Agenda packet — Morgan Hill City Council, June 1, 2022 (part 2 of 3)

10 CITY COUNCIL STAFF REPORT
MEETING DATE: June 1, 2022
PREPARED BY:

Matthew Mahood, Economic Development Director
APPROVED BY: City Manager

APPROVE THE HOTEL STRATEGY AND INCENTIVE POLICY TO

SUPPORT NEW HOTEL DEVELOPMENT AND REHABILITATION OF

EXISTING HOTELS

RECOMMENDATION(S)
Approve the Hotel Strategy and Incentive Policy to support New Hotel Development and rehabilitation of Existing Hotels.

Estimated Time: 30 Minutes

COUNCIL PRIORITIES, GOALS & STRATEGIES
2022-2023 Strategic Priorities
Fiscal Sustainability
Economic Development
Guiding Documents
Economic Blueprint
Morgan Hill 2035 General Plan
REPORT NARRATIVE:

POLICY CONSIDERATION:

Should the City Council create an incentive program to encourage new hotel development and encourage reinvestment in existing hotels to improve the quality of hotels and Transient Occupancy Tax generation?

ISSUE AND BACKGROUND
Expanding sports, recreation and wine tourism is one of the City’s goals. Over the years, Morgan Hill has invested heavily in its recreational facilities, such as the Aquatics Center, Outdoor Sports Center, and Centennial Recreation Center, making them premier destinations for both residents and visitors. In previous years, these facilities, along with the local festivals and events, attracted nearly 1 million visitors annually.

According to the 2017 Morgan Hill Sports Market Business Strategy, a visitor that spends $1.00 in South County recreation activities such as at the Aquatics Center,

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10 generates $1.80 in economic impact.

Morgan Hill’s 2035 General Plan and 2017 Economic Blueprint identifies Tourism as a targeted industry and defines specific strategies and actions that should be taken to support, nurture, and advance this industry sector.

A critical factor in the success of this strategy are hotel rooms, both the quantity and quality. To support the continued growth of tourism in Morgan Hill, the City must ensure the availability of high-quality lodging to accommodate visitors. A 2015 Hotel Market Study conducted by Hotel Appraisers & Advisors, found that there is substantial unmet demand for additional hotel development in the City of Morgan Hill. A 2022 Hotel Market Study Update reinforces these findings and shows new hotel development north and south of Morgan Hill, while Morgan Hill’s hotel development has remained stagnant.

The City collects 11% of Transient Occupancy Tax (TOT) which contributes approximately 5% of the total General Fund revenue.

Morgan Hill Hotel Market
Within the City of Morgan Hill there are currently 900 hotel rooms spread across 14 facilities. Of those 900 rooms, only 529 rooms are Upperscale/Upper-Midscale represented in 6 hotel properties. These six hotels generate approximately 76% of the City’s TOT revenue. The remaining 8 hotels are considered economy class and many of them have reached or are approaching the end of their economic life, which means that they need to re-invest or may be required to downgrade or have already lost the brand/flag. This means that aging hotels need to consider reinvesting or transitioning these facilities to other uses. Alternatively, the life cycle of hotels without reinvestment means that these facilities begin a downward decline of brands/flags until they become ‘independent’ hotels with no attached brand and performance oversight.

In Morgan Hill, some of these aging hotels have a large percentage of over 30-day stays or in other words, function as defacto housing. This raises concerns for safety, State Building Code compliance, and local General Plan and Zoning conformance while generating very little or no TOT revenue.

Morgan Hill’s most recent hotel development, La Quinta Inn & Suites, with 104 rooms, was built in 2016. The City of Morgan Hill has essentially missed the last two hotel development construction booms that took place between 2006 and 2015.

Four hotels have been approved in recent years. Two hotels were subject to a referendum after securing entitlements and were unable to get constructed. A hotel at the Evergreen Village Center secured entitlements in 2020 but development was impacted by the COVID 19 pandemic. Since 2020, a new investor has acquired the site and secured a Holiday Inn Express flag for this site. This hotel is currently being redesigned and is expected to be under construction in 2023. A 60-room boutique hotel in Downtown has also secured entitlements and began construction which was halted at the onset of the pandemic. This hotel is a specialty hotel that requires private financing.

The concrete work in the first two floors, and all underground utility work has been

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10 completed. The developer is in the process of securing the necessary financing to proceed with the hotel construction and has indicated that additional rooms may be necessary to make the hotel operationally functional. It is important to note that costs of construction for these facilities have significantly increased since entitlements were secured and shortage of labor and materials may impact their timely constructability.

The City’s 2017 Economic Blueprint’s Action #27 suggests identifying pre-zoned hotel lodging sites for future development. The intention behind this action is to remove barriers to entry to new hotel development and have locations pre-approved for the desired use. Hotel development is allowed in Highway Commercial Zoning and hotels that locate in these zones are not subject to a referendum. Currently, there are four parcels that can accommodate hotels in this zoning. One additional site may be added in the near future with pending zoning amendments in the Cochrane Commons development area.

