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

Public Infrastructure In Morgan Hill, consistent with other California cities, there is a need for additional public investment in streets, parks and landscape, and public building infrastructure. The City recognizes that ongoing revenue is insufficient to fund these vital community assets at a sustainable level. The condition of the publicly owned infrastructure (especially streets) is deteriorating and the deferred

maintenance backlog is increasing. The expense to repair these assets grows as each year passes so it is fiscally responsible to address this issue now. As reported in the Infrastructure Update in April 2019, it was determined that the City has an annual funding gap of approximately $3.4 million for its streets, parks, and public facilities infrastructure maintenance. The $3.4 million does not include the future anticipated funding needs related to park maintenance and storm water. Nor does it account for actions necessary to deliver the future capital project needs related to the Water and Wastewater Funds.

Street Improvements The City uses the industry standard Pavement Condition Index (PCI) to evaluate street condition and has a goal to have the PCI of 70+. Though the City’s current PCI is now at 73, which is considered “good”. The forecast level of funding will result in PCI decline. The Infrastructure Update identified a $2.3 million annual shortfall in streets and roads maintenance funding to maintain the current PCI level in the low 70. The General Fund had previously contributed $1,000,000 annually, but due to fiscal constraints no longer can do so. Staff is only recommending a General Fund contribution of $250,000 per year in the recommended biennial budget. In addition to the $250,000 from the General Fund, funding for the pavement rehabilitation program includes new revenues from VTA’s Measure B, State’s SB1, and OBAGII Grant Funds.

RECOMMENDED BUDGET MESSAGE 21