Waves of financial turmoil continue to crash down on Morgan Hill
as the state attempts to close its ever-growing billion-dollar
deficit by raiding local coffers.
Waves of financial turmoil continue to crash down on Morgan Hill as the state attempts to close its ever-growing billion-dollar deficit by raiding local coffers.
The Legislature was scheduled to meet late Thursday to deliberate the governor’s budget deal, which if passed would close the $26 billion budget gap through program cuts, accounting tricks and diverting property taxes from cities.
The city is looking at state takeaways that could total $9.8 million over the next two years, mostly through Redevelopment Agency tax diversions totaling $7.8 million.
Morgan Hill Unified School District officials have few concrete numbers to work with. While word is that the state would cut education by $6 billion, Deputy Superintendent Bonnie Tognazzini told the Board of Education Tuesday night that “we’ve done everything we can to protect ourselves for 2009/10.”
Assemblyman Bill Monning was in Morgan Hill Wednesday meeting with city officials and the business community to “commiserate with the pain the entire state is suffering.
“It only raises the volume of my voice,” Monning said of meeting with local leaders like Mayor Steve Tate.
While the cuts are deep and severe to local government, Monning said the state budget deal does preserve Healthy Families, CalWorks, MediCal and other programs. Monning reasoned that if these programs were eliminated, local governments would shoulder the burden there, too.
While the state takeaways won’t affect the city’s capital projects or the city’s payment to the $110 million bond the city issued in February 2008, it will affect how projects are staffed, according to City Manager Ed Tewes.
Layoffs, then, “are certainly something we’re going to have to look at,” Tewes said. There are 18 full-time-equivalent staff positions paid for with Redevelopment Agency funds. The state may take $6.2 million this year and another $1.6 million next year from the RDA.
On the general fund side, the amount of property tax revenues borrowed by the state is about the same as the city expected in May, $800,000. This money would be paid back in three years, with interest.
However, taking $600,000 in gas tax revenues this year and next was not included in the number crunching when the current fiscal year’s budget was adopted. That, coupled with sales tax revenues looking to be $300,000 less than anticipated, leaves a “$1 million hole in the budget,” Tewes said.
The city will consider cutting back on services, raising revenue, using reserves and paying people less, Tewes said.
The RDA takeaway won’t affect RDA projects, like the Butterfield Boulevard extension and Tennant Avenue/U.S. 101 interchange. Such projects are paid for with bond money, Tewes said.
Nor will the takeaway affect the city’s ability to pay its bond debt, which at its current 1 percent interest rate has amounted to about $1 million a year. The agency receives about $20 million in property tax revenues each year, according to Finance Director Kevin Riper.
The city has eased some of its financial burden through use of the general fund reserve, which swelled to more than 40 percent of a year’s expenses last year and rests at about 39 percent now. The council mandates a 25-percent reserve policy.
The council has twice rejected a staff recommendation to shut off street lights to pencil the oft-beleaguered street maintenance fund so it’s anybody’s guess how the city will make up for such a general fund shortfall.
Meanwhile, Morgan Hill Unified School District is wearily eyeing the $6 billion in cuts to education statewide. Of the $9 million in cuts the district has made over the past 18 months, almost $5 million were one time only dollars, such as reserves, balance transfers from the year before and holding off on new textbooks.
Both the city council and school district trustees met in closed session to discuss labor negotiations, according to each body’s agendas. The council and trustees do not have to report on closed session items unless there is action taken, according to open meeting laws.
Morgan Hill Federation of Teachers President Theresa Sage said the district missed the June notification deadline, so there won’t be any more teacher layoffs in August. SEIU President Pam Torrisi said “there’s a good possibility we will have more layoffs.” The classified union, which represents aides, janitors and other support staff, has a 45-day notification policy.
Morgan Hill Police Officers Association President Scott Silva was not available for comment by press time.
