While residents discuss options for MH’s financial future,
dissolving the redevelopment agency could solve the city’s budget
deficit
Morgan Hill – Two months into the city’s community conversation, residents have been warned that if they don’t raise taxes, cops may disappear from the streets, it could take longer to get a fireman to a burning house, the grass in city parks will be left to turn brown and it could be harder to get a building permit.
Dialogue is encouraged, but no one is talking about the Morgan Hill Redevelopment Agency. The agency responsible for scores of affordable housing units, infrastructure improvements and new public buildings over the last 25 years, but one that also drains funds from the basic operations of city, county and state governments.
For all the benefits the RDA has brought to Morgan Hill, it’s arguably the biggest drag on the city’s general fund. Get rid of the RDA and Morgan Hill’s $1.5 million budget gap all but vanishes. Take away the Aquatics Center and the Community and Cultural Center, which will lose about $1 million between them this year, and suddenly, the city is in the black. Take away all redevelopment agencies in Santa Clara County, or change the way they operate, and county voters may not be looking at a new sales tax on the June ballot.
And as the city asks Morgan Hill residents if they want another tax increase, it’s planning on extending the life of the RDA and diverting more money from the general fund. A move the city council, which doubles as the RDA board, can accomplish without the public’s support or sending the issue to a ballot.
Canceling the RDA, or suspending it until the city’s financial health improves, could go a long way toward balancing the budget, but so far, no one has asked Morgan Hill citizens if that’s what they want.
“They absolutely should,” said Laurie Barke, a Morgan Hill City Councilwoman in the 80s and 90s. “That’s the reason for the problems we have right now. The solution is to eliminate the RDA. It will lower our deficit.”
Barke said she was a supporter of the RDA when it was launched in 1981, but she thinks the city has done a poor job of managing it, particularly since 1999, when the agency was renewed and the city used RDA revenue for several new public buildings, including the Aquatics Center and the Morgan Hill Community Playhouse.
“I know city council members will say citizens wanted all these venues, but as leaders in this community, they should have realized that we could not afford them,” Barke said. “They should have done economic development first so we could afford all these swim centers. They’ve done it in reverse.”
The economics of the RDA are labyrinthine. Without the redevelopment agency the city would lose a considerable amount of revenue, but it would collect another $2.6 million this year for its general fund, though half of that would be used for expenses now covered by the RDA.
This year, the city’s agency will collect about $23 million in property tax revenues that can be used for redevelopment projects, but none of that money can be spent on public safety like hiring more police officers or even to operate the facilities built with RDA revenue.
And the RDA diverts money away from the county and school districts, though the state does replace money lost by schools. This year, Santa Clara County will lose $37 million to the county’s nine redevelopment agencies. San Jose is by far the biggest taker, but the Morgan Hill RDA will leave the county $3.3 million poorer in the current fiscal year.
Redevelopment agencies are a big reason the county’s half-cent sales tax measure is on the June ballot, County Executive Pete Kutras said. A sales tax can’t be taken by the state or redevelopment agencies.
“The issue from a county perspective is we have property tax that can be swept away without the consent of the board of supervisors, without the consent of the countywide taxpayer dependent on those moneys to fund general services,” Kutras said. “That’s the main problem. There’s no check on cities.”
Kutras believes that RDA projects should be subject to all jurisdictions that lose tax revenues to them and should require voter approval. At the very least, he said, an RDA should have a finite life span.
“If an RDA came in, accomplished its goals and then went out of business, I wouldn’t have a problem,” he said. “It becomes a crutch the city council relies on to do things they otherwise can’t afford. What good does it do to build buildings if you can’t operate them?”
Morgan Hill RDA has funded two new buildings for the county in the city: the courthouse rising on Butterfield Boulevard and the library scheduled to open next year. But Kutras said the courthouse project was so contentious he would be reluctant to work again with Morgan Hill, and, if state voters approve a bond measure in June, the RDA investment in the library may turn out to be a waste.
Morgan Hill would have been on the list for a new library if the bond passes. Meanwhile, the new library will be half the size of the one new bond money could build in Gilroy, and the Morgan Hill RDA will take $540,000 this year from the county library system.
“This is where it’s yin and yang,” County Librarian Melinda Cervantes said. “Using the RDA to build a new library is great, but with the collective $2.3 million we lose annually we could open on Monday and increase staff and the book budget.”
City council members say they recognize the drawbacks of the RDA, but think the city is better off with $25 million or more of annual redevelopment revenue than with a few million of operating revenue. They also say that in future years, the RDA will get away from erecting buildings and focus on burnishing the city’s business environment.
“I’m in favor of extending the cap, but the use of the dollars will be different,” said Councilman Mark Grzan, who agreed with Barke that the city should have devoted RDA funds to economic enhancement projects before building public facilities. “I’m in favor of using the RDA dollars to look at our downtown, to build roads and improve our infrastructure.”
The city’s plans could be affected by the state and county actions, though. State Senator Christine Kehoe, D-San Diego, is sponsoring SB 1206, a bill that would make it tougher for cities to declare blight and give the state more oversight of RDA activities.
It’s not clear yet what the effect of SB 1206, which is being opposed by the California League of Cities and the California Redevelopment Association, would have on Morgan Hill. But if the city does extend its RDA there’s always the possibility of litigation. The county and San Jose have been in court for several years over that city’s redevelopment efforts. The new courthouse arrangement prevented legal trouble between Morgan Hill and the county.
“I appreciate the dilemma the RDA puts the county in,” Councilman Larry Carr said. “I just hope the county would be willing to work with us on that rather than take legal action. If we didn’t extend the RDA, would the same amount of dollars truly be coming back [from the county] to our community? I’m not sure it would.”
Since its inception, the Morgan Hill RDA has provided funding for dozens of road improvements, infrastructure upgrades and housing projects. Below is a sample of some of those projects. In most cases, the RDA is not the sole funder.
Projects funded with Morgan Hill Redevelopment Agency money
Public Facilities
- Community and Cultural Center
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Community Playhouse
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Aquatics Center
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Indoor Recreation Center
Affordable Housing Developments
- Sycamore Glen Senior Apartments
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The Willows Family Apartments
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Depot Commons
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Crest Avenue Apartments
Street Improvements
- Butterfield Boulevard between Cochrane Road and Main Avenue, from Dunne Avenue to Tennant Avenue
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Traffic signal at intersection of Butterfield and Diana Avenue
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Watsonville Road bridge widening
Downtown
- Median improvements
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Parking lots
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Morgan Hill Downtown Transit Center
Parks
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Paradise Park construction
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Galvan Park ball field lights
