Adopted Budget (Final Document)

Water Operations (continued) FY 2022-23 and 2023-24 Activity Goals  Complete pipeline capacity improvements at various locations at 5 locations within the City (Maintaining and Enhancing Infrastructure)  Replace Woodland 0.03 MG Tank with 0.25 MG Tank (Maintaining and Enhancing Infrastructure)  Complete groundwater well capacity improvements on Butterfield between Railroad Ave. and Fisher Ave (Maintaining and Enhancing Infrastructure)  Identify sites for and commence construction on two new well sites within the Llagas Sub basin (Maintaining and Enhancing Infrastructure)  Complete pump station capacity improvements at valve site on Condit Rd (Maintaining and Enhancing Infrastructure)  Commence annual renewal and replacement of known and recommended pipelines citywide (Maintaining and Enhancing Infrastructure)  Complete the generator replacement project for Jackson Oaks Booster Station (Protecting the Environment)  Complete reservoirs condition improvements at Jackson, Encino, Glen Ayre, El Toro and Edmundson tanks (Maintaining and Enhancing Infrastructure)  Flush all dead-end mains in the water distribution system (annually) (Maintaining and Enhancing Infrastructure)  Continue participation with Valley Water and the City of Gilroy in working towards recycled water opportunities for the City of Morgan Hill (Advancing Regional Initiatives; Maintaining and Enhancing Infrastructure; Protecting the Environment and Preserving Open Space and Agricultural Land)  Exercise 1,200 system valves in the water distribution system (annually) (Maintaining and Enhancing Infrastructure)  Respond to and repair water breaks throughout the water system (Maintaining and Enhancing Infrastructure) Financial Comments In 2021, the City updated its Water System Master Plan which outlined capital improvements necessary to maintain the City’s water system. In Spring of 2022, the City completed a Water Rate Study, which will guide water rates over the next several years. Water rates have been heavily impacted by several factors, including utility cost increases associated with groundwater pumping, very high inflationary costs for both materials and services, and reduced water sales due to drought conditions. Water rates are increased annually to support increased costs for Water Operations and to support the planned capital improvements within the Master Plan. Additionally, Valley Water has increased the groundwater extraction fees that it charges the City of Morgan Hill on an annual basis. When Valley Water fee increases exceed what the City has planned for within its fee schedule, the City passes these increased costs on to its customers through corresponding rate increases. Included in this budget are salary adjustments and/or reclassifications of certain positions to address retention and recruitment issues that have been impacting the City.

214 PUBLIC SERVICES