Regional Hotel Competition
Hotel markets are regionally based. The City of Morgan Hill is in direct competition with the cities of San Jose and Gilroy for new hotel properties, each of which has recently approved new hotel developments. In the last two years, San Jose has built 2 hotels with a total of 290 rooms and Gilroy has built 1 hotel with 103 rooms. Currently, in 2022, San Jose is adding another 406 rooms across 3 hotel brands, Element, Holiday Inn Express, and Hilton Garden Inn. Gilroy is actively pursuing 3 hotel projects consisting of Hyatt Place (120 rooms), Springhill Suites (112 rooms), and Staybridge Suites (91 rooms).

Due to the regional nature of the hotel market, Morgan Hill could potentially miss the opportunity to secure key hotel brands if the City doesn’t make new hotel development a priority.

Revenue Generation
Hotels generate General Fund revenue through the collection of Transient Occupancy Tax (TOT).

The graphic below details the collection of TOT since FY 2008/09. The collection of TOT has been increasing since FY2010/11, but the COVID-19 pandemic negatively impacted the hospitality and tourism industries, resulting in a significant loss of TOT collection since the spring of 2020. Hotels generate more revenue per acre than any other use in Morgan Hill. Prior to COVID-19, the larger three-diamond hotel properties in the City were generating approximately $138,000 in TOT revenue per acre. This compares to auto dealers who average approximately $86,000 in sales tax per acre.

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10 Hotel Incentive Policies
A number of municipalities have shown that some public investment is often needed to augment the large private capital that is required to develop hotel and tourism facilities.

Many cities have induced the development of hotel rooms through public financial participation in the project. The following table provides a quick summary of several jurisdictions that have successfully employed a hotel incentive program. * Hotel must provide a minimum level of service, such as: meeting room space, room service, valet, concierge, pool, laundry, etc.

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10 ** Hotel must be of a minimum room count to be eligible for the hotel incentive program
Staff proposes the approval of a new Hotel Incentive Policy (HIP) to provide financial incentives to develop quality hotels and the rehabilitation of existing hotels to help improve the lodging inventory in Morgan Hill. This would enhance the tourist and travel experience, increase hospitality services for businesses and residents in the area, and assist the city in achieving its tourism goals and increase TOT receipts. The proposed program will be similar to the Auto Dealer Incentive Policy. The Hotel Incentive Policy (HIP) would provide rebate incentives to encourage the construction of new hotel development and the rehabilitation and upgrade of existing hotels. The City would provide a rebate of up to 50% of the value of City required off-site improvements for new hotel construction or up to 50% of costs associated with property improvements needed to obtain a higher quality standard that upgrades the hotel brand or increases TOT revenue for existing hotels. The City’s contribution will be deducted from future TOT revenue generation after an established TOT baseline. The baseline will be equal to the corresponding chain scale hotel annual average revenue per guest room in Morgan Hill during the year 2019. The baseline would be updated every five years. The rebate ends after the City’s 50% contribution has been financed or after 10 years, whichever is first. Only 50% of TOT generated above the baseline would be applied to the rebate, ensuring the City always gets a healthy TOT contribution. The proposed Hotel Incentive Policy is attached, and a summary of the parameters is detailed in the table below:

Proposed
HIP
New Hotels Existing Hotels
Eligibility Location of new hotel
development shall be in
conformance with the
City’s General Plan and
Existing Zoning.

Hotels that are currently
branded as a chain must
achieve an upgrade of at least
one chain scale after
renovations are completed.

Participating hotels that are
currently Independent may
either (a) obtain a chain brand
or (b) apply for a maximum
rebate of $100,000.

Rebate
amount
50% of costs
associated with offsite
improvements
50% of costs associated with
property improvements
necessary to upgrade brand
Rebate
Payment
City rebate equal to
50% of TOT revenue
generated above the
baseline
City rebate equal to 50% of TOT
revenue generated above the
baseline.

Baseline Equal to the Equal to hotel’s average TOT

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10 corresponding chain
scale hotel annual
average revenue per
guest room in Morgan
Hill during the year
2019. Baseline to be
updated every five
years.
revenue generated in 2019.

Term The rebate ends after
the City’s 50%
contribution has been
financed or after 10
years, whichever is
first.

The rebate ends after the City’s
50% contribution has been
financed or after 10 years,
whichever is first.

Approval City Council shall
approve Hotel Incentive
agreements over
$100,000.

City Council shall approve Hotel
Incentive agreements over
$100,000.

