Residents will likely be disappointed with the clear and
definite decline in city services, and the dire state of local
finances come July when the next fiscal year’s budget is
adopted
– that’s the message relayed by Morgan Hill City Manager Ed
Tewes at an open house meeting on the budget last week.
Residents will likely be disappointed with the clear and definite decline in city services, and the dire state of local finances come July when the next fiscal year’s budget is adopted – that’s the message relayed by Morgan Hill City Manager Ed Tewes at an open house meeting on the budget last week.
Utility rates will go up by 10 percent or more while infrastructure repairs will fall behind, overall city staff levels in 2012 will be the lowest they have been since 2000 and the city will no longer have an animal control officer. These are some of the cutbacks to city services proposed for the fiscal year 2011-12 budget, Tewes said, and they follow two previous years of service reductions in public safety, street maintenance, administrative services and almost every department of city hall.
“The challenge is, many of you will not appreciate the lower level of services we will be able to provide,” Tewes told the crowd of about 30 residents at the open house, roundtable-style meeting Thursday. He added specifically that the level of water and wastewater services proposed for next year, for example, will “clearly be unacceptable over the long-term,” though residents will have to live with the changes for at least one year.
Compounding the city’s financial woes are the same losses in revenue from sales and property taxes that have hindered the state since 2008. Plus, unique to Morgan Hill is the fact that it receives less per capita annual revenue than any other city in Santa Clara County except for Saratoga, due largely to the absence of any special or local taxes levied in the city limits, Tewes said.
The meeting’s casual format allowed residents to wander around the Community and Cultural Center’s assembly hall perusing different informational stations manned by staff from each department. Heads of all the departments were available to answer questions from taxpayers, and lead different group discussions on topics focusing on specific services.
Poster-sized charts from the finance department showed declines in city revenues over the years, contrasted with the expected rise in city employee costs. Street maintenance charts listed lesser-known facts about the city’s infrastructure burden, such as the need to maintain 3,600 street lights in the city limits, and the plan to replace most of those with more energy efficient LED lamps, using redevelopment tax increment revenue over the next couple years.
The community development department showed informational flow charts depicting the two-year process for acquiring and building housing allocations in the city, and breaking down the costs of a typical road project into environmental, consulting, design, construction and other costs.
City staff said the purpose of the meeting was not just to provide information, but to put that information into a comprehensible frame of reference.
“I thought the staff did an excellent job of providing information and a context for the information, so our residents could understand the city’s budget, and some of the issues we are facing, because they are challenging and daunting,” said councilman Gordon Siebert, who attended the meeting.
One of the biggest hits to city services proposed in next year’s budget is in the areas of water and wastewater services, where a tentative recommendation to raise rates for residents and businesses by 10 percent might not even be enough to keep minimum service going.
Charts displayed by utilities staff showed the steep drop in services for the year starting July 1, assuming the city council adopts the budget. Those include six layoffs and a virtual halt to preventive and revenue-preserving maintenance such as water meter testing to ensure system reliability.
“I’m especially concerned about the abilities to deliver clean, safe and reliable quantities of water, and our ability to handle wastewater in a system that works all the time so we can keep up with current needs as well as preventive needs,” Siebert said.
He added that another chief concern is the city’s relatively low rate of per capita tax revenue – about $306 per year. That’s the amount of funding available for “discretionary” services such as police, fire services, parks and street maintenance and recreation. By comparison, Gilroy receives about $415 in such tax revenue per year, and Palo Alto – the wealthiest city in the county – receives about $775, according to city staff.
The city council is expected to adopt a budget by June 15.
Wednesday’s council meeting will include a public hearing on the recommended budget.
City staff’s projections show sales tax revenues will start to inch upward at a continuing pace starting later this year, but some of the attendees at Thursday’s meeting still think the budget recommendations won’t do enough to secure the city from further economic decline.
Cordelia Beveridge said rising costs for employees’ salaries – particularly management-level employees – and ongoing pension and benefits should be reigned in.
“When you don’t make money you’ve got to tighten your belt. I don’t think public employees are doing that,” Beveridge said.
And Morgan Hill resident Rich Jensen said he advised the council it might be seeing the current financial problems “four or five years ago” and now it might get even worse without even more cuts than are proposed in next year’s budget.
“The 500-pound gorilla in the room is still going to be the pension costs,” Jensen said.
One of the charts presented at the meeting showed that by 2015 the city will be paying on average more than 40 percent of police officers’ salaries in pension costs, for example. Many of the personnel costs are outside the city’s immediate control, as employees’ salaries are dictated by contracts that don’t expire until 2013, and pension costs are managed by the CALPers organization and are largely determined by the market which still struggles.
The council and staff have been in talks with employees, most of whom are represented by local unions, in recent weeks to get them to agree to open up the contracts which guarantee annual raises.
Some of the charts, graphs and lists presented at Thursday’s meeting will remain on display for public view in the lobby of city hall until the budget is adopted, Tewes said. The budget book is available for public viewing at city hall and the public library, and a slideshow Tewes presented Thursday, which contains a tutorial on city finances and a breakdown on the portion of the $26.5-million general fund expenditures proposed for each service area, will be available on the city’s website this week.
Overall, the recommended budget proposes the elimination of 18 current city positions and the creation of seven new ones, netting out to a potential loss of jobs for 11 city employees.
Furthermore, the recommendations don’t even touch on how the city would deal with the elimination of the redevelopment agency, which brings in about $22 million of revenue each year. Governor Jerry Brown has proposed eliminating the agencies statewide as a way to close part of the state’s $15-billion deficit.
That proposal would open up a $2.5-million hole in the city’s general fund, further complicating the local financial problems. The first draft of the recommended budget pegged that number at $3.3 million, but Tewes said ongoing revisions to the budget proposal reduced that figure by subtracting transactions made in recent weeks for rent on office space used by the agency, and a police officer position. This year, three officers’ salaries and benefits were funded by the RDA, but only two are proposed for next year.
