A
C
B
D
101
101
E Dunne Ave
Peebles Ave
Cochrane
Rd
Llagas Rd
Monterey St
W Main Ave
Watsonville
Rd
Monterey Rd
National Demographics Corporation, February 8, 2022
City of Morgan HillRedistricting 2022 Public Map 106
©2021 CALIPER
Public Map 106
District A
Total Pop 11,340
Deviation from ideal -52
% Deviation -0.46%
% Hisp 38.8%
% NH White 43%
% NH Black 3%
% Asian-American 11%
Total 7,084
% Hisp 25%
% NH White 57%
% NH Black 4%
% Asian/Pac.Isl. 14%
Total 6,739
% Latino est. 26%
% Spanish-Surnamed 23%
% Asian-Surnamed 5%
% Filipino-Surnamed 1%
% NH White est. 66%
% NH Black 3%
Total 5,722
% Latino est. 24%
% Spanish-Surnamed 22%
% Asian-Surnamed 5%
% Filipino-Surnamed 1%
% NH White est. 67%
% NH Black 3%
Total 4,094
% Latino est. 20%
% Spanish-Surnamed 18%
% Asian-Surnamed 4%
% Filipino-Surnamed 1%
% NH White est. 72%
% NH Black est. 3%
ACS Pop. Est. Total 10,586
age0-19 29%
age20-60 50%
age60plus 21%
immigrants 18%
naturalized 55%
english 73%
spanish 19%
asian-lang 6%
other lang 2%
Language Fluency Speaks Eng. "Less than Very Well" 9%
hs-grad 37%
bachelor 34%
graduatedegree 12%
Child in Household child-under18 36%
Pct of Pop. Age 16+ employed 65%
income 0-25k 8%
income 25-50k 13%
income 50-75k 12%
income 75-200k 43%
income 200k-plus 24%
single family 80%
multi-family 20%
rented 31%
owned 69%
Total population data from the 2020 Decennial Census.
Surname-based Voter Registration and Turnout data from the California Statewide Database.
Latino voter registration and turnout data are Spanish-surname counts adjusted using Census Population Department undercount estimates. NH White and NH Black registration and turnout counts estimated by NDC. Citizen Voting Age Pop., Age, Immigration, and other demographics from the 2015-2019 American Community Survey and Special Tabulation 5-year data.
B
11,030
-362
-3.18%
29%
43%
3%
22%
6,769
26%
52%
2%
17%
6,928
23%
21%
12%
2%
61%
2%
5,983
22%
20%
12%
2%
63%
2%
3,896
19%
18%
9%
2%
68%
2%
10,114
29%
53%
18%
20%
62%
69%
17%
9%
5%
9%
38%
27%
17%
45%
64%
10%
8%
8%
39%
35%
91%
9%
14%
86%
C
11,761
369
3.24%
39%
40%
2%
16%
7,416
28%
54%
2%
15%
6,861
27%
25%
9%
2%
62%
2%
5,743
25%
23%
9%
2%
63%
2%
4,026
22%
21%
7%
1%
68%
2%
11,673
27%
53%
20%
21%
52%
65%
21%
8%
5%
16%
43%
21%
14%
36%
68%
6%
16%
15%
44%
19%
79%
21%
36%
64%
D
11,435
43 0.38%
26%
50%
3%
18%
8,637
19%
60%
2%
17%
7,591
20%
18%
9%
2%
68%
2%
6,670
19%
17%
9%
2%
69%
2%
5,003
17%
16%
8%
1%
72%
2%
12,147
27%
53%
21%
15%
71%
74%
12%
8%
6%
8%
39%
31%
16%
39%
69%
7%
11%
8%
46%
29%
90%
10%
23%
77%
Total
45,566
731
6.42%
33%
44%
3%
17%
29,905
24%
56%
2%
16%
28,119
24%
22%
9%
2%
64%
2%
24,118
22%
21%
9%
2%
66%
2%
17,019
20%
18%
7%
1%
70%
2%
44,520
28%
52%
20%
18%
59%
70%
17%
8%
5%
11%
39%
28%
15%
39%
67%
7%
12%
11%
43%
26%
85%
15%
27%
73%
02/09/2022 0:14 Page 1 of 1
Total Pop
Citizen Voting Age Pop
Voter Registration
(Nov 2020)
Voter Turnout
(Nov 2020)
Voter Turnout
(Nov 2018)
Age
Immigration
Language spoken at home
Education
(among those age 25+)
Household Income
Housing Stats
A
C
B
D
101
101
E Dunne Ave
Peebles Ave
Cochrane
Rd
Llagas Rd
Monterey St
W Main Ave
Watsonville
Rd
National Demographics Corporation, February 14, 2022
City of Morgan HillRedistricting 2022 NDC Map 108
©2021 CALIPER
NDC 108
District A
Total Pop 11,167
Deviation from ideal -225
% Deviation -1.98%
% Hisp 38.0%
% NH White 43%
% NH Black 3%
% Asian-American 12%
Total 6,804
% Hisp 24%
% NH White 57%
% NH Black 3%
% Asian/Pac.Isl. 14%
Total 6,669
% Latino est. 25%
% Spanish-Surnamed 23%
% Asian-Surnamed 5%
% Filipino-Surnamed 1%
% NH White est. 66%
% NH Black 3%
Total 5,695
% Latino est. 23%
% Spanish-Surnamed 22%
% Asian-Surnamed 6%
% Filipino-Surnamed 1%
% NH White est. 68%
% NH Black 3%
Total 4,092
% Latino est. 19%
% Spanish-Surnamed 18%
% Asian-Surnamed 4%
% Filipino-Surnamed 1%
% NH White est. 73%
% NH Black est. 3%
ACS Pop. Est. Total 10,206
age0-19 29%
age20-60 50%
age60plus 22%
immigrants 18%
naturalized 55%
english 75%
spanish 18%
asian-lang 6%
other lang 2%
Language Fluency Speaks Eng. "Less than Very Well" 8%
hs-grad 36%
bachelor 35%
graduatedegree 13%
Child in Household child-under18 35%
Pct of Pop. Age 16+ employed 65%
income 0-25k 8%
income 25-50k 11%
income 50-75k 11%
income 75-200k 44%
income 200k-plus 25%
single family 83%
multi-family 17%
rented 27%
owned 73%
Total population data from the 2020 Decennial Census.
Surname-based Voter Registration and Turnout data from the California Statewide Database.
Latino voter registration and turnout data are Spanish-surname counts adjusted using Census Population Department undercount estimates. NH White and NH Black registration and turnout counts estimated by NDC. Citizen Voting Age Pop., Age, Immigration, and other demographics from the 2015-2019 American Community Survey and Special Tabulation 5-year data.
B
11,445
53 0.47%
29%
42%
2%
24%
7,088
26%
50%
2%
20%
7,172
23%
21%
13%
2%
60%
2%
6,194
22%
20%
13%
2%
62%
2%
3,996
19%
18%
10%
2%
67%
2%
10,617
28%
53%
18%
20%
64%
68%
17%
10%
5%
10%
38%
27%
17%
45%
64%
9%
8%
8%
39%
36%
92%
8%
14%
86%
C
11,383
-9
-0.08%
40%
41%
2%
14%
7,177
29%
55%
2%
13%
6,554
28%
26%
8%
2%
62%
2%
5,470
26%
24%
8%
2%
64%
2%
3,848
23%
21%
6%
1%
69%
2%
11,411
27%
53%
19%
21%
50%
65%
22%
8%
5%
16%
43%
21%
13%
36%
68%
6%
16%
15%
44%
18%
76%
24%
39%
61%
D
11,571
179
1.57%
26%
50%
3%
18%
8,836
19%
61%
3%
16%
7,724
20%
18%
9%
1%
68%
2%
6,759
19%
17%
9%
2%
69%
2%
5,083
17%
16%
7%
1%
72%
2%
12,286
27%
53%
21%
16%
71%
74%
12%
8%
6%
8%
39%
31%
15%
39%
69%
7%
12%
9%
45%
28%
88%
12%
25%
75%
Total
45,566
404
3.55%
33%
44%
3%
17%
29,905
24%
56%
2%
16%
28,119
24%
22%
9%
2%
64%
2%
24,118
22%
21%
9%
2%
66%
2%
17,019
20%
18%
7%
1%
70%
2%
44,520
28%
52%
20%
18%
59%
70%
17%
8%
5%
11%
39%
28%
15%
39%
67%
7%
12%
11%
43%
26%
85%
15%
27%
73%
02/15/2022 9:50 Page 1 of 1
Total Pop
Citizen Voting Age Pop
Voter Registration
(Nov 2020)
Voter Turnout
(Nov 2020)
Voter Turnout
(Nov 2018)
Age
Immigration
Language spoken at home
Education
(among those age 25+)
Household Income
Housing Stats
A
C
B
D
101
101
E Dunne Ave
Peebles Ave Cochrane
Rd
Llagas Rd
Monterey St
W Main Ave
Watsonville
Rd
National Demographics Corporation, December 7, 2021
City of Morgan HillRedistricting 2021 NDC Green Map
©2021 CALIPER
Este mapa muestra un enfoque mínimo de cambios en el mapa.
District A B C D Total
2020 2020 Census (Raw) 11,509 11,093 11,117 11,847 45,566 Deviation from ideal 118 -299 -275 456 754
% Deviation 1.03% -2.62% -2.41% 4.00% 6.62%
% Hisp 39% 30% 39% 26% 33%
% NH White 43% 43% 40% 50% 44%
% NH Black 3% 3% 2% 3% 3%
% Asian-American 12% 22% 16% 18% 17%
Total 7,020 6,784 7,083 9,019 29,905
% Hisp 25% 26% 28% 19% 24%
% NH White 56% 54% 53% 60% 56%
% NH Black 3% 2% 2% 3% 2%
% Asian/Pac.Isl. 14% 17% 16% 17% 16%
Total 6,807 6,989 6,468 7,855 28,119
% Latino est. 25% 24% 27% 20% 24%
% Spanish-Surnamed 23% 22% 24% 18% 22%
% Asian-Surnamed 5% 12% 9% 9% 9%
% Filipino-Surnamed 1% 2% 2% 2% 2%
% NH White est. 66% 61% 62% 67% 64%
% NH Black 3% 2% 2% 2% 2%
Total 4,151 3,840 3,900 5,128 17,019
% Latino est. 20% 20% 22% 17% 20%
% Spanish-Surnamed 19% 18% 21% 16% 18%
% Asian-Surnamed 4% 9% 7% 8% 7%
% Filipino-Surnamed 1% 2% 1% 1% 1%
% NH White est. 72% 68% 68% 72% 70%
% NH Black 3% 1% 2% 2% 2%
Total 5,806 6,004 5,428 6,880 24,118
% Latino est. 24% 23% 25% 19% 22%
% Spanish-Surnamed 22% 21% 23% 17% 21%
% Asian-Surnamed 6% 12% 9% 9% 9%
% Filipino-Surnamed 1% 2% 2% 2% 2%
% NH White est. 67% 62% 64% 68% 66%
% NH Black est. 3% 2% 2% 2% 2%
ACS Pop. Est. Total 10,604 10,116 11,219 12,581 44,520
age0-19 29% 29% 27% 27% 28%
age20-60 50% 53% 53% 53% 52%
age60plus 22% 18% 20% 21% 20%
immigrants 17% 18% 22% 17% 18%
naturalized 54% 62% 52% 71% 59%
english 74% 68% 66% 74% 70%
spanish 18% 18% 20% 12% 17%
asian-lang 6% 9% 8% 8% 8%
other lang 2% 4% 6% 6% 5%
Language Fluency Speaks Eng. "Less
than Very Well" 8% 10% 16% 8% 11%
hs-grad 36% 38% 43% 39% 39%
bachelor 34% 26% 21% 31% 28%
graduatedegree 12% 17% 14% 15% 15%
Child in Household child-under18 35% 45% 36% 39% 39%
Pct of Pop. Age 16+ employed 65% 65% 67% 69% 67%
income 0-25k 8% 9% 6% 7% 7%
income 25-50k 12% 9% 15% 12% 12%
income 50-75k 11% 9% 15% 9% 11%
income 75-200k 44% 39% 45% 45% 43%
income 200k-plus 25% 34% 19% 28% 26%
single family 82% 90% 79% 89% 85%
multi-family 18% 10% 21% 11% 15%
rented 28% 17% 36% 25% 27%
owned 72% 83% 64% 75% 73%
Total population data from the California adjustment to the 2020 Decennial Census. Surname-based Voter Registration and Turnout data from the California Statewide Database. Latino voter registration and turnout data are Spanish-surname counts adjusted using Census Population Department undercount estimates. NH White and NH Black registration and turnout counts estimated by NDC.
Citizen Voting Age Pop., Age, Immigration, and other demographics from the 2015-2019 American Community Survey and Special Tabulation 5-year data.
Housing Stats
Household Income
Education (among those
age 25+)
2020 Total Pop
City of Morgan Hill - NDC Green Map
Language spoken at home
Immigration
Citizen Voting Age Pop
Age
Voter Registration (Nov
2020)
Voter Turnout (Nov
2018)
Voter Turnout (Nov
2020)
13 CITY COUNCIL STAFF REPORT
MEETING DATE: April 6, 2022
PREPARED BY:
Mario Ramirez, Police Captain
APPROVED BY: City Manager
INTRODUCE ORDINANCE APPROVING MILITARY EQUIPMENT
POLICIES AS REQUIRED BY AB 481
RECOMMENDATION(S)
1. Waive the first and second reading of the ordinance; and
2. Introduce ordinance approving Morgan Hill Police Department Policies 708--Armored Rescue Vehicle (ARV MedEvac) and 709--Military Equipment.
Estimated Time: 20 minutes
COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Enhancing Public Safety
2022-2023 Strategic Priorities
Fiscal Sustainability
Guiding Documents
Public Safety Master Plan
REPORT NARRATIVE:
Background:
The City Council has a long-standing commitment to ensuring the Morgan Hill Police Department has the equipment necessary to safeguard the lives of the community members in Morgan Hill. Recent state legislation requires governing bodies of agencies to adopt policies for use of the equipment.
Assembly Bill 481 (AB 481 or the Bill), codified at Government Code sections 7070 through 7075 requires a law enforcement agency (LEA) to obtain approval from the applicable governing body via adoption of a “military equipment” use policy (the Policy) by ordinance (the Ordinance), prior to the LEA funding, acquiring, or using military equipment.
13 The Morgan Hill Police Department (MHPD) seeks City Council adoption of the attached Policy 709 - Military Equipment Use Policy and Policy 708 - Armored Rescue Vehicle (ARV) MedEvac Policy -- in order to allow MHPD to continue to use the necessary equipment specified therein, as well as acquire new pieces of essential equipment.
Items deemed to be “military equipment” by AB 481 are used as a component of overall best practices for Law Enforcement Agencies (LEAs) throughout the country. These tools have been tested in the field, and are used by LEAs to enhance community member safety as well as officer safety. Loss of these items would jeopardize the welfare of community members and peace officers within the MHPD.
The term “military equipment,” as used in AB 481, in fact, does not necessarily indicate equipment that has been used by the military. Pursuant to AB 481, items deemed to be “military equipment” include, but are not limited to, unmanned aerial or ground vehicles, armored vehicles, command and control vehicles, pepper balls, less lethal shotguns, less lethal 40mm projectile launchers, long-range acoustic devices, and flashbangs.
Many of these items deemed to be “military equipment” by AB 481 are, in fact, owned and deployed by MHPD and LEAs across the country, in order to specifically reduce risk to community members. These items provide peace officers with the ability to safely resolve volatile situations which otherwise might rise to the level of a lethal force encounter. To that end, the items listed in this report and accompanying Military Equipment Use Policy also provide MHPD’s peace officers with necessary tools that facilitate compliance with its stringent use of force policy.
Other items deemed to be “military equipment” via AB 481 include foundational equipment such as rifles. These rifles allow peace officers to address lethal threats from a greater distance and with greater precision. Along with seeking authorization to use preexisting equipment, the MHPD also seeks authorization to acquire, fund, and use new pieces of equipment: Armored Rescue Vehicle (ARV), Rook and a Long Range Acustic Device (LRAD).
The Armored Rescue Vehicle (ARV) MedEvac vehicle is an armored rescue vehicle that seats 10-12 personnel with an open floor plan to rescue personnel and community members. It can stop various projectiles, which provides greater safety for citizens and officers beyond the protection level of shield and personal body armor. Morgan Hill Police Officers perform high-risk warrant services on armed suspects, respond to active shooters, hostage rescues, and other calls involving weapons and violence. The protective ballistic equipment allows for more time and opportunity to deescalate situations and provide safer tactics to resolve lifethreatening events in the safest way possible. ARV has become a standard for many tactical teams in the nation, offering opportunities to resolve critical incidents safely for all involved parties.
Currently, MHPD has been calling the Santa Clara County Sheriff’s Department to respond with their ARV on many occasions to help resolve critical incidents which is no longer readily available. MHPD authored a 2021 grant to fund an ARV as a regional asset for South County.
The Rook is an armored vehicle on a tracked platform that allows officers the ability to gain a better view of suspects from a safe position and introduce less than lethal options when dealing with violent offenders. The Rook has become a standard alternative for many tactical teams in the nation, offering more opportunities to resolve critical incidents
13 most safely for all involved parties. MHPD would like to seek future grant opportunities for the purchase of a Rook. The MHPD would have to call for mutual aid in the event a Rook was needed from outside Santa Clara County, which would prolong the incident and place our officers and community at risk.
The Long Range Acoustic Device, or LRAD, is a speaker system. It renders sound in directional focus and at extreme volumes, allowing the user to make sound audible over greater distances, and with more geographical precision, than an ordinary loudspeaker.
LRADs have a microphone for speech, inputs for playback of recording. The LRAD will be used to make public addresses during emergency situations, such as the evacuation orders given during the 2020 fires.
There is significant interest in ensuring that law enforcement continues to have access to equipment that will provide peace officers as many options as possible to safeguard lives, ensure safety, and protect civil liberties. The use of the tools identified are necessary to MHPD’s mission and will continue to be strictly regulated through internal processes and oversight.
The proposed Ordinance seeks to approve the MHPD’s Policies 708 and 709. Policy 709.4 outlines each item identified in Government Code section 7070 currently owned by the City. The Policy also includes the current use and cost of each item. These particular items, and their stated uses, were in place prior to the implementation of AB 481. Future acquisitions of any item deemed to be “military equipment” will require a further public meeting, policy update, and City Council approval.
The proposed policies safeguard the public’s welfare, safety, civil rights, and civil liberties by ensuring there are safeguards, transparency, oversight, and accountability measures in place. The Policies require that MHPD ensures that MHPD complies with Policy 708 and Policy 709 and conducts an annual audit of military equipment.
Violations of Policy 709 will be corrected when discovered. Members of the public are provided direction per the Policy on how to register complaints for violations. All items which result in the use of force will be investigated, as is already required by existing MHPD policy.
COMMUNITY ENGAGEMENT:
This report serves to inform the community of the Armored Rescue Vehicle-MedEvac and Military Equipment Policies.Information about the proposed policies is on our website.
ALTERNATIVE ACTIONS:
Council could direct staff to add additional requirements to each policy.
PRIOR CITY COUNCIL AND COMMISSION ACTIONS:
This is the initial report to City Council for compliance with the state legislation.
13 FISCAL AND RESOURCE IMPACT:
There is no current Fiscal impact to the City at this time. Any future fiscal impact will be addressed in a coinciding Staff Report requesting permission to add additional equipment to the designated policies.
CEQA (California Environmental Quality Act):
Not a Project.
This entails organizational or administrative activities of governments and will not result in direct or indirect physical changes in the environment.
Policy
708
Morgan Hill Police Department
Morgan Hill PD Policy Manual
Copyright Lexipol, LLC 2022/01/04, All Rights Reserved.
Published with permission by Morgan Hill Police Department ***DRAFT*** Armored Rescue Vehicle (ARV)- MedEvac - 1 Armored Rescue Vehicle (ARV)- MedEvac
708.1 PURPOSE AND SCOPE
The purpose and scope of this policy is to set guidelines for the proper use, training, care and storage of the Morgan Hill Police Department’s armored rescue vehicle. In this policy, this vehicle will be referred to as Armored Rescue Vehicle (ARV).
The ARV is an asset that was acquired by the Morgan Hill Police Department. The purpose and intent of the acquisition and deployment of this vehicle is to enhance and sustain local and regional preparedness for first responders in major urban areas by allowing for delivery of emergency medical services into on-going hazardous situations. This will allow law enforcement, fire service staff, and medical personnel the ability to safely enter unsecured and unstable areas (warm or hot zone). This vehicle will assist with providing immediate medical assistance, enhancing the ability of first responders to rescue persons in need and help protect first responders at the scene of an emergency situation. The vehicle is also designed to meet tactical needs of law enforcement agencies tasked with responding to acts of violence and/ or terrorism. The purpose is to enhance law enforcement’s ability to serve and protect the community. 708.2 USE OF THE LENCO MEDEVAC
The use of an Armored Rescue Vehicle (ARV) is to preserve life and enhance the safety of citizens and officers. The ARV should be deployed in situations where its use would enhance the tactical advantage of officers, aid in the rescue of injured persons, protect life and property, or improve the likelihood that an incident would be resolved without the use of deadly force or other force options.
The ARV is primarily used for Special Weapons and Tactics Team (SWAT) incidents, safe transport of SWAT personnel to and from critical incidents, high risk warrant service operations, dangerous high risk tactical operations, high risk rescue operations, training, providing emergency medical staff and/or Tactical Emergency Medicine (TEMS) personnel, delivering equipment, and other rescue capabilities. It may also be used for community engagement efforts and other applications deemed appropriate and approved by the Special Operations Captain. 708.3 DEPLOYMENT
Approval to deploy an ARV will be the responsibility of the Special Operations Captain. A Watch Commander may authorize the deployment of an ARV if there is an immediate need to prevent loss of life or great bodily injury. Upon deployment, the Watch Commander shall notify the Special Operations Captain as soon as practical. In most cases where the Watch Commander authorized the deployment of an ARV, the SWAT Commander (Special Operations Captain) will assign two (2) SWAT Officers to relieve the patrol officers in charge of the ARV at the scene of an ARV deployment.
Nothing in this policy is meant to preclude the immediate deployment of the ARV to perform an officer or citizen rescue, to save lives that are in immediate danger of great bodily injury or death or to deliver the ARV to the scene of a callout.
Morgan Hill Police Department
Morgan Hill PD Policy Manual
Armored Rescue Vehicle (ARV)- MedEvac
Copyright Lexipol, LLC 2022/01/04, All Rights Reserved.
Published with permission by Morgan Hill Police Department ***DRAFT*** Armored Rescue Vehicle (ARV)- MedEvac - 2 The Special Operations Captain should be notified of all deployments of the ARV as soon as possible after a deployment.
708.3.1 TACTICAL OPERATIONS, INVESTIGATIONS, AND ENFORCEMENT Deployment of an ARV should be considered in the following circumstances; • During incidents involving violent felonies;
• Responding to persons with a history of extreme violence involving firearms, explosives or other dangerous weapons;
• When information is present that the suspect has used, intends to use or is likely to use extreme violence against citizens or law enforcement personnel; and • At a scene of an incident where a suspected or actual explosive device is located.
With full consideration for the safety of the occupants, an ARV may be used to breach a structure with the vehicle’s ram attachment. Using an ARV for this purpose is appropriate only after a clear articulated need exist and only when; (1) a search warrant is obtained and the issuing judge authorized the use of the ARV to breach a structure; and (2) when the ram was utilized, officers reasonably believed that evidence inside the premises was presently being destroyed, or (3) there was an immediate threat of resistance from the occupants which posed a serious danger to officers or community member. Nothing in this section is intended to prevent the use of an ARV to conduct rescue operations to prevent loss of life or great bodily injury.
An ARV will not be deployed at incidents that do not involve actual, threatened or suspected violence or investigations of misdemeanor crimes, unless the crime involves a firearm or equivalent deadly weapon.. In the absence of actual, threatened or suspected violence, an ARV may be deployed during natural disasters, rescue/emergency operations that necessitate the deployment of the ARV’s equipment and capabilities. Examples include but are not limited to the following;
• The ARV’s ground clearance and 4-wheel drive capabilities. • Use of night vision/search equipment to locate missing and/or at risk persons. • Use of onboard oxygen system during an operation.
Generally, an ARV will not be utilized in crowd control situations or during times of civil unrest, protest or demonstrations unless clear articulable facts dictate the need to deploy the ARV (shots fired, suspected violence involving firearms, actual or suspected presence of explosives, etc.). 708.3.2 RESCUE OPERATIONS
An ARV may be utilized to perform rescue operations of citizens or officers. The ARV may be deployed to the scene of an incident involving hazardous chemicals or materials and may utilize onboard equipment to assist with the response and successful mitigation of the situation. The ARV has the capability to deliver law enforcement personnel specially trained in hazardous material operations to the scene of emergencies requiring this level of expertise.
Morgan Hill Police Department
Morgan Hill PD Policy Manual
Armored Rescue Vehicle (ARV)- MedEvac
Copyright Lexipol, LLC 2022/01/04, All Rights Reserved.
Published with permission by Morgan Hill Police Department ***DRAFT*** Armored Rescue Vehicle (ARV)- MedEvac - 3 In certain rescue operations, such as an Active Shooter or Criminal Mass Casualty Incident, the ARV may be used to deploy Fire and/or EMS resources into potential Warm Zones as a Rescue Task Force. The integration of Fire and/or EMS into a Rescue Task Force is strictly meant to expedite life-saving efforts. The use of the ARV is meant to provide protection and a safe environment for the Rescue Task Force personnel as well as for victims requiring evacuation or treatment. The Rescue Task Force will be deployed in compliance with the Santa Clara County Active Shooter Protocol.
708.3.3 PRE-PLANNED OPERATIONS
Any sworn member of the Morgan Hill Police Department may request to deploy an ARV in a preplanned operation by making the request to the Special Operations Captain. The request should include, but is not limited to; the date and time frame of the operation; the location(s) of the operation; and the reason why the ARV is necessary for the success of the operation. The Special Operations Captain will be responsible for approving/denying the request. 708.3.4 PRE-PLANNED SPECIAL EVENTS
With the approval of the Special Operations Captain, an ARV may be staged at the location of a pre-planned special event for the purpose of providing a rapid response to acts of extreme violence. The vehicle should be parked and staged in a manner appropriate for the circumstances.
Each event Incident Commander is responsible for communicating the intended use of the ARV to the Special Operations Captain prior to deployment. If approval is granted , a trained ARV driver will be assigned to deliver and provide security for the vehicle. 708.3.5 PUBLIC RELATIONS
An ARV may be deployed for public relations purposes, such as charity events, law enforcement demonstrations and other special events, with the approval of the Special Operations Captain.
If approval is granted, a trained ARV driver will be assigned to deliver and provide security for the vehicle.
708.4 ALLIED AGENCY REQUEST
Non-Emergency request for deployment of the ARV by an allied agency will be made through the on-duty Watch Commander who will then contact the Special Operations Captain for authorization. If there is an allied agency request for an immediate ARV deployment to an emergency to assist in life-saving operations, the Watch Commander may authorize the deployment of the vehicle pursuant to Section 707.3 of this policy.
Upon approving an allied agency’s request, two officers trained in ARV deployment will be assigned to deliver the ARV to the requesting agency. It is recommended that one officer drive the ARV and one officer assist with escorting the ARV in a marked patrol vehicle. The officer(s) will respond to the incident and deploy the ARV per the orders of the Incident Commander of the allied agency. Morgan Hill Officers will not deploy an ARV if the deployment conflicts with Morgan Hill Police Department’s policies, procedures, practices or established law. Officers arriving on scene with the ARV will act as operators of the vehicle and security for the vehicle.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Armored Rescue Vehicle (ARV)- MedEvac - 4 MHPD officers deployed with an ARV should not be directly involved in the tactical operations of the allied agency unless specifically requested to do so by the requesting agency. If the MHPD officers are asked to participate in any part of the Allied Agency’s operation other than the operation of the ARV, the officer(s) shall contact the Special Operations Captain as soon as practical and brief the Special Operations Captain on the intended actions of the officers and allied agency. This policy is not intended to restrict officers from taking action if necessary to prevent loss of life or great bodily injury.
If the allied agency’s request for an ARV develops into an extended operation, the officers deploying the vehicle will contact the Special Operations Division Captain and advise him/her of the situation. The Special Operations Captain will be responsible for ensuring relief officers are deployed as necessary.
If multiple simultaneous requests are made for the ARV, the Special Operations Captain will evaluate the situation and determine which request takes priority based on the nature of the incidents. The Special Operations Captain shall be notified when the ARV is deployed outside of city limits.
708.5 TRAINING
Officers are to be trained in the operation of the ARV prior to use. Training requirements will be set by the Special Operations Captain in cooperation with the Emergency Vehicle Operations (EVOC) Training Manager. Training will include knowledge of this policy, rules of the road and basic knowledge of electronic/mechanical functions on the vehicle. The training will also include a driving exercise. SWAT personnel will receive advanced training and are expected to maintain a higher level of operational knowledge and expertise.
Only MHPD personnel who have completed training and possess a valid California Driver’s License will be authorized to drive/operate the ARV, unless a delayed deployment of an ARV would result in serious bodily injury or death.
The Special Operations Captain or his/her designee is responsible for training officers on proper use, driving techniques and ensuring the vehicle is properly serviced and maintained. 708.6 DOCUMENTATION
Each deployment of an ARV shall be documented in a police report, a SWAT After Action Report or on the ARV Deployment Log. Training shall be documented and forwarded to the MHPD Training Unit.
708.7 OPERATING/ STORAGE/MAINTENANCE GUIDELINES
Backing
(a) When operating the ARV in reverse and when persons, equipment or other property is within the immediate area of the ARV, a ground guide or spotter should be used unless officer safety would be jeopardized.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Armored Rescue Vehicle (ARV)- MedEvac - 5 Inventory
(a) The MHPD officer operating the ARV during the deployment shall ensure that all of the vehicle’s equipment has been returned to the ARV once the deployment is completed. The SWAT Sergeant shall ensure quarterly inventories/inspections are completed and a list of the equipment is stored inside the of the ARV.
Fueling
(a) Prior to securing the ARV after deployment, the MHPD officer operating the ARV during the deployment shall ensure that the vehicle has sufficient fuel and is ready for re-deployment.– Diesel Fuel
Storage
(a) The ARV will be stored in designated parking locations on the Morgan Hill Police Department campus unless authorization for an alternative storage location is granted by the Special Operations Captain.
Damage
(a) If the ARV is damaged, the MHPD officer operating the ARV during the deployment shall report the damage to the SWAT Commander (Special Operations Captain) as soon as possible and complete a Vehicle Damage Control Report.
Policy
709
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 1 Military Equipment
709.1 PURPOSE AND SCOPE
The purpose of this policy is to provide guidelines for the approval, acquisition, and reporting requirements of military equipment (Government Code § 7070; Government Code § 7071; Government Code § 7072).
709.1.1 DEFINITIONS
Definitions related to this policy include (Government Code § 7070):
Governing body – The elected or appointed body that oversees the Department.
Military equipment – Includes but is not limited to the following:
• Unmanned, remotely piloted, powered aerial or ground vehicles. • Mine-resistant ambush-protected (MRAP) vehicles or armored personnel carriers. • High mobility multipurpose wheeled vehicles (HMMWV), two-and-one-half-ton trucks, five-ton trucks, or wheeled vehicles that have a breaching or entry apparatus attached. • Tracked armored vehicles that provide ballistic protection to their occupants. • Command and control vehicles that are either built or modified to facilitate the operational control and direction of public safety units. • Weaponized aircraft, vessels, or vehicles of any kind. • Battering rams, slugs, and breaching apparatuses that are explosive in nature. This does not include a handheld, one-person ram.
• Firearms and ammunition of_.50 caliber or greater, excluding standard-issue shotguns and standard-issue shotgun ammunition.
• Specialized firearms and ammunition of less than_.50 caliber, including firearms and accessories identified as assault weapons in Penal Code § 30510 and Penal Code § 30515, with the exception of standard-issue handguns.
• Any firearm or firearm accessory that is designed to launch explosive projectiles. • Noise-flash diversionary devices and explosive breaching tools. • Munitions containing tear gas or OC, excluding standard, service-issued handheld pepper spray.
• TASER® Shockwave, microwave weapons, water cannons, and long-range acoustic devices (LRADs).
• Kinetic energy weapons and munitions.
• Any other equipment as determined by a governing body or a state agency to require additional oversight.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 2 709.2 POLICY
It is the policy of the Morgan Hill Police Department that members of this department comply with the provisions of Government Code § 7071 with respect to military equipment. 709.3 MILITARY EQUIPMENT COORDINATOR
The Chief of Police should designate a member of this department to act as the military equipment coordinator. The responsibilities of the military equipment coordinator include but are not limited to:
(a) Acting as liaison to the governing body for matters related to the requirements of this policy.