The Hotel Incentive Policy promotes economic development, supports business operations, and provides attractive and desirable experiences to enhance the City’s economic sustainability. This incentive program is important as it will signal to the hotel development community that the City of Morgan Hill is open for business and interested in new hotel development. Equally important, this program conveys the City’s support to existing operators and willingness to partner to help them improve their properties and protect their investment. The proposed program is in conformance with the City’s General Plan Update 2035 and the 2017 Economic Development Blueprint which is further detailed in the attached Policy.

COMMUNITY ENGAGEMENT:

Inform
This report serves to inform the community of the proposed HIP. City staff has shared the proposed policy with Visit Morgan Hill and the Chamber of Commerce Board of Directors. City staff have individually shared the proposed policy with existing hotel operators for their feedback.

ALTERNATIVE ACTIONS:

The City Council may choose not to adopt the Hotel Incentive Program, or may modify the proposed program.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

In 2018, the City Council took action to form a Tourism Based Improvement District

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10 (TBID) to help support and promote the tourism and hospitality industries.

FISCAL AND RESOURCE IMPACT:

If approved, on new participating hotel developments, the City would be sharing a portion of new incremental Transient Occupancy Tax (TOT) revenues generated above the baseline equal to no more than 50% of the cost of offsite improvements. For existing hotel projects, the City would be sharing a portion of incremental TOT revenues generated above the baseline amount.

CEQA (California Environmental Quality Act):

Not a Project
The Hotel Incentive Program is exempt from environmental review under Section 15061(b)(3) of the State CEQA Guidelines. The program is covered by the general rule that CEQA applies only to projects which have the potential to cause a significant effect on the environment. Where it can be seen with certainty that these is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The program will not result in any direct impact upon the physical environment. Any development that occurs in the future will be subject to the development standards of the zoning district and will undergo an independent analysis pursuant to the requirements of CEQA.

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Q:\matt mahood\hotels\hotel incentive policy June 1 2022 Hotel Incentive Policy
June 2022
Purpose
The Hotel Incentive Policy (HIP) provides rebate incentives to encourage the construction of new hotel development and the rehabilitation and upgrade of existing hotels to help enhance the tourism and travel experience and hospitality services for businesses and residents in the area. The intent of this program is to promote economic development, support business operations, and provide attractive and desirable visitor serving facilities and experiences to enhance the city’s economic sustainability.

For new hotel development, the HIP provides cost-sharing of up to 50% of City required off-site improvements. The City’s contribution will be deducted from future TOT revenue generation after an established TOT baseline.

For the renovation of existing hotel properties, the HIP provides cost-sharing of up to 50% of costs associated with property improvements needed to obtain a higher quality standard that upgrades the hotel brand*. The City’s contribution will be deducted from future TOT revenue generation after an established TOT baseline.

Goals

1. The City supports hotel investment to support sports, recreation and wine tourism and support business development.

2. The City supports the development of unique and specialty lodging facilities such as full-service hotels with conference and restaurant facilities; boutique hotels, Bed and Breakfasts, Airbnb, VRBOs and other short-term lodging rental platforms to increase lodging diversity and promote the area as a tourism destination.

3. The City supports reinvestment into existing hotel properties that support the improvements required to upgrade the quality of hotel rooms and enhance hotel brand inventory.

The City’s General Plan Update 2035 and the 2017 Economic Development Blueprint provides direction that support the Hotel Incentive Policy.
2035 General Plan. Policy ED 4-9
Overnight Accommodations. Support the construction of a full range of new lodging facilities to build the local tourism industry, enhancing the City’s position as a hub for wine tourism and for visitors attracted to the City’s sports facilities.

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Q:\matt mahood\hotels\hotel incentive policy June 1 2022 2035 General Plan. Policy ED 4-11
Tourism Support Services. Actively promote development of tourist-oriented commercial, industrial, and recreational uses and facilities, including such uses as lodging, meeting and conference centers, outdoor restaurants, wine and beer tasting, and farmers’ markets. 2035 General Plan. Policy ED 4--A
Bed and Breakfast Establishments. Adopt zoning for bed and breakfast establishments where compatible with existing and planned land uses.
2017 Economic Development Blueprint. Tourism Strategy: Support Lodging.

Ensure General Plan and Zoning Code Address Bed & Breakfasts, Airbnb and Hotel Development (Action #25) to provide clear guidance regarding the rules that apply to short-term room or home rentals through Airbnb or other platforms.
2017 Economic Development Blueprint. Tourism Strategy: Support Lodging.

Develop Plan to Help Upgrade or Transition Aging Hotel Facilities (Action #26) to address safety, State Building Code compliance, and local General Plan and Zoning conformance issues. 2017 Economic Development Blueprint. Tourism Strategy: Support Lodging.

Identify Pre-Zoned Lodging Sites (Action #27) to support the vision of making Morgan Hill and South Silicon Valley a tourism destination and offering diversity among lodging amenities.

HIP Program Parameters & Eligibility
New Hotels

1. Location of new hotel development shall be in conformance with the City’s General Plan and Existing Zoning.

2. The City’s contribution shall be up to 50% of the costs associated with off-site/public improvements such as: roadways, sidewalks, utility undergrounding and other offsite improvements required of a new hotel construction in a greenfield development.

