Rosier financial outlook predicted for city during next fiscal
year
Morgan Hill – Revenues and expenditures are rising but the deficit is dropping, according to the proposed budget for fiscal year 2006-07 likely to be adopted Wednesday by the Morgan Hill City Council.
During the new fiscal year – which starts July 1 – general fund income will increase by $3 million from this year’s take, for a total of $22.1 million.
Spending will also sail higher in the new budget, up from about $20.4 million this year to about $22.7 million over the next 12 months.
That leaves the budget gap at about $800,000, actually representing a deficit drop of about 50 percent from last year’s $1.6 million operational shortfall.
“The city’s financial position has improved,” said Morgan Hill Mayor Dennis Kennedy. “We had projected a $1.2 million deficit (for the upcoming fiscal year), and now it’s down to just under $800,000, thanks to cuts we have made in expenditures and services.”
Fortunately, he added, Morgan Hill has gotten by with a good healthy budget reserve since the dotcom bust.
“During the good years we were very frugal in saving our surplus revenues,” he said. “We built them up to $12 million. We’ve had to use those, but that’s why they were put aside.”
And while the city of 37,000 residents is now doing a good job of weaning itself off those juicy reserves, Kennedy said much work needs to be done to increase income.
Illustrating his point, a recent general fund forecast by city officials shows the deficit lingering into 2011, where it’s expected to hover at $300,000.
Fortunately, things are improving faster than anyone expected two years ago.
The economy is showing signs of bouncing back, generating unusually high sales and property tax revenues last year.
It will get better over the next 12 months, with sales and property taxes expected to account for 53 percent of the city’s income, said Morgan Hill Director of Finance Jack Dilles.
Transportation-related sales taxes – especially those generated from car sales, RV sales and gas taxes – have accounted for much of the boost, Dilles said.
But that doesn’t mean the city will rely on high gas prices to pad its bank accounts.
“We have to be careful with that,” Dilles said. “You’ve seen what has happened at the pump. Prices go up and down, and our taxes go up and down.”
As for next year’s expenditures, the new budget includes new costs later in the year with the opening of the Centennial Recreation Center, where the equivalent of three new full-time staff positions will be created.
In other personnel moves, the position of Office of Emergency Services Coordinator within the Morgan Hill Police Department will be expanded from part-time to full-time.
Kennedy said Morgan Hill’s deficit problems will require more reflection in the community on what services people want, and what they are willing to pay for them. He thinks the Community Conversations process started a helpful dialogue on that question, but more detailed solutions must be identified.
“At this point, it’s not clear what the community wants as far as service levels,” Kennedy said. “And we are operating at lower service levels per capita than other cities in Santa Clara County.”
For example, Kennedy noted recreation expenditures are much lower in Morgan Hill than other cities of similar size.
Nevertheless, rising concerns over domestic violence and gang-related crime indicate many in the community think more money should be spent on public safety.
The challenge, Kennedy said, is to “translate those services into cost figures.”
Tony Burchyns covers Morgan Hill for The Times. Reach him at (408) 779-4106 or tb*******@mo*************.com.
