High gas prices fueled rise in sales tax revenue
Morgan Hill – The latest round of number crunching by city officials show a slight budget surplus occurred in fiscal year 2005-06, which ended June 30, ending three years of shortfalls.
In addition to cost-cutting moves in several departments, revenue grew by 15 percent over the 2005-06 fiscal year. This helped the city end up with a $48,000 surplus on June 30, less than six months after city officials had projected a budget deficit of $622,000.
The Morgan Hill City Council approved a new $22.7 million operating budget June 21.
Higher than usual sales and property tax revenues combined for $1.5 million in unforeseen funds between July 2005 and June 2006. Property tax revenue rose by 20 percent and sales tax revenue jumped 15 percent.
“This was going to be the toughest year, but it was actually the turnaround year,” said Morgan Hill City Treasurer Mike Roorda at Wednesday’s City Council meeting, giving a rundown of the figures. “We’re back to those good years we saw in the late ’90s where we’re able to build up the general fund.”
Morgan Hill Finance Director Jack Dilles presented a new general fund forecast for the next five years based on the latest city financial statements. It shows a $600,000 shortfall – the difference between expenditures and revenues – for this year segueing into a string of four profitable years. The new forecast shows reserves rising from $10.2 million to $14.6 million by 2011.
City Manager Ed Tewes warned the public not to read the numbers as a prediction. A slight surplus in fiscal year 2005-06 does not mean the city is flush with resources, he said.
“We haven’t gone to Ouija board to find out what will happen five years from now,” said Tewes, alluding to how unforeseen economic conditions could throw the city a curve ball.
A number of city departments spent less money than expected during the 2005-06 fiscal year. For example, the city’s new Aquatics Center spent $39,000 less than expected. The Morgan Hill Police Department saved $35,000.
Dilles shared Roorda’s positive tone over the surplus, but said officials would continue to rely on scaled-down financial projections for future forecasts.
Higher-than-expected gas prices, he said, spurred an unexpected jump in sales taxes. The average cost of regular unleaded fuel rose from $2.78 to $3.10 over the last year in the San Jose market, according to numbers supplied by the American Automobile Association.
“We are concerned that the transportation segment won’t continue to go up like that,” Dilles said, adding he used a conservative 2.5 percent growth rate for sales tax in the new forecasts.
IN THE MONEY:
Budget Surplus – Higher than expected sales taxes contributed to a budget surplus of $48,000 in fiscal year 2005-06. It’s the first time the city posted a surplus in three years.
Shrewd Spending – Expenditures in fiscal year 2005-06 were $87,000 less than the amount projected
Reserve Funds – The city’s reserves equaled $10.2 million on June 30. Forecasts show that
figure rising to $14.6 million by June 2011.
Unforeseen conditions could change the
economic projection.
Tony Burchyns covers Morgan Hill for The Times. Reach him at (408) 779-4106 ext. 201 or tb*******@mo*************.com.