3. The City’s contribution will be in the form of a rebate deducted from future TOT revenue generation after an established TOT baseline and shall be paid within 10 years.

4. The rebate ends after the 50% contribution has been financed or after 10 years, whichever is first.

5. The baseline will be equal to the corresponding chain scale hotel annual average revenue per guest room in Morgan Hill during the year 2019. Baseline to be updated every five years.

6. Only up to 50% of TOT generated above the baseline will be applied to the rebate.

7. The City Council shall approve Hotel Incentive agreements over $100,000.

8. The HIP does not limit hotel developments from accessing other local or regional incentive programs.

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Q:\matt mahood\hotels\hotel incentive policy June 1 2022 Existing Hotels

1. Existing hotels must be an established hotel located in Morgan Hill city limits.

2. Participating hotels that are currently branded as a chain must achieve an upgrade of at least one chain scale after renovations are completed. Participating hotels that are currently Independent may either (a) obtain a chain brand or (b) apply for a maximum rebate of $100,000.

3. The City’s contribution shall be up to 50% of the costs required to achieve the chain scale upgrade, as supported by the brand’s Property Improvement Plan (PIP) document and receipts of completed items listed on the PIP.

4. Hotel upgrades must meet the California Building Code and must obtain required City permits.

The City’s contribution will be calculated based on the cost estimate submitted to the City for building permits.

5. The City’s contribution will be in the form of a rebate deducted from future TOT revenue generation after an established TOT baseline and shall be paid within 10 years.

6. The rebate ends after the 50% contribution has been financed or after 10 years, whichever is first.

7. The baseline for established hotels will be based on the hotel’s average TOT revenue generated in 2019.

8. Only up to 50% of TOT generated above the baseline will be applied to the rebate.

9. The City Council shall approve Hotel Incentive agreements over $100,000. * Minimum Quality Standards
Hotel facilities are evaluated based on STR’s published industry U.S. Chain Scales. Chain Scales are determined by each brand’s national, systemwide room rates. An independent hotel, regardless of average room rate, is included as a separate “Independent” category. The Chain Scales are: Luxury, Upper Upscale, Upscale, Upper Midscale, Midscale, Economy and Independent.

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Hotel Market Research
Morgan Hill, California
PREPARED FOR: CITY OF MORGAN HILL
PREPARED BY: HA&A
7/9/2015

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2 Executive Summary

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3 Executive Summary
• How can existing hotels in Morgan Hill be classified? Hotels are typically categorized by hotel brand affiliation and chain scale. In Morgan Hill, Marriott, Hilton, IHG, Choice, Wyndham, and Extended Stay America brands are represented, but not Hyatt and Starwood. In terms of chain scales, two hotels are categorized as upscale, three hotels are upper-midscale, and others belong to lower chain scales. Chain scales are defined and published by STR each year, based on system-wide average rates for each brand operating in the United States.
• How many more hotels can the Morgan Hill market support? Developers typically begin to target a market for new hotel construction when top-performing existing hotels demonstrate occupancies in excess of 70% for multiple years, on an annual basis. Moreover, upscale hotel development is typically targeted when RevPAR levels can be expected to exceed approximately $90 on an annual basis. Instead of trying to determine how many more hotels a market can support, hotel investors and developers typically ask a different question. They ask: Can we develop a new hotel that will compete favorably in this market? We expect to see continued interest in development so long as: (1) existing hotels demonstrate sustained strong performance levels; (2) popular national brands remain available; and (3) capital markets continue to provide debt and equity for hotel construction.

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4 Executive Summary
• What is the impact from new supply on Transient Occupancy Tax (TOT)? Supply growth generally has a positive impact on TOT, as additional inventory increases total room nights available to be accommodated in the market. Newer, higher-quality hotels can also increase the market’s average rate, which typically leads to higher TOT revenues in markets that can support higher-rated hotels. In 2014, newer, upscale and upper midscale hotels in Morgan Hill made up 79% of total TOT.

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5 Market Analysis

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6 S.W.O.T Summary
Strengths
• Expanding Economic
Base
• Silicon Valley Location
• Proximity from/to San
Jose
• Leisure attractions
• Major events (Taste of
Morgan Hill, Freedom
Fest, and Mushroom
Mardi Gras)
• Sporting Recreation
(Outdoor Sports Center
and Aquatics Center)
Weaknesses
• Dependence on San
Jose and Silicon Valley
businesses
• Leisure demand
appears to be highly
seasonal with relatively
weak weekend
occupancies between
November and
February
• Cost of installing
infrastructure
• Residential Control
Growth Ordinance
Opportunities
• Strong Occupancy and
ADR Trend
• Substantial
Unaccommodated
Demand
• Missing Major Hotel
Brands
• Potential to Grow
Additional Demand
Generators
Threats
• San Jose Supply
Growth
• Economic Cycles

