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

Recreation Revenue Recreation services revenue, the City’s third largest revenue source of the general fund, is also expected to be one of the hardest hit categories due to the closure of facilities during the SIP. Staff continues to explore steps to lessen the impacts to the City’s fiscal sustainability in general and recreation services, in particular, including the implementation of virtual recreation programs and classes. Hopefully, this will soften the impacts to members with the intent of decreasing the number of cancellations. In the current fiscal year, recreation services revenue is expected to end the year about $0.9 million short of the budget. The estimated impacts for FY 2020-21 and FY 2021-22 are $0.8 million and $0.4 million, respectively. The cumulative impact for the three fiscal years is approximately $2.1 million. Recreation services revenue for FY 2020-21 and FY 2021-22 is $7.0 million and $7.7 million, respectively. Transient Occupancy Tax As for City’s Transient Occupancy Tax (TOT), or hotel tax, based on the current occupancy estimates and the projection of occupancy rates of 20 percent or below, for months to come, the City’s hotel tax collection will be drastically reduced. It is estimated that current year hotel tax revenue will come in at about $2.2 million versus the budgeted $3.1 million. The estimates for FY 2020-21 and FY 2021-22 are $2.5 million and $3.3 million, respectively versus our prior estimates of $3.1 million and $3.5 million, respectively. The cumulative impact for the three fiscal years is approximately $1.7 million. The current TOT projections include the existing new hotel under construction, the Granada, to come online in FY 2021-22.

RECOMMENDED BUDGET MESSAGE 15