(b) Identifying department equipment that qualifies as military equipment in the current possession of the Department, or the equipment the Department intends to acquire that requires approval by the governing body.
(c) Conducting an inventory of all military equipment at least annually. (d) Collaborating with any allied agency that may use military equipment within the jurisdiction of Morgan Hill Police Department (Government Code § 7071). (e) Preparing for, scheduling, and coordinating the annual community engagement meeting to include:
1. Publicizing the details of the meeting.
2. Preparing for public questions regarding the department’s funding, acquisition, and use of equipment.
(f) Preparing the annual military equipment report for submission to the Chief of Police and ensuring that the report is made available on the department website (Government Code § 7072).
(g) Establishing the procedure for a person to register a complaint or concern, or how that person may submit a question about the use of a type of military equipment, and how the Department will respond in a timely manner.
709.4 MILITARY EQUIPMENT INVENTORY
The following constitutes a list of qualifying equipment for the: :
1. Unmanned Aircraft System (UAS): An unmanned aircraft along with the associated equipment necessary to control it remotely.
(a) Description, quantity, capabilities, and purchase cost of current UAS:
1. Skydio 2+, cost: $1,000 each, quantity: 1. Skydio 2+ UAS that weighs approximately 800 grams and is able to record video and audio with approximately 27 minutes of flight time
(b) Purpose: To be deployed when its view would assist officers or incident commanders with the following situations, which include but are not limited to:
1. Major collision investigations
2. Search for missing persons.
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3. Natural disaster management.
4. Crime scene photography.
5. SWAT, tactical, or other public safety and life preservation missions.
6. In response to specific requests from local, state, or federal fire authorities for fire response and/or prevention.
(c) Authorized Use: Only assigned operators who have completed the required training shall be permitted to operate any UAS during approved missions. (d) Expected Life Span: All UAS equipment, 3-5 years.
(e) Fiscal Impact: There is no annual fiscal impact.
(f) Training: All Department UAS operators are licensed by the Federal Aviation Administration for UAS operation.
(g) Legal and Procedural Rules: Use is established under Policy 613, FAA Regulation 14 CFR Part 107. It is the policy of the Morgan Hill Police Department to utilize UAS only for official law enforcement purposes and in a manner that respects the privacy of our community, pursuant to State and Federal law.
2. Armored Rescue Vehicles: Commercially produced wheeled armored personnel vehicle utilized for law enforcement purposes.
(a) Description, quantity, capabilities, and purchase cost:
1. LENCO BEARCAT, G3, cost: approximately $375,000, quantity: 0. The Lenco Bearcat, G3, is an armored rescue vehicle that seats 10-12 personnel with an open floor plan to rescue down personnel. It can stop various projectiles, which provides greater safety to citizens and officers beyond the protection level of shield and personal body armor. (b) Purpose: To be used in response to critical incidents to enhance officer and community safety, improve scene containment and stabilization, and assist in resolving critical incidents.
(c) Authorized Use: The use of armored rescue vehicles shall only be authorized by a watch commander or Special Operations Captain, based on the specific circumstances of a given critical incident.The armored rescue vehicles shall be used only by officers trained in their deployment and in a manner consistent with Department policy and training.
(d) Lifespan: Lenco Bearcat models G3, 25 years.
(e) Fiscal Impact: Annual maintenance cost of approximately $10,000. (f) Training: All drivers/operators shall attend formalized instruction and be trained in vehicle operations and practical driving instruction. (g) Legal and Procedural Rules: Use is established under Policy 708. It is the policy of the Department to utilize the armored rescue vehicles only for official law enforcement purposes and pursuant to State and Federal law.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 4 (h) Grant Proposal: The armored rescue vehicle is currently being considered via a State Homeland Security Grant Program (SHSGP) Grant. The grant will be documented to show the armored rescue vehicle's need, price, and capabilities.
If the armored rescue vehicle is obtained, it will be the responsibility of the Department to maintain the training of personnel for the operation of the vehicle.
It will also be the responsibility of the Department to handle all maintenance of the vehicle once it is acquired.
3. NIJ Level IV Armored Caterpillar (CAT) Multi-Terrain Loader (The ROOK): The ROOK is a custom "armored critical incident vehicle" built on the chassis of a CAT Bulldozer, manufactured by Ring Power. The ROOK is built to increase job safety, versatility, and mission-specific response. The ROOK is equipped with powerful mission-specific attachments. The ROOK is capable of being used in tight areas both inside and outside, where traditional armored vehicles may not be able to enter. (a) Description, quantity, capabilities, and purchase cost:
1. ROOK- Modified CAT compact Track Loader chassis, cost: $400,000, quantity: 0. The ROOK can be utilized by authorized SWAT personnel to identify, discover and locate threats or hazards, including explosives and ballistic threats. The ROOK may be used to stabilize critical infrastructure and functions to minimize health and safety threats during a terrorist attack. During a terrorist attack, the ROOK will allow for a protected law enforcement response.
(b) Purpose: To provide a capability for defensive ballistic protection in indoor and outdoor environments, rescue platforms for elevated structure rescue, and rough terrain environments where certain equipment would be limited. (c) Authorized Use: The ROOK shall be used by SWAT team members in a manner consistent with Department policy and training. Furthermore, only SWAT team members who have completed the appropriate training will operate the ROOK. (d) Lifespan: 25 years
(e) Fiscal Impact: The annual maintenance cost is approximately $8,000. (f) Training: All drivers/operators shall attend formalized instruction and be trained in vehicle operations and practical driving instruction. (g) Legal and Procedural Rules: It is the policy of the Department to utilize armored vehicles only for official law enforcement purposes and pursuant to State and Federal law.
(h) Grant Proposal: The department will be requesting grant funds in the future for the purchase of The ROOK. If the ROOK is obtained, it will be the responsibility of the Department to maintain the training of personnel for the operation of the vehicle. It will also be the responsibility of the Department to handle all maintenance of the vehicle once it is acquired.
4. Mobile Command Vehicle (MCV): A vehicle used mobile office that provides shelter, access to Department computer systems and restroom facilities during extended events.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 5 (a) Description, quantity, capabilities, and purchase cost:
1. Freightliner MT-55 Chassis (custom built) vehicle, cost: $699,186, quantity: 1. The MCV can also be utilized for SWAT/CNT and other critical incidents, large preplanned events, searching for missing persons, natural disasters, and community events
(b) Purpose: To be used based on the specific circumstances of a given critical incident, large event, natural disaster, or community event that is taking place. (c) Authorized Use: Only officers trained in their deployment and operations in a manner consistent with Department policy and training are authorized to operate the MVC. Situations in which the MCV is authorized for use would include but not be limited to critical incidents, emergencies, and natural disasters. (d) Lifespan: The MCV, 20-year lifespan on chassis and vehicle structure.
Upgrades needed in 7 years to maintain IT systems.
(e) Fiscal Impact: The annual maintenance cost is approximately $25,000, which is split 50/50 with the Gilroy Police Department.
(f) Training: The driver/operator shall receive training in the safe handling of the vehicle on a closed training course. Once the operator has shown competence in vehicle handling, the driver/operator will drive the vehicle with an experienced driver throughout the city.
(g) Legal and Procedural Rules: It is the policy of the Department to use the MCV only for official law enforcement purposes and in accordance with California State law regarding the operation of motor vehicles.
5. Long Range Acoustic Device (LRAD) Long Range Acoustical Device (LRAD) is a high-intensity directional acoustical array for long-range, crystal clear hailing, notification, and an unmistakable warning tone. The LRAD is primarily used as a communication device.
(a) Description, quantity, capabilities, and purchase cost:
1. LRAD 100x Mag- HS Wireless Kit, cost: $17,558 each, quantity: 0. Selfcontained,portable, and featuring an extended voice broadcast range out to 600 meters, the LRAD 100X ensures voice messages are clearly heard and understood. LRAD's optimized driver, waveguide, and power efficiency technologies enable the LRAD 100X to provide several hours of clear, continuous communication from a single battery charge. (b) Purpose: To be used to issue dispersal orders during crowd and riot control situations or to addressthe public in the event of civil emergencies, natural disasters, evacuations, and police incidents (e.g., missing persons, perimeters for wanted suspects/ K9 deployments, etc.). TheLRAD may also be used to issue a warning tone.
(c) Authorized Use: The LRAD shall only be used by officers trained in its deployment and used in a mannerconsistent with Department policy and training.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 6 (d) Lifespan: All Department LRADS, 25 years.
(e) Fiscal Impact: The annual maintenance cost for the LRAD is approximately $400 annually.
(f) Training: All operators receive training prior to operating any of the LRAD's in the field.
(g) Legal and Procedural Rules: It is the policy of the Morgan Hill Police Department to utilize the LRAD only for official law enforcement purposes and pursuant to State and Federal law.
(h) Grant Proposal: The LRAD is currently being considered via a State Homeland Security Grant Program (SHSGP) Grant. The grant will be documented to show the need, price, and capabilities of the LRAD. If the armored rescue vehicle is obtained, it will be the responsibility of the Department to maintain the training of personnel for operation.
6. 40 MM Launchers and Rounds: 40MM Launchers are utilized by department personnel as a less-lethal tool to launch impact rounds. (a) Description, quantity, capabilities, and purchase cost:
1. DEFENSE TECHNOLOGY, 40MM SINGLE SHOT LAUNCHER, #1425, cost: $1000, quantity: 5. The 40MM Single Launcher is a tactical singleshot launcher that features a collapsible stock and adjustable vertical front grip with a light rail. It will fire standard 40MM less-lethal ammunition, up to 4.8 inches in cartridge length. It will launch a 40MM less-lethal round up to 131 feet. Additionally, it will launch a signaling munition with OC. Only authorized to be used by SWAT personnel may use the 40MM launcher for the deployment of OC munition.
(b) Purpose: To limit the escalation of conflict where employment of lethal force is prohibited or undesirable.
(c) Authorized Use: Situations for the use of the less-lethal weapon systems may include, but are not limited to:
1. Self-destructive, dangerous and/or combative individuals.
2. Riot/crowd control and civil unrest incidents.
3. Circumstances where a tactical advantage can be obtained.
4. Potentially vicious animals.
5. Training exercises or approved demonstrations.
(d) Training: Sworn members utilizing 40MM less-lethal chemical agents or impact rounds are trained in the use by a POST-certified less lethal and chemical agents instructors.
(e) Lifespan: DEFENSE TECHNOLOGY, 40MM SINGLE SHOT LAUNCHER, #1425- 10 years.
(f) Fiscal Impact: Annual maintenance is approximately $50 for each launcher.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 7 (g) Legal and Procedural Rules: Use is established under Policy 308.9. It is the policy of the Morgan Hill Police Department to utilize the 40mm only for official law enforcement purposes and pursuant to State and Federal law, including those regarding the use of force.
7. Less Lethal Shotgun: Less Lethal Shotgun is used to deploy the less-lethal 12-gauge Super-Sock Beanbag Round.
(a) Description, quantity, capabilities, and purchase cost:
1. Mossberg 500 LESS LETHAL SHOTGUN, cost: $553.00, quantity: 10. The Mossberg 500 Less Lethal Shotgun is used to deploy the less-lethal 12- gauge Super-Sock Beanbag Round up to a distance of 75 feet. The range of the weapon system helps to maintain space between officers and a suspect reducing the immediacy of the threat, which is a principle of Deescalation. (b) Purpose: To limit the escalation of conflict where employment of lethal force is prohibited or undesirable.
(c) Authorized Use Situations for the use of the less-lethal weapon systems may include, but are not limited to:
1. Self-destructive, dangerous and/or combative individuals.
2. Riot/crowd control and civil unrest incidents.
3. Circumstances where a tactical advantage can be obtained.
4. Potentially vicious animals.
5. Training exercises or approved demonstrations.
(d) Lifespan: Mossberg 500 870 Less Lethal Shotgun- 10 years. (e) Fiscal Impact: Annual maintenance is approximately $50 for each shotgun. (f) Training: Through in-service training, all officers are trained in the 12 gauge less lethal shotgun as a less lethal option. SWAT personnel receive additional training internally when they transfer to the unit. SWAT operators who utilize these munitions have been through and successfully completed a POSTapproved gas school and/or trained in-house by POST certified chemical agent instructors for muzzle blast training.
(g) Legal and Procedural Rules: Use is established under Poly 308.9. It is the policy of the Morgan Hill Police Department to utilize the less-lethal shotgun only for official law enforcement purposes and pursuant to State and Federal law, including those regarding the use of force.
8. Distraction Devices: A device used to distract dangerous persons. (a) Description, quantity, capabilities, and purchase cost:
1. COMBINED TACTICAL SYSTEMS, 7290M MINI FLASH-BANG, cost:
$38, quantity: 31. The 7290M Flash-Bang exhibits all the same attributes of its larger counterpart but in a smaller and lighter package. Weighing in
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 8 at just 15 ounces, the new 7290M is approximately 30% lighter than the 7290 but still has the same 175db output of the 7290 and produces 6-8 million candelas of light.
(b) Purpose: A distraction device is ideal for distracting dangerous suspects during assaults, hostage rescue, room entry, or other high-risk arrest situations.
To produce atmospheric overpressure and brilliant white light and, as a result, can cause short-term (6 - 8 seconds) physiological/psychological, sensory deprivation to give officers a tactical advantage.
(c) Authorized Use: Diversionary Devices shall only be used:
1. By officers who have been trained in their proper use.
2. In hostage and barricaded subject situations.
3. In high-risk warrant (search/arrest) services where there may be extreme hazards to officers.
4. During other high-risk situations where their use would enhance officer safety.
5. During training exercises.
(d) Lifespan: Until used.
(e) Fiscal Impact: There is no fiscal impact.
(f) Training: Prior to use, officers must attend diversionary device training that is conducted by Post certified instructors.
(g) Legal and Procedural Rules: Use is established under Policy 308. It is the policy of the Morgan Hill Police Department to utilize diversion devices only for official law enforcement purposes and pursuant to State and Federal law regarding the use of force.
9. Rifles: Guns fired from shoulder level have a long spirally grooved barrel intended to make bullets spin and thereby have greater accuracy over a long distance. (a) Description, quantity, capabilities, and purchase cost:
1. COLT CARBINE AR 15 RIFLE,.223 CALIBER RIFLE, Semi-Automatic, cost: $1,099, quantity: 44. The Colt AR 1 with 16.1" Barrel is a secondary weapon platform to the officer's sidearm. The Cold AR 15 rifle is utilized during high-risk situations where the use of a handgun is not feasible. This firearm is chambered in.223 Remington/ 5.56 NATO Rifle and 16.1" barrel.
The magazine holds 10 or 30 rounds of ammunition. All sworn officers use this rifle within the police department.
2. COLT CARBINE M4 RIFLE,.223 CALIBER RIFLE, cost: $2,027, quantity:
8. The Colt M4 with a 10.5" Barrel is a secondary weapon platform to the officer's sidearm. The Colt M4 rifle is utilized during high-risk situations where the use of a handgun is not feasible. This firearm is chambered in.223 Remington/ 5.56 NATO Rifle and has a 10.5" barrel. The magazine
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 9 holds 10 or 30 rounds of ammunition. This rifle is used by all SWAT operators only.
3. REMINGTON 700 RIFLE,.308 CALIBER RIFLE, cost: $1099, quantity: 1.
The Remington 700 rifle is to provide SWAT team snipers with a weapon platform capable of being utilized during high-risk incidents where the SWAT M4 rifle would not be ideal. The Remington 700 allows the operator to be at a further distance than the recommended ideal operating distance of their M4 rifle. This firearms chambered in a.308 Hornady and has a 20" barrel.
4. SPEER GOLD DOT.223 CALIBER 55 GRAIN RIFLE ROUND, cost: $260 per case of 500, quantity: 88 cases. Remington ammo made by Speer is reloadable, features nickel-plated brass cases and Boxer primers, and this is a non-corrosive round. The Gold Dot LE ammunition goes through a process of joining the jacket and core one molecule at a time; thanks to this, Speer eradicates the potential for the leading cause of bullet failure (jacket/core separation). This process will guarantee extraordinary weight retention through barriers as strong as auto-glass. In addition to its remarkable strength, Gold Dot rifle ammunition asserts remarkable accuracy. With exact tolerances and unparalleled bullet uniformity of jacket thickness.
5. SPEER GOLD DOT.223 CALIBER 62 GRAIN RIFLE ROUND, cost: $260 per case of 500, quantity: 25 cases. Remington ammo made by Speer is reloadable, features nickel-plated brass cases and Boxer primers, and this is a non-corrosive round. The Gold Dot LE ammunition goes through a process of joining the jacket and core one molecule at a time; thanks to this, Speer eradicates the potential for the leading cause of bullet failure (jacket/core separation). This process will guarantee extraordinary weight retention through barriers as strong as auto-glass. In addition to its remarkable strength, Gold Dot rifle ammunition asserts remarkable accuracy. With exact tolerances and unparalleled bullet uniformity of jacket thickness.
6. FEDERAL 9MM LUGER AUTO 147 Grain FULL METAL JACKET FLAT POINT PRACTICE AMMUNITION, cost: $6,300, quantity: 4000 rounds.
This Federal American Eagle 9mm Luger ammunition is loaded with a 147- grain Full Metal Jacket bullet. The Full Metal Jacket bullet is for range practice and reducing fouling in the barrel. The jacket extends from the nose to the base, preventing bullet expansion and barrel leading. This ammunition is non-corrosive ammo, featuring brass cases, boxer primed, and reloadable.
7. HORNADY,.308 168GR RIFLE ROUND, cost: $433 per case of 200, quantity: 4 cases. The Federal Gold Medal.308 Winchester ammunition is new production ammo that features a 168 Grain Sierra MatchKing Hollow Point Boat Tail bullet, a non-corrosive boxer primer. The Hornady.308 Winchester ammo offers a muzzle speed of 2650 feet per second and muzzle energy of 2619 foot-pounds.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 10 (b) Purpose: To be used as precision weapons to address a threat with more precision and/or greater distances than a handgun, if present and feasible. (c) Authorized Use: Only members that are POST certified are authorized to use a rifle.
(d) Lifespan:
1. Colt Carbine AR 15 Rifle- 10 years.
2. Colt Carbine M4 Rifle- 10 years.
3. Remington 700 Rifle - 10 years.
(e) Fiscal Impact: Annual maintenance is approximately $50 for each rifle. (f) Training: Prior to using a rifle, officers must be certified by POST instructors in the operation of the rifle. Additionally, all members who operate any rifle must pass a range qualification two times a year.
(g) Legal and Procedural Rules: Use is established under Policy 312.3.3. It is the policy of the Morgan Hill Police Department to utilize rifles only for official law enforcement purposes and pursuant to State and Federal law regarding the use of force.
10. Chemical Agent and Smoke Canisters: Canisters containing chemical agents are released when deployed.
(a) Description, quantity, capabilities, and purchase cost:
1. COMBINED SYSTEMS, CS, #8230, cost: $24.85, quantity: 150. CTS 8230 (outdoor)-8230 is the smallest diameter burning grenade that discharges a high volume of smoke and chemical agent through multiple emission ports.
Specifically for outdoor use, it should not be deployed on rooftops, in crawl spaces, or indoors due to fire-producing capability. It can be hand thrown or launched. The canister is 1.41 in. by 4.90 in and holds approximately
1.4 grams of the active agent. It has an approximate burn time of 20-40 seconds.
2. COMBINED SYSTEMS, CS, #85230B, cost: $32.95, quantity: 0. CTS 5230B (indoor/baffled)-5230B –Pyrotechnic grenade designed for indoor use delivers a maximum amount of irritant smoke throughout multiple rooms with minimal fire risk. It can be hand thrown. The canister is 2.60 in. by 6.20 in. and holds approximately 1.4 grams of the active agent. It has an approximate burn time of 20-40 seconds.
3. COMBINED SYSTEMS, CS, #4350, cost: $25.00, quantity: 75. CTS 4530 (40mm frangible impact)- 4530- 40MM multi-effect munition delivering greater energy on the target with extreme accuracy and simultaneously dispersing a cloud of irritant or marking powder. The CS 4530 is deployed through a 40mm launcher and can be deployed up to 50 yards. The CS 4530 is 4.0 in. and holds approximately 1.4 grams of the active agent.
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Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 11 (b) Purpose: To limit the escalation of conflict where employment of lethal force is prohibited or undesirable. Situations for use of the less-lethal weapon systems may include, but are not limited to:
1. Self-destructive, dangerous and/or combative individuals.
2. Riot/crowd control and civil unrest incidents.
3. Circumstances where a tactical advantage can be obtained.
4. Potentially vicious animals.
5. Training exercises or approved demonstrations.
(c) Authorized Use: Only officers who have received POST certification in the use of chemical agents are authorized to use chemical agents. (d) Training: Sworn members utilizing chemical agent canisters are certified by POST less lethal and chemical agents instructors.
(e) Lifespan: Five years from manufacturing date.
(f) Fiscal Impact: No annual maintenance.
(g) Legal and Procedural Rules: Use is established under Policy 308.6. It is the policy of the Morgan Hill Police Department to utilize chemical agents only for official law enforcement purposes and pursuant to State and Federal law, including those regarding the use of force.
11. PepperBall Launcher: A device that discharges irritant projectiles. (a) Description, quantity, capabilities, and purchase cost:
1. PepperBall DEFENSE INNOVATION, cost: $350, quantity 2. The Defense Innovation is a compressed-air powered launcher designed to fire nonlethal PepperBall projectiles. The PepperBall Defense Innovation is a single feed system with the use of a Hooper.
2. PepperBall DEFENSE INNOVATION PROJECTILE, cost: $75.00 per case,quantity 3. The basic PepperBall projectile contains 2% PAVA pepper powder and is designed for direct impact and area saturation, especially in confined, interior spaces. The projectile contains 0.5% PAVA Powder. Discharged from a PepperBall Launcher, the projectile has a 200-500 FPS velocity.
(b) Purpose: To limit the escalation of conflict where employment of lethal force is prohibited or undesirable. Situations for the use of the less-lethal weapon systems may include but are not limited to:
(a) Self-destructive, dangerous and/or combative individuals. (b) Riot/crowd control and civil unrest incidents.
(c) Circumstances where a tactical advantage can be obtained. (d) Potentially vicious animals.
(e) Training exercises or approved demonstrations.
Morgan Hill Police Department
Morgan Hill PD Policy Manual
Military Equipment
Copyright Lexipol, LLC 2022/01/10, All Rights Reserved.
Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 12 (c) Authorized Use: Only those officers who have been trained in the use of PepperBall launchers are authorized to use the PepperBall launchers. (d) Training: Sworn members utilizing PepperBall launchers and projectiles are trained in the use by a POST-certified less-lethal and chemical agents instructors.
(e) Lifespan:
(a) PepperBall VKS Carbine- 20 years
(b) PepperBall Live Projectile- 3 years
(f) Fiscal impact: Annual maintenance is approximately $50 for each PepperBall launcher.
(g) Legal and Procedural Rules: Use is established under Policy 308.7.2. It is the policy of the Morgan Hill Police Department to utilize PepperBall only for official law enforcement purposes and pursuant to State and Federal law, including those regarding the use of force.
[Insert attachment here]
709.5 APPROVAL
The Chief of Police or the authorized designee shall obtain approval from the governing body by way of an ordinance adopting the military equipment policy. As part of the approval process, the Chief of Police or the authorized designee shall ensure the proposed military equipment policy is submitted to the governing body and is available on the department website at least 30 days prior to any public hearing concerning the military equipment at issue (Government Code § 7071). The military equipment policy must be approved by the governing body prior to engaging in any of the following (Government Code § 7071):
(a) Requesting military equipment made available pursuant to 10 USC § 2576a. (b) Seeking funds for military equipment, including but not limited to applying for a grant, soliciting or accepting private, local, state, or federal funds, in-kind donations, or other donations or transfers.
(c) Acquiring military equipment either permanently or temporarily, including by borrowing or leasing.
(d) Collaborating with another law enforcement agency in the deployment or other use of military equipment within the jurisdiction of this department. (e) Using any new or existing military equipment for a purpose, in a manner, or by a person not previously approved by the governing body.
(f) Soliciting or responding to a proposal for, or entering into an agreement with, any other person or entity to seek funds for, apply to receive, acquire, use, or collaborate in the use of military equipment.
(g) Acquiring military equipment through any means not provided above.
Morgan Hill Police Department
Morgan Hill PD Policy Manual
Military Equipment
Copyright Lexipol, LLC 2022/01/10, All Rights Reserved.
Published with permission by Morgan Hill Police Department ***DRAFT*** Military Equipment - 13 709.6 COORDINATION WITH OTHER JURISDICTIONS
Military equipment should not be used by any other law enforcement agency or member in this jurisdiction unless the military equipment is approved for use in accordance with this policy. 709.7 ANNUAL REPORT
Upon approval of a military equipment policy, the Chief of Police or the authorized designee should submit a military equipment report to the governing body for each type of military equipment approved within one year of approval, and annually thereafter for as long as the military equipment is available for use (Government Code § 7072).
The Chief of Police or the authorized designee should also make each annual military equipment report publicly available on the department website for as long as the military equipment is available for use. The report shall include all information required by Government Code § 7072 for the preceding calendar year for each type of military equipment in department inventory. 709.8 COMMUNITY ENGAGEMENT
Within 30 days of submitting and publicly releasing the annual report, the Department shall hold at least one well-publicized and conveniently located community engagement meeting, at which the Department should discuss the report and respond to public questions regarding the funding, acquisition, or use of military equipment.
ORDINANCE NO. , NEW SERIES
AN UNCODIFIED ORDINANCE OF THE CITY COUNCIL
OF THE CITY OF MORGAN HILL APPROVING POLICE
DEPARTMENT POLICIES 708 (ARMORED RESCUE
VEHICLE) AND 709 (MILITARY EQUIPMENT)
THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES ORDAIN AS FOLLOWS:
Section 1. Police Department Policy 708—Armored Rescue Vehicle (ARV MedEvac) is approved by the City Council in accordance with the requirements of AB 481.
Section 2. Police Department Policy 709—Military Equipment is approved by the City Council in accordance with the requirements of AB 481.
Section 3. Severability. Should any provision of this ordinance be deemed unconstitutional or unenforceable by a court of competent jurisdiction, such provision shall be severed from the ordinance, and such severance shall not affect the remainder of the ordinance.
Section 4. Effective Date; Posting. This Ordinance shall take effect on ____ ______, 2022. The City Clerk is hereby directed to publish this Ordinance or a summary thereof pursuant to Government Code Section 36933.
This ordinance was introduced at a meeting of the City Council held on the _____ day of _____,2022__, and adopted at a meeting held on the _____ day of ________,2022__, and said ordinance was duly passed and adopted in accordance with law by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
ATTEST: APPROVED:
______________________________ _______________________________ MICHELLE BIGELOW, City Clerk RICHARD CONSTANTINE, Mayor
CERTIFICATE OF THE CITY CLERK
I, MICHELLE BIGELOW, CITY CLERK OF THE CITY OF MORGAN HILL, CALIFORNIA, do hereby certify that the foregoing is a true and correct copy of Ordinance No. , New Series, adopted by the City Council of the City of Morgan Hill, California at their regular meeting held on the ____ day of ________, 2022.
WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.
DATE: _______________________ _____________________________ MICHELLE BIGELOW, City Clerk
14 CITY COUNCIL STAFF REPORT
MEETING DATE: April 6, 2022
PREPARED BY:
Anthony Eulo, Program Administrator
APPROVED BY: City Manager
INTRODUCE ORDINANCE UPDATING WATER WASTE ORDINANCE,
ADOPT WATER SHORTAGE RESOLUTION, AND ACCEPT REPORT
ON WATER OFFSET PROGRAM
RECOMMENDATION(S)
1. Waive the first and second reading of the ordinance; and
2. Introduce the ordinance updating the City's water waste provisions to reflect the actions and stages identified in the City's Urban Water Management Plan (UWMP);
3. Adopt resolution declaring a Level 4 Water Supply Shortage; and
4. Accept report on the development of a "water offset" program for new development.
Estimated Time: 30 Minutes
COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Enhancing Public Safety
Protecting the Environment and Preserving Open Space and Agricultural Land REPORT NARRATIVE:
POLICY CONSIDERATIONS:
Should the City establish some form of "water offset" program that would require owners and developers of new residential and nonresidential developments to "find" the water needed for their development by implementing or funding conservation programs that would reduce existing water consumption?
WATER WASTE ORDINANCE:
The City has long had a water waste ordinance that it relies upon to guide City activities during droughts and other water shortages. This ordinance specifically mimics the "Water Shortage Contingency Plan" required to be prepared with the Urban Water Management Plan (UWMP) that is submitted to the State every five years. When the 2020 UWMP was prepared, the City fine tuned the Water Shortage Contingency Plan to
14 better reflect the tools and opportunities that the City has to respond to water shortages.
The previous three large stages of water shortage were expanded to six smaller stages that offer more flexibility and responsiveness. The proposed ordinance (Attachment 1) merely codifies the six stage response plan that the Council approved last October when considering the UWMP and staff recommends adoption of the ordinance to ensure that the Municipal Code reflects the UWMP submitted to the State.
With the addition of the smaller more-nuanced stages, the actions associated with what used to be a Level 2 water shortage now constitute a Level 4 water shortage. Since California remains in a drought and the City was already in a declared Level 2 water shortage, staff recommends that the Council adopt the resolution (Attachment 2) updating the water shortage declaration from a Level 2 shortage to a Level 4 shortage.
Importantly, the increased number does not cause or represent additional use restrictions - it is merely updating the number to reflect the new numbering system.
Irrigation will remain limited to twice per week.
WATER OFFSET PROGRAM:
As climate change introduces more water uncertainty to California, it is advisable to consider new approaches to meeting each community's water needs. In Morgan Hill, the City is dependent on imported Sacramento - San Joaquin River Delta water to be purchased and piped to South County for groundwater recharge by Valleywater. As the likelihood of interruptions in these imported water supplies increases, so do the chances of declining groundwater levels and water shortages in South County. Any shortages potentially facing the community, could be more severe as the community grows.
While some have suggested that the City issue moratoriums on building during drought periods, moratoriums have two fatal flaws that make them untenable. First, the State would likely strike down any moratorium that impacted residential development (due to the housing crisis) so a moratorium would only restrict the nonresidential development that typically offers positive economic benefits to the community. Second, a moratorium does nothing to address the long-term water needs generated by development; it just stalls building.
An alternative to a moratorium is a water offset program that would require developers of new projects to "find" the water for the project by implementing or funding conservation programs that reduce water consumption. For example, a developer needing 100 units of water a day to support a new project would need to fund the conservation of 100 units of water a day by existing customers or, alternately, contribute to a project that would recycle 100 units of water a day. Several other communities, primarily coastal communities, have implemented similar programs after recognizing that their water supplies were limited.
To begin this work, staff proposes that the City hire a conservation consultant to prepare a policy options report for the City Council to consider later this year. The report would highlight the lessons learned in other communities, the options available for proceeding, and the fiscal impacts of such a program.
14 COMMUNITY ENGAGEMENT:
Inform and Consult
Community engagement relating to the City's water waste rules was completed with the community engagement for the UWMP. Per the staff report presented to the Council for UWMP adoption: "The UWMPA requires that the adopted UWMP demonstrate the water agency solicited public participation. Per the stated law, the City held a public hearing so community members could provide comments, learn about existing and future water supplies of the City, and raise any concerns towards the plan. A notice of the public hearing was published in the local newspaper on August 13 and 20, 2021, notifying interested parties that the draft 2020 UWMP was available at various City facilities and on the City’s web page (www.morganhill.ca.gov) for review two successive weeks before the anticipated adoption scheduled for October 6. In addition to the public hearing held for this item, the City hosted a workshop/town hall meeting for the public on September 9, in anticipation of the 2020 UWMP being adopted by the Council on October 6.
In addition, tonight's public hearing was properly noticed in the Morgan Hill Times.
The development of the water offset program will involve additional community engagement in the future before the program and any implementing actions are brought back to the City Council. The details of the program are not yet developed enough to do community engagement prior to tonight's meeting. City staff have received many public comments reflecting a concern about growth and water consumption that have demonstrated the need to consider this program.
ALTERNATIVE ACTIONS:
The Council could amend the recommended ordinance prior to adoption tonight or decline to adopt the ordinance at this time while providing staff with amendments to incorporate into the ordinance.
PRIOR CITY COUNCIL AND COMMISSION ACTIONS:
The Urban Water Management Plan was adopted by the Council on October 6, 2021.
The City's water waste ordinance was last amended by the Council in 2017. The current Level 2 water shortage was declared in June, 2021.
FISCAL AND RESOURCE IMPACT:
There are no direct fiscal impacts associated with adopting the new ordinance as it does not change the fiscal impacts (namely reduced water sales revenues and increased conservation program costs) associated with droughts and other water shortages that already exist under the current ordinance.
