As budget news from Sacramento continues to spiral downward with
less and less hope of the state replacing money taken from the
cities, the Morgan Hill City Council will begin further tightening
its belt.
As budget news from Sacramento continues to spiral downward with less and less hope of the state replacing money taken from the cities, the Morgan Hill City Council will begin further tightening its belt.
A particularly important loss is the Vehicle License Fee, from which the city expected and budgeted $2.1 million for the current fiscal year, July 1, 2003-June 30, 2004. City Manager Ed Tewes said Monday that it looks as if far less money will actually arrive.
“If we do not receive VLF backfill for the current fiscal year,” Tewes said, “we are expecting $700,000 rather than the $2.1 million – a loss of about $1.4 million.”
The total city general fund is $16,073,853 of which the VLF is 12.9 percent. The general fund pays for police and fire protection (63.8 percent), recreation and park maintenance (16.4 percent) and some city administration costs (11.1 percent).
The state had, in the past, “backfilled” or replaced money lost to the cities and counties when car registration fees (the VLF) were reduced significantly because of a booming economy.
With the economic bust, now moving into its fourth year, and with new Gov. Schwarzenegger refusing to return the VLF rates to previous levels proposed by former Gov. Gray Davis, cities and counties will hurt in a big way.
The Legislature on Thursday and Friday approved a budget deal that would allow the state to ask voter approval of a $15 billion bond, along with a spending limit, on the March 2 ballot. The governor signed the measure on Friday.
Voters will also be asked to approve a $12.3 billion school construction and renovation bond for a total of $27 billion in future public debt.
Assemblyman John Laird, in town Saturday for a meeting with voters, said the Legislature’s agreement did not approach a solution.
“We did not deal with closing the gap,” Laird. That will come later, he said.
Unfortunately for cities and counties, the $15 billion bond would mostly be used to pay off previous borrowing, not used to backfill the VLF.
City Council will hold a workshop at 5 p.m. Wednesday – open to the public – taking a look at service levels, whether they can continue to be offered and at what levels.
“We have been tasked by the City Council to identify at 5-year strategy,” Tewes said, “on how to accommodate this financial gap.” He said Wednesday’s workshop is the beginning of a conversation on serious budget cutting that will continue into the new year.
The state budget maneuverings that translated to reduced monthly payments to counties and cities came in at levels many municipal leaders say they can’t live with.
Gilroy got $58,000 in vehicle license fee money for this month, $150,000 less than its previous monthly payment – a 72 percent cut. City officials expect to get $700,000 this fiscal year, $1.8 million less than they budgeted.
The city can weather the storm for now but will have to begin laying off staff in spring if things don’t change, City Administrator Jay Baksa said. At worst, the city might have to close its youth and senior centers, the city museum and a new, third fire station.
Santa Clara County lost $11.6 million in vehicle fees for December, or 85 percent. It got $2 million this month and found out it won’t get a vehicle license payment at all in January and may not in February either, according to county spokeswoman Gwendolyn Mitchell.
The county is expected to lose between $60 million and $70 million this fiscal year and could lose more than $85 million next year if the state doesn’t step up for a payback.
County executives will bring both short-term and long-term cutback plans to the Board of Supervisors for today’s meeting. The short-term plan would save about $70 million by freezing technology investments and capital improvement projects, including a disaster recovery plan and a plan to automate construction-project management, Mitchell said. Long-term reductions may include cuts from the Sheriff’s Department, fire and emergency medical services and the county-owned Santa Clara Valley Medical Center.
“The nurses at the hospital are critical, the firefighters are critical, and we need to get them (paid for),” county Supervisor Don Gage said Wednesday. “Otherwise, we don’t have any choice but to cut from those.”
County supervisors Jim Beall and Liz Kniss and executive Pete Kutras were among about 100 local politicians and police and fire chiefs in Sacramento last Wednesday, urging state legislators to “backfill,” or repay, municipalities for vehicle-fee losses. Two bills are in the Legislature to do that, but the state budget deficit of roughly $14 billion may prove too big an obstacle.
“Every day of delay further jeopardizes the county’s ability to continue to provide services that are essential to public safety,” Beall said. “Every day of talk is one less cop, one less nurse, one less firefighter (who is) needed to protect our communities.”
“One of the governor’s promises was to protect local services,” Kniss said. “This is a promise that needs to be kept.”
The state’s leading plan to pay locl governments hinges on voters passing a $15 billion bond in the March 2004 general election. Thus far, the Legislature has made a token payment only – $1,000 for California’s counties and cities to share.
The state constitution requires backfill, but there’s some disagreement over how much. Mitchell said the constitution doesn’t require the state to repay the full amount. Gage said the constitution guarantees 100 percent backfill.
“They should reimburse us totally for that,” Gage said of legislators and the vehicle-fee loss.
Although Gage didn’t go to Sacramento, he said he spoke to at least one state legislator over the phone about the issue.
Vehicle license fees had made up 27.5 percent of the county’s discretionary funding and 8 to 10 percent of its general fund.
In California as a whole, the vehicle license fee cuts mean a monthly loss of about $300 million to cities and counties, or more than $4 billion a year.
The Morgan Hill Council will also hold a lengthy public hearing, beginning at about 7:30 p.m. on an affordable housing project for local teachers under consideration for land on Watsonville Road near Monterey Road. The indoor recreation center’s senior and youth building spaces and programming and contract details between the city and Café Y’a Bon over the café’s renting the train depot are also on the agenda.
The complete Council agenda in full is available at the City Clerk’s desk in City Hall and on line. City Council and/or the Redevelopment Agency meets at 7 p.m. Wednesdays in City Hall Chambers, 17555 Peak Ave. Details: www.morgan-hill.ca.gov or 779-7271. Council meetings are broadcast live on cable access channel 17.
