, “in the belief that good times would continue.”
As part of the discussion on capital projects, the council decided to organize a meeting with state and Congressional representatives to discuss flood control.
Morgan Hill, unlike areas further south along Llagas Creek, has reaped no benefits from the long-stalled $100 million federal and state project designed to spare a wide area of South County from devastating flooding that occurs periodically.
The Santa Clara Valley Water District will provide the local funding match for PL566 work, but Morgan Hill must pay for local projects from development impact fees.
As for a new or expanded city hall, council members postponed a decision until they learn in September whether the city will receive state bond money to build a library. Morgan Hill, part of the county library system, lost out in the first round of funding, which ended last month.
If funding becomes available in the second round, the library would be built adjacent to city hall. If not, Seller said, a host of possibilities opens up, including building a smaller library at the site, expanding city hall at its present location or rebuilding elsewhere.
“I’ve never been 100 percent sure that city hall is in the right place,” Seller said.
Unlike other capital projects that can draw on redevelopment revenue, a seat of city government would have be paid for from development impact fees and the general fund.
Police department employees — including administrators and emergency dispatchers, who virtually are sitting on each other’s lap in a 10,000-square-foot building – are probably most in need of new headquarters.
City officials learned a couple of months ago of a 43,000-square-foot unfinished industrial building that could be converted into a new police headquarters. They are interested because they’ve learned that the county is not willing to share land at the corner of Diana Avenue and Butterfield Boulevard where a courthouse is scheduled to be built in 2005-06.
A report on the progress of acquiring a site for police headquarters is due the council on Feb. 5.
Tewes said the city needs a site for a new fire station as quickly as possible. The city has money from development impact fees to buy land, but revenue for salaries is the issue, Tewes said. He said there could be sufficient land at the courthouse site for a fire station, which requires less space than a police department.
The effort to restore medical services in Morgan Hill was discussed at length.
Council members are less than happy with progress being made by a community-based foundation to find replacements for the practitioners who left town after St. Louise Hospital closed in December 1999 to consolidate services in Gilroy. A subsequent clinic established by San Jose Medical Group physicians to take up the slack folded late last year.
Although two OB-GYN physicians were recruited to reopen the medical office building at old St. Louise Hospital, “business has not been as good as hoped for,” Kennedy said. He said that he and Chang are leading efforts to bring private capital into the venture.
Gaining moment will take several years, Sellers said.
Other council members were less charitable, citing the financial help the city has provided the Morgan Hill Community Health Foundation — $250,000 in matching funds last year and an equal amount in an unrestricted grant when the foundation was created. The council also gave $80,000 with no match required to recruit physicians.
“I’m not happy. We’re worse off than before,” Chang said.
“Let’s let the community build momentum before we get involved,” Tate said.
Carr said the city has put “significant resources on the table,” adding that “it’s been suggested that we take an active role in helping the foundation. But in light of the budget, it’s not time to do that.”
