FY 2018-19 and 2019-20 Adopted Operating and CIP Budget

infrastructure maintenance. The $3.6 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 72, 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. As previously noted above, it is being recommended that the General Fund contribution for street improvement projects be increased from $250,000 to $1,000,000 for FY 19-20, bringing the total estimated investment in the City’s pavement rehabilitation and safety program in the Biennial Budget to $8.1 million, including gas tax funds, Santa Clara Valley Transportation Authority (VTA) Measure B, Senate Bill 1 (SB 1), and grant funding. SB 1, also known as the Road Repair and Accountability Act of 2017, which the California Legislature and Governor Brown approved in 2017 increased several taxes and fees to raise over $5 billion annually over ten years in new transportation revenues and prioritizes funding towards maintenance, rehabilitation and safety improvements on state highways, local streets and roads, and bridges to improve the state’s trade corridors, transit, and active transportation facilities. The City of Morgan Hill is estimated to receive $12 million over the ten-year period. This revenue, which is a significant source of funding for the City’s planned street improvement projects, has been incorporated into the City’s FY 18-24 CIP. However, there is a proposed ballot measure aimed for the November 2018 ballot that would repeal the new transportation revenues provided by SB 1 and make it more difficult to increase funding for state and local transportation improvements in the future. To address the SB 1 repeal initiative, the City Council adopted a resolution on April 18, 2018, joining the coalition of local governments, business, labor, and transportation, and other organizations throughout the State opposing the November 2018 measure. In addition, the Council, via its adopted resolution, supported the June 2018 ballot measure, Proposition 69, the Transportation Taxes and Fees Lockbox and Appropriations Limit Exemption Amendment, the constitutional amendment preventing the legislature from diverting transportation funds for non- transportation purposes.

RECOMMENDED BUDGET MESSAGE 25