FY 2021 2122 ADOPTED OPERATING AND FY 2021 2526 CIP BUDGETS

Major Revenue Assumptions

General Fund (010) FY 20-21 and 21-22 revenues for the General Fund, including transfers in, are estimated to be $39.6 million and $43.4 million, respectively. 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 $13.7 million or 35 percent of the total General Fund revenues for FY 20-21. It is anticipated to decrease slightly to $13.4 million in FY 21-22. 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, Home Owner Property Tax (HOPTR).

The City is expecting current year property tax revenue to come in higher than budget. However, the impact to the property tax for the next few years will be dependent on the duration of the COVID-19 pandemic. Property tax revenue has been slightly reduced this year and next year to account for reduced supplemental property tax revenue as real estate activities have come to a halt as a result of the Shelter In Place Order. In addition, the projected growth rate for FY 21-22 is 0 percent, with 2 percent growth in FY 22-23 and 4 percent for the remainder of the five- year forecast.

PropertyTax

$10 $12 $14 $16 $18 Millions

$- $2 $4 $6 $8

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 $8 million or 20 percent of the total General Fund revenue projected for FY

80 BUDGET SUMMARY