The water offset program will have short term costs and, if implemented, will necessitate a recalculation of the City's water impact fee and potentially require other amendments to the City's water conservation program budget. In the short term, consultant costs of approximately $50,000 will be required to engage in the study. Funding for this contract will be incorporated into the Water Operations budget (650.5710) and no budget adjustment is required. The long-term impacts cannot be determined until the program is more fully developed.
Administering the City's water waste and drought response programs are activities
14 included in the work program of the Public Services Department. Coordinating the evaluation of a water offset program and the associated need for community engagement is not a planned activity, but will not result in salary cost increases.
CEQA (California Environmental Quality Act):
Categorical Exemption
This Ordinance and actions taken hereafter pursuant to this Ordinance are exempt from the California Environmental Quality Act as actions intended to preserve and protect natural resources (CEQA Guidelines section 15307).
ORDINANCE NO. XXX, NEW SERIES
AN ORDINANCE OF THE CITY OF MORGAN HILL
AMENDING SECTIONS, 13.04.330 (WASTING OF WATER
AND DROUGHT EMERGENCIES) AND 13.04.390
(ENFORCEMENT) AND 13.04.400 (VIOLATIONPENALTY) OF CHAPTER 13.04 (WATER SYSTEM) OF TITLE 13 (PUBLIC SERVICES), AMENDING
REGULATIONS PROHIBITING NONESSENTIAL USE OF
POTABLE WATER
THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES HEREBY ORDAIN AS FOLLOWS:
Section 1. Findings.
a. A reliable minimum supply of potable water is essential to the public health, safety and welfare of the people and economy of City of Morgan Hill. b. The City of Morgan Hill is located in a semi-arid region and is dependent upon local groundwater, and imported water supplies. A growing population, climate change, environmental concerns, and other factors in other parts of the State and western United States, make the region highly susceptible to water supply reliability issues. c. There is a need for water conservation program and regulations because there is a limited supply of water available to serve the residents and businesses of Morgan Hill and demand for water has, at times, exceeded groundwater replenishment, threatening a water shortage.
d. Careful water management that includes active water conservation measures not only in times of drought, but at all times, is essential to ensure a reliable minimum supply of water to meet current and future water supply needs.
e. Article X, Section 2 of the California Constitution declares that the general welfare requires that water resources be put to beneficial use, waste or unreasonable use or unreasonable method of use of water be prevented, and conservation of water be fully exercised with a view to the reasonable and beneficial use thereof. f. Article XI, Section 7 of the California Constitution declares that a city or county may make and enforce within its limits all local, police, sanitary and other ordinances and regulations not in conflict with general laws.
g. California Water Code Section 375 authorizes water suppliers to adopt and enforce a comprehensive water conservation program to reduce water consumption and conserve supplies.
h. The City of Morgan Hill’s water conservation and supply shortage program has functioned adequately since its adoption in 2009. Changes to the program are necessary in order to expand and establish the permanent water conservation practices needed to
City of Morgan Hill
Ordinance No. XXXX, New Series
2 best manage the City of Morgan Hill’s potable water supply in the short and long-term and to avoid or minimize the effects of drought, climate change, and the unreliability of imported water infrastructure that serves the City of Morgan Hill.
Section 2. Declaration of Purpose and Intent.
a. The purpose of this Ordinance is to amend the City of Morgan Hill’s water conservation and supply shortage program. The program’s purposes are to reduce water consumption within the City of Morgan Hill through conservation, enable effective water supply planning, assure reasonable and beneficial use of water, prevent waste of water, and maximize the efficient use of water within the City of Morgan Hill to avoid and minimize the effect and hardship of water shortage to the greatest extent possible.
b. This Ordinance amends permanent water conservation standards intended to alter behavior related to water use efficiency at all times and further establishes six levels of water supply shortage response actions to be implemented during times of declared water shortage or declared water shortage emergency, with increasing restrictions on water use in response to worsening drought or emergency conditions and decreasing supplies.
Section 3. CEQA Exemption
The city finds that this Ordinance and actions taken hereafter pursuant to this Ordinance are exempt from the California Environmental Quality Act per the California Environmental Quality Act Guidelines Section 15307 (protection and preservation of natural resources). The City Clerk is hereby authorized and directed to file a Notice of Exemption as soon as possible following adoption of this Ordinance.
Section 4. Section 13.04.330 (Wasting of Water) of Chapter 13.04 (Water System) of Title 13 (Public Services) is hereby amended in its entirety to read as follows:
“13.04.330 Wasting of water and drought emergencies
A. Applicability
1. The provisions of this chapter apply to any person in the use of any potable water in the city.
2. The provisions of this chapter do not apply to uses of water necessary to protect public health and safety or for essential government services, such as police, fire and other similar emergency services.
3. The provisions of this chapter do not apply to the use of recycled water, with the exception of subsection B (1) of this section.
4. The provisions of this chapter do not apply to the use of water by commercial nurseries and commercial growers to sustain plants, trees, shrubs, crops or other vegetation intended for commercial sale, to the use of water in a community garden providing garden plots to the public, or to home fruit and vegetable gardens less than 200 square feet.
5. This chapter is intended solely to further the conservation of water. It is not intended to implement nor supersede any provision of federal, State, or local statutes,
City of Morgan Hill
Ordinance No. XXXX, New Series
3 ordinances, or regulations relating to protection of water quality or control of drainage or runoff.
B. Prohibition Against Waste: The following water conservation requirements are effective at all times and are permanent. Violations of this section will be considered waste and an unreasonable use of water.
1. Limits on Watering Hours: Watering or irrigating of lawn, landscape or other vegetated area with potable water is prohibited between the hours of 9:00 a.m. and 7:00 p.m. Pacific Standard/Daylight Savings Time on any day, except by use of a hand-held bucket or similar container, a hand-held hose equipped with a positive self-closing water shut-off nozzle or device, or for very short periods of time for the express purpose of adjusting or repairing an irrigation system. Watering or irrigating within 48 hours after ¼ inch or more of precipitation is received is prohibited.
2. Limit on Watering Duration: Watering or irrigating of lawn, landscape or other vegetated area with potable water using a landscape irrigation system or a watering device that is not continuously attended is limited to no more than fifteen (15) minutes watering per day per station/valve/zone. This subsection does not apply to landscape irrigation stations/valves/zones that exclusively use drip type irrigation systems, soaker hoses, bubblers, or high efficiency sprinkler nozzles that have a precipitation rate of less than two (2) gallons per hour; to systems controlled by weather-based irrigation controllers; and systems having stream rotor sprinklers with a 70% or greater efficiency standard.
3. Limit on Watering Days: During the months of March through October, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to three days per week on a schedule established and posted by the city. During the months of November through February, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to no more than one day per week on a schedule established and posted by the city. This provision does not apply to the following uses of water:
a. To landscape irrigation zones that exclusively use very low flow drip type irrigation systems when no emitter produces more than two (2) gallons of water per hour; b. To watering or irrigating by use of a hand-held bucket or similar container, a hand-held hose equipped with a positive self-closing water shut-off nozzle or device, or for very short periods of time for the express purpose of adjusting or repairing an irrigation system;
c. To landscape irrigation zones that are controlled by an activated weather-based irrigation controller;
d. To watering or irrigating a newly installed or significantly rehabilitated landscape for the first sixty days after the first plant is placed in the ground. For the purposes of this section, a significantly rehabilitated landscape is a landscape in which 25% or more of a property’s landscape is replaced.
4. No Excessive Water Flow or Runoff: Watering or irrigating of any lawn, landscape or other vegetated area in a manner that causes or allows excessive water flow or runoff onto an adjoining sidewalk, driveway, street, alley, gutter or ditch is prohibited.
5. No Washing Down Hard or Paved Surfaces: Washing down hard or paved surfaces, including but not limited to sidewalks, walkways, driveways, parking areas, tennis courts, patios or alleys, is prohibited except when necessary to alleviate safety or
City of Morgan Hill
Ordinance No. XXXX, New Series
4 sanitary hazards, and then only by use of a hand-held bucket or similar container, a handheld hose equipped with a positive self-closing water shut-off device, a low-volume, high-pressure cleaning machine equipped to recycle any water used, or a low-volume high-pressure water broom. Washing down structures, fences, and hard surfaces expressly for the purposes of preparing a surface for the application of a surface coating is not prohibited provided it does not occur more than one time in any twelve (12) month period.
6. Obligation to Fix Leaks, Breaks or Malfunctions: Excessive use, loss or escape of water through breaks, leaks or other malfunctions in the water user’s plumbing or distribution system for any period of time after such escape of water should have reasonably been discovered and corrected and in no event more than ten (10) days of receiving written notice from the city, is prohibited.
7. Recirculating Water Required for Water Fountains and Decorative Water Features: Operating a water fountain or other decorative water feature that does not use recirculated water is prohibited.
8. Limits on Washing Vehicles: Using water to wash or clean a vehicle, including but not limited to any automobile, truck, van, bus, motorcycle, boat or trailer, whether motorized or not is prohibited, except by use of a hand-held bucket or similar container or a hand-held hose equipped with a positive self-closing water shut-off nozzle or device.
This subsection does not apply to any commercial car washing facility that incorporates a recycled or recirculating water system in its operation.
9. Drinking Water Served Upon Request Only: Eating or drinking establishments, including but not limited to a restaurant, hotel, cafe, cafeteria, bar, or other public place where food or drinks are sold, served, or offered for sale, are prohibited from providing drinking water to any person unless expressly requested.
10. Commercial Lodging Establishments Must Provide Guests Option to Decline Daily Linen Services: Hotels, motels and other commercial lodging establishments must provide customers the option of not having towels and linen laundered daily.
Commercial lodging establishments must prominently display notice of this option in each bathroom using clear and easily understood language.
11. No Installation of Single Pass Cooling Systems: Installation of single pass cooling systems is prohibited in buildings requesting new water service.
12. No Installation of Nonrecirculating in Commercial Car Wash and Laundry Systems: Installation of nonrecirculating water systems is prohibited in new commercial conveyor car wash and new commercial laundry systems.
13. Restaurants Required to Use Water Conserving Dish Wash Spray Valves: Food preparation establishments, such as restaurants or cafes, are prohibited from using nonwater conserving dish wash spray valves.
14. Commercial Car Wash Systems: All commercial conveyor car wash systems must have installed operational recirculating water systems or must have a waiver of this requirement from the city.
15. Construction Activities: Use of potable water for construction site dust control, compaction, and other site activities suitable for nonpotable water is prohibited if recycled water is available within five miles of the construction site.
16. Plumbing System Testing: Use of potable water for plumbing system testing is prohibited unless required by law or alternative testing procedures are determined to be unsuitable by City inspection staff.
City of Morgan Hill
Ordinance No. XXXX, New Series
5 17. Pool Covers: Constructing a pool without the inclusion of a pool cover is prohibited. All contracts for the construction of a new pool entered into after September 2, 2015 shall include the provision of a pool cover.
C. Level 1 Water Supply Shortage (1% - 10% reduction): A Level 1 Water Supply Shortage (“Alert” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a 1% - 10% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 1 Water Supply Shortage condition, the City will implement an active communication campaign asking the community to conserve water in compliance with the City’s permanent water use restrictions.
D. Level 2 Water Supply Shortage (11% - 20% reduction): A Level 2 Water Supply Shortage (“Severe” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a 11% - 20% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 2 Water Supply Shortage condition, the City will:
1. Evaluate the water use of individual water utility customers and distribute targeted communications to those water utility customers that are high users or appear to be violating the City’s water use rules; and
2. Continue implementing all Level 1 response activities.
E. Level 3 Water Supply Shortage (21% - 30% reduction): A Level 3 Water Supply Shortage (“Critical 1” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a 21% - 30% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 3 Water Supply Shortage condition, the City will:
1. Actively enforce the City’s current restrictions regarding the limits on watering days contained in Section 13.04.330 B (3);
2. Suspend exemptions 13.04.330 B (3)(c) and 13.04.330 B (3)(d) to Section
13.04.330 B (3);
3. Prohibit the use of potable water to wash or clean a vehicle, including but not limited to, any automobile, truck, van, bus, boat or trailer, whether motorized or not, except at a commercial car washing facility that utilizes a recirculating water system to capture or reuse water. This provision does not apply to bicycles and motorcycles. The use of potable water to clean the windshield, windows, or mirrors of a vehicle by use of a hand-held bucket or similar container is not prohibited;
City of Morgan Hill
Ordinance No. XXXX, New Series
6 4. Impose an alternative rate schedule designed for water supply shortage events if such a rate schedule has been adopted by the City Council; and
5. Continue implementing all other Level 2 response activities.
F. Level 4 Water Supply Shortage (31% - 40% reduction): A Level 4 Water Supply Shortage (“Critical 2” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a 31% - 40% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 4 Water Supply Shortage condition, the City will:
1. Actively enforce the following limited irrigation schedule: During the months of March through October, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to two days per week on a schedule established and posted by the city. During the months of November through February, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to no more than one day per week on a schedule established and posted by the city. This provision does not apply to landscape irrigation zones that exclusively use very low flow drip type irrigation systems when no emitter produces more than two (2) gallons of water per hour. This provision also does not apply to watering or irrigating by use of a hand-held bucket or similar container, a hand-held hose equipped with a positive self-closing water shut-off nozzle or device, or for very short periods of time for the express purpose of adjusting or repairing an irrigation system; and
2. Continue implementing all other Level 3 response activities.
G. Level 5 Water Supply Shortage (41% - 50% reduction): A Level 5 Water Supply Shortage (“Emergency 1” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a 41% - 50% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 5 Water Supply Shortage condition, the City will:
1. Actively enforce the following limited irrigation schedule:
a. The watering or irrigating of lawns and turf is prohibited except for turf utilized for active recreation at a school, park, or public facility.
Turf used for active recreation at a school, park, or public facility may be irrigated in accordance with all other irrigation restrictions up to two times per week from March – October and one time per week from November – February;
b. Trees, shrubs, and dedicated landscapes that do not contain turf may be watered one time per week in accordance with all other irrigation restrictions; and
City of Morgan Hill
Ordinance No. XXXX, New Series
7 2. Consider limits on the issuance of building permits, new potable water services, temporary meters and/or statements of immediate ability to serve or provide potable water service (such as, will-serve letters, certificates, or letters of availability). The City may consider exemptions to the limitation that include, but are not limited to the following circumstances:
a. A valid, unexpired building permit has been issued for the project; b. The project is necessary to protect the public health, safety, and welfare; or
c. The applicant provides substantial evidence of an enforceable commitment that water demands for the project will be offset prior to the provision of a new water meter(s) to the satisfaction of the city.
This provision does not preclude the resetting or turn-on of meters to provide continuation of water service or the restoration of service that has been interrupted for a period of one year or less; and
3. Continue implementing all other Level 4 response activities.
H. Level 6 Water Supply Shortage (greater than 50% reduction): A Level 6 Water Supply Shortage (“Emergency 2” stage) exists when the city council determines, in its sole discretion, that due to drought, other water supply conditions, or as mandated by the State of California, a water supply shortage or threatened shortage exists and a greater than 50% consumer demand reduction is necessary to make more efficient use of water and appropriately respond to existing water conditions. Upon the declaration by the city of a Level 6 Water Supply Shortage condition, the City will:
1. Prohibit all irrigation; and
2. Continue implementing all other Level 5 response activities.
I. Procedures for Determination/Notification of Water Supply Shortage The existence of Water Supply Shortage conditions may be declared by resolution of the city council adopted at a regular or special public meeting held in accordance with state law. The mandatory conservation requirements relating to each level of Water Supply Shortage conditions will take effect on the tenth day after the date the shortage level is declared. Within five (5) days following the declaration of the shortage level, the city must publish a copy of the resolution in a newspaper used for publication of official notices.
J. Hardship Waiver. If, due to unique circumstances, a specific requirement of this chapter would result in undue hardship to a person using water or to property upon which water is used, that is disproportionate to the impacts to water users generally or to similar property or classes of water users, then the person may apply for a waiver to the requirement as provided in this Section.
1. Application: Application for a waiver must be on a form prescribed by the City Manager and accompanied by a nonrefundable processing fee in an amount set by city council resolution.
2. Supporting Documentation: The application must be accompanied by photographs, maps, drawings, and other information, including a written statement of the applicant.
City of Morgan Hill
Ordinance No. XXXX, New Series
8 3. Required Findings for Waiver: The waiver may be granted or conditionally granted only upon a written finding of the existence of facts demonstrating an undue hardship to a person using water or to property upon which water is used, that is disproportionate to the impacts to water users generally or to similar property or classes of water use due to specific and unique circumstances of the user or the user’s property. An application for a waiver will be denied unless the City Manager finds, based on the information provided in the application, supporting documents, or such additional information as may be requested, and on water use information for the property as shown by the records of the city or its agent, all of the following:
a. That the waiver does not constitute a grant of special privilege inconsistent with the limitations upon other residents and businesses; b. That because of special circumstances applicable to the property or its use, the strict application of this chapter would have a disproportionate impact on the property or use that exceeds the impacts to residents and businesses generally; c. That the authorizing of such waiver will not be of substantial detriment to adjacent properties, and will not materially affect the ability of the city to effectuate the purpose of this chapter and will not be detrimental to the public interest; and
d. That the condition or situation of the subject property or the intended use of the property for which the waiver is sought is not common, recurrent or general in nature.
4. Approval Authority: The City Manager must act upon any completed application no later than ten (10) days after submittal and may approve, conditionally approve, or deny the waiver. The applicant requesting the waiver must be promptly notified in writing of any action taken. Unless specified otherwise at the time a waiver is approved, the waiver will apply to the subject property during the period of the mandatory water supply shortage condition. The decision of the City Manager shall be final.”
Section 5. Section 13.04.390 (Enforcement) of Chapter 13.04 (Water System) of Title 13 (Public Services) is hereby amended in its entirety to read as follows:
“13.04.390 - Enforcement.
It shall be the duty of the employees of the police, fire, community development, community services, and engineering and utilities departments to give vigilant aid to the city manager in the enforcement of the provisions of this chapter, and to this end they shall report all violations thereof which shall come to their knowledge, to the office of the city manager and it shall be the duty of the chief of the fire department to report immediately to the city manager in case of fire in premises, having metered service for fire protection purposes that fire has occurred there.” Section 6. Section 13.04.400 (Violation-Penalty) of Chapter 13.04 (Water System) of Title 13 (Public Services) is hereby amended in its entirety to read as follows:
“13.04.400 - Violation—Penalty.
City of Morgan Hill
Ordinance No. XXXX, New Series
9 A. Penalty. Any person violating or causing or permitting to be violated, any of the provisions of this chapter, is deemed guilty of a misdemeanor. Upon conviction thereof, such person shall be punished by a fine not exceeding one thousand dollars, or by imprisonment in the county jail for not more than 30 days. Every such person shall be deemed to be guilty of a separate offense for every day during any portion of which any violation of any provision of this chapter is committed, continued or permitted by such person, and shall be punishable therefor as provided in this section.
B. Notwithstanding any other provision of this code, whenever a violation of any section contained in this chapter is punishable as a misdemeanor, the city attorney may specify that the offense is an infraction, and proceed with prosecution as an infraction, unless the defendant objects to the offense being made an infraction, in which event the court may elect to have the complaint amended to charge as a misdemeanor, and the case shall proceed on a misdemeanor charge.
C. Violation of Section 13.04.330. In addition to all other available remedies, including penalties available pursuant to subsection A or B of this section, any person violating or causing or permitting to be violated any provision of Section 13.04.330 shall be subject to the following penalties and fines pursuant to the authorities and procedures set forth in Chapter 1.19:
1. First Violation: The City of Morgan Hill will issue a written warning and deliver a copy of the ordinance codified in this section by mail.
2. Second Violation: A second violation within any consecutive twelve-month period is punishable by a fine not to exceed one hundred dollars. The fine for a second violation shall be three hundred dollars if the violation occurred during a City Council declared Water Supply Shortage condition.
3. Third Violation: A third violation within any consecutive twelve-month period is punishable by a fine not to exceed two hundred dollars. The fine for a third violation shall be six hundred dollars if the violation occurred during a City Council declared Water Supply Shortage condition.
4. Subsequent Violations: Any subsequent violations within any consecutive twelvemonth period are punishable by a fine not to exceed one thousand five hundred dollars and subject to installation of a water flow restrictor device of approximately one gallon per minute capacity for services up to one and one-half inch size and comparatively sized restrictors for larger services after written notice of intent to install a flow restrictor for a minimum of forty-eight hours.
a. In addition to any other fines or penalties, a person who violates provisions of Section
13.04.330 is responsible for payment of the City of Morgan Hill's charges for installing and/or removing any flow restricting device and for disconnecting and/or reconnecting service per the city's schedule of charges then in effect. The charge for installing and/or removing any flow restricting device must be paid to the city before the device is
City of Morgan Hill
Ordinance No. XXXX, New Series
10 removed. Nonpayment will be subject to the same remedies as nonpayment of basic water rates.
b. The first installation of a flow-restricting device shall remain in place for a minimum of three days and shall be removed by the city not more than ten days after installation.
The second installation of a flow-restricting device, for continued violation of this chapter, shall remain in place for a minimum period of ten days before being removed by the city no later than thirty days thereafter. Normal water service shall not be restored until all installation and removal costs of flow-restricting devices have been paid.
5. Separate Offenses: Each day that a person violated provisions of Section 13.04.330 shall constitute a separate violation or offense.
D. All remedies provided for herein shall be cumulative and not exclusive.” Section 7. Severability
If any section, subsection, sentence, clause or phrase in this Ordinance is for any reason held invalid, the validity of the remainder of the Ordinance will not be affected. The city council hereby declares it would have passed this Ordinance and each section, subsection, sentence, clause or phrase thereof, irrespective of the fact that one or more sections, subsections, sentences, clauses, or phrases or is declared invalid.
Section 8. Effective Date; Posting.
Pursuant to California Water Code Section 376, this Ordinance shall constitute a water conservation program and shall be effective upon adoption. Within ten (10) days of its adoption, this ordinance shall be published in full once in a newspaper of general circulation which is printed, published, and circulated in the City of Morgan Hill.
THE FOREGOING ORDINANCE WAS INTRODUCED AT A MEETING OF THE CITY COUNCIL HELD ON THE 6TH DAY OF APRIL 2022, AND WAS FINALLY ADOPTED AT A MEETING OF THE CITY COUNCIL HELD ON THE 20th DAY OF APRIL 2022, AND SAID ORDINANCE WAS DULY PASSED AND ADOPTED IN ACCORDANCE WITH LAW BY THE FOLLOWING VOTE:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
APPROVED:
________________________________
RICHARD CONSTANTINE, Mayor
City of Morgan Hill
Ordinance No. XXXX, New Series
11 ATTEST:
________________________________ DATE: _____________________ MICHELLE BIGELOW, City Clerk
APPROVED:
________________________________
RICHARD CONSTANTINE, Mayor
ATTEST:
________________________________ DATE: _____________________ MICHELLE BIGELOW, City Clerk
Effective xxx
CERTIFICATION
I, MICHELLE BIGELOW, CITY CLERK OF THE CITY OF MORGAN HILL, CALIFORNIA, do hereby certify that the foregoing is a true and correct copy of Ordinance No. xxxx, New Series, adopted by the City Council of the City of Morgan Hill, California at its regular meeting held on the 20th day of April 2022.
WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.
DATE:
MICHELLE BIGELOW, City
Clerk
RESOLUTION NO. 22-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF MORGAN HILL DECLARING A LEVEL 4 WATER
SHORTAGE CONDITION REQUIRING THE
IMPLEMENTATION OF LEVEL 4 CONSERVATION
MEASURES
WHEREAS, the reasons supporting the entrance of the City into that certain agreement described in, and that is the subject of, this Resolution are set forth in detail in that certain City Council Staff Report entitled “Adopt ordinance updating water waste ordinance, adopt water shortage resolution, and accept report on water offset program” submitted for City Council consideration at its meeting of April 6, 2022, submitted to the City Council by the City Manager (the “Staff Report”), the contents of which Staff Report are incorporated herein by this reference; and
WHEREAS, on June 9, 2021, the Valley Water Board of Directors called for a 33% reduction in water use compared to 2013; and
WHEREAS, the underground water aquifers that the City relies on for 100% of its water supply are recharged by the District using water supplies imported into the District; and WHEREAS, the District’s imported water supply allocations have been significantly reduced for 2022 by the State and Federal government water systems; and WHEREAS, historical evidence indicates that the State of California has experienced prolonged periods of drought in the past; and
WHEREAS, the long-term health, safety, and prosperity of the community depends upon having a reliable supply of potable water; and
WHEREAS, the City declared a Level 2 Water Shortage, in response to Valley Water’s request in June 2021. With the adoption of an updated water waste ordinance by the City Council, the previous Level 2 response measures now comprise a Level 4 Water Shortage so a resolution changing the City’s declared level from Level 2 to Level 4 is necessary in order to maintain the City’s drought response activities.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES HEREBY FIND, DETERMINE, RESOLVE AND ORDER AS FOLLOWS:
Section 1. Recitals. The City Council does hereby find, determine and resolve that all of the foregoing recitals are true and correct.
Section 2. Approval and Authorization. The City Council does further resolve, order and/or direct as follows:
a. That the City Council of the City of Morgan Hill declares a Level 4 Water Shortage
City of Morgan Hill
Resolution No. 22-xxx
2 b. That the following limitations are now instituted in accordance with the City’s Municipal Code’s determined response to a Level 4 Water Shortage:
1. Watering Days. During the months of March through October, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to two days per week on a schedule established and posted by the city. During the months of November through February, watering or irrigating of lawn, landscape or other vegetated area with potable water is limited to no more than one day per week on a schedule established and posted by the city. This provision does not apply to landscape irrigation zones that exclusively use very low flow drip type irrigation systems when no emitter produces more than two (2) gallons of water per hour. This provision also does not apply to watering or irrigating by use of a handheld bucket or similar container, a hand-held hose equipped with a positive selfclosing water shut-off nozzle or device, or for very short periods of time for the express purpose of adjusting or repairing an irrigation system. Exemptions
13.04.330 B (3)(c) and 13.04.330 B (3)(d) in Section 13.04.330 B (3) are suspended.
2. Limits on Washing Vehicles. Using potable water to wash or clean a vehicle, including but not limited to, any automobile, truck, van, bus, boat or trailer, whether motorized or not, is prohibited except at a commercial car washing facility that utilizes a recirculating water system to capture or reuse water. This provision does not apply to bicycles and motorcycles. The use of potable water to clean the windshield, windows, or mirrors of a vehicle by use of a hand-held bucket or similar container is not prohibited.
For the sake of clarity, the above limitations are now instituted in addition to the permanent ongoing limitations on water use contained in the Section 13.04.330 B of the Morgan Hill Municipal Code.
c. That the City Council hereby finds based upon the facts and information in the record for this Resolution that the declaration of a Level 4 Water Supply Shortage and its related regulatory effects are categorically exempt from environmental review under the California Environmental Quality Act pursuant to California Code of Regulations, Title 21, Section 15307 (actions by regulatory agencies for protection of natural resources)
City of Morgan Hill
Resolution No. 22-xxx
3 PASSED, APPROVED, AND ADOPTED by the City Council of Morgan Hill at a Regular Meeting held on the 6th day of April 2022 by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
APPROVED: ATTEST:
___________________________________ _______________________________ RICH CONSTANTINE, Mayor MICHELLE BIGELOW, City Clerk
CERTIFICATION
I, Michelle Bigelow, City Clerk of the City of Morgan Hill, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. 22-XXX adopted by the City Council at the meeting held on the 6th day of April 2022.
WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.
DATE: _____________________ ___________________________________ MICHELLE BIGELOW, City Clerk
15 CITY COUNCIL STAFF REPORT
MEETING DATE: April 6, 2022
PREPARED BY:
Rebecca Garcia, Housing Director
APPROVED BY: City Manager
CONDUCT TAX AND EQUITY FISCAL RESPONSIBILITY ACT (TEFRA)
HEARING APPROVING ISSUANCE OF BONDS FOR VILLAGE AT
MADRONE AFFORDABLE HOUSING APARTMENTS AT 18960
MONTEREY STREET WITHIN THE CITY OF MORGAN HILL
RECOMMENDATION(S)
1. Open/close public hearing consistent with the requirements of the Federal Tax and Equity Fiscal Responsibility Act ("TEFRA") and Section 147 (f) of the Internal Revenue Code of 1986, as amended (the “Code”); and
2. Adopt resolution approving the issuance of bonds by the California Municipal Finance Authority (CMFA), for the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 18960 Monterey Street, Morgan Hill, California (the “Project”).
Estimated Time: 15 Minutes
COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Preserving and Cultivating Public Trust
Enhancing Diversity and Inclusiveness
Advancing Regional Initiatives
2022-2023 Strategic Priorities
Affordable Housing and Homelessness
Guiding Documents
Morgan Hill 2035 General Plan
REPORT NARRATIVE:
POLICY CONSIDERATIONS:
JEMCOR Development Partners, LLC (“JEMCOR” or the “Borrower”), is approved to build a 100 percent affordable housing development project, Village at Madrone,
15 comprised of 249 multi-family units, ranging from 30% of the Area Median Income (AMI) to 60% AMI. These apartments will serve as workforce housing, and are located at the northeast corner of Monterey Road and Madrone Parkway.
The City is required to hold this public hearing allowing community members to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. The City Council’s only role is to listen to public testimony regarding the appropriateness of bond financing. Following the close of the hearing, the City must approve the issuance of the bonds for the financing of the Project. The City has no financial obligation or legal risk with the bond issuance.
To finance this new construction Project of Village at Madrone, JEMCOR Development Partners have applied and received a very competitive award for Federal Low Income Housing Tax Credits (“LIHTC”) from the California Tax Credit Allocation Committee and a tax-exempt bond allocation from the California Debt Limit Allocation Committee (“CDLAC”).
The Borrower, JEMCOR, requested that the California Municipal Finance Authority (“CMFA”), a joint exercise of powers authority and public entity of the State of California, serve as the municipal issuer of the tax-exempt revenue bonds in an aggregate principal amount not to exceed $85,000,000. The tax-exempt bond financing is a “conduit” financing in which the City has no exposure for the debt. Rather, JEMCOR, the sponsor, asks the CMFA to issue the bonds upon CDLAC’s authorization and then solicits a lender who purchases all of the bonds in a private sale. CMFA is a public entity that is authorized and experienced in the issuance of such bonds.
As the nature of the financing vehicle is tax-exempt, the Tax and Equity Fiscal Responsibility Act (“TEFRA”) requires the local jurisdiction to support the transaction.
This requirement is fulfilled through the public hearing approving the conduit financing after public notice is published seven days prior, allowing the community members an opportunity to speak in favor of or against the use of tax-exempt bonds for the financing of the Project. Following the close of the TEFRA Hearing, the City must approve the issuance of the bonds for the financing of the Project through a resolution.
CALIFORNIA MUNICIPAL FINANCE AUTHORITY:
The CMFA was created on January 1, 2004, pursuant to a joint exercise of powers agreement to promote economic, cultural, and community development through the financing of economic development and charitable activities throughout California. The bonds to be issued by the CMFA for the Project will be the sole responsibility of the Borrower, and the City will have no financial, legal, moral obligation, liability, or responsibility for the Project or the repayment of the bonds for the financing of the Project. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that the bonds are not obligations of the City or the State but are to be paid for solely from funds provided by the Borrower. Outside of holding the TEFRA Hearing and adopting the required resolution, no other participation or activity of the City or the City Council with respect to the issuance of the bonds will be required.
15 COMMUNITY ENGAGEMENT:
The community was informed by a notice published in the Morgan Hill Times on March 25, 2022.
ALTERNATIVE ACTIONS:
There are no alternative actions as the City must approve the resolution after the public hearing.
PRIOR CITY COUNCIL AND COMMISSION ACTIONS:
Government Code Section 65915(f)(3)(D)(i) and 65915(d)(2)(D) required the City to grant an 80 percent Density Bonus and three concessions. The resolution was adopted by the City Council on April 21, 2021.
FISCAL AND RESOURCE IMPACT:
There is no fiscal impact to the City. The Bonds will be issued as limited obligations of CMFA, payable solely from revenues and receipts derived from a loan to be made by CMFA to the Borrower with the Bond proceeds. The City bears no liability with respect to the issuance of the Bonds. Further, the City is not a party to any of the financing documents related to the Bond issuance and is not named in any of the disclosure documents describing the Bonds or the proposed financing.
CEQA (California Environmental Quality Act):
This is not a project but rather an administrative activity that will not result in direct or indirect physical changes in the environment. Thus, the administrative activity of the project is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3).
