No time like the present to begin addressing local budget troubles

There’s a fundamental economic reality that seems to be only
slowly seeping in to the public sector consciousness. And it’s of
grave concern locally.
Here’s an example: while new housing starts are at a virtual
standstill in Gilroy, the Gilroy Unified School District Board
raises square footage fees for home developers, presumably in
anticipation of future building.
1. Making the assumption that things will get back to ‘normal’ is trouble

There’s a fundamental economic reality that seems to be only slowly seeping in to the public sector consciousness. And it’s of grave concern locally.

Here’s an example: while new housing starts are at a virtual standstill in Gilroy, the Gilroy Unified School District Board raises square footage fees for home developers, presumably in anticipation of future building.

It’s understandable, but only if the assumption is made that “things will get back to normal” pretty soon. “Normal” means plenty of mortgage money, buyers aplenty and rising home prices that beg for investment.

But if many predictions are right, that dynamic may be lost and gone for a very long time. Most assuredly, developers aren’t going to build projects that don’t pencil out and banks aren’t going to lend risky money “like the old days.”

2. Government’s knee-jerk action to raise fees and taxes won’t work

So, other than the same old government plan – raising fees – what’s the back-up plan, the alternative? If there is one, it surely hasn’t been publicly articulated.

School fees aren’t the only – or even the main problem – in this arena. There are city fees, for parks for example, also based on the cost of land, which are sky high and in need of major adjustment. Land prices, as everyone knows who is breathing in California, have plummeted and the future is uncertain.

Simply put, government cannot continue to do business based on the past or based on a near miraculous economic recovery scenario.

3. As 2010 unfolds, the city’s unfunded liabilities will likely be an eye-opener

Early in 2010, the Gilroy City Council is scheduled to receive an unfunded liability report that may very well be a real eye opener. Retirement related costs, for example, continue to grow for the city as CalPERS investments have lost billions and continue to struggle. The city’s mounting retirement obligations coupled with union contracts and demands, likely state government takeaways and retracting revenues will likely create further strain on the city’s budget.

Perhaps it’s naive, but if the city and the school district could sit down and conduct negotiations with employee unions resulting in substantial cost savings that would go a long way toward saving jobs and alleviate potentially acrimonious negotiations.

It’s going to take some innovative thinking and plenty of give and take to keep our community in good fiscal shape. Better to start the task now.

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