City aims to spend $5.5 million on critical projects

City of Gilroy

The Gilroy City Council on Monday decided to spend more than $5 million of city reserves over the next two years to improve city operations and infrastructure.
The approximately $5.5 million would come from the portion of the budget that is set aside for rainy days and be used to upgrade the city’s technology, infrastructure and staffing levels that took a hit during the recession of 2009-2010.
The city’s reserves are at about 45 percent of annual expenditures, more than the 40 percent set in 2010 and re-affirmed in 2016.
For fiscal year 2018, General Fund expenditures are expected to be $51.7 million and for FY 2019, $52.4 million, according to the staff report presented at the city council meeting on June 5.
According to the Government Finance Officers Association, organizations should hold two months operating expenditures or revenues in reserve.
For Gilroy, this amounts to approximately $8.5 million or 16 percent based on a $52 million expenditure budget, according to city staff.
A reserve level of 30 percent in aggregate will provide approximately $16 million in reserves, almost double the amount recommended by the GFOA, according to the city’s staff report for the upcoming council meeting on June 19.
During council discussions on June 12, policymakers agreed it was time to draw down on the reserves to invest in important city functions.
“I think it’s entirely appropriate to draw down on reserves as it is one less dollar used to service our citizens,” said Mayor Roland Velasco. “Reserves are good – no one on this council is saying to go from 40 percent reserves to zero. What the council is saying is let’s be responsible, let’s be prudent, let’s look at the things we need to invest in.”
City departments submitted $28 million worth of requests that was then whittled down during numerous departmental meetings, according to the staff report.
Big ticket items approved to move forward on June 12 at the special council session, include: $2 million for a new Enterprise Resource Planning system – the city has used the same business services program and budgeting software since 1998; $1 million for new Community Development Land Management System software to expedite the permitting and development review process and about $2 million for personnel – the city reduced its workforce by nearly 25 percent in 2008-2009.
There will also be one-time investments in facility upgrades, including to City Hall, the Senior Center, Willey, Gilroy Arts Center and Wheeler Auditorium. 

“In our worst depression ever in 2008-2009, we did not draw on those [reserve] funds,” said Councilwoman Cat Tucker. “If that is the worst thing that has happened and we haven’t drawn on them, I don’t know why it has to be so high. I don’t know why we as a council could not change that so we can free up some of these funds for these one-time spends that our city infrastructure clearly needs, especially the IT infrastructure.  I think we are doing a disservice if we don’t do these one-time spends in the betterment of the community and the city as a whole.”
The city council will vote to adopt a resolution to amend the budget for fiscal years 2017-2018 and 2018-2019 and revise the general fund reserve policy on June 19.
The agenda and packet for the Monday, June 19 city council meeting is here.