Leaders say even though dissolving the city’s redevelopment
agency could help solve the budget deficit, the program is too
precious to the city’s future to let go
Morgan Hill – The redevelopment agency is too valuable to the future of Morgan Hill to let it expire, city leaders said Friday.
“We wouldn’t have the downtown we have today and we wouldn’t have the possibility of continuing to improve it,” Councilman Greg Sellers said. “We wouldn’t have the variety of housing we have and opportunities for a wide section of the community. Fundamentally, it comes down to what kind of community do we want?”
That question is the crux of the city’s community conversation process. But while residents are asked if they can stomach higher taxes or cuts to some city services, they aren’t being asked if the city should extend the RDA, which is set to expire in 2007.
Dissolving the RDA would cost the city millions in economic development funding, but it could also help balance the city’s budget, because a portion of the property tax that goes into the RDA comes out of the city’s general fund. This year, the city is $1.5 million in the red, and considering cutting public safety employees like local police officers.
City officials credit the RDA with almost all of the city’s growth over the last 25 years, but Gilroy has grown just as much, if in a different way, without an RDA. It would also be possible to suspend the RDA until the economy improves, though doing so would subject the agency to potentially damaging changes in state law.
Without the RDA the city would have at least $1.3 million more in its general fund, but Sellers said maintaining the RDA is essential to meeting the city’s economic development goals. He said Morgan Hill is better off with the $23 million the agency will collect this year than the few million that could balance the budget.
“It’s appropriate that we should always look carefully at whether we should extend the RDA, but we are better off with the flexibility the RDA allows,” Sellers said. “We’re in a position now, where the time is right for us to focus on economic development. Our downtown is poised to be able to grow in a way that it hasn’t in the past. … Morgan Hill has grown to the point where it has become a draw.”
Redevelopment money can be used for affordable housing, infrastructure improvements, new public buildings and social service programs. Buildings such as the Community and Cultural Center and the Morgan Hill Community Playhouse, and housing including the Willows Family Apartments and Depot Commons are all RDA projects.
City Manager Ed Tewes said that without the RDA, Morgan Hill would not have attracted major employers like Hospira or developed the industrial park at the north end of town as quickly. He said the city’s downtown would be without medians, parking and street furniture.
“The purpose of the redevelopment agency is to encourage private investment and reinvestment where it would not otherwise occur,” Tewes said. “It is often the case that additions to the tax base … are generated by redevelopment activity.”
The property tax base in the city’s redevelopment area has grown enormously since 1980, from $130 million to $2.4 billion. That growth is the reason the city’s RDA takes in so much cash that would otherwise go the county, state or special districts such as the county library system.
But the city’s remarkable growth has been duplicated by its neighbor to the South. Since 1986, Gilroy’s property tax roll has increased from $772 million to $5.2 billion. Morgan Hill has grown from $751 million to $5.3 billion. While Morgan Hill’s growth is attributed to the RDA, Gilroy’s is based largely on its retail explosion, the dozens of big box and outlet stores on its eastern edge and an auto mall on the south end of town.
“The approach that Gilroy took would have been almost impossible for us to take,” Sellers said. “They’re geographic location allows them to have development that we can’t have here and the citizens of Morgan Hill have spoken very loudly that they want a different approach.”
Gilroy voters rejected an RDA in 1989. City Administrator Jay Baksa said Gilroy’s lack of an agency has hampered downtown development, but the city does have a balanced budget. And through the aggressive pursuit of grant funding and liberal incentive to developers, Gilroy has begun a major overhaul of its downtown.
“We have found that it’s much more difficult to do some of the things that Morgan Hill has done,” Baksa said. “The RDA brings other people’s money into the game. In Gilroy it’s being done with 100 percent of our general fund. Our incentive program is basically the equivalent of an RDA.”
In 1999, Morgan Hill residents voted to extend the RDA. Since then, the city has built a number of public facilities that, at the moment, cost the city about $1 million a year.
As city leaders contemplate extending the RDA this year, there will not be a similar advisory vote, but several council members have said the next life of the agency will be devoted to economic development and not building facilities. With the RDA at their disposal, they say, they’ll be ready to take on the tough task of resurrecting the city’s problem area.
“Some would say that Albertson’s [at Dunne Avenue and Monterey Road] is currently a blighted area,” Sellers said. “If Albertson’s moves it out it will be a significantly blighted area. Not having the RDA would hamper our ability to do anything in the blighted area.”
Matt King covers Morgan Hill and Santa Clara County for The Times. Reach him at 779-4106 ext. 201 or mk***@*************es.com.
How Does the Morgan Hill Redevelopment Agency Work?
The RDA is a city agency devoted to cleaning up blight and promoting economic development in the city within a designated benefit area. The agency receives 1 percent of the property taxes paid on all the land within the project area, which includes the bulk of city land, and can use the revenue to build public facilities, improve streets and infrastructure and provide business incentives. Twenty percent of the money collected must be used to build affordable housing. The agency collects tax revenue until it reaches a target amount, set when the agency is formed. When the target is hit, the agency can be extended.
The agency brings about $23 million into the city that would otherwise go to the county or state, but it also hurts the city’s budget. None of that $23 million can be used to put cops on the street or even operate the public facilities built with redevelopment revenue. Without the RDA, according to city finance director Jack Dilles, the city’s budget deficit would be slashed from about $1.5 million to $200,000. Also, two recently completed RDA projects, the Aquatics Center and Community and Cultural Center, will lose about $1 million this year, forcing the city to dip into its reserves to balance the budget. The latest RDA project, the Indoor Recreation Center, is projected to lose about $205,000 in its first year.
