After elected officials authorized him to dip into reserves four
out of the last five budget cycles, City Manager Ed Tewes said he’s
ready to deliver a proposed budget that includes a surplus of
$550,000 for fiscal year 2007-08.
Morgan Hill – After elected officials authorized him to dip into reserves four out of the last five budget cycles, City Manager Ed Tewes said he’s ready to deliver a proposed budget that includes a surplus of $550,000 for fiscal year 2007-08.
But as a result, Tewes said the city would be left with a “lean” government with little room to grow or even keep up with ordinary tasks like repairing traffic signals and cleaning road gutters.
On May 16, Tewes will present his $24 million budget, two days before the Morgan Hill City Council holds its annual budget workshop. The council aims to adopt a final budget by the start of the fiscal year July 1.
This year, Tewes hopes to preserve the city’s 180 jobs. He’s confident he can meet the goal – based on financial projections in January – but he also warns the result will be a city operating at maximum efficiency with little fat left to trim.
“We are running as efficiently as we can, given how lean we are,” Tewes said in an interview Thursday.
To illustrate his point, he noted all of the city’s labor negotiations, job-recruitment efforts, performance evaluations and health benefits are managed by a tiny personnel department with only three employees.
Additionally, last year the city trimmed its street operations budget – which pays for traffic signals, streetlights, cleaning out storm drains and other house-keeping details – by $200,000 to $1.7 million, a 10-percent reduction. This year, another $200,000 reduction is planned.
Meanwhile, costs of providing services are rising. The city’s contract with the Santa Clara County Fire Department, for instance, will jump $300,000 from $4.6 million to $4.9 million in the upcoming budget – a increase of 6.7 percent.
Revenues are rising, too, but only enough to keep things stable. Most of the money in the general fund, which covers salaries, services, supplies, capital expenses and other operational costs, comes from tax base that’s projected to grow.
Local property taxes – which account for about $5.5 million in general-fund dollars this year – will jump $1.1 million next year to about $6.6 million, an increase of 20 percent. The lion’s share of that increase will result from the smaller Redevelopment Agency project area the council adopted last November, which will return about $800,000 in yearly property taxes to the general fund.
Sales taxes, Morgan Hill’s largest general-fund revenue source this year at roughly $6.2 million, are also expected to grow when Target and other big stores open on Cochrane Road.
On a positive note, the local economy continues to rebound. The arrival of businesses such as 24-7 Workspace, an up-and-coming furniture retailer that relies on a Web-based sales platform, are contributing to higher sales taxes. There also appears to be an increase in business-to-business sales in Morgan Hill, indicating companies are spending money – a healthy economic sign – and generating local sales-tax dollars.
While the city won’t offer many new amenities to residents next year, its recreational services will expand with the Outdoor Sports Center under construction on Condit Road scheduled to open in October. But total recreational costs will remain about the same – $1.6 million – with the council instructing Tewes not to exceed that amount in the upcoming budget.
One new “free” perk for residents that won’t cost the city a dime will be the new library opening in July on Peak Avenue. Because it’s part of the Santa Clara County library system, the facility won’t require city funds to run.
The picture Tewes paints brings to mind the heated debate that erupted Wednesday night between Morgan Hill Mayor Ed Tewes and City Councilwoman Marby Lee on whether to float a tax to hire more police officers. The city is growing and sales and property taxes alone – the city’s two major revenue streams – won’t grow quickly enough to expand city services.
A solution could be a voter-approved utility-users tax, which seven of Santa Clara County’s 15 cities and towns, including Gilroy, rely on as funding sources. Whether that’s politically feasible in Morgan Hill remains to be seen.
New data from the state confirm Morgan Hill is the fastest growing city in Santa Clara County with 38,4128 residents in January – a 3.1-percent increase over last year’s population of 37,256.
According to the city, Morgan Hill ranked 12th among cities in the county last year in terms of per-capita revenues from property taxes, sales taxes, transit occupancy taxes, business licensing and utility taxes.
HIGHLIGHTS FROM CITY’S PROJECTED FISCAL YEAR 2007-08 BUDGET
- General fund will grow from $22 million to $24 million
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Budget will include surplus of $550,000
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Local property taxes are projected to jump $1.1 million next year to about $6.6 million, an increase of 20 percent.
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Sales taxes, the largest general-fund revenue source this year at $6.2 million, are also expected to grow when big stores open on Cochrane Road.
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City will not ax any of its 180 jobs.
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Recreational services will be capped at $1.6 million.
Morgan Hill Statistics
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Population: 38,418
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City employees: 180
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Per capita tax-base: $346
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Tax-base compared to neighboring cities: fourth lowest among Santa Clara County’s 15 cities.
