Rosy budget set for Council stamp

The City Council breezed through Monday's study session.

When Gilroy City Councilman Dion Bracco first looked at his copy
of the city’s new draft budget, he said had a feeling the Council’s
upcoming study sessions would be brief. Full article
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When Gilroy City Councilman Dion Bracco first looked at his copy of the city’s new draft budget, he said had a feeling the Council’s upcoming study sessions would be brief.

“It’s not like the old days when the budget was 3 inches thick,” he said. “There’s not a whole lot there. When I saw it originally, I thought it shouldn’t take that long.”

It didn’t.

Council members breezed through Monday’s study session in 1 hour and 56 minutes – quicker than most Council meetings – and canceled a second budget hearing Wednesday because they didn’t feel it was needed.

The meeting wasn’t without discussion with some turning into vehement words from Mayor Al Pinheiro and Councilman Peter Arellano.

The disagreement centered on the Council voting 6-1 to add amendments into the proposed 264-page budget to beef up funding to the Gilroy Visitors Bureau and Gilroy Economic Development Corporation.

“I think it’s a shame,” Arellano said Monday night. “If we have extra money, then we should step up and try to cover some of the programs that the schools cannot provide. And that’s where I think our money should go.”

“It’s not something that I’d be willing to support,” Arellano said of extra funding for the EDC and visitors bureau.

Pinheiro responded harshly to Arellano’s comments, accusing him of not having read the budget.

“For as long as you’ve been here, I thought you would understand the budget a lot better than you seem to,” Pinheiro told Arellano.

He added, “If you read this budget, you wouldn’t be talking like that.”

Despite the study session’s brevity, the Council had time to add $334,000 in salary and benefits during the next two years for a development center manager – a position vacant for the past two years. The position would focus on new development, redevelopment, permitting processes and other economic development aspects, according to City Administrator Tom Haglund.

The amended budget will also include more than $1 million in funding during the next two years to the EDC, visitors bureau and Gilroy Downtown Business Association.

Bracco on Tuesday said he was willing to give the organizations more funding, but with a caveat.

“I’m willing to give it to them this year, but there has to be some performance indicators,” he said. “There has to be some cold hard facts of what you did with that money, or it dries up.”

The Council can approve the budget – which would end furloughs for city workers and assume jumps in revenue from sales taxes, development fees and traffic fines – as early as Monday night. The city’s current fiscal year ends June 30.

The additions would diminish the general fund’s operating cushion during the next fiscal year from $379,273 to $77,226. The following year, the balance would fall from $247,817 to $13,264.

With the barrier so thin, Bracco said he was wary of spending additional city funds based solely on projections.

“Just because you got some good reports, doesn’t mean you start spending money again,” Bracco said. “I’m a little concerned that six months from now, readjustments might have to be made and that money will be gone.”

Pinheiro said he had been meeting this week with Haglund to discuss ways the city could pump up that cushion.

When asked what his suggestions were to increase the cushion, Pinherio said, “Wait until we get to the meeting Monday.”

Even if the general fund cushion doesn’t increase, Councilman Peter Leroe-Muñoz said he still would be in favor of the budget amendments.

“We need to make sure we put our best foot forward when trying to draw more businesses or more visitors,” he said. “I think that’s a smart investment on our part when we have the funds to do that. As long as we’re balanced, then I think it’s a good investment on our part.”

The city will absorb a $1.2 million dent by eliminating furloughs, but the new budget projects almost a 16 percent increase in sales tax revenue compared with the previous year’s prediction.

The city originally budgeted for $10.9 million in sales taxes for the current fiscal year, but based on recent receipts and updated projections, the city has altered its current estimates to approximately $12.4 million for this year, and $12.6 million for the upcoming year, according to Finance Director Christina Turner.

But Bracco said he was afraid the city might have to dip into its projected $20 million reserves because “what if the forecast they put in front of us is wrong?”

“If times are good, and we have the money left over, then go ahead and spend it,” Bracco said hypothetically. “Once you spend it, it’s gone. If the revenues don’t work out, you still have already spent your money.”

Turner said the city works with MuniServices, a company that assists cities in managing their revenue bases, to validate those projections based on information from the California State Board of Equalization.

Haglund said budget talks were brisk because the new budget was “really an extension of the current financial structure that we live in right now” and won’t usher in huge changes. Those changes came two years ago, Haglund said, when the city eliminated 48 full-time and part-time positions, along with 23 vacant positions, in an attempt to eliminate a $4.7 million deficit.

“We took bold, aggressive, appropriate action in 2008 to address the city’s financial problems that were emerging then and were greatly exacerbated by the collapse of the stock market,” Haglund said. “We addressed it right up front. We didn’t hide from it, we didn’t kick the can down the road, we didn’t shrink away.”

While the city’s general fund is expected to be balanced for the next two years, total anticipated expenditures would outweigh projected revenues approximately $112 million to $91 million for the next fiscal year because of capital improvements such as library construction and street and sidewalk repair, though total expenditures are expected to fall to roughly $85.5 million by fiscal year 2012-13, with revenues staying about the same, Turner said.

“It has to be done that way sometimes,” said Councilman Bob Dillon. “You go into debt to get what you want.”

Councilman Perry Woodward agreed with Pinheiro, saying the proposed operating surplus would help cover the additional funding. Pinheiro and Woodward have said they’d be willing to take funds from the reserves to cover necessary expenses.

“I wanted a budget that was going to try and get us out there and say, ‘Hey, come to Gilroy, and we’re open for business,’ ” Pinheiro said Tuesday. “All others are kind of shrinking. We’re in business, holding a pretty healthy reserve.”

Business, tourism arms hope to flex monetary muscle

City of Gilroy Budget

Covers fiscal years 2011-12 and


– Budget packet 264 pages long

– Fiscal year 2011-12 expenditures: $112,227,594 *

– Fiscal year 2011-12 revenues: $91,215,488

– Fiscal year 2012-13 expenditures: $85,575,931

– Fiscal year 2012-13 revenues: $91,024,908

– General fund balance (Fiscal year 2011-12): $77,226

– General fund balance (Fiscal year 2012-13): $13,264

* Includes mandatory and grant-funded capital expenditures, including $16.6M for new library construction

Source: City of Gilroy

Finance Department

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