Recommended FY 2022-2024 Operating Budget and CIP

Major Revenue Assumptions

6.87% for the prior year. This “slower” growth still exceeds expectations mainly due to strong residential growth as well as limited impact to the commercial properties from the pandemic. The City of Morgan Hill’s assessment roll for FY 21-22 grew 5.75% versus 6.12% for the prior year. Though showing lower growth than the prior year, the City’s growth is the 2nd highest in the County, behind only Mountain View of 8.06% which is mainly due to the construction of Google’s new campus in Bayview, and it is also much better than budget predictions of no growth for the year. The City’s total net assessed value for FY 21-22 is about $11.5 billion, increased by about $625 million from prior year total net assessed value of about $10.9 billion. For FY 22-23, staff anticipates the resumption of the “elevated” growth rate of about 7% with the growth rate returning to a more normal growth rate of about 4% starting in FY 23-24. This normal growth rate includes the limit increase of property tax by Proposition 13 of 2% or lower of CPI as well as property transfers and new housing units adding to assessment value.

General Fund (010) FY 22-23 and 23-24 revenues for the General Fund, including transfers in, are estimated to be $50.5 million and $52.2 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 revenue for FY 22-23 and FY 23 24 is $17.4 million and $18.0 million, respectively. While the pandemic is still having some negative impacts to the City’s major revenue categories, so far property tax seems to have escaped the financial hit from the pandemic albeit demonstrating a slower growth rate. On July 1, 2021, the County of Santa Clara Assessor’s Office released the assessment roll close for FY 21-22. The assessment roll for the County grew 4.6% for FY 21-22 versus

84 BUDGET SUMMARY