FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

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 adopted 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. 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 2020 -26 CIP. VTA Measure B, which the County of Santa Clara residents overwhelming approved in November 2016, increased the countywide sales tax by ½ cent to fund transportation priorities in the County. The projects range from local streets and roads repair, bicycle/pedestrian improvements, building Caltrain grade separations to funding Phase II of the Bay Area Rapid Transit (BART) extension. Measure B is anticipated to generate $6.3 billion in 2017 dollars over the next 30 years, of which approximately $1.2 billion is allocated for local streets and roads. The City of Morgan Hill is expected to receive $800,000 annually from the Measure B for the City’s street improvement projects. In addition, the City’s planned Hale Avenue extension is to be majority funded by VTA Measure B funds. The annual street improvement allocation and one-time funding for the Hale Avenue extension have been incorporated into the City’s FY 20 -26 CIP.

20 ADOPTED BUDGET MESSAGE