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
MORGAN HILL APPROVING THE ISSUANCE BY THE
CALIFORNIA MUNICIPAL FINANCE AUTHORITY
MULTIFAMILY HOUSING REVENUE BONDS FOR
VILLAGE AT MADRONE
WHEREAS, Village at Madrone, LP (the "Borrower") a partnership of which JEMCOR Development Partners, LLC (the "Developer") or a related person to the Developer is the general partner, has requested that the California Municipal Finance Authority (the "Authority") adopt a plan of financing providing for the issuance of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the "Code") in one or more series issued from time to time, including bonds issued to refund such exempt facility bonds in one or more series from time to time, and at no time to exceed $85,000,000 in aggregate principal amount (the "Bonds"), to finance or refinance the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 18960 Monterey Street, Morgan Hill, California (the "Project"); and
WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City of Morgan Hill (the "City") because the Project is located within the territorial limits of the City; and
WHEREAS, the City Council of the City (the "City Council") is the elected legislative body of the City and is one of the "applicable elected representatives" required to approve the issuance of the Bonds under Section 147(f) of the Code; and WHEREAS, the Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisfy the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local agencies, including the City; and
WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES HEREBY FIND, DETERMINE, RESOLVE AND ORDER AS FOLLOWS:
Section 1. The above recitals are true and correct.
Section 2. The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area
City of Morgan Hill
Resolution No. 22-xxx
in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement.
Section 3. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents that they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing approved hereby.
Section 4. This resolution shall take effect immediately upon its passage.
PASSED, APPROVED AND ADOPTED by the City Council of the City of Morgan Hill at a regular meeting held on the April 6, 2022.
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
APPROVED: ATTEST:
_____________________________ ________________________________ RICH CONSTANTINE, Mayor MICHELLE BIGELOW, City Clerk
CERTIFICATION
I, Michelle Bigelow, City Clerk of the City of Morgan Hill, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. 22-xxx, adopted by the City Council at a regular meeting held on April 6, 2022.
WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.
DATE: _____________________ ___________________________________ MICHELLE BIGELOW, City Clerk
16 CITY COUNCIL STAFF REPORT
MEETING DATE: April 6, 2022
PREPARED BY:
Matthew Mahood, Economic Development Director
APPROVED BY: City Manager
ACCEPT INITIATIVE PETITION IMPACT REPORT AND ADOPT
RESOLUTION PLACING THE CITIZENS' INITIATIVE AMENDING THE
GENERAL PLAN TO REQUIRE VOTER APPROVAL OF ANY FUTURE
MONTEREY ROAD LANE REDUCTION ON THE NOVEMBER 2022
BALLOT
RECOMMENDATION(S)
1. Accept the Initiative Petition Impact Report; and
2. Adopt Resolution placing Initiative Petition Titled: The Citizens' Initiative Amending The General Plan To Require Voter Approval of Any Future Monterey Road Lane Reduction on the November 2022 ballot.
Estimated Time: 45 Minutes
COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Preserving and Cultivating Public Trust
REPORT NARRATIVE:
On March 2, 2022, the City Council adopted the resolution accepting the City Clerk’s Certificate of sufficiency for the Initiative Petition Titled: Citizens’ initiative amending the General Plan to require voter approval of any future Monterey Road lane reduction. The Council also directed staff to prepare an impact report under Elections Code section 9212.
Per Elections Code section 9212, staff compiled an impact report addressing how the Citizens' Initiative affects the City, including consistency with the City’s general and specific plans, its impact on funding for infrastructure and vacant parcels of land as well as its impact on the City's ability to retain and attract business and employment (Attached).
COMMUNITY ENGAGEMENT:
Involve
16 As a General Law City, Morgan Hill is governed by Government and Election Codes to elect municipal officers (e.g., mayor, council members, and city treasurer), for ballot measures, and for initiative and referendum processes.
ALTERNATIVE ACTIONS:
The City Council could choose to adopt the Citizens' Initiative in lieu of placing it on the November 2022 ballot.
PRIOR CITY COUNCIL AND COMMISSION ACTIONS:
On March 2, 2022, the City Council adopted the resolution accepting the City Clerk’s Certificate of sufficiency for the Initiative Petition Titled: Citizens’ initiative amending the General Plan to require voter approval of any future Monterey Road lane reduction. The Council also directed staff to prepare an impact report under Elections Code section 9212.
On January 19, 2022, as part of the Downtown Traffic Calming and Monterey Road Land Reduction and Place-Branding Program, the City Council approved the proposed Traffic Mitigation Plan Implementation Schedule to support the Monterey Road Lane Reduction Program, and approved the re-design of traffic lanes for Monterey Road from Dunne Avenue to Main Avenue to be implemented in the Implementation Schedule.
On August 18, 2021, the City Council authorized staff and the City Manager to apply for and negotiate Transportation Development Act Grant Funds for bicycle lane improvements.
On May 19, 2021, due to the COVID-19 pandemic and requests from local business owners, the City Council provided direction for staff to return with the design of an Improved Lane Reduction Program and associated Place Branding Design for the Downtown.
On June 3, 2020, the City Council provided direction on the Monterey Road Complete Streets/Lane Reduction Program and business use of Downtown spaces. The Council did not elect to move forward with the Complete Streets/Lane Reduction Program.
The Council previously acted on the Monterey Road Complete Streets/Lane Reduction Program on August 5, 2015. The City Council directed the re-establishment of two travel lanes in each direction following the trial of the Program. The Council did request the item be revisited at a later date, should circumstances change. Prior to August 2015, the Council made several actions leading to the Pilot.
FISCAL AND RESOURCE IMPACT:
Election Cost: If the Council elects to place the initiative on the ballot, it will be placed on the ballot at the next regular municipal election scheduled for November 8, 2022.
The estimated cost to place a measure on the ballot for the November 8, 2022 election is $61,502.
16 Resource Impact: Thus far, staff has been able to accommodate the additional work due to the initiative petition within its existing workplan.
Ordinance Impact: See attached Election Code 9212 Initiative Petition Impact Report CEQA (California Environmental Quality Act):
Categorical Exemption
Certification of an initiative petition is not a project under CEQA.
Citizens’ Initiative Amending The General Plan To
Require Voter Approval Of Any Future Monterey Road
Lane Reduction
Initiative Petition Impact Report
Pursuant to Election Code 9212
THE INITIATIVE
The Citizens’ Initiative intends to amend the City of Morgan Hill 2035 General Plan’s Transportation Element Policy TR1.5 Monterey Road Four Lanes with an Option.
This Transportation Element also provides that Monterey Road shall be a four-lane thoroughfare with an option for the City of Morgan Hill to narrow the road to two-lanes through Downtown. The option to reduce Monterey Road to two lanes through the Downtown shall be decided solely by the voters through an election. Until the voters exercise the option, Monterey Road shall be a four-lane thoroughfare. The requirement of voter approval to reduce Monterey Road to two lanes shall apply to any mention of the option in the General Plan.
BACKGROUND & INTRODUCTION
On June 9, 2021, proponents submitted a Notice of Intention, written text of the initiative, and reasons for the proposed initiative.
On December 22, 2021, the City of Morgan Hill (City) requested that the Santa Clara County Registrar of Voters Office (ROV) conduct a random sampling of the signatures on the referendum petitions.
On January 20, 2022, the City was notified by the ROV that the random sampling results fell between 95% and 110%, necessitating a full count.
On February 23, 2022, the City was notified by the ROV that 2,814 signatures were found to be sufficient.
On March 2, 2022, the City Council 1) Adopted the resolution accepting the City Clerk’s Certificate of sufficiency for the Initiative Petition Titled: Citizens’ initiative amending the General Plan to require voter approval of any future Monterey Road lane reduction; and 2) Directed staff to prepare an impact report under Elections Code section 9212 within 30 days and no later than April 1, 2022, for City Council consideration at the April 6, 2022 City Council meeting.
Per the Elections Code, the report should analyze:
1. The fiscal impact of the measure;
2. The effect of the measure on consistency with the City’s general and specific plans:
3. Its impact on funding for infrastructure;
4. Its impact on the community’s ability to attract and retain business and employment;
5. Its impact on vacant parcels of land;
6. Its impact on traffic congestion, existing business districts, and developed areas;
7. Any other matters the City Council would like to be in the report.
This report aims to provide the City Council with information to assist in deciding to adopt the Initiative or adopt a resolution calling for an election on the measure.
FISCAL IMPACT
If the Council elects to place the initiative on the ballot, it will be placed on the ballot at the next regular municipal election scheduled for November 8, 2022. The estimated cost to place a measure on the ballot for the November 8, 2022 election is $61,502.
If the Council elects to adopt the initiative, there are no election costs.
If the lane reduction project is not implemented, the cost of the project not being implemented would be saved. The project cost is $95,000 and is grant funded. If the grant funds are not used for the lane reduction, the funds can be reallocated for a different purpose.
If the Monterey Lane Reduction is not implemented, there are potential future liability costs associated with increasing traffic and vehicle congestion in the Downtown core that continues to erode pedestrian and bicyclist safety. Historically, the City has incurred fiscal impacts due to litigation over pedestrian and bicycle related accidents. However, the City is protected from liability for many accidents based on design immunity. With increased pedestrian activity downtown, the City could potentially lose its immunity based on the inability to create a “complete street.”
Other potential increased costs in the Downtown could include overtime costs for officers conducting directed traffic enforcements to mitigate speeding, especially during the busy summer months. Without lane reduction project implementation, it is anticipated the number of traffic collisions would remain the same. From 2017 to 2021 there were 62 traffic collisions along the Monterey corridor averaging just over 12 per year. Collisions require officer response and may incur overtime costs for investigation and court.
In addition, noise complaints would also remain at the same levels. These too require officer response, which pulls officers away from patrolling the entire city.
Sales tax in the Downtown district has been increasing over the last few years. The intent of the Monterey Road Lane Reduction program and associated place branding beautification program has been to support the Downtown as a growing, vibrant, pedestrian friendly business district. The graphic below shows the increasing sales tax collection trend in the Downtown district.
CONSISTENCY WITH GENERAL PLAN, SPECIFIC PLANS, AND ECONOMIC DEVELOPMENT The Monterey Road Lane Reduction Plan is supported by numerous General Plan policies and goals, the Morgan Hill Downtown Specific Plan, the 2017 Economic Blueprint and Vision Zero.
General Plan Policies:
Policy CNF-8.2: Comfortable pedestrian facilities that promote a high level of pedestrian activity.
Policy CNF-11.8: Multi-Modal Transportation System. Require new subdivisions to contain a network of streets, sidewalks, trails, and transit facilities that accommodate all modes of transportation.
Methods to achieve this may include:
Incorporating complete streets designed for low vehicle speeds. Planting trees along both sides of streets.
Installing bus stops, shelters, and benches in or adjacent to the project. Providing safe walking and bicycling routes to schools, parks, and other youth destinations.
Policy CNF-14.7: Pedestrian-Oriented Downtown. Enhance the positive, friendly atmosphere of the Downtown by encouraging proposed development to expand pedestrian-oriented design and amenities east of Monterey Road to Butterfield Boulevard.
Policy CNF-14.8: Downtown Streetscape. Continue the Downtown streetscape and pedestrian-oriented design theme along Monterey Road for at least one block north of Main Avenue and at least one block south of Dunne Avenue, and from Monterey Road east to Butterfield Boulevard between Main and Dunne Avenues, to provide a transition from downtown adjoining commercial areas.
Policy CNF-14.12: Downtown Transportation Improvements. Ensure that Transportation Element and road improvement programs provide efficient access to the Downtown at a level of service not intended to accommodate regional pass-through traffic.
Policy TR-21: Multi-Modal System for All Users. A balanced multi-modal system offers viable choices for residents, employees, customers, visitors, and recreational users. Use smart growth and Sustainable Communities principles throughout the city to provide a balanced transportation system which assures access to all, and which integrates all appropriate modes of transportation into an effectively functioning system, including modes such as auto, ride sharing, public rail and bus transit, paratransit, bicycling, and walking. (South County Joint Area Plan 11.00 & 11.01)
Policy TR-3.19: Monterey Road Functionality. Give special consideration to the design of Monterey Road, balancing its functions as an arterial street, a “main street” accommodating downtown activities, and as an access road to the downtown and the major commercial areas of the city. 2017 Economic Blueprint Goal:
GOAL ED-6 A mix of uses along Monterey Corridor that supports the Downtown and encourages walking and biking.
Vision Zero Strategy:
Morgan Hill is a Vision Zero city, the goal of which is to create a culture that prioritizes safety, creates livable streets, and seeks to eliminate traffic fatalities. The Vision Zero Morgan Hill program states that “human life takes priority over mobility and other objectives of the road system. The street system should be safe for all users, for all modes of transportation, in all communities, and for people of all ages and abilities.”
On January 17, 2018, the Morgan Hill City Council committed to implementing our own Vision Zero safety strategies which build upon previously adopted planning documents and provides direction for future planning, design, and development of the community.
IMPACT ON INFRASTRUCTURE
There are no assumed impacts on infrastructure beyond the stated goals of the initiative which would maintain Monterey Road as a four-lane thoroughfare.
IMPACT OF BUSINESS & EMPLOYMENT RETENTION & ATTRACTION
Having a thriving, vibrant and walkable Downtown district is a critical asset to most every community’s ability to attract and retain top-tier employers and their employees. Historically, Morgan Hill has used its General Plan, Economic Blueprint and Downtown Specific Plan to support Downtown’s continued growth, development, and evolution. Each of these guiding documents point to a strategy of making downtown more walkable, and more pedestrian and family friendly.
IMPACT ON VACANT PARCELS OF LAND
There are currently two (2) vacant properties and two (2) properties under development on Monterey Road between Main Street and E. Dunne Ave.
The vacant properties are:
1. 17205 Monterey – Vacant.
2. 17520 Monterey – Previous site of pop-up Putt-Putt Park and current tree storage.
There are no assumed impacts whether the lane reduction is implemented or not.
The two properties under development are:
1. 17490 Monterey – Granada Hotel development site.
2. 17395 Monterey – Currently the Pop-up Park but will soon be an active construction site for the Edes Art Gallery.
It would be expected that both of these projects would benefit from slower traffic speeds, and a more walkable business district should the lane reduction be implemented.
IMPACT TO TRAFFIC CONGESTION, EXISTING BUSINESS DISTRICTS, AND DEVEOPED AREA
Monterey Road has a long history as a traffic corridor dating back to its original use as a State Highway. Over the last several decades the number of cars using Monterey Road has decreased significantly. Data provided from City speed survey for years 1987 through 2015. Overall traffic in Morgan Hill continues to be impacted by regional overflow of those bypassing Highway 101. Through Monterey Road during commute hours, approximately 1 in 5 vehicles is driving through without stopping anywhere within the City.
Data provided from City speed survey for years 1987 through 2015. 2020 data provided by Morgan Hill Police Department traffic counts.
In the future, traffic congestion in Morgan Hill is likely to increase due to the continued development of new homes and businesses both within the City limits, but especially in the communities south of Morgan Hill.
In addition, until the expansion of Highway 101 through Morgan Hill is completed, residents living south of Morgan Hill are highly likely to continue to use alternative routes that travel through Morgan Hill along Monterey Rd, Butterfield Blvd and Hale Avenues.
The COVID-19 pandemic increased demand for more outdoor dining. It is expected that this demand will not diminish even after indoor dining is allowed without any restrictions. The goals of the Lane Reduction and Place Branding Project included improving accessibility, increasing safety, making it more walkable, more family friendly, and creating additional space for community and businesses. Additionally, it was envisioned that this effort would address the interface between parklets, and public spaces located directly adjacent to Monterey Road. This would include solving for the areas that could be converted to semipermanent parklet spaces, creating new community space, and other furniture and features through the Downtown. If the lane reduction is not implemented, these goals and benefits would not be realized.
During the 2015 Pilot Program traffic counts demonstrated a decrease in vehicles using Monterey Road with the greatest increase to Butterfield Blvd. Neither Peak Avenue nor Dewitt Avenue showed an increase in traffic volumes during the Pilot, which demonstrates the West side of the community was not a major alternative used to bypass Monterey. Depot Street traffic counts also did not increase during the Pilot. The largest vehicle impact was on Wright Avenue, where it appears more traffic began using Wright versus Main Avenue to head West.
According to traffic studies, the construction of Hale Avenue will significantly reduce the number of vehicles using Monterey Road through the Downtown. The Hale Avenue Extension is currently under construction, but it is not estimated to be completed until late 2023. Prior to the completion of the Hale Avenue extension, significant amounts of traffic could be moved from Monterey Road to Butterfield Boulevard by implementing certain traffic control improvements, thus supporting reduced traffic through the Downtown and facilitating better traffic movement throughout the City.
The San Jose/Willow Glen Lane Reduction
“Lessons Learned from San Jose’s Lincoln Avenue Road Diet”, a study published in 20171, measured traffic volume and speed data collected at 45 different locations on and around Lincoln Avenue, including impacts on both the road diet location itself and on surrounding streets potentially impacted by traffic diverted off the road diet segment. The study found that the daily number of speeders traveling 10 mph+ over the speed limit fell by 60%. “Traffic volumes fell [on other road types] or, in a few cases, remained essentially flat, suggesting that the road diet did not divert traffic to other neighborhood streets. Of more concern, the number of speeders outside the road diet area rose, with the percentage increases being fairly large, in the double digits. Fortunately, the change was less pronounced on the neighborhood streets. On these streets, the numbers of new speeders were low, even if the percentage increases were high.”
OTHER MATTERS
No other matters were requested by the City Council at the time this report was requested. 1 https://transweb.sjsu.edu/research/Designing-Road-Diet-Evaluations-Lessons-Learned-San-Jose%E2%80%99sLincoln-Avenue-Road-Diet
RESOLUTION NO. ___
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF MORGAN HILL, CALIFORNIA SUBMITTING TO THE
VOTERS OF THE CITY AN INITIATIVE ORDINANCE
AMENDING THE GENERAL PLAN TO REQUIRE VOTER
APPROVAL OF ANY FUTURE MONTEREY ROAD LANE
REDUCTION
WHEREAS, pursuant to authority provided by Division 9, Chapter 3, Article 1 (commencing at S 9200) of the Elections Code of the State of California, a petition has been filed with the City Council of the City of Morgan Hill signed by more than ten percent (10%) of the registered voters of the City, according to the Santa Clara County Registrar of Voters last official report of registration to the Secretary of State, to submit a proposed ordinance to the voters amending the City’s General Plan to require voter approval of any future Monterey Road lane reduction; and
WHEREAS, the City Clerk, though the Santa Clara County Registrar of Voters, has examined the records of voter registration and ascertained that, pursuant to California Elections Code section 9215, the petition was signed by the requisite number of voters, and has so certified; and
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF MORGAN HILL AS FOLLOWS:
Section 1. Recitals. The City Council hereby finds and determines that the foregoing recitals are true and correct.
Section 2. Election. The City Council hereby orders, pursuant to Section 9222 of the Elections Code, that the Initiative Petition ordinance amending the General Plan to require voter approval of any future Monterey Road Lane reduction be submitted to the voters at the November 8, 2022 General Municipal Election.
Section 3. Ballot Question. The question submitted under Section 3 of this Resolution shall appear on the ballot as follows:
YES
Shall the measure, amending the City’s General Plan to require voter approval of any future Monterey Road lane reduction be adopted? NO
Section 4. Approval. Pursuant to Article XIII C of the Constitution, this measure requires approval by a majority (50% plus 1) of those casting ballots on the measure.
Section 5. Filing with County. The City Clerk shall file a certified copy of this Resolution with the Board of Supervisors.
Section 6. Analysis and Argument. The City Council authorizes all members of the City Council to file written argument(s) In Favor of, or Against the measure described in Section 3 above, not exceeding 300 words, accompanied by the printed name(s) and signature(s) of the author(s) submitting it, in accordance with Article 4, Chapter 3, Division 9 of the Elections Code of the State of California. The arguments may be changed or withdrawn until and including the date fixed by the City Clerk after which no arguments for or against the ballot measure may be submitted to the City Clerk.
The City Attorney shall prepare an impartial analysis of the measure. Any person or persons may file an argument either for or against the ballot measure. An argument for or against the measure shall not exceed 300 words in length. If more than one argument is submitted for the measure, or more than one argument against the measure, the City Clerk shall select the argument to be included with the ballot materials. Rebuttal arguments shall be permitted pursuant to applicable law.
Section 7. In accordance with Elections Code section 9280, the entire text of the measure referenced in Section 3 above, shall not be placed in the voter information sample ballot and instead there shall be printed immediately below the impartial analysis, in no less than 10-point type, the following: "The above statement is an impartial analysis of the Ordinance of The City of Morgan Hill, California Amending the General Plan to Require Voter Approval of Any Future Lane Reduction on Monterey Road. If you desire a copy of the measure, please visit http://www.morgan-hill.ca.gov, email the City Clerk at [email protected], or call the City Clerk at (408)779-7271 and a copy will be mailed or e-mailed at no cost to you.” Section 8. The primary arguments for and against the measure shall be submitted to the City Clerk by five o'clock p.m. on August 16, 2022 to meet the deadline established by the Santa Clara County Registrar of Voters for primary arguments. The arguments shall be filed with the City Clerk, signed, with the printed name(s) and signature(s) of the author(s) submitting it, or if submitted on behalf of an organization, the name of the organization, and the printed name and signature of at least one of its principal officers who is the author of the argument. The arguments shall be accompanied by the Form of Statement To Be Filed By Author(s) of Argument to be provided by the City Clerk.
Section 9. In accordance with Elections Code section 9285(b), the City of Morgan Hill hereby authorizes the filing of rebuttal arguments as set forth below and in accordance with state law.
The elections official shall send a copy of an argument in favor of the proposition to the authors of any argument against the measure and a copy of an argument against the measure to the authors in any argument in favor of the measure immediately upon receiving the arguments.
The author, or a majority of the authors, of any argument relating to the measure may prepare and submit a rebuttal argument not exceeding 250 words or may authorize in writing any other person or persons to prepare, submit, or sign the rebuttal argument.
A rebuttal argument may not be signed by more than five authors.
The rebuttal arguments shall be filed with the City Clerk, signed with the printed name(s) and signature(s) of the author(s) submitting it, or if submitted on behalf of an organization, the name of the organization and the printed name and signature of at least one of its principal officers, not more than 10 days after the final date for filing direct arguments. The rebuttal arguments shall be accompanied by the Form of Statement to be provided by the City Clerk and to be filed by the author(s) of the argument.
Rebuttal arguments shall be printed in the same manner as the direct arguments. Each rebuttal argument shall immediately follow the direct argument which it seeks to rebut.
Rebuttal arguments for and against the measure shall be submitted to the City Clerk by five o'clock p.m. on August 23, 2022 to meet the deadline established by the Santa Clara County Registrar of Voters for rebuttals.
Section 10, Effective Date. This Resolution shall be effective immediately upon adoption.
Section 11. That in all particulars not recited in this resolution, the election shall be held and conducted as provided by law.
PASSED, APPROVED AND ADOPTED by the City Council of the City of Morgan Hill at its meeting held on this ___ day of ____ 2022 by the following vote:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSTAIN: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
APPROVED: ATTEST:
___________________________________ _______________________________ RICH CONSTANTINE, Mayor MICHELLE BIGELOW, City Clerk
CERTIFICATION
I, Michelle Bigelow, City Clerk of the City of Morgan Hill, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. _____ adopted by the City Council at the meeting held on the ___ day of ____ 2022.
WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.
DATE: _____________________ ___________________________________ MICHELLE BIGELOW, City Clerk
17 CITY COUNCIL STAFF REPORT
MEETING DATE: April 6, 2022
PREPARED BY:
Dat Nguyen, Finance Director
APPROVED BY: City Manager
RECEIVE WATER RATE STUDY REPORT, ADOPT RESOLUTION
DECLARING INTENT TO IMPLEMENT NEW WATER RATES,
COMMENCING PROPOSITION 218 NOTICES, AND SETTING JUNE 1, 2022 AS DATE FOR A PUBLIC HEARING
RECOMMENDATION(S)
1. Receive Water Rate Study report;
2. Adopt resolution declaring intent to adjust water rates and authorizing the commencement of Proposition 218 noticing; and
3. Set June 1, 2022 as the date for Public Hearing and new water rates adoption.
Estimated Time: 30 Minutes
COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Maintaining and Enhancing Infrastructure
Preserving and Cultivating Public Trust
2022-2023 Strategic Priorities
Fiscal Sustainability
Guiding Documents
Water System Master Plan
REPORT NARRATIVE:
The City owns and operates the Water Distribution System within the Engineering and Utilities Department. The system consists of 16 active groundwater wells, a total of 10.5 million gallons in storage, distribution mains, and fire hydrants. One of Morgan Hill’s key elements of the City’s highest priority for public safety, is to ensure that the City’s water system infrastructure is adequate at supplying its residents with safe clean drinking water needs, as a core service for its residents.
17 On December 15, 2021, the City Council approved a Water System Master Plan for future repairs and improvements to the City’s water system. The Master Plan identified $108 million in total capital improvement and expansion projects, with 55% of that amount to be paid for by future users through development impact fees, and $49 million or 45% of the total of $108 million to be paid by the ratepayers. The costs identified in the Master Plan are heavily impacted by inflationary costs, which have been seen across the country but are especially prevalent in the Bay Area. Additionally, operational costs have seen large inflationary cost increases in supplies and services, high increases in electricity costs, and continued increases in groundwater charges assessed by Valley Water. Without a rate adjustment, there would be a significant shortage in funding to make the necessary repairs and improvements to the existing system, which was the primary factor in moving forward with a rate study.
Updated Zonal Elevation Surcharge
While most of the City's water customers are located within normal elevation zones, some customers are in higher elevation zones that cost more to pump water to them.
These elevation surcharges are part of the current rate structure and this Water Rate Study evaluated the annual costs of power in providing the water service for these customers.
Updated Rates
On March 11, 2022, the 2022 Water Rate Study (Attachment No. 1), prepared by NBS Government Finance Group, was released to the community via eblast along with the posting on City’s website.
The proposed adjustment to the rates and zonal elevation surcharge per water unit in hundred cubic feet (hcf) are as follows:
7/1/22 7/1/23 7/1/24 7/1/25 7/1/26
Water rates percent
increase
9% 9% 7% 7% 3%
Water zonal elevation
surcharge per hcf
$0.36 $0.37 $0.39 $0.41 $0.43
In addition, the proposed low income subsidy adjustment is as follows:
Current 7/1/22 7/1/23 7/1/24 7/1/25 7/1/26
Subsidy amount $5.85 $6.44 $7.08 $7.57 $8.10 $8.35
Percentage 10% 10% 7% 7% 3%
Water Revenue Stabilization Rate
As California enters its third consecutive dry year and water conservation is becoming more vital, it is important for the City to have the means necessary to respond to revenue losses related to various drought stages to ensure the safety of the City's water system as well as its ability to continue to supply residents with safe, and clean drinking water needs. Revenue stabilization rates are the necessary tools needed to offset such revenue losses.
17 The table below shows the proposed revenue-stabilization rate for each water unit at various water consumption levels below forecast:
Water Consumption
Level Below Forecast FY22/23 FY23/24 FY24/25 FY25/26 FY26/27 10% $3.21 $3.50 $3.82 $4.09 $4.38
15% $3.40 $3.71 $4.04 $4.32 $4.62
20% $3.61 $3.93 $4.28 $4.58 $4.90
25% $3.85 $4.20 $4.58 $4.90 $5.24
30% $4.12 $4.49 $4.89 $5.23 $5.60
Water Revenue Stabilization Rate Trigger and Implementation Process If staff determines that annual water sales revenue to date is more than 10% below expected year-to-date levels (based on monthly averages over the previous threeyears) and expense reduction measures have been reviewed and considered, staff will implement the revenue-stabilization rates. Staff will inform the City Council of the revenue-stabilization rates implementation at the earliest financial update. Staff will also update the Council on current reserve levels and provide an analysis of why the revenue losses are occurring, along with a six-month projection of anticipated water sales.
Once staff has informed the City Council of implementation, the Council may:
Act to implement less than 100% of the revenue stabilization rates at the earliest billing cycle.
Utilize reserves to meet all or part of the revenue gap. Take no action, which results in implementation of revenue stabilization rates from the revenue-stabilization rate schedule
Once the volumetric water sales revenue has returned to expected levels, staff will rescind the revenue-stabilization rates and previously adopted uniform volumetric rates are (again) in effect. In addition, City staff will inform the Council of such action at the earliest financial update.
Next Steps
Proposition 218 Noticing - In order to implement the rate adjustments, the City is required to follow Proposition 218 majority protest proceedings. Proposition 218 requires specific procedures be followed with regard to property-related fee increases.
The California Constitution requires local governments to give mailed notice of any property-related proposed fee changes at least 45 days before holding a public hearing where the City Council may adopt or reject the changes. Those opposed to the proposed rate adjustments can submit written protests to the City. If a majority (50% plus 1) of customers oppose the proposed rate adjustments, City Council cannot implement the proposed increases.
Staff recommends City Council adopt a resolution declaring intent to adjust the water
17 rates, authorizing staff to begin the Proposition 218 noticing process, and setting June 1, 2022 as the date of public hearing where Council will consider the adoption of the rates.
COMMUNITY ENGAGEMENT:
A virtual townhall meeting for community members was held on March 24, 2022.
ALTERNATIVE ACTIONS:
City Council could elect not to adopt the resolution of intent or approve a lower rate adjustment than presented.
PRIOR CITY COUNCIL AND COMMISSION ACTIONS:
On December 15, 2021, the City Council adopted the Water System Master Plan.
FISCAL AND RESOURCE IMPACT:
The fiscal impact of preparing this report is included in the staff’s annual workplan. The cost for the water rate study, was budgeted in the Water Operations Fund (650) in the current fiscal year.
If the Proposition 218 majority protest process is concluded without majority protest, and the water rate adjustments are adopted as presented, the new rate increases could generate an average of $4.3 million annually, for the next five years, to assist in recovery of costs to provide and maintain infrastructure and services. In addition, the cost of Proposition 218 mailing will be borne by the Water Operations Fund (650).
Those costs are projected to be $10,000.
CEQA (California Environmental Quality Act):
Not a Project.
Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
OFFICE LOCATIONS:
San Francisco - Regional Office
870 Market Street, Suite 1223
San Francisco, CA 94102
Temecula – Corporate Headquarters
32605 Temecula Parkway, Suite 100
Temecula, CA 92592
Phone: 800.676.7516
www.nbsgov.com
City of Morgan Hill
FINAL REPORT
WATER RATE STUDY
March 2022
View of City of Morgan Hill
via Google Earth
TABLE OF CONTENTS
SECTION 1. PURPOSE AND OVERVIEW OF THE STUDY .........................................................................1 PURPOSE ...............................................................................................................................1 CITY OF MORGAN HILL BACKGROUND ....................................................................................1 OVERVIEW OF THE STUDY ......................................................................................................2 RATE STUDY METHODOLOGY .................................................................................................3 SECTION 2. WATER RATE STUDY .........................................................................................................6 KEY WATER RATE STUDY ISSUES.............................................................................................6 WATER UTILITY REVENUE REQUIREMENTS .............................................................................6 CHARACTERISTICS OF WATER CUSTOMERS BY CLASS ..............................................................8 COST OF SERVICE ANALYSIS....................................................................................................9 CURRENT VS. PROPOSED WATER RATE STRUCTURES ............................................................12 SECTION 3. REVENUE STABILIZATION RATE ANALYSIS .......................................................................18 CALCULATION OF REVENUE STABILIZATION RATES................................................................18 REVENUE-STABILIZATION RATE TRIGGER AND COUNCIL NOTIFICATION.................................19 SECTION 4. ZONAL ELEVATION SURCHARGES ....................................................................................20 OVERVIEW OF ZONAL ELEVATION SURCHARGES ...................................................................20 SECTION 5. RECOMMENDATIONS AND NEXT STEPS...........................................................................21 CONSULTANT RECOMMENDATIONS .....................................................................................21 NEXT STEPS..........................................................................................................................21 PRINCIPAL ASSUMPTIONS AND CONSIDERATIONS ................................................................22 APPENDIX - WATER RATE ANALYSIS..................................................................................................23
City of Morgan Hill – Water Rate Study
Prepared by NBS City of
TABLE OF FIGURES
Figure 1. Primary Components of a Rate Study ......................................................................................... 3 Figure 2. Summary of Water Revenue Requirements................................................................................. 8 Figure 3. Summary of Water Reserve Funds.............................................................................................. 8 Figure 4. Water Consumption by Customer Class....................................................................................... 9 Figure 5. Peaking Factors by Customer Class.............................................................................................. 9 Figure 6. Number of Meters by Customer Class ......................................................................................... 9 Figure 7. Allocated Net Revenue Requirements ...................................................................................... 11 Figure 8. Distribution of Costs to Each Customer Class............................................................................. 11 Figure 9. Calculation of FY 2022/23 Residential Fixed Meter Charges...................................................... 13 Figure 10. Calculation of FY 2022/23 Non-Residential Fixed Meter Charges............................................ 13 Figure 11. Calculation of FY 2022/23 Private Fire Protection Fixed Meter Charges.................................. 13 Figure 12. Calculation of FY 2022/23 Uniform Volumetric Rates.............................................................. 14 Figure 13. Current and Proposed Water Rates for FY 2022/23 through 2026/27..................................... 14 Figure 14. Comparison of Monthly Water Bills for Single-Family Residential Customers ......................... 15 Figure 15. Comparison of Monthly Water Bills for Multi-Family Residential Customers.......................... 16 Figure 16. Comparison of Monthly Water Bills for Commercial Customers.............................................. 17 Figure 17. Average Monthly Consumption at Various Levels of Conservation.......................................... 18 Figure 18. Proposed Revenue Stabilization Rates for FY 2022/23............................................................. 18 Figure 19. Proposed Revenue Stabilization Rates FY 2022/23 through FY 2026/27 ................................. 19 Figure 20. Water Zonal Elevation Surcharges .......................................................................................... 20 Figure 21. Five-Year Schedule of Water Zonal Elevation Surcharges........................................................ 20
City of Morgan Hill – Water Rate Study 1
Prepared by NBS City of
SECTION 1. PURPOSE AND OVERVIEW OF THE STUDY
PURPOSE
The City of Morgan Hill (“City”) retained NBS in May 2021 to conduct an updated comprehensive water rate study for a number of reasons, including meeting long-term revenue requirements, ensuring revenue stability in water rates, providing adequate funding for capital improvements, and ensuring rates comply with applicable laws, including Proposition 218. The rates developed in this study meet Proposition 218 (Prop 218) requirements and were developed based on industry standards. This report is provided with the intent of assisting the City in maintaining the financial health of its water utility, transparently communicating with the residents and businesses it serves, and documenting the rate study analysis.