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7 Conveniently located along U.S. Route 101…
… highly accessible from San Jose
Source: ESRI Driving Time
15 minutes
30 minutes Page 178 of 419
8 Population is projected to continue to increase in Morgan Hill Source: ESRI

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9 Median household incomes…
…much higher than the national average
Source: ESRI

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10 Somewhat Diverse Employment Base
Source: ESRI

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11 Unemployment rate in Morgan Hill…
…near lowest level since Dot-com bubble
Source: Bureau of Labor Statistics

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12 Market Analysis – Demand Generators
Commercial
• Anritsu
• Specialized Bicycles
• Anaerobe Systems
• Infineon Technologies
• Sakata Seeds
• ITT Corporation
• Paramit
• TenCate Advanced Composites
• Flextronics International
• San Jose Business
Leisure
• Amateur Sports
• Friends and Relatives
• 22 Wineries
• 7 Golf Courses
• Outdoor Activities
• Lakes
• Parks
• Ranches
• Seasonal Festivals and Events
• Downtown Wine Stroll
• Mushroom Mardi Gras
• Freedom Fest
• Taste of Morgan Hill
• Morgan Hill Marathon
Group
• Morgan Hill Aquatics Center
• Morgan Hill Outdoor Sports Center
• McEnery Convention Center (San
Jose)
• Social
• Military
• Education
• Religious
• Fraternal

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13 Demand Generators Map
A Anritsu
B Specialized Bicycles
C Anaerobe Systems
D Infineon Technologies
E Sakata Seeds
F ITT Corporation
G Paramit
H TenCate Advanced Composites
I Flextronics International
J Morgan Hill Downtown
K Morgan Hill Aquatic Center
L Morgan Hill Outdoor Sports Center Page 184 of 419
14 Top Employers Have Been Adding Jobs
Source: City of Morgan Hill

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15 Leisure Attractions Map
Source: City of Morgan Hill

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16 Morgan Hill 2015 – 2016 Events Outdoor Sports Center Events Month Events Number of Attendees
July Freedom Fest 64,500
September British Falls Classic Car Show 500
September Taste of Morgan Hill 20,000
October Makos Meet 1,800
Novermber Morgan Hill Marathon 2,500
December Makos Swim Meet 1,200
February Quicksilver/Morgan Hill Splash 500
March AAUW Wildflower Run 900
April Far Westerns Meet 1,547
May Specialized Spring Classic 1,000
May Mushroom Mardi Gras 35,000
Total 129,447
Source: City of Morgan Hill Community Services Department Year Event Type Number of Attendees
2015 Tournaments (28) 229,200 visitors
2015 Events (2) 30,000 attendees
2015 Camps (4) 1,000 players
Total 260,200
Source: City of Morgan Hill Community Services Department * The list only includes events which are expected to generate lodging demand by Community Services Department

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17 Hotel Supply and Demand Analysis

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18 There are 13 Hotels in Morgan Hill
* We have excluded the Paradise Motel, the Rancho Motel, and the Maple Leaf RV Park because these are not primarily considered as lodging facilities Hotels Open Date Rooms
A Budget Inn 1980 29
B Economy Inn 1981 26
C Holiday Motel 1981 25
D Morgan Hill Inn 1983 23
E Quality Inn Morgan Hill 1985 83
F Executive Inn Suites 1991 30
G Hampton Inn Morgan Hill 1993 106
H Extended Stay America Morgan Hill 1998 92
I Microtel Inn & Suites by Wyndham Morgan Hill 1999 60
J Comfort Inn Morgan Hill 1999 53
K Holiday Inn Express & Suites Morgan Hill 1999 85
L Courtyard South Morgan Hill 2001 90
M Residence Inn South Morgan Hill 2002 90
13 Hotels 792 Page 189 of 419
Hotels Affiliation Chain Scale Affiliation Date Open Date Rooms A Budget Inn Independent Economy Class - 1980 29
B Economy Inn Independent Economy Class - 1981 26
C Holiday Motel Independent Economy Class - 1981 25
D Morgan Hill Inn Independent Economy Class 1996 1983 23 E Quality Inn Morgan Hill Choice Hotels Midscale Class 2006 1985 83 F Executive Inn Suites Independent Economy Class 1991 1991 30 G Hampton Inn Morgan Hill Hilton Upper Midscale Class 2012 1993 106 H Extended Stay America Morgan Hill Extended Stay America Economy Class 1998 1998 92 I Microtel Inn & Suites by Wyndham Morgan Hill Wyndham Economy Class 1999 1999 60 J Comfort Inn Morgan Hill Choice Hotels Upper Midscale Class 1999 1999 53 K Holiday Inn Express & Suites Morgan Hill IHG Upper Midscale Class 1999 1999 85 L Courtyard South Morgan Hill Marriott Upscale Class 2001 2001 90 M Residence Inn South Morgan Hill Marriott Upscale Class 2002 2002 90 13 Hotels 792
19 High rated hotels entered the market…
…Older, economy hotels nearing end of economic life
Source: STR, HA&A
* We have excluded the Paradise Motel, the Rancho Motel, and the Maple Leaf RV Park because these are not primarily considered as lodging facilities

