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

Major Revenue Assumptions

General Fund (010) FY 18-19 and 19-20 revenues for the General Fund, including transfers in, are estimated to be $40.1 million and $41.6 million, respectively. General Fund revenues continue the upward trajectory as the City has recovered from the economic downturn. In general, the FY 18-19 and 19-20 Budget estimates that most revenues will experience growth over the next five years. Sales Tax Sales tax is imposed on retailers for selling tangible personal property in California. The use tax is imposed on the user of a product purchased out-of-state and delivered for use in California. The sales and use tax rate for Santa Clara County is 9.00 percent. Sales tax, at $9.9 million or 25 percent of the total General Fund revenue projected for FY 18-19, is the second largest revenue source for the City’s general fund. This revenue source is anticipated to increase by $0.6 million to $10.5 million in FY 18-19. Subsequent forecast years assume steady annual growth.

Property Tax Property tax is imposed on real property (land and permanently attached improvements such as buildings) and tangible personal property (movable property) located within the State, based on the property value rather than on a fixed amount or benefit. Properties are distinguished as secured and unsecured (property for which the value of the lien is not sufficient to assure payment of the tax). Article XIIIA of the State Constitution limits the real property tax rate to 1 percent of the property’s assessed value plus rates imposed to fund indebtedness approved by the voters. Morgan Hill’s share of the 1 percent is equivalent to 10 cents for every $1.00 collected from property taxes. With the passage of Proposition 13 in 1978, assessed valuations are limited to a 2 percent increase each year. Property tax is projected at $11.9 million or 30 percent of the total General Fund revenues for FY 18-19. It is anticipated to grow to $12.0 million in FY 19-20. Included in the total projected property tax revenue are the secured and unsecured taxes, RPTTF Residual Distribution, VLF In-Lieu of Property Tax, Former RDA Pass Through, and Supplemental Property Taxes.

Sales Tax

$10 $12 $14 $16 $18 Millions

$- $2 $4 $6 $8

Property Tax

$10 $12 $14 $16 $18 Millions

$- $2 $4 $6 $8

86 BUDGET SUMMARY