Morgan Hill
’s budget deficit more than predicted last fiscal year
Though the city of Morgan Hill brought in $17.7 million in revenue last fiscal year, it was still $1.6 million short of expenses, a report headed to the state auditor’s office disclosed last week.
With $19.3 million in expenses last fiscal year, which ended on June 30, the city had to rely on $1.6 million of reserve funds to balance the books. The city had expected to lose about $2 million last spring, according to City Manager Ed Tewes. A budget review in May had reduced deficit estimates to $1.2 million.
Budget Manager Chu Thai told the Morgan Hill City Council that although general fund revenues continue to rise, the city lost more money than originally expected. He said while sales and property taxes are higher compared to the last two fiscal years, increased benefit costs, full operations of the Aquatics Center, debt service payments for the new police facility, increased fire service costs and unanticipated legal expenses contributed to the deficit.
In the Recreation Division alone, expenses overtook revenues by $1 million dollars. According to Chu’s report, historically, that has been the case. After one full year of operation, the Aquatics Center showed a deficit of $406,236 and the Morgan Hill Cultural and Community Center lost $302,719. While Redevelopment Agency money was used to construct the new facilities, operation costs are funded by the general fund.
Chu said the Aquatics Center deficit is different from the figure of $357,000 the city reported earlier because it includes $10,000 in additional revenues taken in at the end of last fiscal year, but also $40,000 in additional expenses in supplies and services and about $20,000 in costs for water and electricity.
Councilman Greg Sellers asked Chu if there were any one-time expenses the Aquatics Center incurred that it would no longer need for its operation in future years. Tewes said there are some expenses of supplies needed for this year that were purchased and therefore recorded on the last fiscal year’s ledger. He gave the example of chemicals purchased before June that would be used for this year.
City Finance Director Jack Dilles also noted though a minimal amount, another one-time expense is a shaved ice cart, which the city purchased last year for $2,300.
Dilles told the Times, “We are currently looking at ways to invest our reserves to reduce our operating costs.”
Reserves, which were at $11.3 million in 2003, have dipped to roughly $8 million this fiscal year.
The city took in $5.2 million in sales tax revenue last fiscal year, up from $4.6 million the previous year. Revenue from Transient Occupancy Taxes were up by $1,000 to $956,327.
The report, Tewes said, presents the final numbers in the $19.3 million budget for the 2004-05 fiscal year and will be submitted to the auditor for review.