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20 Strong Occupancy and ADR Recovery in Morgan Hill
Year
Room
Supply
Room Night
Supply % Change Room Night Demand
%
Change Occupancy
Average
Rate
%
Change RevPAR
%
Change
2000 606 221,190 -- 169,323 -- 76.6% 83.69 -- 64.06 --
2001 629 229,470 3.7% 137,275 -18.9% 59.8% 88.08 5.2% 52.69 -17.8% 2002 786 286,890 25.0% 132,947 -3.2% 46.3% 78.26 -11.1% 36.27 -31.2% 2003 786 286,890 0.0% 134,011 0.8% 46.7% 75.05 -4.1% 35.06 -3.3% 2004 786 286,890 0.0% 151,043 12.7% 52.6% 71.31 -5.0% 37.55 7.1% 2005 786 286,890 0.0% 165,566 9.6% 57.7% 75.93 6.5% 43.82 16.7% 2006 786 286,890 0.0% 161,429 -2.5% 56.3% 78.35 3.2% 44.09 0.6% 2007 786 286,890 0.0% 176,136 9.1% 61.4% 81.79 4.4% 50.21 13.9% 2008 786 286,890 0.0% 161,184 -8.5% 56.2% 85.64 4.7% 48.12 -4.2% 2009 786 286,890 0.0% 148,412 -7.9% 51.7% 76.17 -11.1% 39.40 -18.1% 2010 786 286,890 0.0% 160,094 7.9% 55.8% 74.98 -1.6% 41.84 6.2% 2011 786 286,890 0.0% 174,602 9.1% 60.9% 77.85 3.8% 47.38 13.2% 2012 787 287,351 0.2% 178,479 2.2% 62.1% 86.80 11.5% 53.92 13.8% 2013 793 289,445 0.7% 197,210 10.5% 68.1% 99.57 14.7% 67.84 25.8% 2014 792 289,200 -0.1% 198,675 0.7% 68.7% 110.51 11.0% 75.92 11.9% YTD 2014 thru April 793 95,160 -- 58,879 -- 61.9% 102.54 -- 63.45 -- YTD 2015 thru April 792 95,040 -0.1% 66,383 12.7% 69.8% 120.00 17.0% 83.82 32.1% Historical Annual Growth Rates 1.9% 1.1% 2.0% 1.2%
Sources: STR and HA&A Page 191 of 419
21 Local Demand Generally Increasing
A. Dot-com Bubble Bust and 9.11
B. Pre-Recession Peak (61.4% @ $81.79)
C. National Recession
D. Expansion Period (68.7% @ $110.51)
Source: STR, HA&A

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22 The 5 Highest-Rated Hotels in Morgan Hill…
…Experiencing Strong Growth
Year
Room
Supply
Room Night
Supply % Change Room Night Demand
%
Change Occupancy
Average
Rate
%
Change RevPAR
%
Change
2009 418 152,570 -- 81,062 -- 53.1% 94.82 -- 50.38 --
2010 418 152,570 0.0% 89,325 10.2% 58.5% 91.34 -3.7% 53.48 6.2% 2011 418 152,570 0.0% 98,869 10.7% 64.8% 94.87 3.9% 61.48 15.0% 2012 419 153,031 0.3% 99,117 0.3% 64.8% 105.39 11.1% 68.26 11.0% 2013 425 155,125 1.4% 108,614 9.6% 70.0% 123.02 16.7% 86.13 26.2% 2014 424 154,880 -0.2% 111,660 2.8% 72.1% 133.74 8.7% 96.42 11.9% YTD 2014 thru April 425 51,000 -- 34,395 -- 67.4% 125.42 -- 84.59 -- YTD 2015 thru April 424 50,880 -0.2% 37,354 8.6% 73.4% 146.05 16.5% 107.23 26.8% Historical Annual Growth Rates 0.3% 6.6% 7.1% 13.9%
Sources: STR and HA&A Page 193 of 419
23 Significant Supply Growth Regionally…
…2,400 Rooms in Pipeline
* The list includes new hotels in the San Jose market. Some hotels in the list are located over 40 miles from Morgan Hill.

