The proposed budget for the City of Morgan Hill for the coming fiscal year would increase spending for basic services by about 10 percent, but local officials say that highlights encouraging trends such as growing revenues and more City staff to ease the burden on current employees.
City Manager Steve Rymer has proposed a $31.6 million 2013/2014 general fund budget, which is funded primarily by local sales, property and hotel taxes, that contains some key wildcards in the form of soon-to-expire employee contracts and continued uncertainty over the wind-down of the former Redevelopment Agency.
The current contracts with most of the City’s employees expire at the end of the current fiscal year June 30. Staff and the Council are in the midst of negotiations with the three labor unions. The budget proposal assumes total personnel costs of about $17 million in the general fund (plus about $10.3 million in funds that are financed by other sources).
That $17 million figure could change, depending on the outcome of negotiations with the Police Officers Association, Community Service Officers Association and American Federation of State, County and Municipal employees, but Rymer declined to say by how much until the new contracts are signed.
Councilmembers said Wednesday that seeking significant savings in the renewed contracts is not their highest priority.
“You have to remember our labor groups, during the downturn, didn’t take the raises they were due (in the current five-year contracts) for the last three years,” Councilman Rich Constantine said.
Councilman Gordon Siebert added that “attraction and retention” of qualified employees is one of the Council’s key standards in labor negotiations. He noted the City has already lost about one-third of its management staff since the recession of 2008, and at least some of that loss was due to better salaries found elsewhere.
“We have people who are well qualified and experienced, but we don’t want to fall behind,” Siebert said. “The era of big increases has been over for a number of years, but we have an obligation to attract and retain the best employees.”
Rymer’s “budget message” to the Council also notes an ongoing challenge is the City’s rising share of employees’ retirement benefits. In 2013/2014, the City will have to pay about 35 percent of sworn police officers’ salaries, and 16 percent of others’ into the CalPERS retirement fund. That equates to about $4.1 million ($2.7 million of which is funded by the general fund), Rymer said. The City also faces an unfunded liability of about $1.7 million over the next 30 years in employees’ retirement health insurance.
The overall budget picture looks more positive than the last few years, with projected growth in revenues due to increasing taxable sales (by about 8 percent), more building activity and a one-time surge in property tax revenues from the redirection of former RDA funds to the general fund, according to the budget proposal.
Depending on the outcome of labor negotiations and litigation related to the dissolution of the RDA, this extra revenue will allow the City to add 3.5 positions by the middle of the fiscal year that starts July 1, City staff said. And it will provide a one-year surge of about $750,000 to invest in streets and sidewalks infrastructure, which are deteriorating and in need of even larger investments in future years.
“I think it’s very encouraging that things are starting to perk up and we’re ahead of where we thought we would be in our last forecast,” Mayor Steve Tate said.
The addition of new staff members will act as a balm to the existing City staff, Constantine added. Overall, City staff has been cut by 20 positions since 2010, to the current payroll of about 169.
“We’ve had a record low staff, and our citizens expect the same amount of work to be done,” Constantine said.
Two of the proposed new positions are in the police department. One of those is an “administrative sergeant” who wouldn’t be hired until about halfway through the year, if approved by the Council, according to Police Chief David Swing.
That sergeant would take over a significant portion of special operations and desk-related tasks currently shared by existing Morgan Hill sergeants, Swing said. That would allow current supervisors to spend more time out in the field.
The proposed police budget also includes funding for a patrol officer position that has been left vacant the last year , City staff said.
Other proposed new positions, starting mid-year if approved, are a “communication and engagement manager” who will “provide organizational leadership;” a part-time human resources assistant; a part-time management analyst in the City’s streets and parks maintenance divisions; and a part-time administrative services assistant.
Rymer and City staff released the budget proposal Friday, and it was on the Council’s agenda for a presentation Wednesday. The Council will have a budget workshop May 31 to discuss the proposal with City staff and consider changes. Two public hearings will follow in June, with the Council expected to adopt a final draft June 19.
In addition to the general fund, the proposed budget includes about $83 million in expenses in City departments that are funded by user and impact fees. These include recreation, building and planning services. Also proposed is a $102 million, five-year capital improvement program.
As is typical of the City’s budget, the vast majority of the general fund – about 82 percent of expenses – is devoted to public safety, with a police department budget of about $13.4 million (about 13 percent higher than 2012/2013), and a fire services budget of about $5.1 million (slightly lower than 2012/2013), according to City staff.
The use of $750,000 in one-time property tax revenues – distributed back to the City through the wind-down of the RDA which formerly grossed about $22 million annually – is a step in the right direction to address what a recent study identified as a major shortfall in streets infrastructure needs, Councilmembers added. That study said the City needs at least $2.4 million annually (on top of about $1.7 million it spends now) to bring all its streets to a “safe and sustainable” level.
But finding enough money to fully fund those needs will be an ongoing task, which considers the improvements a high priority.
“That’s probably the most significant new feature in the budget – $750,000 sounds like a lot of money, but we need $2.5 million (more) annually” to upgrade the street maintenance to a safe level, Siebert said.
-$31.6 million: Total proposed general fund expenditures, 2013/2014
-10: Percentage of growth in the general fund since 2012/2013
-3.5: Number of new positions to be added to City Hall payroll in next fiscal year
