FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

of $3.1 million and $3.5 million, respectively. The cumulative impact for the three fiscal years is approximately $2.5 million. The current TOT projections include the existing new hotel under construction, the Granada, to come online in FY 2021-22.

The table below summarizes the projected revenue loss by major revenue categories over the three fiscal years from the current year FY 2019-20 to FY 2021-22:

Revenue Type Property Tax

FY 2019-20 FY 2020-21 FY 2021-22 $0.1 M $0.1 M $0.6 M $1.5 M $2.4 M $1.6 M $2.1 M $2.2 M $1.1 M $0.9 M $1.3 M $0.3 M $1.2 M $1.5 M $0.5 M $0.2 M $0.2 M $0.1 M

Total

$0.8 M $5.5 M $5.4 M $2.5 M $3.2 M $0.5 M

Sales Tax Recreation Hotel Tax Fund 206

Other (Gas Tax, Transfer Tax, etc.)

Total

$6.0 M $7.7 M $4.2 M $17.9 M

To offset the impact to City’s revenues from the pandemic, the City had to make some budget adjustments. In conjunction with the closure of the recreation centers, the City has furloughed most part-time teammates, reduced contractual services citywide such as janitorial and maintenance services, and implemented a hiring freeze, except for Public Safety. In addition, the City has unfunded a total of 5.0 FTEs through hiring freeze and attrition. This is on top of the 4.5 FTEs that were eliminated in FY 2019-20. General Fund – Expenditures The General Fund expense budget is $43.8 million and $44.7 million for FY 2020-21 and FY 2021- 22, respectively. FY 2021-22, salaries and benefits increase 4 percent or $0.9 million compared to the FY 2020- 21 Adopted amount, primarily due to scheduled pay increases per the City’s Memorandums of Understanding (MOU) with the three bargaining groups, health benefits, and pension increases. In the past, Morgan Hill primarily funded its park maintenance activities from the City’s Park Maintenance Fund (302) with some support from the General Fund. The revenue for this fund was derived from the Residential Development Control System (RDCS) process and represents voluntary contributions made by developers to compete in the housing allocation process. With the passage of the Housing Crisis Act of 2019 (SB 330) which suspended the voter approved RDCS, it also took away the major source of revenue that funded the City’s park maintenance. The lack of funding necessitates the division be transferred and funded by the General Fund moving forward. The remaining fund balance in Fund 302 will be transferred into the General Fund by set annual amounts, until the fund balance is depleted.

16 ADOPTED BUDGET MESSAGE