FY 2425 2526 Recommended Operating Budget

In addition to the City Council’s ongoing priorities, six specific strategic priorities were recognized by the City Council that will require significant resources:

Fiscal Sustainability

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• Affordable Housing and Homelessness

Community Engagement

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Economic Development and Tourism

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Transportation

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Healthy Community

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We continue to educate and engage the Community regarding City services, funding, and priorities. Over the past two years, the City has held various townhall meetings with the intent to engage, build trust, and educate the Community on the services the City provides and how those services are funded as well as keeping the Community abreast of legislation and bills that may have an impact on the Community. City staff have engaged the Community on various topics including budget, economic development, housing, infrastructure, water conservation, and public safety. The City of Morgan Hill is fortunate to be situated in a region of innovation. Despite the challenges posed by the high interest rate environment which dampened commercial real estate, the region’s economy remains resilient. Morgan Hill historically has a low proportion of commercial real estate compared to residential, which may have lessened the impact compared to our neighbors up north but nonetheless, the City has seen certain developments delayed due to developers unable to get projects financed. In developing the biennial budget, we have carefully assessed our revenue projections to align with the City Council’s priorities. While we anticipate property tax revenue continuing to grow moderately, other revenue sources such as sales tax remain tepid without significant retail development that would propel it to the growth rate that the City experienced during 2021 through 2023. This budget reflects our measured approach to slow revenue growth with increased costs in both personnel and supplies and services. The total Recommended Budget is $205.9 million in FY 24-25 and $254.4 million in FY 25-26. FY 24-25 budget includes $62.0 million for General Fund expenditures, $60.7 million for CIP, and $83.2 million for non-General Fund expenditures. For FY 25-26, the recommended budget includes $63.2 million for General Fund expenditures, $108.5 million for CIP, and $82.7 million for non- General Fund expenditures. Details of each Division’s budget, project description and funding requirements can be found in the accompanying operating departments and Capital Improvement Program sections of this document.

12 BUDGET MESSAGE