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

Water Operations (continued)

 Flush all dead-end mains in the water distribution system (annually) (Maintaining Infrastructure)  Exercise 2,000 system valves in the water distribution system (annually) (Maintaining Infrastructure)  Test 800 large water meters (greater than 1½ inches) to ensure accuracy for the largest water customers (Maintaining Infrastructure; Fiscal Sustainability)  Replace 1,345 20 year + old water meters though the meter aging program (Maintaining Infrastructure) Financial Comments In 2016, the City completed a Water Rate study and in 2017 updated its Water System Master Plan which outlined capital improvements necessary to maintain the City’s water system. Water rates are increased annually to support increased costs for Water Operations and to support the planned capital improvements within the Master Plan. Fleet replacement costs in the Water Operations Division have been comprehensively updated resulting in an increase to the annual contribution to the Vehicle Replacement Fund. Additionally, Valley Water has increased the groundwater extraction fees that it charges the City of Morgan Hill on an annual basis. When the 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 though corresponding rate increases. The last of the scheduled increases from the 2016 rate study was implemented on January 1, 2020. No comprehensive rate study is planned for these biennial years, however, staff will conduct internal analysis and adjust existing rates with the consumer price index, as legally allowed, to keep up with the increasing cost of providing the service.

274 ENGINEERING AND UTILITIES