CITY OF MORGAN HILL BACKGROUND
The City of Morgan Hill is a general law city with a council-manager form of government, located in southern Santa Clara Valley, approximately 12 miles south of San Jose, 10 miles north of Gilroy, and 15 miles inland from the Pacific Coast. The Valley is approximately 4 miles wide and is surrounded by the Santa Cruz mountain range to the west, and the Diablo mountain range to the east.
The City of Morgan Hill provides water service to approximately 15,000 metered customers, including about 308 customers outside the city limits. The majority (about 87%) of the water utility’s customers are single and multi-family residential users. Most recent records indicate these residential households use approximately 70% of total water sold; businesses, commercial, industrial, government, institutional, and landscape customers use the remaining 30%.
The City's municipal water source is 100% from ground water and sustaining the groundwater supply is dependent upon the overall groundwater management program administered by the Santa Clara Valley Water District (SCVWD). SCVWD imports water from the Sacramento/San Joaquin Delta through a series of channels, reservoirs, pipes and pumps and re-charges the groundwater table by pumping water into strategically located re-charge basins.
City of Morgan Hill – Water Rate Study 2
Prepared by NBS City of
OVERVIEW OF THE STUDY
Key Issues Addressed – In addition to ensuring that water rates collect revenue sufficient to meet the annual operating and capital improvement plans, there are a number of key issues that were specifically addressed in this study, including:
• Statewide Conservation – The State of California has experienced drought-related cutbacks over the past several years and the City of Morgan Hill was mandated to reduce water consumption. Because of this, current and projected future consumption levels were closely evaluated in this study. • Long-Term Conservation – The assumptions and recommendations contained in this study are not a short-term response to the drought. They assume that water supplies will continue to be limited in the future.
• Rate Design – The current rate design includes a fixed monthly charge that collects about 46% of the rate revenue and a uniform volumetric rate based on monthly water consumption that collect the remainder of the rate revenue. Because the current rate design is covering all the City’s expenses, NBS is recommending keeping the current rate design and updating the cost of service. • Financial Planning – Long-range financial plans for the water utility were closely examined to ensure they meet annual operating expenses, debt covenants, capital improvement costs and broader financial management concerns.
Recommendations – NBS recommends the City take the following actions:
• Adopt the long-range financial plan that NBS developed, including the projected revenues, expenditures, and annual net revenue requirements.
• Based on this plan, annual increases in total rate revenue of 9% for fiscal years 2022/23-2023/24, 7% for 2024/25-2025/26, and 3% in 2026/27 are needed over the next five years to fund the majority of the capital improvement program proposed in the Water Systems Master Plan of 2021.
• Continue to use a rate design that collects approximately 46% of rate revenue from fixed charges and 54% from volumetric charges.
• Adopt the water rates proposed in this report that follows this rate design with updates to the cost of service.
• Adopt the updated zonal surcharges, which allocate the additional costs that customers in the three elevation zones that incur additional costs to provide service to these customers. • Adopt the revenue stabilization rates that would implement small, temporary rate increases whenever rate revenues drop by 10 percent or more in any given month. • Retain recommended reserve fund targets.
• Provide the normal legal review of the recommended rates by a qualified attorney. • Proceed with Proposition 218 noticing requirements necessary for legal adoption and implementation of the proposed rates, zonal surcharges, and revenue stabilization mechanism.
City of Morgan Hill – Water Rate Study 3
Prepared by NBS City of
RATE STUDY METHODOLOGY
Components of the Rate Study Methodology – A comprehensive utility rate study typically encompasses three major components: (1) preparation of a financial plan which identifies the net revenue requirements for the utility; (2) analysis of the cost to serve each customer class, and; (3) the rate structure design.
These three steps, which are shown in Figure 1, are intended to follow industry standards and reflect the fundamental principles of cost-of-service rate making embodied in the American Water Works Association (AWWA) Principles of Water Rates, Fees, and Charges1, also referred to as the Manual M1. These steps address general requirements for equity and fairness. They also address requirements under California Constitution article XIII D, Section 6 (commonly referred to as Proposition 218) that rates not exceed the cost of providing the service and be proportionate to the cost of service for all customers. In terms of the chronology of the study, these three steps represent the order they were performed in this study.
As a part of this rate study, NBS projected revenues, expenditures, developed net revenue requirements, performed cost-of-service rate analyses, and prepared new water rates. The following sections in this report present an overview of the methodologies, assumptions, and data used along with the financial plans and rates developed during this study.
Figure 1. Primary Components of a Rate Study
1 FINANCIAL
PLAN 2
COST-OFSERVICE
ANALYSIS
3 RATE DESIGN
ANALYSIS
Compares current sources and
uses of funds and determines the
revenue needed from rates and
projects rate adjustments.
Proportionately allocates the
revenue requirements to the
customer classes and tiers in
compliance with industry
standards and State Law.
Considers what rate structure will
best meet the City’s need to collect
rate revenue from each customer
class.
Rate Design Criteria – Several criteria are typically considered in setting rates and developing sound rate structures. The fundamentals of this process have been documented in a number of rate-setting manuals, such as the AWWA Manual M1. The foundation for evaluating rate structures is generally credited to James C. Bonbright in the Principles of Public Utility Rates2 which outlines pricing policies, theories, and economic concepts along with various rate designs. The following is a simplified list of the attributes of a sound rate structure:
• Rates should be easy to understand from the customer’s perspective. • Rates should be easy to administer from the utility’s perspective. 1 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, M1, AWWA, seventh edition, 2017. 2 James C. Bonbright; Albert L. Danielsen and David R. Kamerschen, Principles of Public Utility Rates, (Arlington, VA: Public Utilities Report, Inc., Second Edition, 1988), p. 383-384.
City of Morgan Hill – Water Rate Study 4
Prepared by NBS City of
• Rates should promote the efficient allocation of the resource. • Rates should be equitable and non-discriminating (i.e., cost based). • There should be continuity in the rate making philosophy over time. • Addressing other utility policies (e.g., encouraging conservation & economic development). • Rates should provide month-to-month and year-to-year revenue stability.
The following section covers basic rate design criteria that NBS and City staff considered as a part of their review of the rate structure.
Rate Structure Considerations – The fundamental starting point in considering rate structures is the relationship between fixed costs and variable costs. Fixed costs typically do not vary with the amount of water consumed. Debt service and City personnel are examples of a fixed cost. In contrast, variable costs such as the cost of purchased water, chemicals and electricity tend to change with the quantity of water sold. The vast majority of rate structures contain a fixed or minimum charge in combination with a volumetric charge.
Key Financial Assumptions – Following are the key assumptions used in the water rate analyses:
• Funding of Capital Projects – After the City’s extensive review of the planned capital improvement projects (CIP) and funding requirements, the City has decided that the water utility will fund the currently planned CIP, as shown in detail in the Appendix to this report. The capital improvement projects included in the rate program are designed to keep existing infrastructure in good repair and maintain current service levels. There is about a $2 million deficiency in fiscal years 2024-2027 in which the proposed rates in this report are not expected to fund. • Reserve Targets – Target reserves for operations and maintenance (O&M) and capital system replacement, which essentially follow industry standards for utility fund management, are set at the following levels for the water utilities:
✓ Operating Reserve (Fund 650) – 90-days of O&M expenses. ✓ System Replacement Reserve (Fund 653) – approximately 6.0% of net assets value (i.e., net of depreciation).
✓ Rate Stabilization Reserve (Fund 652) – equal to 20% of current level of rate revenue. • Inflation and Growth Projections:
✓ Customer growth is estimated at 2.1% annually based on historical growth. ✓ General costs (such as professional and contractual services, fuel, vehicle maintenance, etc.) are estimated at 3% annually.
✓ Ground water production costs are estimated at 6.6% annually based on average annual increases.
✓ Labor costs are estimated at 5% annually and include health and retirement benefits for both utilities.
✓ Energy expenses are estimated to increase at a rate of 20% in FY 2022/23 and 5% annually thereafter.
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✓ No inflation is added to other budget items, such as late fee revenue, lease income, and miscellaneous fees.
• Revenue Stabilization Rates – New revenue stabilization rates were developed as part of the study with the intent of stabilizing the City’s variable rate revenue that may be affected by low water sales due to conservation or unusual weather patterns (i.e., not just declared drought stages). ✓ Once adopted through Prop 218, these rates can be implemented when volumetric revenue drop by 10%, 15%, 20%, 25% and 30%.
✓ Revenue Stabilization rates are revocable; when volumetric revenue losses subside, revenue stabilization rates would be rescinded and the current proposed volumetric rate would be used.
Commodity or volumetric rates are charged per unit of water, or hundred cubic feet (hcf), or 748 gallons.
✓ The City will provide adequate notice prior to implementation and rescission. ✓ Although details are yet to be finalized, a key qualification for revenue stabilization rates to be implemented is the period and level of volumetric rate revenue losses (i.e., revenues below the expected revenue level3). Higher volumetric rates, beginning with 10 percent increase would be implemented and, depending on the level of revenue losses, can be increased by additional increments of five percent but capped at 30 percent.
3 Expected volumetric rate revenue could be based on the average month-to-month consumption (calculated as a percentage of the annual consumption over the prior three years, times the projected annual consumption).
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SECTION 2. WATER RATE STUDY
KEY WATER RATE STUDY ISSUES
The water rate analysis was undertaken with a few specific objectives, including:
• Generating sufficient revenue to meet projected funding requirements. • Analyzing the impacts from drought levels and COVID-19 impacts to customer consumption. • Meeting target reserve fund levels and minimizing customer bill impact on rate payers.
The fixed and volume-based charges calculated were based on the net revenue requirements, number of customer accounts, water consumption, and other City-provided information. The following are the basic components included in this analysis:
• Developing Unit Costs: The water revenue requirements were “functionalized” into five categories:
(1) customer service costs; (2) fixed capacity costs; (3) commodity (or volume-based) costs; (4) fire protection costs; and (5) zonal-specific costs. Unit costs for each of these functions were determined based on allocations to functional areas, which reflect water consumption, peaking factors, number of accounts by meter size, and customer class.
• Determining Revenue Requirements by Customer Class: The total revenue that should be collected from each customer class was determined using the unit costs and the total units belonging to each class. For example, customer costs are allocated based on number of meters, while volume-related costs are allocated based on the water consumption for each class. Once the costs are allocated and the revenue requirement for each customer class is determined, collecting these revenue requirements from each customer class is addressed in the rate design task. • Rate Design and Fixed vs. Variable Costs: The revenue requirements for each customer class are collected from both fixed service charges and volumetric (commodity) charges. The cost-of-service analysis indicated that approximately 46% of the City’s costs are fixed and 54% are variable. Although state regulatory agencies, such as the California Water Efficiency Partnership (formerly the California Urban Water Conservation Council), has historically recommended that water utilities collect at least 70% of rate revenue from volumetric ratesto encourage conservation, this has resulted in many water agencies collecting less than the necessary revenues during mandated conservation periods. Because of this, many utilities have chosen to collect less than 70% from volumetric rates. NBS recommends the City adopt the rates proposed in this report using approximately 46/54 fixed/volumetric rate design that better represents the utility’s true cost structure and provides greater revenue stability compared to one that collects more revenue from volumetric rates.
WATER UTILITY REVENUE REQUIREMENTS
It is important for municipal utilities to maintain reasonable reserves in order to handle minor emergencies, fund working capital, maintain a good credit rating, and generally follow sound financial management practices. Rate increases are governed by the need to meet operating and capital costs,
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maintain adequate debt coverage, and maintain sufficient reserve funds. The current condition of the City’s water utility, with regard to these objectives is as follows:
• Meeting Net Revenue Requirements: The City’s water utility is currently running a structural surplus (i.e., for Fiscal Year 2021/22). For Fiscal Year 2022/23 through 2026/27, the projected annual net revenue requirement (i.e., total annual expenses plus rate-funded capital costs, less non-rate revenues) is approximately $19.6 million. This average revenue requirement assumes that most of the planned capital improvement projects will be funded over the next five years with both reserve funds and rate revenue. During fiscal years 2023/24-2026/27, there is a $2 million deficiency for the planned capital improvement program. NBS is recommending the following rate increases:
▪ 9% in fiscal year 2022/23
▪ 9% in fiscal year 2023/24
▪ 7% in fiscal year 2024/25
▪ 7% in fiscal year 2025/26
▪ 3% in fiscal year 2026/27
• Building and Maintaining Reserve Funds: The City should maintain sufficient reserves for the Water Utility. NBS recommends that the City maintain reserve levels in order to meet the following reserve fund target balances:
✓ Operating Reserve (Fund 650) should normally equal 90 days of the Utility’s budgeted annual operating expenses, which is equal to a three-month (or 25%) cash reserve for normal operations. An Operating Reserve is intended to promote financial viability in the event of any short-term fluctuation in revenues and/or expenditures, such as those caused by weather patterns, the natural inflow and outflow of cash during billing cycles, natural variability in demand-based revenue streams (e.g., volumetric charges), and – particularly in periods of economic distress – changes or trends in age of receivables. ✓ Rate Stabilization Fund (Fund 652) has a target ending balance of 20% of estimated rate revenue, as set by current City policy. This reserve is to further promote financial stability in the event of short-term reductions in rate revenues.
✓ Capital System Replacement Reserve (Fund 653) should typically be equal to a minimum of 6% of net depreciable capital assets. This target serves simply as a starting point for addressing longterm capital system replacement needs.
No debt reserve is recommended in this study, due to the fact that the 2014 Water Refunding & CIP Revenue Bonds do not require funds to be held in reserve. If at some point the City issues additional debt, this policy should be revised to reflect the requirements at that time.
Figure 2 summarizes the sources and uses of funds and net revenue requirements for the next five years, assuming the City funds 100% of the planned CIP projects over this period.
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Figure 2. Summary of Water Revenue Requirements
Figure 3 summarizes the projected reserve fund balances and reserve targets for the next five years.
Because of the capital projects needed over the next five fiscal years, the City will dip below target reserve levels until fiscal year 2030/31, when the water system replacement fund can catch up to target levels.
Detail of the water utility’s proposed 5-year financial plan are included in the Appendix of this report.
These tables include revenue requirements, reserve funds, capital improvement detail, revenue sources and proposed rate increases for the 5-year period.
Figure 3. Summary of Water Reserve Funds
CHARACTERISTICS OF WATER CUSTOMERS BY CLASS
The amount of consumption, the peaking factors, and the number of meters by customer class are all used in allocating costs as a part of the cost-of-service analysis. The City’s most recent consumption data is summarized in Figure 4, peaking factors by customer class are summarized in Figure 5, and Figure 6 compares the total number of meters by customer class.
Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 Sources of Water Funds
Rate Revenue Under Prevailing Rates $ 15,179,148 $ 15,497,910 $ 15,823,366 $ 16,155,656 $ 16,494,925 $ 16,841,319 Non-Rate Revenues 1,098,954 1,106,147 1,113,492 1,120,991 1,128,647 1,136,465 Interest Earnings 180,121 176,388 164,908 110,214 94,864 79,547 Total Sources of Funds $ 16,458,222 $ 16,780,445 $ 17,101,766 $ 17,386,862 $ 17,718,436 $ 18,057,331 Uses of Water Funds
Operating Expenses $ 11,785,202 $ 13,027,679 $ 13,665,520 $ 14,337,001 $ 15,043,999 $ 15,788,501 Rate-Funded Capital Expenses - 890,787 6,412,621 7,432,357 8,616,828 9,023,266 Total Use of Funds $ 11,785,202 $ 13,918,466 $ 20,078,141 $ 21,769,358 $ 23,660,827 $ 24,811,767 Surplus (Deficiency) before Rate Increase $ 4,673,020 $ 2,861,978 $ (2,976,375) $ (4,382,496) $ (5,942,391) $ (6,754,436) Additional Revenue from Rate Increases - 1,394,812 2,976,375 4,382,496 5,942,391 6,754,436 Surplus (Deficiency) after Rate Increase $ 4,673,020 $ 4,256,790 $ - $ - $ - $ - Projected Annual Rate Increase 0.00% 9.00% 9.00% 7.00% 7.00% 3.00% Net Revenue Requirement1$ 10,506,128 $ 12,635,931 $ 18,799,741 $ 20,538,153 $ 22,437,316 $ 23,595,754
1. Total Use of Funds less non-rate revenues and interest earnings. This is the annual amount needed from water rates.
Summary of Sources and Uses of Funds and
Net Revenue Requirements
5-Year Rate Adoption Period Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 Water Operations Fund (650) $ 2,946,301 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 3,256,920 Recommended Minimum Target 2,946,301 3,256,920 3,416,380 3,584,250 3,761,000 3,947,125 Water System Replacement Fund (653) $ 8,288,597 $ 7,246,771 $ 3,763,100 $ 2,785,359 $ 1,809,794 $ 834,340 Recommended Minimum Target 2,953,600 3,300,600 3,763,100 4,236,000 4,757,700 5,194,200 Rate Stabilization Fund (652) $ 3,035,830 $ 3,083,492 $ 3,131,903 $ 3,181,074 $ 3,231,017 $ 3,281,744 Recommended Minimum Target 3,035,830 3,099,582 3,164,673 3,231,131 3,298,985 3,368,264 Total Ending Balance $ 14,270,727 $ 13,587,183 $ 10,151,923 $ 9,223,353 $ 8,297,731 $ 7,373,003 Total Recommended Minimum Target $ 8,935,730 $ 9,657,102 $ 10,344,153 $ 11,051,382 $ 11,817,685 $ 12,509,589 Beginning Reserve Fund Balances and
Recommended Reserve Targets
5-Year Rate Adoption Period
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Figure 4. Water Consumption by Customer Class
Figure 5. Peaking Factors by Customer Class
Figure 6. Number of Meters by Customer Class
COST OF SERVICE ANALYSIS
Once the revenue requirements for the water utility are determined, the cost-of-service analysis distributes those revenue requirements to each of the customer classes. The cost-of-service analysis consists of two major components: (1) the functionalization and classification of expenses, and (2) the allocation of costs to customer classes. This process is described as follows:
Functionalization, Classification and Allocations
Most costs are not typically allocated 100% to fixed or variable categories and, therefore, are allocated to multiple functions of water service. The classification (i.e., functionalization) of costs provides the basis for allocating the classified costs to the following cost-causation components:
Customer Class
FY 2020/21
Volume (hcf)1
Percent of Total
Volume
Single Family - Inside 1,773,378 57.7%
Single Family - Outside 52,931 1.7%
Multi-Family 319,696 10.4%
Commercial 929,760 30.2%
Grand Total 3,075,765 100.0%
Fire 565 0.02%
1. Consumption data source: Morgan Hill_2018-2021 Consumption Billing Data.xlsx Customer Class Average Monthly
Use (hcf)
Peak
Monthly Use
(hcf)1
Peak Month
Factor
Max Month
Capacity Factor
Single Family - Inside 147,782 217,683 1.47 58.2%
Single Family - Outside 4,411 6,725 1.52 1.8%
Multi-Family 26,641 31,378 1.18 8.4%
Commercial 77,480 118,489 1.53 31.7%
Grand Total 256,314 374,275 1.46 100.0%
Fire 47 261 5.54 0.1%
1. Based on peak monthly data (peak day data not available).
Customer Class
Number of
Meters1
Percent of
Total
Single Family - Inside 10,502 69.9%
Single Family - Outside 308 2.1%
Multi-Family 2,284 15.2%
Commercial 1,663 11.1%
Fire 263 1.75%
Grand Total 15,020 100.0%
1. Number of meters is from source: Morgan Hill_2018-2021 Consumption Billing Data.xlsx Page 416 of 520
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• Commodity related costs are those costs associated with the total consumption of water over a specified period of time (e.g., annual).
• Capacity related costs are those costs associated the maximum-month demand and the design capacity of facilities required to meet this demand.
• Customer related costs are costs associated with having a customer on the water system, such as meter reading, postage and billing.
• Fire Protection costs are associated with providing sufficient capacity in the system for fire meters and other operations and maintenance costs of providing water to properties for private fire service protection.
• Zonal related costs are costs that are directly allocated to the zonal elevation surcharges that include the cost of electricity needed to pump water to higher elevation zones. These surcharges are discussed in Section 4 of this report.
Once costs have been organized in the City’s functional budget categories, they are allocated to these cost causation components that are used as the basis for establishing new water rates and translate to fixed and variable charges. The tables in the Appendix show how the City’s expenses were classified and allocated to these cost causation components and then into fixed and variable costs in more detail.
Fixed costs generally consist of costs that a utility incurs to serve customers irrespective of the amount of water they use. These include (1) the infrastructure (capacity-related facilities) required to provide service to customers, (2) costs associated with the peaking requirements, or maximum demand which affects the maximum size of water supply, treatment and delivery system, and (3) administrative and billing costs associated with meter reading, postage and billing.
Variable costs are those that change as the volume of water produced and delivered changes. These commonly include the costs of chemicals used in the treatment process, energy related to pumping for transmission and distribution, and source of supply.
Ideally, utilities should recover all of their fixed costs from fixed charges and all of their variable costs from volumetric charges; when this is the case, fluctuations in water sales revenues would be directly offset by reductions or increases in variable expenses. Because of this, this rate design provides greater revenue stability. However, other factors are often considered when designing water rates such as community values, water conservation goals, ease of understanding, and ease of administration.
NBS allocated the functionalization of costs into categories that can be more generally grouped into the fixed and variable costs discussed above. This analysis resulted in a cost distribution that is about 50% fixed and 50% variable (volumetric). Figure 7 summarizes how costs are allocated to each cost component and used to establish new water rates. As a result, 52.6% of revenue will be collected from commodity rates, 41.3% will be collected from fixed capacity-related charges, 3.7% from fixed customer-related charges, 0.94% will be collected from fire-protection fixed charges and 1.5% will be collected from zonal elevation surcharges.
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Figure 7. Allocated Net Revenue Requirements
Costs Allocated to Customer Classes
Customer classes are typically determined by grouping customers with similar demand characteristics into categories that reflect the cost differentials to serve each type of customer. The new rates will remain in the same structure as current rates and will continue to be distinguished between residential and nonresidential customer classes. These two groups of customers will have different fixed charges by meter size that reflects the different costs incurred to serve residential vs. non-residential classes of customers.
Figure 8 shows how costs are distributed to each customer class (except zonal related costs).
Figure 8. Distribution of Costs to Each Customer Class
Commodity related costs are distributed to each customer class based on the percentage of water consumed (previously shown in Figure 4). Capacity related costs are distributed to each customer class based on the peaking factors (previously shown in Figure 5). Customer related costs are distributed to each customer class based on the number of customers in each customer class (previously shown in Figure 6). A direct allocation is made in the functionalization and classification process to commercial fire which reflects their share of system-wide costs.
Classification Components
Commodity-Related Costs $ 8,879,127 52.6%
Capacity-Related Costs (Fixed) 6,978,331 41.3%
Customer-Related Costs 625,855 3.7%
Fire Protection-Related Costs 158,592 0.94%
Subtotal Revenue Requirement $ 16,641,905 98.5%
Zonal-Related Costs $ 250,817 1.5%
Net Total Revenue Requirement $ 16,892,721 100%
Proposed Rate
Adjusted Net Revenue
Requirements
1. Zonal Related Costs are recovered via the zonal charge and are not included in this rate revenue calculation.
Commodity Capacity Customer
Fire
Protection
Residential (Single & Multi-Family) $ 6,195,093 $ 4,769,112 $ 545,602 $ - $ 11,509,807 69.2% Non-Residential (Commercial) $ 2,684,034 $ 2,209,219 $ 69,294 $ - $ 4,962,547 29.8% Fire $ - $ - $ 10,959 $ 158,592 $ 169,550 1.0%
Grand Total $ 8,879,127 $ 6,978,331 $ 625,855 $ 158,592 $ 16,641,905 100% Customer Class
Cost Classification Components % of COS Net
Revenue Req'ts
Cost of Service
Net Revenue
Req'ts
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CURRENT VS. PROPOSED WATER RATE STRUCTURES
The process of evaluating the water rate structure provides the opportunity to incorporate a number of rate-design objectives and policies, including revenue stability, equity among customer classes, and water conservation. One of the City’s main objectives in this study was to develop a rate structure that would provide the utility with continual revenue stability and promote conservation.
Fixed Charges
Meter sizes have different fixed charges based on the capacity requirements of each size meter connected to the system. This is because larger meters have the potential to use more of the system’s capacity, or said differently, they have higher peaking factors compared to smaller meters. The potential capacity demanded (peaking) is proportional to the maximum hydraulic flow through each meter size as established by the AWWA hydraulic capacity ratios4. As an example, a 2-inch meter has a greater capacity, or potential peak demand than a 3/4-inch meter; therefore, the fixed charge for a 2-inch meter is larger than a 3/4-inch meter based on their proportionate capacity requirements5. A “hydraulic capacity factor” is calculated by dividing the maximum capacity or flow of large meters by the capacity of the base meter size, which is typically the most common residential meter size (in this case a 1-inch meter).
The actual number of meters by size is multiplied by the corresponding capacity ratios to calculate the total number of equivalent meters. The number of equivalent meters is used as a proxy for the potential demand that each customer can place on the water system (which dictates the sizing of the system’s maximum capacity). A significant portion of a water system’s peak capacity, and in turn, the utility’s fixed operating and capital costs, are related to meeting system capacity requirements.
Currently, the City charges all customer classes a fixed monthly charge based on meter size and customer class. NBS recommends maintaining the current fixed rate structure. Not uncommon in industry practice, 5/8-inch and 3/4-inch meters are set to be equivalent to the 1-inch base meter.
Fire service customers will still be subject to a different set of fixed charges than the other customer classes. Fire service customers differ from other water service customers because their service is more of a standby service, where a readiness-to-serve charge is appropriate. Except in the event of a fire, these users are not intended to use water on a regular basis (as shown previously in Figure 4). However, the City still needs to provide sufficient capacity for fire meters and recover other operations and maintenance costs of providing water to such properties for private fire service protection. Based on the cost-of-service analysis and the standby nature of fire meters, the overall cost to serve these users is less than that of a standard service; therefore, the fixed charges are less.
Figures 9, 10 and 11 show how fixed meter charges were calculated for each customer class. The customer component of the rate is $3.47 per meter and does not vary by meter size because it represents costs to the utility for having connections to the water system. Capacity costs vary by meter size and are based on their hydraulic capacity, but customer costs remain consistent across all customers. 4 See: American Water Works Association, Principles of Water Rates, Fees and Charges: Manual of Water Supply Practices M1, 386, (7
th ed. 2017) and American Water Works Association, Water Meters – Selection, Installation, Testing and Maintenance M6, 65 (5th ed. 2012).
5 This is reflected in the fixed charge calculations by using the AWWA hydraulic capacity factors to represent the maximum volume each meter size is capable of delivering.
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Figure 9. Calculation of FY 2022/23 Residential Fixed Meter Charges Figure 10. Calculation of FY 2022/23 Non-Residential Fixed Meter Charges Figure 11. Calculation of FY 2022/23 Private Fire Protection Fixed Meter Charges Volumetric Rates
Currently, the City charges all customers a uniform commodity rate for all water consumed (commodity or volumetric rates are charged per unit of water, or hundred cubic feet (hcf), or 748 gallons). NBS recommends maintaining the uniform, or single-tier, volumetric rate for all customers. It is easier to demonstrate that the use of a uniform volumetric rate meets the requirements of Proposition 218.
In addition, because of the significant differences in typical water use of commercial customers (e.g., laundromat vs. restaurants vs. office space), uniform commodity charges are a commonly used rate structure for these types of customers and is the primary reason why tiered rates typically aren’t used for commercial customers. Figure 12 shows water consumption, commodity related costs, and the uniform volumetric rate that will apply to all customer classes. 5/8-1 inch 1.00 12,981 12,981 $3.47 $29.63 $33.10 $ 5,155,716
1.5 inch 2.00 41 82 $3.47 $59.25 $62.72 $ 30,860
2 inch 3.20 60 192 $3.47 $94.80 $98.27 $ 70,757
3 inch 6.40 - - $3.47 $189.60 $193.08 $ -
4 inch 10.00 8 80 $3.47 $296.25 $299.73 $ 28,774
6 inch 20.00 4 80 $3.47 $592.51 $595.98 $ 28,607
Total (Residential Customers) 13,094 13,415 $ 5,314,714 Total Monthly
Fixed Meter
Charge
Estimated
Revenue from
Fixed Charges
Fixed Meter Charge Residential Meter
Size
Hydraulic
Capacity
Factor
Number of
Meters
Total
Equivalent
Meters
Customer
Component
Capacity
Component 5/8-1 inch 1.00 703 703 $3.47 $50.14 $53.62 $ 452,314
1.5 inch 2.00 360 720 $3.47 $100.29 $103.76 $ 448,252
2 inch 3.20 549 1,757 $3.47 $160.46 $163.94 $ 1,080,008 3 inch 6.40 14 90 $3.47 $320.93 $324.40 $ 54,499
4 inch 10.00 35 350 $3.47 $501.45 $504.92 $ 212,067
6 inch 20.00 1 20 $3.47 $1,002.90 $1,006.37 $ 12,076
8 inch 32.00 1 32 $3.47 $1,604.63 $1,608.11 $ 19,297
10 inch 84.00 - - $3.47 $4,212.16 $4,215.63 $ -
Total (Non-Residential Customers) 1,663 3,671 $ 2,278,513 Non-Residential
Meter Size
Hydraulic
Capacity
Factor
Number of
Meters Customer
Component
Capacity
Component
Total
Equivalent
Meters
Fixed Meter Charge Total Monthly
Fixed Meter
Charge
Estimated
Revenue from
Fixed Charges
2 inch 3.20 1 3 $3.47 $4.64 $8.11 $ 97
3 inch 7.00 - - $3.47 $10.14 $13.61 $ -
4 inch 14.00 64 896 $3.47 $20.28 $23.75 $ 18,242
6 inch 32.00 126 4,032 $3.47 $46.36 $49.83 $ 75,340
8 inch 56.00 67 3,752 $3.47 $81.12 $84.59 $ 68,014
10 inch 88.00 5 440 $3.47 $127.48 $130.95 $ 7,857
Total (Fire Customers) 263 9,123 $ 169,550
Total Monthly
Fixed Meter
Charge
Estimated
Revenue from
Fixed Charges
Customer
Component
Capacity
Component
Fire Meter Size
Hydraulic
Capacity
Factor
Number of
Meters
Total
Equivalent
Meters
Fixed Meter Charge
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Figure 12. Calculation of FY 2022/23 Uniform Volumetric Rates Current and Proposed Water Rates
Figure 13 compares the current and proposed rates for Fiscal Year 2022/23 through 2026/27.
Figure 13. Current and Proposed Water Rates for FY 2022/23 through 2026/27
Number of
Meters1
Water
Consumption
(hcf/yr.)2
Target Rev.
Req't from
Vol. Charges
% of Total
Rate Revenue
Uniform
Commodity
Rates ($/hcf)
Proposed
Rate Structure
Residential 13,094 2,146,005 $ 6,195,093 36.7%
Non-Residential 1,663 929,760 $ 2,684,034 15.9%
Subtotal 14,757 3,075,765 $ 8,879,127 53%
Fire 263 565 $ - 0.00% $2.89 Uniform
Grand Total 15,020 3,076,330 $ 8,879,127 53%
1. Number of meters and consumption by size and class is per the City of Morgan Hill's utility billing data as of May 2021 in the Billed Consumption Report by Month spreadsheets.