Column1 New Hotels Location Rooms Status
A Residence Inn San Jose, CA 175 Opened in June
B SpringHill Suites San Jose, CA 146 Opened in June
C Aloft San Jose, CA 175 Under Construction
D AC Hotels San Jose, CA 210 Under Construction
E TownePlace Suites Foster City, CA 121 Under Construction F La Quinta Morgan Hill, CA 104 Under Construction
G Staybridge Suites Palo Alto, CA 147 Application Pending H Hampton Inn & Suites Sunnyvale, CA 166 Application Pending I SpringHill Suites Belmont, CA 69 Application Pending
J Hyatt House/Hyatt Place San Jose, CA 355 Application Pending K Hampton Inn/Home2 Suites San Jose, CA 285 Application Pending L Homewood Suites San Jose, CA 145 Application Pending
M Residence Inn/Fairfield Inn San Jose, CA 261 Application Pending N Hampton Inn Gilroy, CA 104 Application Pending
Total 2,463
Source: HA&A Page 194 of 419
24 Long-term National Supply and Demand…
…Appear Closely Correlated
CAGR
Demand: 2.0%
Supply : 1.9%

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25 Source: STR, HA&A
There are two periods when national ADR declined since 1988… …ADR declines were caused by demand decreases, not supply increases % Change
Demand
Supply
ADR
ADR declines were
caused by demand
decreases, not supply
increases

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26 Source: STR, HA&A
Long-term national trend shows increases both in supply and ADR Supply
ADR

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27 Nearly 1,400 rooms added to San Jose market since 2010 New Hotels Location Opening Date Rooms
Courtyard by Marriott Campbell, CA Feb-10 162
Hyatt House San Jose, CA Mar-11 164
aloft Hotel Cupertino Cupertino, CA Jan-13 123
Courtyard by Marriott San Jose, CA Jan-14 157
TownePlace Suites by Marriott Santa Clara, CA Feb-14 107 Joie De Vivre The Epiphany Palo Alto, CA Mar-14 86
Courtyard by Marriott Sunnyvale, CA Oct-14 145
Homewood Suites by Hilton Palo Alto, CA Mar-15 138
Hilton Garden Inn Palo Alto, CA Mar-15 174
Residence Inn by Marriott Menlo Park, CA May-15 138
1,394
Source: STR, HA&A
* The list includes new hotels in the STR participation list of the San Jose market.

Some hotels in the list are located over 40 miles from Morgan Hill.

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28 …Yet Morgan Hill still has strong Demand and ADR growth

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29 Strong occupancy patterns…
…indicate substantial unaccommodated demand
Morgan Hill Top 5 National
Occupancy
Over 90%
Over 80%
Over 70%
Sun Mon Tue Wed Thu Fri Sat
May - 14 53.2 65.9 85.8 86.6 64.9 64.3 86.7
Jun - 14 52.2 78.5 97.4 95.0 81.1 79.1 89.6
Jul - 14 56.4 82.8 88.9 87.7 75.1 87.1 86.3
Aug - 14 63.2 82.7 94.9 94.6 82.9 82.8 97.5
Sep - 14 52.2 72.1 87.4 86.3 68.9 65.8 82.6
Oct - 14 54.8 79.1 93.6 89.2 71.0 58.7 80.2
Nov - 14 41.4 73.2 84.7 84.6 68.8 52.9 67.2
Dec - 14 42.7 59.0 66.2 67.4 65.6 54.5 61.7
Jan - 15 47.0 77.0 89.6 91.3 65.3 47.5 59.8
Feb - 15 52.5 77.8 93.6 95.0 74.5 56.8 63.2
Mar - 15 47.3 78.0 91.3 89.9 70.6 62.7 84.6
Apr - 15 51.0 81.7 92.3 93.2 79.7 71.3 77.7
Sun Mon Tue Wed Thu Fri Sat
May - 14 54.6 59.7 67.9 69.2 65.5 72.2 76.5
Jun - 14 55.4 68.3 75.3 75.8 72.5 78.0 81.1
Jul - 14 58.5 71.6 73.9 73.9 73.3 81.3 82.6
Aug - 14 58.7 69.5 73.9 73.5 68.9 75.9 81.1
Sep - 14 51.6 60.6 67.6 69.3 65.7 70.8 75.3
Oct - 14 53.3 65.1 70.3 69.8 65.6 71.9 79.3
Nov - 14 44.3 56.8 60.5 62.1 60.9 64.5 64.6
Dec - 14 43.0 51.1 52.7 55.4 50.9 55.6 58.9
Jan - 15 42.3 53.9 59.5 60.3 53.6 54.7 55.8
Feb - 15 48.0 58.2 64.4 65.7 61.2 66.7 71.5
Mar - 15 51.2 64.0 69.2 70.6 67.5 73.5 75.8
Apr - 15 49.4 64.0 69.9 69.7 66.7 73.6 74.0 Page 200 of 419 30 Pent-up demand is for higher-rated hotels in Morgan Hill Morgan Hill Top 5 (72%@$134) Morgan Hill Others (65%@$81) Occupancy
Over 90%
Over 80%
Over 70%
Sun Mon Tue Wed Thu Fri Sat
May - 14 57.9 60.2 74.5 74.7 65.8 64.8 77.9
Jun - 14 54.5 70.0 87.2 83.2 79.8 79.2 88.4
Jul - 14 57.9 76.4 79.4 78.8 75.4 84.5 85.9
Aug - 14 62.1 70.7 79.6 78.7 75.1 79.4 89.2
Sep - 14 54.6 66.0 77.1 73.7 65.0 68.6 77.5
Oct - 14 56.3 68.0 78.0 75.9 68.9 65.8 75.7
Nov - 14 47.6 68.3 77.5 73.0 64.0 56.9 65.3
Dec - 14 42.4 54.3 58.0 56.6 55.5 53.3 54.9
Jan - 15 45.7 66.8 78.8 77.0 63.5 52.9 54.8
Feb - 15 47.8 64.0 75.3 75.1 63.3 49.1 57.4
Mar - 15 50.2 67.5 76.8 73.4 63.4 57.6 78.3
Apr - 15 51.8 69.8 81.6 82.5 73.9 68.0 75.3
Sun Mon Tue Wed Thu Fri Sat
May - 14 53.2 65.9 85.8 86.6 64.9 64.3 86.7
Jun - 14 52.2 78.5 97.4 95.0 81.1 79.1 89.6
Jul - 14 56.4 82.8 88.9 87.7 75.1 87.1 86.3
Aug - 14 63.2 82.7 94.9 94.6 82.9 82.8 97.5
Sep - 14 52.2 72.1 87.4 86.3 68.9 65.8 82.6
Oct - 14 54.8 79.1 93.6 89.2 71.0 58.7 80.2
Nov - 14 41.4 73.2 84.7 84.6 68.8 52.9 67.2
Dec - 14 42.7 59.0 66.2 67.4 65.6 54.5 61.7
Jan - 15 47.0 77.0 89.6 91.3 65.3 47.5 59.8
Feb - 15 52.5 77.8 93.6 95.0 74.5 56.8 63.2
Mar - 15 47.3 78.0 91.3 89.9 70.6 62.7 84.6
Apr - 15 51.0 81.7 92.3 93.2 79.7 71.3 77.7 Page 201 of 419 31 79% TOT Revenue is from Five Newer Upscale and Upper Midscale Hotels… … Combination of Higher Occupancy and Average Daily Rate Source: City of Morgan Hill Top 5 Hotels
Others

