As property values plummet across California, Santa Clara County is expecting an almost-unheard-of drop in its property tax rolls — about 2 percent.
Gilroy should be so lucky. The Garlic Capital of the World is facing a plunge of 11 percent — which represents a cut of about $1 million in tax revenue.
While many other cities in the county are now only beginning to panic about the sudden drop in revenue, the South County city has been struggling to keep from drowning for a year now.
As sales tax revenue plunged and building fees dried up last fall, the city council voted to lay off a sixth of its workforce — the equivalent of 48 full-time employees, including six full-time positions in both the police and fire departments.
Residents are being told to report many crimes online instead of in person or on the phone. The fire department went from three engine companies to two.
“It’s a bloodbath down there,” said county Assessor Larry Stone.
The pain has filtered down to Monterey Street, the downtown’s main drag in this city of 52,000.
At Sue’s Coffee Roasting Company, owner Sue Shalit has noticed a smaller morning crowd, in part because there are fewer city employees grabbing a morning Joe.
“Some people just don’t come that early any more. Now, unfortunately, they’re getting to sleep in,” said Shalit, who misses not only their business but the people themselves.
One of the toughest cuts for the police department was losing its community services officer who specialized in fighting graffiti. She not only photographed the tags so investigators could identify the vandals, she also cleaned up the graffiti herself.
“Now we’re seeing more graffiti,” said Sgt. Jim Gillio, “and it’s staying up longer.”
The economy took a nasty turn just when downtown Gilroy was making a comeback. The city had just spent millions on new sidewalks and street trees. Dozens of condos were being built on Monterey Street.
Now, many buildings sit empty, in part because laws require vacant properties with unreinforced masonry to be retrofitted before new tenants can move in. Plans were afoot to fix the buildings, but now owners can’t get loans or are reluctant to spend money until the economy picks up.
“It’s been a mess, even before we learned about the million dollar loss in property tax,” Gilroy Mayor Al Pinheiro said.
When Gilroy officials were initially preparing their current budget, they calculated the city would end the fiscal year with a $10 million deficit — representing about 20 percent of the budget. The city immediately froze 23 positions; eliminated all non-mandatory training and travel; and delayed projects such as remodeling city hall.
Over the next several months, however, the city continued to bleed red ink as the economy tanked, prompting the layoffs.
Like Morgan Hill and parts of San Jose, Gilroy has a lot of newer homes. Those were generally the first to drop in value as builders slashed prices. As mortgage values began to exceed home values, foreclosure rates skyrocketed.
“We have homes worth half as much as a couple of years ago,” said Gilroy City Administrator Tom Haglund.
The poster children for this frightening trend were fast-growing Central Valley cities such as Manteca and Tracy. But in many ways, Haglund said, “we’re the Central Valley of Santa Clara County.”
Indeed, in “feel” and in politics, the majority-Latino, relatively conservative city is more closely aligned with the agricultural towns to the south and east than with Silicon Valley.
“Gilroy is the only city in Santa Clara County that doesn’t touch another city,” said developer Gary Walton, a Gilroy resident who has an office downtown.
The isolation may make the place distinctive and quaint. But it also presents problems.
“I do worry about Gilroy, because we’re kind of an island,” Fire Chief Dale Foster said.
With a smaller fire department, he said, Gilroy will sometimes have to depend on far-flung departments for help.
“Luckily, we haven’t had that many big fires,” Foster said. “But the potential is also there for a train wreck or a big traffic accident on 101.”
To ease its pain, the city has been dipping into reserves — $4.7 million alone in the last fiscal year. But the city council decided it can no longer drain the rainy-day fund. In the next few weeks, it “will put together a truly balanced budget for the next fiscal year,” which will mean even deeper cuts, Mayor Pinheiro said.
That likely means a lot fewer employees, or a lot of employees making less. The city has asked its unions to reduce wages and benefits to save jobs.
Amid the gloom, there are signs Gilroy voters are willing to share the pain.
Despite the city’s reputation for turning down tax measures, voters in November passed a $37 million bond measure to build a new library. “Nobody could believe it,” said Lani Yoshimura, the longtime community librarian. The same day, voters in the Gilroy Unified School District passed a $150 million bond measure for school improvements.
The city recently got great ratings for the new library bonds, largely because the bond-rating agencies thought city officials had done a good job wielding the budgetary ax before things got worse.
City officials also say they’ve seen a spike in volunteerism. Residents have volunteered to help police patrol the streets and staff the Gilroy Museum, which lost all its paid employees to budget cuts.
Mayor Pinheiro said he was amazed when he tried to find residents willing to organize the town’s Memorial Day parade. He sent out a mass e-mail and quickly came up with a committee of nine to make sure the town didn’t cancel its popular parade.
Perhaps, developer Walton said, the do-it-yourself spirit can catch on downtown. “Maybe,” he said, “it’s time for us to start cleaning our own sidewalks.”