$2.89 Uniform
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27
Fixed Service Charges
Single- and Multi-Family Residential:
5/8 inch $31.14 $33.10 $36.08 $39.32 $42.08 $45.02
3/4 inch $31.14 $33.10 $36.08 $39.32 $42.08 $45.02
1 inch $31.14 $33.10 $36.08 $39.32 $42.08 $45.02
1.5 inch $58.72 $62.72 $68.37 $74.52 $79.74 $85.32
2 inch $91.81 $98.27 $107.12 $116.76 $124.93 $133.68
4 inch $279.36 $299.73 $326.70 $356.11 $381.03 $407.71
6 inch $555.17 $595.98 $649.62 $708.09 $757.65 $810.69
Non-Residential:
5/8 inch $47.23 $53.62 $58.44 $63.70 $68.16 $72.93
3/4 inch $47.23 $53.62 $58.44 $63.70 $68.16 $72.93
1 inch $47.23 $53.62 $58.44 $63.70 $68.16 $72.93
1.5 inch $90.90 $103.76 $113.10 $123.28 $131.91 $141.14 2 inch $143.31 $163.94 $178.69 $194.77 $208.41 $222.99
3 inch $283.06 $324.40 $353.59 $385.42 $412.40 $441.27
4 inch $440.28 $504.92 $550.36 $599.90 $641.89 $686.82
6 inch $877.00 $1,006.37 $1,096.94 $1,195.67 $1,279.36 $1,368.92 8 inch $1,401.07 $1,608.11 $1,752.84 $1,910.59 $2,044.33 $2,187.43 Fire Service:
5/8 inch $4.02 $4.05 $4.42 $4.81 $5.15 $5.51
3/4 inch $4.25 $4.34 $4.73 $5.16 $5.52 $5.91
1 inch $4.71 $4.92 $5.36 $5.85 $6.26 $6.69
1.5 inch $5.86 $6.37 $6.94 $7.57 $8.10 $8.66
2 inch $7.24 $8.11 $8.84 $9.63 $10.31 $11.03
3 inch $11.61 $13.61 $14.84 $16.17 $17.31 $18.52
4 inch $19.66 $23.75 $25.89 $28.22 $30.20 $32.31
6 inch $40.37 $49.83 $54.31 $59.20 $63.34 $67.78
8 inch $67.98 $84.59 $92.21 $100.51 $107.54 $115.07
10 inch $104.79 $130.95 $142.74 $155.58 $166.47 $178.13 Volumetric Charges
Uniform Rate, All Customers $2.57 $2.89 $3.15 $3.43 $3.67 $3.93
1. The FY 2022/23 rate increase will be effective July 1, 2022; subsequent rate increases will be effective on July 1st each year.
Water Rate Schedule Current
Monthly Rates
Proposed Monthly Water Rates
City of Morgan Hill – Water Rate Study 15
Prepared by NBS City of
Figures 14 and 15 compare monthly bills for single-family and multi-family residential customers under current and proposed rates at varying levels of water consumption. Figure 16 compares monthly bills for commercial customers under current and proposed rates at varying levels of water consumption. The recommended rates and monthly bills shown in these Figures differ from existing rates due to both the rate increases and changes in the allocation factors (water consumption, peaking factors, etc.), which change over time. The City’s current policy is to charge 5/8” – 1” meters the same rate; this practice has been maintained in the proposed rates shown in Figure 13, per direction from City Staff.
Figure 14. Comparison of Monthly Water Bills for Single-Family Residential Customers
City of Morgan Hill – Water Rate Study 16
Prepared by NBS City of
Figure 15. Comparison of Monthly Water Bills for Multi-Family Residential Customers
City of Morgan Hill – Water Rate Study 17
Prepared by NBS City of
Figure 16. Comparison of Monthly Water Bills for Commercial Customers
City of Morgan Hill – Water Rate Study 18
Prepared by NBS City of
SECTION 3. REVENUE STABILIZATION RATE ANALYSIS
If revenue from volumetric rates fall below the levels currently expected, the City is still obligated to meet its annual net revenue requirements. In contrast to drought rates, which are specifically intended to respond to revenue losses related to various drought stages, revenue stabilization rates are intended to offset revenue losses for any reason. For example, revenue losses could be related to conservation, unusual weather conditions, catastrophic loss of system infrastructure, or similar emergencies. To this end, revenue stabilization rates have been developed so that the water utility would still be kept financially whole under these conditions.
CALCULATION OF REVENUE STABILIZATION RATES
The intent of revenue stabilization rates is to offset the revenue losses that may be due to a variety of reasons and thereby decoupling this process from specific drought rates, drought stages, and/or Statemandated conservation. Revenue stabilization rates are the expected volumetric rate revenue divided by the reduced levels of water sales.
Figure 17 shows the estimated water consumption by customer class at various levels of reduction, up to 30%. Figure 18 shows the calculation of the revenue stabilization rates for FY 2022/23. Figure 19 shows the whole proposed rate schedule for revenue stabilization rates through FY 2026/27.
Figure 17. Average Monthly Consumption at Various Levels of Conservation Figure 18. Proposed Revenue Stabilization Rates for FY 2022/23 10% 15% 20% 25% 30%
Single Family - Inside 1,773,378 1,596,040 1,507,371 1,418,702 1,330,034 1,241,365 Single Family - Outside 52,931 47,638 44,991 42,345 39,698 37,052 Multi-Family 319,696 287,726 271,742 255,757 239,772 223,787 Commercial 929,760 836,784 790,296 743,808 697,320 650,832 Total 3,075,765 2,768,189 2,614,400 2,460,612 2,306,824 2,153,036
1. Consumption data source: Morgan Hill_2018-2021 Consumption Billing Data.xlsx Annual Consumption at Various Levels of Reduction
Customer Class
Water
Consumption1
(hcf/yr.) Customer Class
Total Target
Rev. Req't
from Vol.
Charges
10% 15% 20% 25% 30%
Residential (Single & Multi-Family) $ 6,195,093
Non-Residential (Commercial) $ 2,684,034
Fire $ -
Grand Total $ 8,879,127
$3.21 $3.40 $3.61 $3.85 $4.12
City of Morgan Hill – Water Rate Study 19
Prepared by NBS City of
Figure 19. Proposed Revenue Stabilization Rates FY 2022/23 through FY 2026/27
REVENUE-STABILIZATION RATE TRIGGER AND COUNCIL NOTIFICATION For background/informational purposes, City Staff (staff) will provide the City Council with the average units of water sales (for each month) for the rolling previous three years at the periodic financial update, which will serve as the “baseline” against which current annual sales to date will be compared. The City will include a revenue stabilization rate schedule in each budget year (and Proposition 218 Notices) indicating the volumetric rate for increases of 10%, 15%, 20%, 25% and 30%. This information will be provided as a part of the budget package each year.
If staff determines that annual water sales revenue to date is more than 10% below expected year-todate levels (based on monthly averages over the previous three-years) and expense reduction measures have been reviewed and considered, staff will implement the revenue-stabilization rates. Staff will inform the Council of the revenue-stabilization rates implementation at the earliest financial update.
Staff will also update the Council on current reserve levels and provide an analysis of why the revenue losses are occurring, along with a six-month projection of anticipated water sales.
Implementing Revenue Stabilization Rates: Once City staff has informed the Council of implementation, the Council may:
• Act to implement less than 100% of the revenue stabilization rates at the earliest billing cycle. • Utilize reserves to meet all or part of the revenue gap. • Take no action, which results in implementation of revenue stabilization rates from the revenue-stabilization rate schedule6.
Rescinding Revenue Stabilization Rates: Once the volumetric water sales revenue has returned to expected levels7, City staff will rescind the revenue-stabilization rates and previously adopted uniform volumetric rate are (again) in effect. In addition, City staff will inform the Council of such action at the earliest financial update.
6 The Revenue-Stabilization rate schedule will be the current uniform volumetric rate that correspond to water sales reductions of 10%, 15%, 20%, 25% and 30%.
7 The expected year-to-date volumetric rate revenue is the three-year rolling average monthly water sales (in units) times the currently adopted uniform volumetric water rate.
FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27
10% Revenue Stabilization Rate* $3.21 $3.50 $3.82 $4.09 $4.38 15% Revenue Stabilization Rate* $3.40 $3.71 $4.04 $4.32 $4.62 20% Revenue Stabilization Rate* $3.61 $3.93 $4.28 $4.58 $4.90 25% Revenue Stabilization Rate* $3.85 $4.20 $4.58 $4.90 $5.24 30% Revenue Stabilization Rate* $4.12 $4.49 $4.89 $5.23 $5.60 * Revenue Stabilization Rates would be implemented if current revenue from water sales are below the percentages indicated. Page 426 of 520 City of Morgan Hill – Water Rate Study 20
Prepared by NBS City of
SECTION 4. ZONAL ELEVATION SURCHARGES
OVERVIEW OF ZONAL ELEVATION SURCHARGES
While most of the City’s water customers are located within normal elevation zones (those not requiring significant additional infrastructure to get water to the higher elevations), some customers are in higher elevation zones that costs more to pump water to them. These elevation surcharges are part of the current rate structure and NBS evaluated the current cost of service for these customers.
Although this analysis could have included the annual costs of power as well as pumping facility maintenance and replacement costs, the calculated surcharges only included annual power costs. The City decided to only recover power costs at least partly because the fixed assets of the water system are sized to provide fire protection, not just water service, and fire protection is a community-wide issue for which the costs are shared community-wide. Also, surcharges for all three zones were calculated as a single volumetric rate based on the annual flows through these three zones.
NBS is proposing a single volumetrically based zonal elevation surcharge since energy is a variable cost.
Figure 20 shows the proposed water zonal elevation surcharges.
Figure 20. Water Zonal Elevation Surcharges
A five-year projection of costs was prepared as part of the zonal elevation surcharge analysis, in order to provide a five-year schedule of surcharges that is consistent with the rate schedules prepared in this study.
Figure 21 show the five-year schedules of zonal elevation surcharge options. Refer to the Appendix of this report, which show the detail of how the surcharges were calculated.
Figure 21. Five-Year Schedule of Water Zonal Elevation Surcharges Surcharge
Costs
Total
Revenue
Elevation Zones Annual
Power Costs
Annual Flow
(hcf)
Costs to
Recover in
Volumetric
Surcharge
Volumetric
Surcharges
($/hcf)
Fixed +
Volumetric
Revenue
from
Surcharges
All Zones $ 267,520 752,540 $ 267,520 $0.36 $ 267,520
Total $ 267,520 752,540 $ 267,520 -- $ 267,520
VOLUMETRIC SURCHARGES
(for 100% of Power Costs) Water Enterprise Zonal Elevation Surcharges: Volumetric Surcharges FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26
Volumetric Surcharges ($/hcf) $0.11 $0.36 $0.37 $0.39 $0.41 $0.43
1. The Annual % increase is due to inflation of energy costs.
Elevation Zones Current
City of Morgan Hill – Water Rate Study 21
Prepared by NBS City of
SECTION 5. RECOMMENDATIONS AND NEXT STEPS
CONSULTANT RECOMMENDATIONS
NBS recommends the City take the following actions for the water and wastewater rates:
• Approve and Accept This Study Report: NBS recommends that the City Council formally approve and adopt this report and its recommendations. This will provide documentation of the rate study analyses and the basis for analyzing potential changes to future rates. • Maintain Reserve Fund Targets: The City should periodically evaluate reserve fund levels and make it a long-term goal to achieve these levels for the Operating, Capital, and Rate Stabilization Reserves. • Implement Recommended Levels of Rate Increases and Proposed Rates: Based on the analysis presented in this report, the City Council should implement the proposed water rates recommended in this report for the next five years as shown in Figure 13 in Section 2 of this report. • Adopt Revenue Stabilization Rates: Adopt the revenue stabilization rates shown in Figure 19 in Section 3 of this report.
• Adopt Elevation Zone Surcharges: Adopt the zonal surcharges shown in Figures 21 in Section 4 of this report.
• Complete a Legal Review: This rate study outlines proposed new rates, including new revenue stabilization rates, updated zonal elevation surcharges, and the continued use of outside surcharges.
Particularly in light of changing legal requirements, these rates should be reviewed by competent legal counsel with respect to compliance with Proposition 218 and related State laws prior to adoption, including language for new resolutions and public notices required to implement these rates.
NEXT STEPS
• Annually Review Rates and Revenue – Any time an Agency adopts new utility rates or rate structures, those new rates should be closely monitored over the next several years to ensure the revenue generated is sufficient to meet the annual revenue requirements. Changing economic and droughtrelated water consumption patterns underscore the need for this review, as well as potential and unseen changing revenue requirements, particularly those related to environmental regulations that can significantly affect capital improvements and repair and replacement costs.
Note: The attached Technical Appendices provide detailed information on the analysis of the water revenue requirements, cost of service and rate design analyses that have been summarized in this report.
City of Morgan Hill – Water Rate Study 22
Prepared by NBS City of
PRINCIPAL ASSUMPTIONS AND CONSIDERATIONS
In preparing this report and the recommendations included herein, NBS has relied on a number of principal assumptions and considerations with regard to financial matters, number of customer accounts, conditions and events that may occur in the future. This information and assumptions, including the City’s budgets and customer account information from City staff, were provided by sources we believe to be reliable, although NBS has not independently verified this data.
While we believe NBS’ use of such information and assumptions is reasonable for the purpose of this report and its recommendations, some assumptions will invariably not materialize as stated herein or may vary significantly due to unanticipated events and circumstances. Therefore, the actual results can be expected to vary from those projected to the extent that actual future conditions differ from those assumed by us or provided to us by others.
City of Morgan Hill – Water Rate Study 23
Prepared by NBS City of
APPENDIX - WATER RATE ANALYSIS
CITY OF MORGAN HILL Financial Plan & Reserve Summary
WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 1 : FINANCIAL PLAN AND SUMMARY OF REVENUE REQUIREMENTS Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Sources of Water Funds
Rate Revenue:
Current Rate Revenue $ 15,179,148 $ 15,497,910 $ 15,823,366 $ 16,155,656 $ 16,494,925 $ 16,841,319 $ 17,194,986 $ 17,556,081 $ 17,924,759 $ 18,301,179 Non-Rate Revenue in Operations & System Replacement Funds:
Interest Income1
180,121 176,388 164,908 110,214 94,864 79,547 64,233 84,685 104,494 149,683 Other, Non-Rate Revenues 1,098,954 1,106,147 1,113,492 1,120,991 1,128,647 1,136,465 1,144,446 1,152,595 1,160,915 1,169,410 Total Sources of Funds $ 16,458,222 $ 16,780,445 $ 17,101,766 $ 17,386,862 $ 17,718,436 $ 18,057,331 $ 18,403,665 $ 18,793,361 $ 19,190,168 $ 19,620,272 Uses of Water Funds
Operating Expenses2
Water Operations $ 9,785,473 $ 10,785,807 $ 11,339,535 $ 11,923,538 $ 12,539,549 $ 13,189,404 $ 13,875,048 $ 14,598,542 $ 15,362,070 $ 16,167,943 Water Operations - Capital Expenses 860,985 886,815 913,419 940,822 969,046 998,118 1,028,061 1,058,903 1,090,670 1,123,390 Utility Billing 957,802 998,262 1,040,523 1,084,667 1,130,781 1,178,958 1,229,293 1,281,886 1,336,843 1,394,273 Water Conservation 157,393 332,540 347,059 362,242 378,118 394,721 412,085 430,246 449,242 469,112 Water Rate Stabilization Fund Admin. 371 383 394 406 418 431 443 457 470 485 Water System Replacement Fund 23,178 23,874 24,590 25,328 26,088 26,870 27,676 28,507 29,362 30,243 Subtotal: Operating Expenses $ 11,785,202 $ 13,027,679 $ 13,665,520 $ 14,337,001 $ 15,043,999 $ 15,788,501 $ 16,572,607 $ 17,398,541 $ 18,268,656 $ 19,185,446 Other Expenditures:
Rate-Funded Capital Expenses $ 890,787 - $ 6,412,621 $ 7,432,357 $ 8,616,828 $ 9,023,266 $ 6,688,244 $ 6,690,613 $ 5,015,485 $ 5,610,429 $ Subtotal: Other Expenditures $ - $ 890,787 $ 6,412,621 $ 7,432,357 $ 8,616,828 $ 9,023,266 $ 6,688,244 $ 6,690,613 $ 5,015,485 $ 5,610,429 Total Uses of Water Funds $ 11,785,202 $ 13,918,466 $ 20,078,141 $ 21,769,358 $ 23,660,827 $ 24,811,767 $ 23,260,850 $ 24,089,153 $ 23,284,141 $ 24,795,875 plus: Revenue from Rate Increases3
- 1,394,812 2,976,375 4,382,496 5,942,391 6,754,436 7,137,192 7,535,504 7,949,935 8,381,064 Increase/Decrease to Reserves $ 4,673,020 $ 4,256,790 $ - $ - $ - $ - $ 2,280,007 $ 2,239,712 $ 3,855,961 $ 3,205,461 Net Revenue Reqt. (Total Uses less Non-Rate Revenue) $ 10,506,128 $ 12,635,931 $ 18,799,741 $ 20,538,153 $ 22,437,316 $ 23,595,754 $ 22,052,171 $ 22,851,873 $ 22,018,732 $ 23,476,782 Total Rate Revenue After Rate Increases $ 15,179,148 $ 16,892,721 $ 18,799,741 $ 20,538,153 $ 22,437,316 $ 23,595,754 $ 24,332,178 $ 25,091,585 $ 25,874,694 $ 26,682,243 Projected Annual Rate Revenue Increase 0.00% 9.00% 9.00% 7.00% 7.00% 3.00% 1.00% 1.00% 1.00% 1.00% Cumulative Increase from Annual Revenue Increases 0.00% 9.00% 18.81% 27.13% 36.03% 40.11% 41.51% 42.92% 44.35% 45.80% Debt Coverage After Rate Increase 4
4.45 4.22 5.12 6.63 6.84 6.84 6.68 6.67 6.66 6.66
Target Debt Coverage 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20 1.20
1. Interest earnings for FY 2021/22 are per the City's budget projections. For all future years, interest earnings are calculated here based on historical LAIF returns and projected cash balances.
2. The FY 2021/22 operating expenses are per the City's budget projections. Inflationary factors are applied to these expenses to project costs in FY 2022/23 and beyond.
3. Revenue from rate increases are implemented on January 1, 2022, so the City will collect 6 months of the increased rate revenue for the first year of the adjustment. The rate increase for future years through 2026 will occur on January 1 annually.
4. Per the Installment Loan Agreement for the 2014 Revenue Bonds, the City is required to maintain a debt coverage ratio of 1.20 for these bond issues and all other parity debt. Connection fee revenue and interest earnings in that fund are figured into this calculation.
RATE REVENUE REQUIREMENTS SUMMARY 5-Year Rate Adoption Period Projected Prepared by NBS
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CITY OF MORGAN HILL Financial Plan & Reserve Summary
WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 2 : RESERVE FUND SUMMARY
Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Total Beginning Cash1 $ 14,627,203
Water Operations Fund (650)
Beginning Reserve Balance1 $ 2,958,793 $ 3,256,920 2,946,301 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 4,143,152 $ 4,349,635 $ 4,567,164 $ Plus: Net Cash Flow (After Rate Increases) 4,673,020 4,256,790 - - - - 2,280,007 2,239,712 3,855,961 3,205,461 Plus: Transfer of Debt Reserve Surplus - - - - - - - - - - Plus: Transfer of Rate Stabilization Reserve Surplus 134,930 - - - - - - - - - Less: Transfer Out to Water System Replacement Reserve (4,820,442) (3,946,171) - - - - (1,393,775) (2,033,229) (3,638,432) (2,976,264) Less: Transfer Out to Rate Stabilization Fund - - - - - - - - - - Ending Operating Reserve Balance $ 2,946,301 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 3,256,920 $ 4,143,152 $ 4,349,635 $ 4,567,164 $ 4,796,361 Target Ending Balance (90-days of O&M) 2 $ 3,256,920 2,946,301 $ 3,416,380 $ 3,584,250 $ 3,761,000 $ 3,947,125 $ 4,143,152 $ 4,349,635 $ 4,567,164 $ 4,796,361 $ Water System Replacement Fund (653)
Beginning Reserve Balance1 $ 8,513,872 $ 7,246,771 8,288,597 $ 3,763,100 $ 2,785,359 $ 1,809,794 $ 834,340 $ 1,250,817 $ 2,306,010 $ 4,966,775 $ Plus: Grant Proceeds - - - - - - - - - -
Plus: Transfer of Operating Reserve Surplus 4,820,442 3,946,171 - - - - 1,393,775 2,033,229 3,638,432 2,976,264 (976,266) (978,736) (975,971) (977,741) (975,565) (975,454) (977,298) (978,036) (977,667) (976,192) Less: Use of Reserves for Capital Projects (4,066,982) (4,011,731) (2,507,700) - - - - - - - Ending System Replacement Reserve Bal. $ 8,288,597 $ 7,246,771 $ 3,763,100 $ 2,785,359 $ 1,809,794 $ 834,340 $ 1,250,817 $ 2,306,010 $ 4,966,775 $ 6,966,847 Target Ending Balance (6% of Assets) 2,4 $ 3,300,600 2,953,600 $ 3,763,100 $ 4,236,000 $ 4,757,700 $ 5,194,200 $ 5,460,800 $ 5,719,500 $ 5,872,800 $ 6,056,000 $ Rate Stabilization Fund (652)
Beginning Reserve Balance 1 $ 3,154,538 $ 3,083,492 3,035,830 $ 3,131,903 $ 3,181,074 $ 3,231,017 $ 3,281,744 $ 3,333,267 $ 3,385,599 $ 3,438,753 $ Plus: Contributions to Rate Stabilization Fund - - - - - - - - - - Plus: Interest Earnings5
16,222 47,663 48,411 49,171 49,943 50,727 51,523 52,332 53,154 53,988 Less: Transfer of Surplus to Operating Reserve (134,930) - - - - - - - - - Ending Rate Stabilization Balance $ 3,035,830 $ 3,083,492 $ 3,131,903 $ 3,181,074 $ 3,231,017 $ 3,281,744 $ 3,333,267 $ 3,385,599 $ 3,438,753 $ 3,492,742 Target Ending Balance (20% of Estimated Revenue) 2
$ 3,035,830 $ 3,099,582 $ 3,164,673 $ 3,231,131 $ 3,298,985 $ 3,368,264 $ 3,438,997 $ 3,511,216 $ 3,584,952 $ 3,660,236 Ending Balance - Excludes Debt Reserve $ 14,270,727 $ 13,587,183 $ 10,151,923 $ 9,223,353 $ 8,297,731 $ 7,373,003 $ 8,727,235 $ 10,041,244 $ 12,972,693 $ 15,255,950 Minimum Target Ending Balance - Excludes Debt Reserve $ 8,935,730 $ 9,657,102 $ 10,344,153 $ 11,051,382 $ 11,817,685 $ 12,509,589 $ 13,042,949 $ 13,580,351 $ 14,024,916 $ 14,512,597 Ending Surplus/(Deficit) Compared to Reserve Targets $ 5,334,997 $ 3,930,081 $ (192,230) $ (1,828,029) $ (3,519,954) $ (5,136,586) $ (4,315,714) $ (3,539,107) $ (1,052,223) $ 743,353 Days Cash on Hand for Unrestricted Funds 6
483 412 293 252 216 182 205 224 274 306
City's Minimum DCOH (per City Fiscal Policies) 202 193 189 186 183 180 177 175 172 170
1. Total beginning cash is the sum of the projected cash balances in Funds 650, 651, 652, and 653 as of 07.01.21. Source file: balance sheet.pdf .
2. Reserve targets are set according to existing City policy.
3. Per email provided by Staff on 10.07.15, the debt service payment for the 2014 Water Revenue Bonds is split as follows: 41% to the Water Impact Fund (651) and 59% to the Water System Replacement Fund (653).
4. The Water System Replacement reserve target is set to 6% of net assets.
5. Interest earnings for FY 2021/22 are per the City's budget projections. For all future years, interest earnings are calculated here based on historical LAIF returns and projected cash balances per the California Treasurer's Office website Source: https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .
6. Days cash on hand represents the number of days cash the City has available to cover operating expenses and debt service payments.
SUMMARY OF CASH ACTIVITY
Less: Existing Debt Service
(Replacement Fund Allocation of 59%)3
5-Year Rate Adoption Period Projected
Prepared by NBS
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CITY OF MORGAN HILL Financial Plan & Reserve Summary
WATER RATE STUDY
Financial Plan and Reserve Projections
TABLE 3 : RESERVE FUND SUMMARY, CONTINUED
Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Restricted Reserves:
Impact Fund (651)
Beginning Reserve Balance1 $ 3,397,655 $ - 2,123,277 $ - $ - $ - $ - $ - $ - $ - $ Plus: Interest Earnings5
33,335 64,003 - - - - - - - -
Plus: Impact Fee Revenue7
918,214 1,782,143 1,146,810 2,608,188 1,722,220 1,287,082 1,072,302 1,072,302 1,072,302 1,072,302 Less: Annual Operating Expenditures (51,830) (53,385) (54,986) (56,636) (58,335) (60,085) (61,888) (63,744) (65,657) (67,626) Less: Debt Service (Impact Fund Allocation of 41%)3
(678,422) (680,139) (678,217) (679,447) (677,935) (677,858) (679,139) (679,652) (679,396) (678,371) Less: Use of Reserves for Capital Projects (2,388,555) (2,343,019) (413,607) (1,872,105) (985,950) (549,139) (331,275) (328,906) (327,250) (326,305) Ending Connection Fee Fund Balance $ 2,123,277 $ - $ - $ - $ - $ - $ - $ - $ - $ - Annual Interest Earnings Rate 5 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57% 1.57%
1. Total beginning cash is the sum of the projected cash balances in Funds 650, 651, 652, and 653 as of 07.01.21. Source file: balance sheet.pdf .
2. Reserve targets are set according to existing City policy.
3. Per email provided by Staff on 10.07.15, the debt service payment for the 2014 Water Revenue Bonds is split as follows: 41% to the Water Impact Fund (651) and 59% to the Water System Replacement Fund (653).
4. The Water System Replacement reserve target is set to 6% of net assets.
5. Interest earnings for FY 2021/22 are per the City's budget projections. For all future years, interest earnings are calculated here based on historical LAIF returns and projected cash balances per the California Treasurer's Office website Source: https://www.treasurer.ca.gov/pmia-laif/historical/annual.asp .
6. Days cash on hand represents the number of days cash the City has available to cover operating expenses and debt service payments.
7. Impact fee revenue projections are from the following file: Budget.xlsx and updated per City staff via email March 9, 2022. 5-Year Rate Adoption Period Projected SUMMARY OF CASH ACTIVITY, continued Prepared by NBS
Web: www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 3 of 46
CITY OF MORGAN HILL Charts & Tables
WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 1
$.Mil.
$5.Mil.
$10.Mil.
$15.Mil.
$20.Mil.
$25.Mil.
$30.Mil.
2022 2023 2024 2025 2026 2027 Annual Obligations
Fiscal Year Ending June 30
Water Revenue Requirements vs.
Revenue Under Existing and Increased Rates
Rate Funded Capital Expenses Debt Service (funded w/ Rates) O&M Expenses Revenues under Existing Rates
Revenues under Increased Rates
Prepared by NBS
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Charts and Tables, 4 of 46
CITY OF MORGAN HILL Charts & Tables
WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 2
4.45 4.22
5.12 6.63
6.84 6.84
0.00 1.00
2.00 3.00
4.00 5.00
6.00 7.00
8.00 2022 2023 2024 2025 2026 2027 Debt Coverage Ratio
Fiscal Year Ending June 30
Debt Coverage Ratios
Debt Coverage After Rate Increase Target Debt Coverage
Prepared by NBS
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Charts and Tables, 5 of 46
CITY OF MORGAN HILL Charts & Tables
WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 3
$.Mil.
$2.Mil.
$4.Mil.
$6.Mil.
$8.Mil.
$10.Mil.
$12.Mil.
$14.Mil.
$16.Mil.
2022 2023 2024 2025 2026 2027 Ending Cash Balance
Fiscal Year Ending June 30
Ending Cash Balances vs.
Recommended Reserve Targets
Projected Ending Cash Reserve Balance
Recommended Minimum Reserve Target
Prepared by NBS
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Charts and Tables, 6 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 4 : REVENUE FORECAST1
WATER OPERATIONS Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water Operations Fund (650)
INTEREST INCOME2
See FP $ 58,595 $ - $ - $ - $ - $ - $ - $ - $ - $ -
RENT & CONCESSIONS 6 54,097 54,097 54,097 54,097 54,097 54,097 54,097 54,097 54,097 54,097 WATER SALES 1 15,179,148 15,497,910 15,823,366 16,155,656 16,494,925 16,841,319 17,194,986 17,556,081 17,924,759 18,301,179 BOOSTER STATION CHARGES 6 147,088 147,088 147,088 147,088 147,088 147,088 147,088 147,088 147,088 147,088 UB COLLECTIONS 6 2,806 2,806 2,806 2,806 2,806 2,806 2,806 2,806 2,806 2,806 METER INSTALL & SERVICE 1 25,215 25,745 26,285 26,837 27,401 27,976 28,564 29,163 29,776 30,401 REIMBURSEMENT OF EXPENSES 6 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 40,000 MISC. SALES 6 5,253 5,253 5,253 5,253 5,253 5,253 5,253 5,253 5,253 5,253 ANNUAL BACKFLOW TESTING ADMINISTRATION 6 13,432 13,432 13,432 13,432 13,432 13,432 13,432 13,432 13,432 13,432 ANNUAL BACKFLOW INSPECTION 6 3,263 3,263 3,263 3,263 3,263 3,263 3,263 3,263 3,263 3,263 UTILITY ACCOUNT SET-UP 1 81,423 83,133 84,879 86,662 88,481 90,340 92,237 94,174 96,151 98,171 CONSTRUCTION BACKFLOW INSPECTION 6 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 2,101 UTILITY BILL DELINQ CHR 1 28,104 28,694 29,297 29,912 30,540 31,182 31,837 32,505 33,188 33,885 DELINQUENT BILL CHARGE 1 130,278 133,013 135,807 138,659 141,570 144,543 147,579 150,678 153,842 157,073 UTILITY SERVICE CALL 1 77,536 79,164 80,827 82,524 84,257 86,027 87,833 89,678 91,561 93,484 TRANSFER FROM-640 (SEWER OPS) 6 488,357 488,357 488,357 488,357 488,357 488,357 488,357 488,357 488,357 488,357 Water Impact Fund (651)
INTEREST INCOME2
See FP 64,003 - - - - - - - - -
DEVELOPMENT IMPACT FEES (AB1600) 6 1,782,143 918,214 1,146,810 2,608,188 1,722,220 1,287,082 1,072,302 1,072,302 1,072,302 1,072,302 Water Rate Stabilization Fund (652)
INTEREST INCOME 2
See FP 16,222 - - - - - - - - -
Water System Replacement Fund (653)
INTEREST INCOME2
See FP 17,211 - - - - - - - - -
TOTAL: REVENUE $18,216,275 $17,522,271 $18,083,668 $19,884,835 $19,345,793 $19,264,865 $19,411,734 $19,780,978 $20,157,976 $20,542,891 Prepared by NBS
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Exhibit 1 (O&M), 7 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 5 : REVENUE SUMMARY, CONT.
WATER OPERATIONS 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water Operations Fund (650)
WATER RATE REVENUE $ 15,179,148 $ 15,497,910 $ 15,823,366 $ 16,155,656 $ 16,494,925 $ 16,841,319 $ 17,194,986 $ 17,556,081 $ 17,924,759 $ 18,301,179 INTEREST INCOME2
58,595 - - - - - - - - -
OTHER REVENUE 1,098,954 1,106,147 1,113,492 1,120,991 1,128,647 1,136,465 1,144,446 1,152,595 1,160,915 1,169,410 Water Impact Fund (651)
IMPACT FEE REVENUE 1,782,143 918,214 1,146,810 2,608,188 1,722,220 1,287,082 1,072,302 1,072,302 1,072,302 1,072,302 INTEREST INCOME2
64,003 - - - - - - - - -
Water Rate Stabilization Fund (652)
RATE STABILIZATION REVENUE - - - - - - - - - -
INTEREST INCOME2
16,222 - - - - - - - - -
Water System Replacement Fund (653)
SYSTEM REPLACEMENT REVENUE - - - - - - - - - -
INTEREST INCOME2
17,211 - - - - - - - - -
TOTAL: REVENUE $18,216,275 $17,522,271 $18,083,668 $19,884,835 $19,345,793 $19,264,865 $19,411,734 $19,780,978 $20,157,976 $20,542,891
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
Impact fee revenue updated per City staff via email March 9, 2022.
2. Interest earnings beyond 2021/22 and internal transfers are calculated in the Financial Plan and Reserve Fund Summary of this model.
