City of Morgan Hill Fiscal Years 2020- 2022 Recommended Operating and CIP Budgets

City Manager’s Office 17575 Peak Avenue Morgan Hill, CA 95037 TEL: 408.779.7271 Fax: 408.779.1592 www.morganhilll.ca.gov

DATE: APRIL 17, 2020

Subject: FISCAL YEARS 2020-2022 BUDGET TRANSMITTAL

Dear Honorable Mayor, Councilmembers, City Teammates, and the Community of Morgan Hill,

The Recommended Budget that I am submitting today reflects the ongoing realities of the impact of the COVID-19 pandemic as the City is expecting significant revenue loss. The pandemic’s impact on the global and local economy, coupled with existing unfunded needs and the loss of revenues from the City’s Residential Development Control System (RDCS), has negatively impacted the City’s budgetary outlook in a substantial way, and a lot sooner than originally projected. As a result, requests for decision packages and service enhancements are not included in the recommended biennial budget. In addition, a hiring freeze has been implemented, with the exception of critical vacant Public Safety positions. Furthermore, the Recommended Budget includes deferment of some building maintenance projects, reduced contractual services, and a draw down on the General Liability Insurance Fund to supplement the expected increase in unemployment insurance claims. The City will evaluate the potential cost savings generated by these measures and will initiate a responsible service level reduction recommendation that considers a wide range of opportunities and circumstances and minimizes the impact to filled positions. Staff will continue to monitor and analyze the effects on City finances from the COVID-19 pandemic and will bring to City Council additional proposals and adjustments to the budget to ensure the City’s fiscal sustainability.

The table below summarizes the projected revenue loss by major revenue sources over the three fiscal years from the current year FY2019-20 to FY2021-22:

Revenue Type

FY2019-20

FY2020-21

FY2021-22

TOTAL

Property Tax

$0.1M $1.5M $0.9M $0.9M $1.2M $4.6M

$0.1M $1.8M $0.8M $0.6M $1.3M $4.6M

$0.6M $1.5M $0.4M $0.2M $0.3M $3.0M

$0.8M $4.8M $2.1M $1.7M $2.8M

Sales Tax

Recreation Services

Hotel Tax

Fund 206 Revenue

TOTAL

$12.2M

The total Recommended Budget is $162.3 million in FY 2020-21 and $144.3 million in FY 2021-22. FY 2020-21 budget includes $46.2 million for General Fund expenditures, $48.9 million for Capital Improvement Program (CIP), and $67.2 million for non-General Fund expenditures. For FY 2021-22, the Recommended Budget includes $47.7 million for General Fund expenditures, $28.6 million for CIP, and $68.0 million for non-General Fund expenditures.

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