The anticipated shortfall of funds in the city’s water and
wastewater budgets will drown previously proposed capital
improvements to the utilities’ infrastructure for the next five
years, according to city staff.
The anticipated shortfall of funds in the city’s water and wastewater budgets will drown previously proposed capital improvements to the utilities’ infrastructure for the next five years, according to city staff.
That’s one of the most significant updates to the city’s recommended five-year capital improvement budget, which the city manager’s office released last week.
“We’re scaling back on our water and sewer replacement projects, because of a lack of revenues in the water and wastewater funds,” public works director Karl Bjarke said.
The city faces a significant deficit in both funds – including about a $1.6 million deficit in the water fund – which will require an increase in rates paid by about 14,000 households and commercial customers in Morgan Hill.
The shortfall of revenues is due to a cutback in water consumption brought about by a recent three-year drought and economic recession. City staff have already recommended a 10-percent increase in both water and sewer rates starting Jan. 1, 2012, though that could jump even higher when the results of a rate study by an independent consultant are released in the coming weeks.
The total recommended five-year capital improvement program proposes spending about $107.7 million on about 41 street, parks, water, sewer and other infrastructure projects now through 2016. Last year’s CIP contained about $162 million in expenses for similar projects.
Water system improvements planned in the CIP total about $3.8 million, compared with about $6.4 million budgeted in last year’s plan.
Cash is so short in the water fund that only one project is budgeted before the 2013-2014 fiscal year – a $925,000 water main replacement on Main Avenue that is proposed for later this year. Bjarke said the main has continued to spring leaks the past five years or so, requiring repeated repairs.
A new main is needed “so we’re not throwing maintenance money at it,” Bjarke said.
Proposed sewer system improvements in the most recent CIP will cost about $49.4 million, compared to about $52.2 million last year.
No new street projects are proposed in this year’s CIP, Bjarke said. Most of the scheduled improvements are budgeted for the next 12 months, and one – the widening, resurfacing and utility undergrounding of West Dunne Avenue – is underway.
The other most expensive street projects in the plan are the extension of Hale Avenue to DeWitt Avenue, at a total cost of about $12.1 million; and the Butterfield Boulevard south extension.
Those projects will be funded mostly by redevelopment agency bond proceeds.
The CIP, along with a separate allotment for downtown improvements and private assistance, also reflects an approaching end to about $110 million in bond proceeds acquired by the Morgan Hill RDA in 2007, according to city manager Ed Tewes.
For the next five years, the CIP budgets about $22.3 million to be spent from the proceeds. Another $15.9 million in the proceeds is available for unspecified downtown revitalization efforts, which could include a Monterey Road streetscape project, assistance to developers on redevelopment projects, parking and other downtown improvements.
“There are more requests (for RDA funds) than there are funds available,” Tewes said.
The possible elimination of the RDA, proposed in Gov. Jerry Brown’s state budget for the upcoming fiscal year, would not impact the CIP, Bjarke said, though it would drastically burden the proposed general fund budget for 2011-2012.
Even if the RDA’s staying power was assured, city staff have “no plans to go out and borrow more money” from bond proceeds once the current proceeds run out, Tewes said.