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Exhibit 1 (O&M), 8 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 6 : OPERATING EXPENSE FORECAST1
WATER OPERATIONS FUND - Operations Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
SALARIES
SALARIES - GENERAL* 4 $ 1,862,956 $ 2,275,547 $ 2,389,325 $ 2,508,791 $ 2,634,230 $ 2,765,942 $ 2,904,239 $ 3,049,451 $ 3,201,923 $ 3,362,020 SALARIES - PART-TIME TEMP 4 13,792 14,482 15,206 15,966 16,764 17,602 18,483 19,407 20,377 21,396 EARNED LEAVE LIABILITY 4 44,788 47,027 49,378 51,847 54,440 57,162 60,020 63,021 66,172 69,480 OVERTIME - GENERAL 4 77,780 81,669 85,752 90,040 94,542 99,269 104,233 109,444 114,916 120,662 RETIREMENT - GENERAL 4 396,929 416,775 437,614 459,495 482,470 506,593 531,923 558,519 586,445 615,767 DEFERRED COMPENSATION 4 24,860 26,103 27,408 28,779 30,217 31,728 33,315 34,981 36,730 38,566 GROUP INSURANCE 4 330,233 346,745 364,082 382,286 401,400 421,470 442,544 464,671 487,905 512,300 MEDICARE 4 26,706 28,041 29,443 30,916 32,461 34,084 35,789 37,578 39,457 41,430 MEDICARE PTT AND OT 4 1,328 1,394 1,464 1,537 1,614 1,695 1,779 1,868 1,962 2,060 INCOME PROTECTION INS 4 11,926 12,522 13,148 13,806 14,496 15,221 15,982 16,781 17,620 18,501 WORKERS COMP 4 45,762 48,050 50,453 52,975 55,624 58,405 61,325 64,392 67,611 70,992 WORKERS COMP PTT AND OT 4 2,289 2,404 2,524 2,650 2,783 2,922 3,068 3,221 3,382 3,551 BENEFITS 4 7,097 7,452 7,824 8,216 8,626 9,058 9,511 9,986 10,486 11,010 UNIFORM 4 3,500 3,675 3,859 4,052 4,254 4,467 4,690 4,925 5,171 5,430
SUPPLIES - - - - - - - - -
TAXES 6 535 535 535 535 535 535 535 535 535 535
ELECTRIC 5 1,197,082 1,436,499 1,508,324 1,583,740 1,662,927 1,746,073 1,833,377 1,925,046 2,021,298 2,122,363 GROUNDWATER PRODUCTION 3 3,508,289 3,739,836 3,986,666 4,249,785 4,530,271 4,829,269 5,148,001 5,487,769 5,849,962 6,236,059 WATER/SEWER 2 12,731 13,113 13,506 13,911 14,329 14,758 15,201 15,657 16,127 16,611 TELEPHONE 2 24,110 24,833 25,578 26,346 27,136 27,950 28,789 29,652 30,542 31,458 GASOLINE & OIL 2 36,771 37,874 39,010 40,181 41,386 42,628 43,906 45,224 46,580 47,978 CONTRACT SERVICES 2 346,470 356,864 367,570 378,597 389,955 401,654 413,703 426,114 438,898 452,065 BANK CARD SERVICE FEES 2 580 597 615 634 653 672 693 713 735 757 RENTALS - OUTSIDE 2 2,630 2,709 2,790 2,874 2,960 3,049 3,140 3,235 3,332 3,432 STATIONERY & OFFICE SUPPLIES 2 3,250 3,348 3,448 3,551 3,658 3,768 3,881 3,997 4,117 4,241 COMPUTER HARDWARE-NON CAPITAL 2 5,780 5,953 6,132 6,316 6,505 6,701 6,902 7,109 7,322 7,542 COMPUTER SOFTWARE-NON CAPITAL 2 2,630 2,709 2,790 2,874 2,960 3,049 3,140 3,235 3,332 3,432 OTHER SUPPLIES 2 225,710 232,481 239,456 246,639 254,039 261,660 269,510 277,595 285,923 294,500 ADVERTISING 2 3,250 3,348 3,448 3,551 3,658 3,768 3,881 3,997 4,117 4,241 PHOTOCOPYING 2 810 834 859 885 912 939 967 996 1,026 1,057 POSTAGE & FREIGHT 2 2,000 2,060 2,122 2,185 2,251 2,319 2,388 2,460 2,534 2,610 PRINTING 2 2,360 2,431 2,504 2,579 2,656 2,736 2,818 2,903 2,990 3,079 AUTO MILEAGE 2 290 299 308 317 326 336 346 357 367 378
CHEMICALS 2 31,827 32,782 33,765 34,778 35,822 36,896 38,003 39,143 40,317 41,527 WATER/SEWER MAINTENANCE SVS 2 53,045 54,636 56,275 57,964 59,703 61,494 63,339 65,239 67,196 69,212 SMALL TOOLS 2 11,820 12,175 12,540 12,916 13,304 13,703 14,114 14,537 14,973 15,422 OTHER EXPENSE 2 61,800 63,654 65,564 67,531 69,556 71,643 73,792 76,006 78,286 80,635 TRAINING & EDUCATION 2 12,600 12,978 13,367 13,768 14,181 14,607 15,045 15,496 15,961 16,440 CONFERENCE & MEETINGS 2 6,000 6,180 6,365 6,556 6,753 6,956 7,164 7,379 7,601 7,829 MEMBERSHIP & DUES 2 12,995 13,385 13,786 14,200 14,626 15,065 15,517 15,982 16,462 16,956 SUBSCRIPTION & PUBLICATIONS 2 225 232 239 246 253 261 269 277 285 294 MAINT - BLDGS/IMPROVEMENTS 2 43,290 44,589 45,926 47,304 48,723 50,185 51,691 53,241 54,838 56,484 MAINT - MACHINE/EQUIPMENT 2 32,460 33,434 34,437 35,470 36,534 37,630 38,759 39,922 41,119 42,353 MAINT - AUTO/TRUCKS 2 30,300 31,209 32,145 33,110 34,103 35,126 36,180 37,265 38,383 39,535 SUB-TOTAL: WATER OPERATIONS FUND - Operations 8,521,586 9,483,462 9,997,552 10,540,699 11,114,598 11,721,046 12,361,949 13,039,325 13,755,314 14,512,186
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years. * Some salary costs are adjusted per City email on Febryary 2, 2022.
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Exhibit 1 (O&M), 9 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 7 : OPERATING EXPENSE FORECAST, CONT.1
WATER OPERATIONS FUND - Operations, cont. Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
CAPITAL
COMPUTER EQUIPMENT 2 105,000 108,150 111,395 114,736 118,178 121,724 125,375 129,137 133,011 137,001 METERS 2 450,000 463,500 477,405 491,727 506,479 521,673 537,324 553,443 570,047 587,148
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE 2 146,604 151,002 155,532 160,198 165,004 169,954 175,053 180,304 185,714 191,285 BUILDING MAINT - CURRENT SERVICES 2 79,674 82,064 84,526 87,062 89,674 92,364 95,135 97,989 100,929 103,957 BUILDING MAINT - FUTURE REPLACEMENT 2 14,039 14,460 14,894 15,341 15,801 16,275 16,763 17,266 17,784 18,317 FLEET REPLACEMENT 2 305,985 315,165 324,619 334,358 344,389 354,720 365,362 376,323 387,613 399,241 GIS 2 27,969 28,808 29,673 30,563 31,480 32,424 33,397 34,399 35,431 36,493 INFO SYSTEM SERVICES 2 162,903 167,790 172,824 178,009 183,349 188,850 194,515 200,350 206,361 212,552 GF ADMIN 2 340,207 350,413 360,925 371,753 382,906 394,393 406,225 418,411 430,964 443,893
TRANSFERS
TRANSFER OUT-010 (GENERAL FUND) 2 357,159 367,874 378,910 390,277 401,986 414,045 426,467 439,261 452,439 466,012 TRANSFER OUT-232 (ENVIRONMENTAL PROGRAMS) 2 108,269 111,517 114,863 118,308 121,858 125,513 129,279 133,157 137,152 141,266 TRANSFER OUT - EMPLOYEE BENEFITS FUND 4 27,062 28,415 29,836 31,328 32,894 34,539 36,266 38,079 39,983 41,982 SUB-TOTAL: WATER OPERATIONS FUND - Operations 2,124,871 2,189,159 2,255,402 2,323,661 2,393,997 2,466,475 2,541,160 2,618,120 2,697,425 2,779,148 TOTAL: WATER OPERATIONS FUND, Operations 10,646,458 11,672,621 12,252,954 12,864,359 13,508,595 14,187,521 14,903,109 15,657,445 16,452,740 17,291,333
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
Prepared by NBS
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Exhibit 1 (O&M), 10 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 8 : OPERATING EXPENSE FORECAST, CONT.1
WATER OPERATIONS FUND - Utility Billing Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
SALARIES
SALARIES - GENERAL 4 $ 418,147 $ 439,054 $ 461,007 $ 484,057 $ 508,260 $ 533,673 $ 560,357 $ 588,375 $ 617,794 $ 648,683 SALARIES - PART-TIME TEMP 4 - - - - - - - - - -
EARNED LEAVE LIABILITY 4 7,893 8,288 8,702 9,137 9,594 10,074 10,578 11,106 11,662 12,245 RETIREMENT - GENERAL 4 72,607 76,237 80,049 84,052 88,254 92,667 97,300 102,165 107,274 112,637 DEFERRED COMPENSATION 4 5,436 5,708 5,993 6,293 6,607 6,938 7,285 7,649 8,031 8,433 GROUP INSURANCE 4 58,432 61,354 64,421 67,642 71,024 74,576 78,304 82,220 86,331 90,647 MEDICARE 4 4,830 5,072 5,325 5,591 5,871 6,164 6,473 6,796 7,136 7,493 MEDICARE PTT AND OT 4 - - - - - - - - - -
INCOME PROTECTION INS 4 2,544 2,671 2,805 2,945 3,092 3,247 3,409 3,580 3,759 3,947 WORKERS COMP 4 8,392 8,812 9,252 9,715 10,201 10,711 11,246 11,808 12,399 13,019 WORKERS COMP PTT AND OT 4 - - - - - - - - - -
BENEFITS 4 2,694 2,829 2,970 3,119 3,275 3,438 3,610 3,791 3,980 4,179
SUPPLIES
TELEPHONE 2 1,600 1,648 1,697 1,748 1,801 1,855 1,910 1,968 2,027 2,088 CONTRACT SERVICES 2 67,272 69,290 71,369 73,510 75,715 77,987 80,326 82,736 85,218 87,775 BANK CARD SERVICE FEES 2 120,000 123,600 127,308 131,127 135,061 139,113 143,286 147,585 152,012 156,573 STATIONERY & OFFICE SUPPLIES 2 3,200 3,296 3,395 3,497 3,602 3,710 3,821 3,936 4,054 4,175 COMPUTER HARDWARE-NON CAPITAL 2 - - - - - - - - - -
OTHER SUPPLIES 2 500 515 530 546 563 580 597 615 633 652 ADVERTISING 2 500 515 530 546 563 580 597 615 633 652
POSTAGE & FREIGHT 2 48,500 49,955 51,454 52,997 54,587 56,225 57,912 59,649 61,438 63,281 PRINTING 2 1,000 1,030 1,061 1,093 1,126 1,159 1,194 1,230 1,267 1,305 TRAINING & EDUCATION 2 1,500 1,545 1,591 1,639 1,688 1,739 1,791 1,845 1,900 1,957
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE 2 20,037 20,638 21,257 21,895 22,552 23,228 23,925 24,643 25,382 26,144 BUILDING MAINT - CURRENT SERVICES 2 33,426 34,429 35,462 36,526 37,622 38,750 39,913 41,110 42,343 43,614 BUILDING MAINT - FUTURE REPLACEMENT 2 1,883 1,939 1,998 2,058 2,119 2,183 2,248 2,316 2,385 2,457 INFO SYSTEM SERVICES 2 33,223 34,220 35,246 36,304 37,393 38,515 39,670 40,860 42,086 43,349 GF ADMIN 2 38,846 40,012 41,212 42,449 43,722 45,034 46,385 47,776 49,210 50,686
TRANSFERS
TRANSFER OUT - EMPLOYEE BENEFITS FUND 4 5,339 5,606 5,886 6,181 6,490 6,814 7,155 7,513 7,888 8,283 TOTAL: WATER OPERATIONS FUND - Utility Billing 957,802 998,262 1,040,523 1,084,667 1,130,781 1,178,958 1,229,293 1,281,886 1,336,843 1,394,273
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
Prepared by NBS
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Exhibit 1 (O&M), 11 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 9 : OPERATING EXPENSE FORECAST, CONT.1
WATER OPERATIONS FUND - Water Conservation Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
SALARIES
SALARIES - GENERAL* 4 $ 23,007 $ 140,908 $ 147,954 $ 155,352 $ 163,119 $ 171,275 $ 179,839 $ 188,831 $ 198,272 $ 208,186 SALARIES - PART-TIME TEMP 4 19,680 20,664 21,697 22,782 23,921 25,117 26,373 27,692 29,076 30,530 EARNED LEAVE LIABILITY 4 1,701 1,786 1,876 1,969 2,068 2,171 2,280 2,394 2,513 2,639 RETIREMENT - GENERAL* 4 4,977 49,669 52,153 54,760 57,498 60,373 63,392 66,562 69,890 73,384 DEFERRED COMPENSATION 4 452 475 498 523 549 577 606 636 668 701 GROUP INSURANCE* 4 2,703 5,943 6,240 6,552 6,880 7,224 7,585 7,964 8,363 8,781 MEDICARE* 4 333 2,032 2,134 2,240 2,352 2,470 2,593 2,723 2,859 3,002 MEDICARE PTT AND OT 4 285 300 315 330 347 364 382 402 422 443 INCOME PROTECTION INS 4 151 159 166 175 184 193 202 212 223 234 WORKERS COMP* 4 575 3,523 3,699 3,884 4,078 4,282 4,496 4,720 4,957 5,204 WORKERS COMP PTT AND OT 4 492 517 542 570 598 628 659 692 727 763 BENEFITS* 4 458 903 949 996 1,046 1,098 1,153 1,211 1,271 1,335
SUPPLIES
CONTRACT SERVICES 2 10,506 10,821 11,146 11,480 11,825 12,179 12,545 12,921 13,309 13,708 STATIONERY & OFFICE SUPPLIES 2 - - - - - - - - - -
OTHER SUPPLIES 2 2,227 2,294 2,363 2,434 2,507 2,582 2,659 2,739 2,821 2,906 POSTAGE & FREIGHT 2 1,114 1,147 1,182 1,217 1,254 1,291 1,330 1,370 1,411 1,454 PRINTING 2 8,930 9,198 9,474 9,758 10,051 10,352 10,663 10,983 11,312 11,652 OTHER EXPENSE 2 52,531 54,107 55,730 57,402 59,124 60,898 62,725 64,607 66,545 68,541
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE 2 831 856 882 908 935 963 992 1,022 1,053 1,084 BUILDING MAINT - CURRENT SERVICES 2 1,424 1,467 1,511 1,556 1,603 1,651 1,701 1,752 1,804 1,859 BUILDING MAINT - FUTURE REPLACEMENT 2 112 115 119 122 126 130 133 137 142 146 INFO SYSTEM SERVICES 2 1,377 1,418 1,460 1,504 1,549 1,596 1,644 1,693 1,744 1,796 GF ADMIN 2 23,250 23,948 24,666 25,406 26,169 26,954 27,762 28,595 29,453 30,337
TRANSFERS
TRANSFER OUT - EMPLOYEE BENEFITS FUND 4 276 290 304 320 335 352 370 388 408 428 TOTAL: WATER OPERATIONS FUND - Water Conservation $ 157,393 $ 332,540 $ 347,059 $ 362,242 $ 378,118 $ 394,721 $ 412,085 $ 430,246 $ 449,242 $ 469,112 TOTAL: WATER OPERATIONS FUND (650) EXPENSES $11,761,652 $13,003,423 $13,640,536 $14,311,268 $15,017,494 $15,761,200 $16,544,487 $17,369,577 $18,238,824 $19,154,718
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years. * Some salary costs are adjusted per City email on Febryary 2, 2022.
Prepared by NBS
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Exhibit 1 (O&M), 12 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 10 : OPERATING EXPENSE FORECAST, CONT.1
WATER IMPACT FUND Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
INTERNAL SERVICES
GF ADMIN 2 19,130 19,704 20,295 20,904 21,531 22,177 22,842 23,528 24,233 24,960
TRANSFERS
TRANSFER OUT-010 (GENERAL FUND) 2 25,000 25,750 26,523 27,318 28,138 28,982 29,851 30,747 31,669 32,619 TRANSFER OUT-207 (GENL PLAN UPDATE) 2 7,700 7,931 8,169 8,414 8,666 8,926 9,194 9,470 9,754 10,047
PROJECTS
TOTAL: WATER IMPACT FUND (651) EXPENSES $ 51,830 $ 53,385 $ 54,986 $ 56,636 $ 58,335 $ 60,085 $ 61,888 $ 63,744 $ 65,657 $ 67,626
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
TABLE 11 : OPERATING EXPENSE FORECAST, CONT.1
WATER RATE STABILIZATION FUND Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
INTERNAL SERVICES
GF ADMIN 2 371 383 394 406 418 431 443 457 470 485
TOTAL: WATER RATE STABILIZATION FUND (652) EXPENSES $ 371 $ 383 $ 394 $ 406 $ 418 $ 431 $ 443 $ 457 $ 470 $ 485
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
TABLE 12 : OPERATING EXPENSE FORECAST, CONT.1
WATER SYSTEM REPLACEMENT FUND Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
INTERNAL SERVICES
GF ADMIN 2 23,178 23,874 24,590 25,328 26,088 26,870 27,676 28,507 29,362 30,243 TOTAL: WATER SYSTEM REPLACEMENT FUND (653) EXPENSES $ 23,178 $ 23,874 $ 24,590 $ 25,328 $ 26,088 $ 26,870 $ 27,676 $ 28,507 $ 29,362 $ 30,243 Grand Total: Operating Expenses $11,837,032 $13,081,064 $13,720,506 $14,393,637 $15,102,335 $15,848,586 $16,634,494 $17,462,285 $18,334,313 $19,253,072 Grand Total: Operating Expenses (Exc. Impact Fund Expenses) $11,785,202 $13,027,679 $13,665,520 $14,337,001 $15,043,999 $15,788,501 $16,572,607 $17,398,541 $18,268,656 $19,185,446
1. Data source for the FY 2020/21-2021/22 budget is from the following file: Budget.xlsx. Inflationary factors are applied to project revenue and expenses in all future years.
Prepared by NBS
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Exhibit 1 (O&M), 13 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
Excluded from Analysis:3
Revenues: Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water System Replacement Fund
TRANSFER FROM-650 (WATER OPS) 6 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Total Revenue Excluded from Analysis: $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Expenses: Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water Operations Fund
Operations
TRANSFERS
TRANSFER OUT-653 (WATER REPLACE) 6 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 $ 4,350,000 TRANSFER OUT-652 (WATER RATE STABILIZATION) 6 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 125,000 Utility Billing
TRANSFERS
TRANSFER OUT-BOND/DEBT 6 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 5,420 Water Impact Fund
PROJECTS
CONSTRUCTION4
2 1,360,772 1,401,595 1,443,643 1,486,952 1,531,561 1,577,508 1,624,833 1,673,578 1,723,785 1,775,499
TRANSFERS
TRANSFER OUT-653 (WATER REPLACE) 6 680,139
Water System Replacement Fund
DEBT
PRINCIPAL 6 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 1,045,000 INTEREST 6 613,875 613,875 613,875 613,875 613,875 613,875 613,875 613,875 613,875 613,875 ISSUANCE COST 6 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
PROJECTS
CONSTRUCTION4
6 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 3,383,141 Total Expenses Excluded from Analysis: $11,564,347 $10,925,031 $10,967,079 $11,010,388 $11,054,997 $11,100,944 $11,148,269 $11,197,014 $11,247,221 $11,298,935
3. The following revenues and expenses have been excluded from this analysis since they do not represent actual cash expenses or are handled in the model elsewhere (i.e., Exhibit 3 (Debt))
4. Construction expenses are excluded from this analysis and are handled in Exhibit 2 (CIP).
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Exhibit 1 (O&M), 14 of 46
CITY OF MORGAN HILL EXHIBIT 1
WATER RATE STUDY
Operating Revenue and Expenses
TABLE 13 : FORECASTING ASSUMPTIONS
INFLATION FACTORS 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 1 Customer Growth52.10% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10% 2.10% 2 General Cost Inflation 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3 Ground Water Production Inflation 6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 6.60% 4 Labor Cost Inflation75.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5 Energy Cost Inflation75.00% 20.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 6 No Escalation 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
5. Customer growth is based on the historical population growth.
6. Ground water projection cost estimated from average annual increase per City staff from email on February 2, 2022.
7. Labor and energy cost inflation is set to 5% per City Staff.
Per City, energy costs escalated 20% during 2022. Using a one-time escalation then back to assumed 5% in 2023/24.
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516
Exhibit 1 (O&M), 15 of 46
CITY OF MORGAN HILL EXHIBIT 2
WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 14 : CAPITAL PROJECT FUNDING SUMMARY
CAPITAL FUNDING FORECAST Budget
Funding Sources: FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Use of Impact Fee Reserves1
$ 2,388,555 $ 2,343,019 $ 413,607 $ 1,872,105 $ 985,950 $ 549,139 $ 331,275 $ 328,906 $ 327,250 $ 326,305 Use of Capital Rehabilitation & Replacement Reserve 4,066,982 4,011,731 2,507,700 - - - - - - - Rate Revenue - 890,787 6,412,621 7,432,357 8,616,828 9,023,266 6,688,244 6,690,613 5,015,485 5,610,429 Total Sources of Capital Funds $ 6,455,537 $ 7,245,537 $ 9,333,928 $ 9,304,462 $ 9,602,777 $ 9,572,404 $ 7,019,518 $ 7,019,518 $ 5,342,734 $ 5,936,734 Uses of Capital Funds:
Total Project Costs $ 6,455,537 $ 7,245,537 $ 9,408,037 $ 9,826,114 $10,908,864 $ 9,712,364 $ 7,019,518 $ 7,019,518 $ 5,342,734 $ 5,936,734 Capital Funding Surplus (Deficiency) $ - $ - $ (74,109) $ (521,652) $ (1,306,087) $ (139,960) $ - $ - $ - $ -
1. The use of the impact fee reserves uses all available funds annually to contribute to future growth projects. 5-Year Rate Adoption Period Projected
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 16 of 46
CITY OF MORGAN HILL EXHIBIT 2
WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 15 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars) Capital Improvement Program Projects2
Fund 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Pipeline Capacity Improvements
Boy's Ranch Pressure Zone
BR-P1 Cochrane Rd. to Half Rd. 651 - - - - - - - - 142,987 142,987 BR-P2 Half Rd. to approx. 1,700' n/o Half Rd. 651 - - - - - - - - 151,924 151,924 BR-P3 Mission View Dr. to Peet Rd. 651 - - - - - - - - 310,485 310,485 BR-P4 Between Cochrane Rd. and 2,100' nw/o Cochrane Rd. 653 67,025 67,025 67,025 - - - - - - - BR-P5 Half Rd. to 2,100' nw/o Half Rd. 651 - - - - - - - - 206,990 206,990 BR-P6 Serene Dr. to Conduit Rd. 651 - - - - - - - - 162,635 162,635 Nob Hill Pressure Zone
NH-P1 Del Monte Ave. to Monterey Rd. 653 122,770 122,770 122,770 - - - - - - - NH-P2 Butterfield Blvd. to Railroad Ave. 653 - - - 65,415 65,415 65,415 65,415 65,415 - - NH-P3 San Pedro Ave. to approx. 600' n/o Mast St. 651 - - - 41,628 41,628 41,628 41,628 41,628 - - NH-P4 Approx. 600' n/o Mast St. to Mast St. 651 - - - 71,362 71,362 71,362 71,362 71,362 - - NH-P5 1,100' ne/o Murphy Ave. to Hill Rd. 651 - - - - - - - - - - NH-P6 San Pedro Ave. to Tennant Ave. 651 - - - - - - - - - - NH-P7 Hill Rd. to Condit Rd. 651 - - - - - - - - - -
NH-P8 John Wilson Wat to E Middle Ave. 651 - - - - - - - - - - NH-P9 Monterey Rd. to Olive Ave. 651 - - - - - - - - - - Holiday Pressure Zone
HL-P1 Flaming Oak Ln. to Proposed E Dunne Tank 651/653 109,026 109,026 109,026 - - - - - - - HL-P2 Proposed E Dunne Tank to Flaming Oak Ln. 651/653 90,353 90,353 90,353 - - - - - - - HL-P3 Proposed E Dunne Tank to Lori Ln. 651 - - - 241,488 241,488 241,488 241,488 241,488 - - HL-P4 Lori Ln. to 650' nw/o Lori Ln. 651 - - - 226,703 226,703 226,703 226,703 226,703 - - Storage Reservoir Capacity Improvements
BR-T1 Replace Boy's Ranch 0.55 MG Tank with 1.20 MG Tank 651/653 - - - - - - - - 888,861 888,861 GA-T1 Replace Glen Ayre 0.10 MG Tank with 0.25 MG Tank 651/653 - - - 231,474 231,474 231,474 231,474 231,474 - - ED-T1 Existing Edmundson Tank Site 651 - - - - - - - - 833,307 833,307 LI-T1 Existing Llagas Tank Site 651/653 - - - 185,179 185,179 185,179 185,179 185,179 - - JO-T1 Existing Jackson Tank Sity 653 - - - 185,179 185,179 185,179 185,179 185,179 - - WD-T1 Replace Woodland 0.03 MG Tank with 0.25 MG Tank 651/653 - - - 231,474 231,474 231,474 231,474 231,474 - - HL-T1 Dunne Ave. approx. 500' ne/o Flaming Oak Ln. 651/653 1,311,688 1,311,688 1,311,688 - - - - - - - Groundwater Well Capacity Improvements
BR-W1 Burnett Ave. Approx. 6,000' ne/o Monterey Ave. 651 - - - 1,008,008 1,008,008 1,008,008 1,008,008 1,008,008 - - BR-W2 Burnett Ave. Approx. 5,000' ne/o Monterey Ave. 651 - - - - - - - - - - NH-W1* Butterfield Blvd. 400' E of Railroad Ave. and Fisher Ave. 653 - - - 1,680,013 1,680,013 1,680,013 - - - - NH-W2 Butterfield Blvd. and Tennant Ave. 651/653 1,680,013 1,680,013 1,680,013 - - - - - - - NH-W3 Well Site to determined at later date 651 - - - 1,008,008 1,008,008 1,008,008 1,008,008 1,008,008 - - NH-W4 Well Site to determined at later date 651 - - - - - - - - 1,008,008 1,008,008 Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 17 of 46
CITY OF MORGAN HILL EXHIBIT 2
WATER RATE STUDY
Capital Improvement Plan Expenditures
TABLE 16 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars) Capital Improvement Program Projects2
Fund 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Pump Station Capacity Improvements
NH-PS1 Dunne Ave. and Magnolia Way 651/653 $ 933,860 $ 933,860 $ 933,860 $ - $ - $ - $ - $ - $ - $ - BR-PS1 Current Condit Valve Site 651/653 33,333 33,333 33,333 - - - - - - - LI-PS1 Llagas Road and Carriage Drive 651/653 - - - 109,200 109,200 109,200 109,200 109,200 - - HL-PS1 Dunne Ave. approx. 500' ne/o Flaming Oak Ln. 651/653 - - - 479,721 479,721 479,721 479,721 479,721 - - Pressure Reducing Valve Capacity Improvements
HL-PRV1 Thomas Gr. Approx. 1,100' w/o Gnarled Oak Ln. 651/653 - - - 20,376 20,376 20,376 20,376 20,376 - - Known Pipeline Renewal and Replacement
RP-1 Holiday Lake - Shady Ln. 653 292,925 292,925 292,925 - - - - - - - RP-2 Jackson Oaks - Hill Top Ct. 653 71,077 71,077 71,077 - - - - - - - RP-3 Jackson Oaks - Oak View Ct. 653 90,462 90,462 90,462 - - - - - - - RP-4 Holiday Lake - Holiday Tank Site 653 103,385 103,385 103,385 - - - - - - - RP-5 Holiday Lake - Manzanita Dr. 653 189,540 189,540 189,540 - - - - - - - RP-6 Holiday Lake - Raccoon Ct. 653 195,284 195,284 195,284 - - - - - - - RP-7 Nob Hill - First St. 653 68,924 68,924 68,924 - - - - - - - RP-8 Hydropneumatic Zone - Oak Canyon Dr. 653 77,539 77,539 77,539 - - - - - - - Recommended Annual Pipeline Condition Renewal and Replacement (10-year) RR 22-24* 0.5% System Pipeline Renewal and Replacement 653 - - - 1,012,833 1,012,833 1,012,833 - - - - RR 25 0.5% System Pipeline Renewal and Replacement 653 - - - 426,627 426,627 426,627 426,627 426,627 - - RR 26 0.5% System Pipeline Renewal and Replacement 653 - - - 429,744 429,744 429,744 429,744 429,744 - - RR 27 0.5% System Pipeline Renewal and Replacement 653 - - - 432,860 432,860 432,860 432,860 432,860 - - RR 28 0.5% System Pipeline Renewal and Replacement 653 - - - 435,977 435,977 435,977 435,977 435,977 - - RR 29 0.5% System Pipeline Renewal and Replacement 653 - - - 439,094 439,094 439,094 439,094 439,094 - - RR 30 0.5% System Pipeline Renewal and Replacement 653 - - - - - - - - 442,210 442,210 RR 31 0.5% System Pipeline Renewal and Replacement 653 - - - - - - - - 445,327 445,327 Reservoir Condition Improvements
RC-1 Re-coat and Retrofit Existing Encino Tank 653 330,000 - - - - - - - - - RC-2 Re-coat and Retrofit Existing Glen Ayre Tank 653 55,000 - - - - - - - - - RC-3 Re-coat and Retrofit Existing El Toro Tank 653 - 275,000 - - - - - - - - RC-4 Re-coat and Retrofit Existing Edmundson Tank 653 - - 2,337,500 - - - - - - - RC-5 Re-coat and Retrofit Existing Boy's Ranch #3 Tank 653 - - - 563,750 - - - - - - RC-6 Re-coat and Retrofit Existing Boy's Ranch #2 Tank 653 - - - - 302,500 - - - - - 5-Year Improvement Projects
5YR-1 Well Rehabilitation 653 300,000 300,000 300,000 300,000 300,000 - - - - - 5YR-2 Booster Rehabilitation 653 - 700,000 700,000 - - - - - - - 5YR-3 Generators Replacement (Jackson Booster Station) 653 333,333 333,333 333,333 - - - - - - - Comprehensive Plan Updates
PLN-1 Water System Master Plan Updates (Yrs. 2026, 2031, 2036) 651/653 - - - - 237,000 - - - - 237,000 PLN-2 Water Assessment Mngt Plan (Yrs. 2026, 2031, 2036) 651/653 - - - - 119,000 - - - - 119,000 PLN-3 Urban Water Mngt Plan (Yrs. 2026, 2031, 2036) 651/653 - - - - 119,000 - - - - 119,000 PLN-4 Water Rate Study Updates (Yrs. 2026, 2031, 2036) 651/653 - - - - 119,000 - - - - 119,000 Calendar Year Budget Expansion
CY7.5 Calendar Year Budget Expansion (2026-2035) 651 - - - - 750,000 750,000 750,000 750,000 750,000 750,000 -- Utility System Security Enhancements -- - 200,000 300,000 - - - - - - - -- Estimated Future Projects2 653 - - - - - - - - - -
Total: Capital Improvement Program Costs (Future-Year Dollars) $ 6,455,537 $ 7,245,537 $ 9,408,037 $ 9,826,114 $10,908,864 $ 9,712,364 $ 7,019,518 $ 7,019,518 $ 5,342,734 $ 5,936,734
1. Capital Improvement Program projects from Water Supply Management Plan projects found in source file: 2021_WSMPUpdate_Report_FinalDraft_120321.pdf * Some projects postponed 2 years from Water Supply Management Plan. Source file: Water CIP from MP revised.pdf Utility System Enhancements added per City email on February 2, 2022
2. Estimated future expenditures are calculated based on the City's average annual CIP expenses.
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 2 (CIP), 18 of 46
CITY OF MORGAN HILL EXHIBIT 3
WATER RATE STUDY
Debt Service
TABLE 17 : EXISTING DEBT OBLIGATIONS
Budget
FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 2014 Water Refunding & CIP Revenue Bonds, $21,975,0001,2 Principal Payment $ 1,045,000 $ 1,080,000 $ 1,120,000 $ 1,165,000 $ 1,205,000 $ 1,250,000 $ 1,300,000 $ 1,350,000 $ 1,400,000 $ 1,450,000 Interest Payment 613,875 574,688 534,188 492,188 448,500 403,313 356,438 307,688 257,063 204,563 Subtotal: Annual Debt Service $ 1,658,875 $ 1,654,688 $ 1,654,188 $ 1,657,188 $ 1,653,500 $ 1,653,313 $ 1,656,438 $ 1,657,688 $ 1,657,063 $ 1,654,563 Coverage Requirement(% above annual payment)2 120% 120% 120% 120% 120% 120% 120% 120% 120% 120% Reserve Requirement3 $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Grand Total: Existing Annual Debt Service $ 1,658,875 $ 1,654,688 $ 1,654,188 $ 1,657,188 $ 1,653,500 $ 1,653,313 $ 1,656,438 $ 1,657,688 $ 1,657,063 $ 1,654,563 Grand Total: Existing Debt Reserve Target $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - TABLE 18 : FUNDING SOURCES FOR EXISTING DEBT OBLIGATIONS Allocation of Debt Service Payments to Funding Sources4 FY 2021/22 FY 2022/23 FY 2023/24 FY 2024/25 FY 2025/26 FY 2026/27 FY 2027/28 FY 2028/29 FY 2029/30 FY 2030/31 Fund 651 - Impact Fund (41%) $ 680,139 $ 678,422 $ 678,217 $ 679,447 $ 677,935 $ 677,858 $ 679,139 $ 679,652 $ 679,396 $ 678,371 Fund 653 - Water System Replacement Fund (59%) $ 978,736 $ 976,266 $ 975,971 $ 977,741 $ 975,565 $ 975,454 $ 977,298 $ 978,036 $ 977,667 $ 976,192
1. The 2014 Water Revenue Bonds were issued to: (1) finance 2014 Projects; (2) refinance 1999 Projects and refund the Series 1999 COPs; (3) refinance 2004 Projects and refund the Series 2004 Bonds; and, (4) to pay certain costs of issuance.
