Gilroy
– A slowing economy and demand for new spending has put Gilroy
in jeopardy of gobbling up nearly $27 million in reserve funds
within five years.
Gilroy – A slowing economy and demand for new spending has put Gilroy in jeopardy of gobbling up nearly $27 million in reserve funds within five years.
Nothing will happen overnight, according to city officials, who say the fate of millions of dollars in “safety net” funds will depend on both the economy and how conservative an approach the city takes on new spending.
But preliminary analysis of Gilroy’s roughly $45 million annual operating budget show the city has already entered a phase of multimillion dollar hits to its reserve funds. In the current fiscal year, officials expect to use up nearly $3 million in reserves; next year, that figure could reach nearly $4.8 million. By 2012, the city expects reserves to stand between $2.5 million and $13 million.
The figures were presented to Gilroy’s seven-member city council during a workshop Monday night, two weeks after council approved $200,000-plus in raises for top managers in City Hall.
“This is a habit that for me is completely unacceptable,” said City Councilman Craig Gartman, the lone no vote on the raises earlier this month. “We are spending today what has taken previous councils many years to build up as a savings account. We’re throwing it all out.”
Gartman advocates a “starting position” of a balanced budget, and to get there he says “everything is on the table” for cuts. That includes rolling back the raises granted to the city’s roughly 40 nonunion managers. To do so, a councilman who voted in favor of the raises would have to request reconsideration of the matter.
Councilman Dion Bracco did not go so far as saying he would roll back the raises, but he did say the latest budget figures would have made “a big difference” in how he voted on the proposal.
“I think now is the time to make the hard decisions and start cutting things out,” Bracco said. “All the things on our want list, we’re going to have to take them off. All the new employees, the new permit center, and stuff like that will just have to wait. And we’ve got to look at bringing in more revenue.”
Sales tax from big-box stores and the outlets buoyed Gilroy through the tech bust of the early 2000s. Yet the $11 million-plus in taxes from Gilroy’s rapidly expanding commercial hub – which accounts for about a third of Gilroy’s revenues – is failing to keep the city’s revenues ahead of expenses.
Even if Gilroy refrained from adding more than a dozen new positions requested by various departments and scaled back spending on programs such as the Visitors Bureau, the city would still be forced to take $3.8 million from its reserves next year, according to budget estimates from City Administrator Jay Baksa.
Baksa is working with department heads on a “gap closure” program to further reduce the need for spending. Measures such as leaving positions of retirees vacant and trimming expense budgets helped the city scale back its spending by $1 million, Baksa said.
“We are going to have a plan that is going to address the gap closure,” Baksa said. “You’ve got a delicate balance. You don’t want to do anything so draconian that it affects things into the future … At the same time, you do have an identified problem and we need to get ready for it and act early enough that it doesn’t pose really dramatic problems in the future.”
Efforts to close the gap could get stymied by forces outside of the city’s control. Federal officials are now working on regulations that would spell the loss of more than $1 million in yearly taxes Gilroy receives from fees on cell phone usage. Meanwhile, Baksa has warned city councilmen of a slowdown in revenues from Gilroy’s thriving commercial centers east of U.S. 101.
But before they consider slashing through the city budget, Councilmen Russ Valiquette and Roland Velasco will wait to hear what savings they can expect from various departments in City Hall. Baksa plans to report back to council next Wednesday.
“There are certain needs in the community and by deficit spending we’re trying to meet those needs,” Velasco said. “There’s nothing wrong with that as long as we have a plan to limit the amount we go into our reserves to fund a position or program that City Hall provides to the community. Also, we need to figure out ways to generate new revenues.
