FY 24-26 ADOPTED BUDGET

Wastewater Fund

The City’s Wastewater revenue is projected to be $16.6 million for FY 24 -25 and $18.4 million for FY 25-26. As mentioned previously, the City is currently going through the rate study process to adjust the wastewater rates for the next five years. The projected revenues for the Recommended Biennial Budget reflect the increase in wastewater rates to meet the minimum reserve levels set by the Council, ensure sufficient funds are available for the much-needed capital projects, keep pace with expenditures, and to ensure the City’s wastewater system integrity and reliability.

Capital Improvement Program (CIP)

The proposed FY 24-25 through FY 29-30 CIP totals $271.2 million. The primary project categories include 1) Parks and Recreation ($34.1 million), 2) Public Facilities ($5.7 million), 3) Storm Drainage ($12.1 million), 4) Streets & Roads ($42.0 million), 5) Wastewater ($111.2 million), and 6) Water ($66.1 million). Though inflation has been coming down from multi-decades high and supply chains have loosened, inflation remains elevated and certain construction items still require long lead time. High inflation is reflected in this CIP with the cost of certain planned capital projects rising drastically from previous projections. The cost of building a new parallel sewer trunk line that will span the distance between Highland Avenue and Renz Lane in the City of Gilroy has increased to a new projected amount of $58.7 million, versus a previous estimate of $30.3 million. With that said, all projects proposed in the CIP are funded by designated funding sources with no General Fund money except the $1.0 million General Fund contribution annually through FY 29-30 to Pavement Rehabilitation. This continues the prior years’ annual contribution level as upkeeping the City’s streets and roads is one of our residents’ priorities. These carefully planned capital projects are either needed to maintain the City’s critical infrastructure or enhance infrastructure as prioritized by the City Council and the Community. The FY 24-25 and FY 25-26 CIP will be appropriated as part of the Biennial Budget approval, and it totals $169.2 million. Some of the project highlights include the following: 1. Recreation Facility Expansion and Renovation ($4.9 million): Renovating the City’s existing recreation facilities will support their ongoing use by future generations of Morgan Hill residents. 2. Pavement Rehabilitation Program ($11.0 million): Ongoing program to address the City's pavement rehabilitation needs. 3. Sewer System Repair and Replacements ($5.0 million): Continue implementing needed repairs and improvements for various pipeline groupings to ensure the optimum level of sewer service.

24 BUDGET MESSAGE