Source file: 2014 water bonds debt service schedule.pdf.
2. Per the Installment Sales Agreement for the 2014 Revenue Bonds, the City is required to maintain a debt coverage ratio of 1.20 of the maximum annual debt service for these bond issues and all other parity debt. Source files: Installment Sales Agreement , page 14 & 6a. Bond Document - Morgan Hill Water Series 2014.pdf , page 74.
3. There is no reserve requirement for this bond issue.
4. Per email provided by Staff on 10.07.15, the debt service payment for the 2014 Water Revenue Bonds is split as follows: 41% to the Water Impact Fund (651) and 59% to the Water System Replacement Fund (653).
Annual Repayment Schedules 5-Year Rate Adoption Period Projected Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 3 (Debt), 19 of 46
CITY OF MORGAN HILL EXHIBIT 4
WATER RATE STUDY
Existing Water Rate Schedule
TABLE 19 : CURRENT RATES
Existing Water Rate Schedule Jan. 1, 2020
Single- & Multi-Family Residential Fixed Monthly Service Charge 5/8 inch $31.14
3/4 inch $31.14
1 inch $31.14
1.5 inch $58.72
2 inch $91.81
3 inch $180.07
4 inch $279.36
6 inch $555.17
8 inch $886.14
10 inch $2,320.33
Non-Residential Fixed Monthly Service Charge
5/8 inch $47.23
3/4 inch $47.23
1 inch $47.23
1.5 inch $90.90
2 inch $143.31
3 inch $283.06
4 inch $440.28
6 inch $877.00
8 inch $1,401.07
10 inch $3,672.04
Fire Fixed Monthly Service Charge
5/8 inch $4.02
3/4 inch $4.25
1 inch $4.71
1.5 inch $5.86
2 inch $7.24
3 inch $11.61
4 inch $19.66
6 inch $40.37
8 inch $67.98
10 inch $104.79
Variable Consumption Charge
Water Rates Per HCF:
All customers $2.57
Out of City water customers add 25% to the rate schedule.
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Exhibit 4 (Current Rates), 20 of 46
CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 20 : CLASSIFICATION OF EXPENSES
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON)
OPERATING EXPENSES
WATER OPERATIONS FUND - Operations
SALARIES
SALARIES - GENERAL* $ 2,275,547 $ 682,664 $ 1,456,350 $ 113,777 $ 22,755 $ - 30% 64% 5% 1% 0% SALARIES - PART-TIME TEMP $ 14,482 $ 4,344 $ 9,268 $ 724 $ 145 $ - 30% 64% 5% 1% 0% EARNED LEAVE LIABILITY $ 47,027 $ 14,108 $ 30,097 $ 2,351 $ 470 $ - 30% 64% 5% 1% 0% OVERTIME - GENERAL $ 81,669 $ 24,501 $ 52,268 $ 4,083 $ 817 $ - 30% 64% 5% 1% 0% RETIREMENT - GENERAL $ 416,775 $ 125,033 $ 266,736 $ 20,839 $ 4,168 $ - 30% 64% 5% 1% 0% DEFERRED COMPENSATION $ 26,103 $ 7,831 $ 16,706 $ 1,305 $ 261 $ - 30% 64% 5% 1% 0% GROUP INSURANCE $ 346,745 $ 104,023 $ 221,917 $ 17,337 $ 3,467 $ - 30% 64% 5% 1% 0% MEDICARE $ 28,041 $ 8,412 $ 17,946 $ 1,402 $ 280 $ - 30% 64% 5% 1% 0% MEDICARE PTT AND OT $ 1,394 $ 418 $ 892 $ 70 $ 14 $ - 30% 64% 5% 1% 0% INCOME PROTECTION INS $ 12,522 $ 3,757 $ 8,014 $ 626 $ 125 $ - 30% 64% 5% 1% 0% WORKERS COMP $ 48,050 $ 14,415 $ 30,752 $ 2,403 $ 481 $ - 30% 64% 5% 1% 0% WORKERS COMP PTT AND OT $ 2,404 $ 721 $ 1,538 $ 120 $ 24 $ - 30% 64% 5% 1% 0% BENEFITS $ 7,452 $ 2,236 $ 4,769 $ 373 $ 75 $ - 30% 64% 5% 1% 0% UNIFORM $ 3,675 $ 1,103 $ 2,352 $ 184 $ 37 $ - 30% 64% 5% 1% 0%
SUPPLIES
TAXES $ 535 $ - $ 535 $ - $ - $ - 0% 100% 0% 0% 0%
ELECTRIC $ 1,436,499 $ 1,168,979 $ - $ - $ - $ 267,520 81% 0% 0% 0% 19% GROUNDWATER PRODUCTION $ 3,739,836 $ 3,702,438 $ - $ - $ 37,398 $ - 99% 0% 0% 1% 0% WATER/SEWER $ 13,113 $ 3,934 $ 8,392 $ 656 $ 131 $ - 30% 64% 5% 1% 0% TELEPHONE $ 24,833 $ 7,450 $ 15,893 $ 1,242 $ 248 $ - 30% 64% 5% 1% 0% GASOLINE & OIL $ 37,874 $ 11,362 $ 24,239 $ 1,894 $ 379 $ - 30% 64% 5% 1% 0% CONTRACT SERVICES $ 356,864 $ 107,059 $ 228,393 $ 17,843 $ 3,569 $ - 30% 64% 5% 1% 0% BANK CARD SERVICE FEES $ 597 $ - $ - $ 597 $ - $ - 0% 0% 100% 0% 0% RENTALS - OUTSIDE $ 2,709 $ 813 $ 1,734 $ 135 $ 27 $ - 30% 64% 5% 1% 0% STATIONERY & OFFICE SUPPLIES $ 3,348 $ 1,004 $ 2,142 $ 167 $ 33 $ - 30% 64% 5% 1% 0% COMPUTER HARDWARE-NON CAPITAL $ 5,953 $ 1,786 $ 3,810 $ 298 $ 60 $ - 30% 64% 5% 1% 0% COMPUTER SOFTWARE-NON CAPITAL $ 2,709 $ 813 $ 1,734 $ 135 $ 27 $ - 30% 64% 5% 1% 0% OTHER SUPPLIES $ 232,481 $ 69,744 $ 148,788 $ 11,624 $ 2,325 $ - 30% 64% 5% 1% 0% ADVERTISING $ 3,348 $ 1,004 $ 2,142 $ 167 $ 33 $ - 30% 64% 5% 1% 0% PHOTOCOPYING $ 834 $ 250 $ 534 $ 42 $ 8 $ - 30% 64% 5% 1% 0% POSTAGE & FREIGHT $ 2,060 $ - $ - $ 2,060 $ - $ - 0% 0% 100% 0% 0% PRINTING $ 2,431 $ - $ - $ 2,431 $ - $ - 0% 0% 100% 0% 0% AUTO MILEAGE $ 299 $ 90 $ 191 $ 15 $ 3 $ - 30% 64% 5% 1% 0% CHEMICALS $ 32,782 $ 9,835 $ 20,980 $ 1,639 $ 328 $ - 30% 64% 5% 1% 0% WATER/SEWER MAINTENANCE SVS $ 54,636 $ 16,391 $ 34,967 $ 2,732 $ 546 $ - 30% 64% 5% 1% 0% SMALL TOOLS $ 12,175 $ 3,652 $ 7,792 $ 609 $ 122 $ - 30% 64% 5% 1% 0% OTHER EXPENSE $ 63,654 $ 19,096 $ 40,739 $ 3,183 $ 637 $ - 30% 64% 5% 1% 0% TRAINING & EDUCATION $ 12,978 $ 3,893 $ 8,306 $ 649 $ 130 $ - 30% 64% 5% 1% 0% CONFERENCE & MEETINGS $ 6,180 $ 1,854 $ 3,955 $ 309 $ 62 $ - 30% 64% 5% 1% 0% MEMBERSHIP & DUES $ 13,385 $ 4,015 $ 8,566 $ 669 $ 134 $ - 30% 64% 5% 1% 0% SUBSCRIPTION & PUBLICATIONS $ 232 $ 70 $ 148 $ 12 $ 2 $ - 30% 64% 5% 1% 0% MAINT - BLDGS/IMPROVEMENTS $ 44,589 $ 13,377 $ 28,537 $ 2,229 $ 446 $ - 30% 64% 5% 1% 0% MAINT - MACHINE/EQUIPMENT $ 33,434 $ 10,030 $ 21,398 $ 1,672 $ 334 $ - 30% 64% 5% 1% 0% MAINT - AUTO/TRUCKS $ 31,209 $ 9,363 $ 19,974 $ 1,560 $ 312 $ - 30% 64% 5% 1% 0% SUB-TOTAL: WATER OPERATIONS FUND - Operations $ 9,483,462 $ 6,161,868 $ 2,753,498 $ 220,163 $ 80,413 $ 267,520 65% 29% 2% 0.85% 3% Basis of Classification Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer Fire
Protection
Direct Alloc.
Zonal Elev.
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Funct. & Classification, 21 of 46
CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 21 : CLASSIFICATION OF EXPENSES, CONTINUED
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON)
OPERATING EXPENSES
WATER OPERATIONS FUND - Operations, cont.
CAPITAL
MACHINERY/EQUIPMENT $ - $ - $ - $ - $ - $ - 0% 99% 0% 1% 0% COMPUTER EQUIPMENT $ 108,150 $ - $ 107,069 $ - $ 1,082 $ - 0% 99% 0% 1% 0% COMPUTER SOFTWARE $ - $ - $ - $ - $ - $ - 0% 99% 0% 1% 0% METERS $ 463,500 $ 107,759 $ 231,750 $ 115,875 $ 8,116 $ - 23% 50% 25% 1.75% 0%
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE $ 151,002 $ 45,301 $ 96,641 $ 7,550 $ 1,510 $ - 30% 64% 5% 1% 0% BUILDING MAINT - CURRENT SERVICES $ 82,064 $ 24,619 $ 52,521 $ 4,103 $ 821 $ - 30% 64% 5% 1% 0% BUILDING MAINT - FUTURE REPLACEMENT $ 14,460 $ 4,338 $ 9,254 $ 723 $ 145 $ - 30% 64% 5% 1% 0% FLEET REPLACEMENT $ 315,165 $ 94,549 $ 201,705 $ 15,758 $ 3,152 $ - 30% 64% 5% 1% 0% GIS $ 28,808 $ 8,642 $ 18,437 $ 1,440 $ 288 $ - 30% 64% 5% 1% 0% INFO SYSTEM SERVICES $ 167,790 $ 50,337 $ 107,386 $ 8,390 $ 1,678 $ - 30% 64% 5% 1% 0% GF ADMIN $ 350,413 $ 105,124 $ 224,264 $ 17,521 $ 3,504 $ - 30% 64% 5% 1% 0%
TRANSFERS
TRANSFER OUT-010 (GENERAL FUND) $ 367,874 $ - $ 364,195 $ - $ 3,679 $ - 0% 99% 0% 1% 0% TRANSFER OUT-232 (ENVIRONMENTAL PROGRAMS) $ 111,517 $ - $ 110,402 $ - $ 1,115 $ - 0% 99% 0% 1% 0% TRANSFER OUT-207 (GENL PLAN UPDATE) $ - $ - $ - $ - $ - $ - 0% 99% 0% 1% 0% TRANSFER OUT - EMPLOYEE BENEFITS FUND $ 28,415 $ - $ 28,131 $ - $ 284 $ - 0% 99% 0% 1% 0% SUB-TOTAL: WATER OPERATIONS FUND - Operations $ 2,189,159 $ 440,670 $ 1,551,756 $ 171,360 $ 25,372 $ - 20% 71% 8% 1.16% 0% Zonal Basis of Classification Budget Categories
Total Revenue
Requirements
Fire
Protection
Commodity Capacity Customer
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Funct. & Classification, 22 of 46
CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 22 : CLASSIFICATION OF EXPENSES, CONTINUED
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON) OPERATING EXPENSES, continued
WATER OPERATIONS FUND - Utility Billing
SALARIES
SALARIES - GENERAL $ 439,054 $ 131,716 $ 83,420 $ 219,527 $ 4,391 $ - 30% 19% 50% 1% 0% SALARIES - PART-TIME TEMP $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% EARNED LEAVE LIABILITY $ 8,288 $ 2,486 $ 1,575 $ 4,144 $ 83 $ - 30% 19% 50% 1% 0% OVERTIME - GENERAL $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% RETIREMENT - GENERAL $ 76,237 $ 22,871 $ 14,485 $ 38,119 $ 762 $ - 30% 19% 50% 1% 0% DEFERRED COMPENSATION $ 5,708 $ 1,712 $ 1,084 $ 2,854 $ 57 $ - 30% 19% 50% 1% 0% GROUP INSURANCE $ 61,354 $ 18,406 $ 11,657 $ 30,677 $ 614 $ - 30% 19% 50% 1% 0% MEDICARE $ 5,072 $ 1,521 $ 964 $ 2,536 $ 51 $ - 30% 19% 50% 1% 0% MEDICARE PTT AND OT $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% OTHER POST EMPLOYMENT BENEFITS (OPEB) $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% INCOME PROTECTION INS $ 2,671 $ 801 $ 508 $ 1,336 $ 27 $ - 30% 19% 50% 1% 0% WORKERS COMP $ 8,812 $ 2,643 $ 1,674 $ 4,406 $ 88 $ - 30% 19% 50% 1% 0% WORKERS COMP PTT AND OT $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% BENEFITS $ 2,829 $ 849 $ 537 $ 1,414 $ 28 $ - 30% 19% 50% 1% 0%
SUPPLIES
TELEPHONE $ 1,648 $ 494 $ 313 $ 824 $ 16 $ - 30% 19% 50% 1% 0% CONTRACT SERVICES $ 69,290 $ 20,787 $ 13,165 $ 34,645 $ 693 $ - 30% 19% 50% 1% 0% BANK CARD SERVICE FEES $ 123,600 $ 37,080 $ 23,484 $ 61,800 $ 1,236 $ - 30% 19% 50% 1% 0% STATIONERY & OFFICE SUPPLIES $ 3,296 $ 989 $ 626 $ 1,648 $ 33 $ - 30% 19% 50% 1% 0% COMPUTER HARDWARE-NON CAPITAL $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0% OTHER SUPPLIES $ 515 $ 155 $ 98 $ 258 $ 5 $ - 30% 19% 50% 1% 0% ADVERTISING $ 515 $ 155 $ 98 $ 258 $ 5 $ - 30% 19% 50% 1% 0% PHOTOCOPYING $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0%
POSTAGE & FREIGHT $ 49,955 $ 14,987 $ 9,491 $ 24,978 $ 500 $ - 30% 19% 50% 1% 0% PRINTING $ 1,030 $ 309 $ 196 $ 515 $ 10 $ - 30% 19% 50% 1% 0% AUTO MILEAGE $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0%
TRAINING & EDUCATION $ 1,545 $ 464 $ 294 $ 773 $ 15 $ - 30% 19% 50% 1% 0% SUBSCRIPTION & PUBLICATIONS $ - $ - $ - $ - $ - $ - 30% 19% 50% 1% 0%
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE $ 20,638 $ 6,191 $ 3,921 $ 10,319 $ 206 $ - 30% 19% 50% 1% 0% BUILDING MAINT - CURRENT SERVICES $ 34,429 $ 10,329 $ 6,542 $ 17,215 $ 344 $ - 30% 19% 50% 1% 0% BUILDING MAINT - FUTURE REPLACEMENT $ 1,939 $ 582 $ 368 $ 970 $ 19 $ - 30% 19% 50% 1% 0% INFO SYSTEM SERVICES $ 34,220 $ 10,266 $ 6,502 $ 17,110 $ 342 $ - 30% 19% 50% 1% 0% GF ADMIN $ 40,012 $ 12,004 $ 7,602 $ 20,006 $ 400 $ - 30% 19% 50% 1% 0% TRANSFERS $ - $ - $ -
TRANSFER OUT - EMPLOYEE BENEFITS FUND $ 5,606 $ - $ 5,550 $ - $ 56 $ - 0% 99% 0% 1% 0% TOTAL: WATER OPERATIONS FUND - Utility Billing $ 998,262 $ 297,797 $ 194,155 $ 496,328 $ 9,983 $ - 30% 19% 50% 1% 0% Basis of Classification Budget Categories
Total Revenue
Requirements
Commodity Capacity Fire
Protection
Customer Direct Alloc.
Zonal Elev.
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CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 23 : CLASSIFICATION OF EXPENSES, CONTINUED
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON) OPERATING EXPENSES, continued
WATER OPERATIONS FUND - Water Conservation
SALARIES
SALARIES - GENERAL* $ 140,908 $ 139,499 $ - $ - $ 1,409 $ - 99% 0% 0% 1% 0% SALARIES - PART-TIME TEMP $ 20,664 $ 20,457 $ - $ - $ 207 $ - 99% 0% 0% 1% 0% EARNED LEAVE LIABILITY $ 1,786 $ 1,768 $ - $ - $ 18 $ - 99% 0% 0% 1% 0% RETIREMENT - GENERAL* $ 49,669 $ 49,173 $ - $ - $ 497 $ - 99% 0% 0% 1% 0% DEFERRED COMPENSATION $ 475 $ 470 $ - $ - $ 5 $ - 99% 0% 0% 1% 0% GROUP INSURANCE* $ 5,943 $ 5,884 $ - $ - $ 59 $ - 99% 0% 0% 1% 0% MEDICARE* $ 2,032 $ 2,012 $ - $ - $ 20 $ - 99% 0% 0% 1% 0% MEDICARE PTT AND OT $ 300 $ 297 $ - $ - $ 3 $ - 99% 0% 0% 1% 0% OTHER POST EMPLOYMENT BENEFITS (OPEB) $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0% INCOME PROTECTION INS $ 159 $ 157 $ - $ - $ 2 $ - 99% 0% 0% 1% 0% WORKERS COMP* $ 3,523 $ 3,487 $ - $ - $ 35 $ - 99% 0% 0% 1% 0% WORKERS COMP PTT AND OT $ 517 $ 511 $ - $ - $ 5 $ - 99% 0% 0% 1% 0% BENEFITS* $ 903 $ 894 $ - $ - $ 9 $ - 99% 0% 0% 1% 0%
SUPPLIES
GASOLINE & OIL $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0%
CONTRACT SERVICES $ 10,821 $ 10,713 $ - $ - $ 108 $ - 99% 0% 0% 1% 0% STATIONERY & OFFICE SUPPLIES $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0% OTHER SUPPLIES $ 2,294 $ 2,271 $ - $ - $ 23 $ - 99% 0% 0% 1% 0% ADVERTISING $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0%
POSTAGE & FREIGHT $ 1,147 $ 1,136 $ - $ - $ 11 $ - 99% 0% 0% 1% 0% PRINTING $ 9,198 $ 9,106 $ - $ - $ 92 $ - 99% 0% 0% 1% 0% OTHER EXPENSE $ 54,107 $ 53,566 $ - $ - $ 541 $ - 99% 0% 0% 1% 0% TRAINING & EDUCATION $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0% CONFERENCE & MEETINGS $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0%
INTERNAL SERVICES
GENERAL LIABILITY INSURANCE $ 856 $ 847 $ - $ - $ 9 $ - 99% 0% 0% 1% 0% BUILDING MAINT - CURRENT SERVICES $ 1,467 $ 1,452 $ - $ - $ 15 $ - 99% 0% 0% 1% 0% BUILDING MAINT - FUTURE REPLACEMENT $ 115 $ 114 $ - $ - $ 1 $ - 99% 0% 0% 1% 0% INFO SYSTEM SERVICES $ 1,418 $ 1,404 $ - $ - $ 14 $ - 99% 0% 0% 1% 0% GF ADMIN $ 23,948 $ 23,708 $ - $ - $ 239 $ - 99% 0% 0% 1% 0% TRANSFERS $ - $ - $ - $ - $ - $ - 99% 0% 0% 1% 0%
TRANSFER OUT - EMPLOYEE BENEFITS FUND $ 290 $ 287 $ - $ - $ 3 $ - 99% 0% 0% 1% 0% TOTAL: WATER OPERATIONS FUND - Water Conservation $ 332,540 $ 329,214 $ - $ - $ 3,325 $ - 99% 0% 0% 1% 0% Commodity Capacity Customer Zonal Basis of Classification Budget Categories Total Revenue
Requirements
Fire
Protection
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CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 24 : CLASSIFICATION OF EXPENSES, CONTINUED
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON) OPERATING EXPENSES, continued
WATER IMPACT FUND
SUPPLIES
CONTRACT SERVICES $ - $ - $ - $ - $ - $ - 24% 70% 5% 1% 0% BANK CARD SERVICE FEES $ - $ - $ - $ - $ - $ - 24% 70% 5% 1% 0% DEBT
SERVICE FEES $ - $ - $ - $ - $ - $ - 24% 70% 5% 1% 0%
INTERNAL SERVICES
GF ADMIN $ 19,704 $ 4,729 $ 13,793 $ 985 $ 197 $ - 24% 70% 5% 1% 0%
TRANSFERS
TRANSFER OUT-010 (GENERAL FUND) $ 25,750 $ 6,180 $ 18,025 $ 1,288 $ 258 $ - 24% 70% 5% 1% 0% TRANSFER OUT-207 (GENL PLAN UPDATE) $ 7,931 $ 1,903 $ 5,552 $ 397 $ 79 $ - 24% 70% 5% 1% 0%
PROJECTS
TOTAL: WATER IMPACT FUND (651) EXPENSES $ 53,385 $ 12,812 $ 37,369 $ 2,669 $ 534 $ - 24% 70% 5% 1% 0% TABLE 25 : CLASSIFICATION OF EXPENSES, CONTINUED
Classification of Expenses
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON) OPERATING EXPENSES, continued
WATER RATE STABILIZATION FUND
SUPPLIES
CONTRACT SERVICES $ - $ - $ - $ - $ - $ - 30% 64% 5% 1% 0%
INTERNAL SERVICES
GF ADMIN $ 383 $ 115 $ 245 $ 19 $ 4 $ - 30% 64% 5% 1% 0% TOTAL: WATER RATE STABILIZATION FUND (652) EXPENSES $ 383 $ 115 $ 245 $ 19 $ 4 $ - 30% 64% 5% 1% 0% TABLE 26 : CLASSIFICATION OF EXPENSES, CONTINUED
Classification of Expenses
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON) OPERATING EXPENSES, continued
WATER SYSTEM REPLACEMENT FUND
SUPPLIES
CONTRACT SERVICES $ - $ - $ - $ - $ - $ - 30% 64% 5% 1% 0% DEBT
SERVICE FEES $ - $ - $ - $ - $ - $ - 30% 64% 5% 1% 0%
INTERNAL SERVICES
GF ADMIN $ 23,874 $ 7,162 $ 15,279 $ 1,194 $ 239 $ - 30% 64% 5% 1% 0% TOTAL: WATER SYSTEM REPLACEMENT FUND (653) EXPENSES$ 23,874 $ 7,162 $ 15,279 $ 1,194 $ 239 $ - 30% 64% 5% 1% 0% Grand Total: Operating Expenses $ 13,027,679 $ 7,236,826 $ 4,514,932 $ 889,064 $ 119,336 $ 267,520 56% 35% 7% 1% 2% Fire
Protection
Basis of Classification
Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer
Fire
Protection
Commodity Capacity Customer Zonal Basis of Classification Basis of Classification
Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer Direct Alloc.
Zonal Elev.
Budget Categories
Total Revenue
Requirements
Fire
Protection
Direct Alloc.
Zonal Elev.
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CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
TABLE 27 : CLASSIFICATION OF EXPENSES, CONTINUED
Classification of Expenses, continued
FY 2022/23 (COM) (CAP) (CA) (FP) (ZON) (COM) (CAP) (CA) (FP) (ZON)
DEBT SERVICE PAYMENTS
2014 Water Refunding & CIP Revenue Bonds, $21,975,000 $ 976,266 $ - $ 976,266 $ - $ - $ - 0% 100% 0% 0% 0% New Debt Service $ - $ - $ - $ - $ - $ - 0% 100% 0% 0% 0% TOTAL: DEBT SERVICE PAYMENTS $ 976,266 $ - $ 976,266 $ - $ - $ - 0% 100% 0% 0% 0% Capital Expenditures
Rate Funded Capital Expenses $ 890,787 $ 400,854 $ 481,025 $ - $ 8,908 $ - 45% 54% 0% 1% 0% TOTAL REVENUE REQUIREMENTS $ 14,894,732 $ 7,637,680 $ 5,972,223 $ 889,064 $ 128,244 $ 267,520 51% 40% 6% 0.86% 2% Less: Non-Rate Revenues
INTEREST INCOME2 $ (176,388) $ (90,448) $ (72,244) $ (10,529) $ - $ (3,168) 51% 41% 6% 0% 2% RENT & CONCESSIONS $ (54,097) $ (27,740) $ (22,156) $ (3,229) $ - $ (972) 51% 41% 6% 0% 2%
WATER SALES
BOOSTER STATION CHARGES $ (147,088) $ (75,423) $ (60,243) $ (8,780) $ - $ (2,642) 51% 41% 6% 0% 2% FRONT FOOTAGE/OFFSITE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% PERCHLORATE SURCHARGE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% UB COLLECTIONS $ (2,806) $ - $ - $ (2,806) $ - $ - 0% 0% 100% 0% 0% METER INSTALL & SERVICE $ (25,745) $ (5,985) $ (12,872) $ (6,436) $ (451) $ - 23% 50% 25% 1.75% 0% FIRE HYDRANT CHARGE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% OTHER REVENUE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2%
REIMBURSEMENT OF EXPENSES $ (40,000) $ (20,511) $ (16,383) $ (2,388) $ - $ (718) 51% 41% 6% 0% 2% MISC. SALES $ (5,253) $ (2,694) $ (2,152) $ (314) $ - $ (94) 51% 41% 6% 0% 2% SURPLUS SALES $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2%
MISC. REVENUE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2%
ANNUAL BACKFLOW TESTING ADMINISTRATION $ (13,432) $ (6,888) $ (5,501) $ (802) $ - $ (241) 51% 41% 6% 0% 2% ANNUAL BACKFLOW INSPECTION $ (3,263) $ (1,673) $ (1,337) $ (195) $ - $ (59) 51% 41% 6% 0% 2% UTILITY ACCOUNT SET-UP $ (83,133) $ - $ - $ (83,133) $ - $ - 0% 0% 100% 0% 0% CONSTRUCTION BACKFLOW INSPECTION $ (2,101) $ (1,077) $ (861) $ (125) $ - $ (38) 51% 41% 6% 0% 2% CONST.INSPECT.-BACKFLOW $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% UTILITY BILL DELINQ CHR $ (28,694) $ - $ - $ (28,694) $ - $ - 0% 0% 100% 0% 0% DELINQUENT BILL CHARGE $ (133,013) $ - $ - $ (133,013) $ - $ - 0% 0% 100% 0% 0% UTILITY SERVICE CALL $ (79,164) $ - $ - $ (79,164) $ - $ - 0% 0% 100% 0% 0% CHGS-CURR/PLANS & SPECS $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% TRANSFER FROM-640 (SEWER OPS) $ (488,357) $ (250,418) $ (200,017) $ (29,150) $ - $ (8,771) 51% 41% 6% 0% 2% TRANSFER FROM-653 (WATER CIP)2 $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% TRANSFER FROM-652 (WATER STABL)2 $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% Water System Replacement Fund (653) $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% INTEREST INCOME2 $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% OTHER REVENUE $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2%
BOND PROCEEDS $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2%
CAPITAL CONTRIBUTIONS $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% CHGS-CURR/PLANS & SPECS $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% TRANSFER FROM-650 (WATER OPS)2 $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% TRANSFER FROM-651 (WATER IMPACT) $ - $ - $ - $ - $ - $ - 51% 41% 6% 0% 2% NET REVENUE REQUIREMENTS $ 13,612,197 $ 7,154,823 $ 5,578,457 $ 500,306 $ 127,794 $ 250,817 Allocation of Revenue Requirements 100.0% 52.6% 41.0% 3.7% 0.94% 1.8% Basis of Classification Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer Direct Alloc.
Zonal Elev.
Fire
Protection
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CITY OF MORGAN HILL
WATER RATE STUDY
Cost of Service Analysis
Classification of Expenses, continued
Adjustments to Classification of Expenses
Adjustment for Current Rate Level: Total (COM) (CAP) (CA) (FP) (ZON) Test Year Target Rate Rev. After Rate Increases $16,892,721 Projected Rate Revenue at Current Rates $15,497,910
Test Year Projected Rate Adjustment 9%
Net Revenue Requirements $ 16,892,721 $ 8,879,127 $ 6,978,331 $ 625,855 $ 158,592 $ 250,817 Percent of Revenue 100.0% 52.6% 41.3% 3.7% 0.94% 1.5%
Cost-of-Service Allocation to Fixed vs. Variable Charges Fixed Charges 47%
Variable Charges 53%
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CITY OF MORGAN HILL Allocation Factors
WATER RATE STUDY
Water Cost of Service Analysis
TABLE 28 : DEVELOPMENT OF THE BASE COMMODITY ALLOCATION FACTOR Development of the BASE COMMODITY Allocation Factor
Customer Class
FY 2020/21
Volume (hcf)1
Percent of
Total Volume
Single Family - Inside 1,773,378 57.7% 14.1 100%
Single Family - Outside 52,931 1.7% 14.3 102%
Multi-Family 319,696 10.4% 11.7 83%
Commercial 929,760 30.2% 46.6 331%
Grand Total 3,075,765 100.0%
Fire 565 0.02% 0.2
1. Consumption data source: Morgan Hill_2018-2021 Consumption Billing Data.xlsx Commodity Related Costs: These costs are associated with the total consumption (flow) of water over a specified period of time (e.g. annual).
TABLE 29 : DEVELOPMENT OF THE PEAK CAPACITY ALLOCATION FACTOR Development of the CAPACITY (MAX MONTH) Allocation Factors 2020 2015 Customer Class
Average
Monthly Use
(hcf)
Peak
Monthly Use
(hcf)1
Peak Month
Factor
Max Month
Capacity
Factor
Single Family - Inside 147,782 217,683 1.47 58.2% 100% 100% Single Family - Outside 4,411 6,725 1.52 1.8% 104% 89%
Multi-Family 26,641 31,378 1.18 8.4% 80% 90%
Commercial 77,480 118,489 1.53 31.7% 104% 100%
Grand Total 256,314 374,275 1.46 100.0%
Fire 47 261 5.54 0.1%
1. Based on peak monthly data (peak day data not available).
Capacity Related Costs: Costs associated with the maximum demand required at one point in time or the maximum size of facilities required to meet this demand.
Average Monthly Consumption
Per meter and % of SFR
average
Peaking Factor as % of
SFR
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CITY OF MORGAN HILL Allocation Factors
WATER RATE STUDY
Water Cost of Service Analysis
TABLE 30 : DEVELOPMENT OF THE CUSTOMER ALLOCATION FACTOR Development of the Customer Allocation Factor
Customer Class
Number of
Meters1
Percent of
Total
Single Family - Inside 10,502 69.9%
Single Family - Outside 308 2.1%
Multi-Family 2,284 15.2%
Commercial 1,663 11.1%
Fire 263 1.75%
Grand Total 15,020 100.0%
with the addition or deletion of customers on the system. Examples: Meter-reading, Postage and billing.
1. Number of meters is from source: Morgan Hill_2018-2021 Consumption Billing Data.xlsx
Customer Related Costs: Costs associated with having a customer on the water system. These costs vary Prepared by NBS
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