New City Budget Will Cautiously Follow ‘Slow Growth’

As planners wrap up the first draft of Gilroy’s next city budget this week, one thing is clear: The recession lingers, and slow economic growth has encouraged a cautious approach to the next two years.

“This is really a status quo budget,” said City Administrator Tom Haglund.

Details of the proposal are still under development, with an initial draft likely to go before the Gilroy City Council on Monday. It will be a road map projecting what the city can afford—and expect to earn—in the coming fiscal years. 

Revenue has been up, including a year’s worth of sales tax income that beat the state’s average. However, much of the city’s improved standing is attributed to the major cuts made over the last few years.

It was in fall 2008 that the city began making drastic budget reductions to weather the recession, ultimately including laying off 48 employees, imposing furlough days and postponing several projects, said Haglund.

Many of those cuts are expected to remain intact, with the slow upturn of the economy unlikely to outpace reductions like the $13 million in cuts to balance the last budget.

“We’ve had to learn to do more with less,” said the city administrator.

This is the second budget after the city adopted a two-year budget cycle, a move meant to encourage long-term planning and reduce the work needed to revise the budget after the first year, Haglund said.

Each city department—from planning to police—has its own budget projection. It’s up to Gilroy’s Finance Department to combine those proposals into a broad fiscal plan.

“By the time this thing is put to bed, we’ve been working solid on it for six months,” the city administrator said.

Those department plans are built from scratch, an approach known as a “zero-based budget” said city Finance Director Christina Turner.

“They build up their budget, line by line,” she said.

Much of the difficulty in budget planning comes from projecting the city’s earnings over the next two years. A combination of taxes and development fees, the income can change with fluctuating market conditions.

Gilroy could experience significant growth in the next two years, specifically in housing, Haglund said. Several neighborhood developments are expected to be building homes during the period, and the related developer fees help fund the city’s improvements to its infrastructure.

“I think Gilroy is at ground zero for the recovery of the housing market,” Haglund said, citing the lower cost of living and rise in the regional economy.

Despite the expected growth, income from new houses is “a fraction of what it used to be” prior to the recession, he said.

Other long-term factors to consider include the fluctuating cost of utilities and the overarching goals of the city’s general and specific plans, said Turner.

This budget could be seen as a bridge to a period when growth in city staff and services might begin again, Haglund said.

The Gilroy City Council will attend two budget study sessions on May 9 and 11. A vote will approve the final budget later that month, with it taking effect when the new fiscal year begins July 1.