Gilroy and Morgan Hill Budget Facts

Written By Marie Blankley , CPA

The purpose of this study is not to propose changes or to make judgements on the figures or to influence policy but , rather , to report the actual numbers as they compare between the two cities for all governmental funds for the same period on a per person basis . Population figures from the official census estimates for 2017 ( Gilroy 55,936 ; Morgan Hill 44,145 ) were used . Actual population figures will not be available until after the 2020 Census .

While the intent was to make comparisons within the general fund alone , that was not possible . Because there were not the same definitions and accounting for both cities , differences in accounting allocations made the comparisons difficult . Instead , all governmental funds were used , and comparisons of broad categories were used to render an apples-to-apples comparison . Looking at the big picture , the results were surprising . On a per capita basis , the Cities of Gilroy and Morgan Hill have about the same amount of revenue , but Gilroy has more expenses .

REVENUE

The results were unexpected . Although Gilroy has significantly more sales tax revenue than Morgan Hill , and Gilroy has a utility tax revenue that Morgan Hill doesn ’ t have at all , the total governmental fund revenue for both cities on a per capita basis is about the same . How can that be ? What about property tax revenue , transient occupancy tax revenue , licenses and permits revenue ? Surely there ’ s something that gives Morgan Hill a revenue edge , isn ’ t there ? Not exactly an edge but , rather , something that makes up for where Gilroy ’ s sales tax and utility tax far exceed Morgan Hill ’ s . Specifically , “ Charges for Services ,” the revenue each city collects to recover the costs of the services it provides .

Where Gilroy has greater revenue in certain categories , Morgan Hill makes up for it in charges for services , primarily in recreation . Specifically , the City of Morgan Hill recovers about 93 % ($ 6.8 million ) of the $ 7.3 million they spend on recreational services ($ 8 million for the 2017-18 fiscal year ). Through the Centennial Recreation Center , the Sport ’ s Park and the Aquatic Center , the City of Morgan Hill provides a much more extensive recreational programing . The City of Gilroy , however , recovers only 33 % ($ 1.1 million ) of the $ 3.1 million they spend on recreational programs ($ 3.4 million for the 2017-18 fiscal year ). The bottom line is that each city has differing amounts of revenue in individual categories , but when viewed in total per capita , they show a level playing field when it comes to revenue .

EXPENSES

Two things stand out . Gilroy spends more on public safety than Morgan Hill , and Gilroy has significantly more debt , attributable almost entirely to the new police station and the library . With regard to public safety , it should come as no surprise that Gilroy spends more in total because Gilroy has a larger population and , therefore , more public safety personnel , including their own fire department . For police , because Morgan Hill pays their police officers more than Gilroy does , when costs are viewed per capita Morgan Hill ’ s costs should be higher . They are not . In fact , for the fiscal year ended June 30 , 2017 , Gilroy spent 12 % more per capita than Morgan Hill on police , and 40 % more per capita on fire .

For sworn officers , Gilroy has 1 per 860 people , as compared to 1 per 1,130 people for Morgan Hill . For non-sworn officers , Gilroy has 1 per 1,512 people , as compared to 1 per 2,006 people for Morgan Hill . With respect to fire personnel , Morgan Hill uses the county , CalFire , for fire service while Gilroy has its own fire department .

One reason for the difference in debt is that the City of Morgan Hill was able to build things like the Community Cultural Center , the Centennial Recreation Center , the Sport ’ s Park and the Aquatic Center with RDA ( Redevelopment Agency ) monies . Gilroy did not pass an RDA and instead uses general fund monies to service the debt on the new police station , and revenue from a parcel tax to service the debt on the library . The RDA no longer exists , and now Morgan Hill is faced with the reality of staffing and maintaining these facilities .

ISSUES THESE NUMBERS DO NOT ADDRESS

Both Gilroy and Morgan Hill , like most cities , are unable to budget for many costs that they know will need to be paid eventually . Unbudgeted costs are also known as unfunded liabilities . No matter

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GILROY • MORGAN HILL • SAN MARTIN AUGUST / SEPTEMBER 2018 gmhtoday . com