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32 Supply growth is cyclical…
…but Morgan Hill missed the last cycle
Source: STR, HA&A

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33 Wide gaps in hotel review scores…
…newer properties receive best scores
Source: TripAdvisor, HA&A
* The Holiday Motel was excluded from the ranking because there is no entry for the hotel on TripAdvisor

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34 Some brands are under-represented in Morgan Hill…
…potential opportunity for Hilton, Starwood, Hyatt brands Source: STR, HA&A Data Library

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35 Hilton, Starwood, and Hyatt brands are underrepresented currently Source: STR, HA&A Brand Library

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36 Developers seek markets that can support…
…RevPARs above brand averages
Brands Occupancy ADR RevPAR
Hyatt House 79% 132.92 105.41
Hotel Indigo 73% 136.36 98.86
Homewood Suites 79% 125.13 98.73
Hilton Garden Inn 75% 126.08 94.94
Aloft 76% 123.32 93.48
Staybridge Suites 78% 111.34 86.73
Hyatt Place 76% 112.24 85.30
Home2 Suites 79% 106.9 84.45
SpringHill Suites 75% 112.16 83.67
TownePlace Suites 75% 96.84 72.34
Fairfield Inn 70% 102.8 72.06
Holiday Inn 66% 107.56 70.77
Top 5 RevPAR
($96.42)

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37 Four top brands already exist in Morgan Hill…
…missing brands may present opportunities
Source: HA&A Data Library and Franchise Disclosure Documents

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38 Thank you!

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39 Addendum

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40 1. Address market demand for our community – with clear understanding of our community dynamics, vision, challenges and opportunities.

Morgan Hill is experiencing a growth phase of an economic cycle, after a rapid recovery from the global recession. As shown on slide 20, Morgan Hill is in its 6th consecutive year of lodging demand growth. After the Dot Com bubble burst, it took Morgan Hill until 2007 to achieve a new peak level of demand. With the most recent recession, demand declined from the 2007 peak. Then a new peak was achieved in 2012. New demand peaks were set in 2013 and 2014. Year-to-date 2015 suggests another record-setting year.

2. Address the impact of more hotel rooms to the TOT, analyzing a long-term historical period of supply and demand in Morgan Hill to evaluate whether supply growth historically has been correlated with demand growth.

Analyze a long-term STR trend to see whether this is also true in Morgan Hill historically. Demonstrate this correlation graphically. Order a national STR trend report as a control group to isolate what portion of demand growth is due to national economic growth versus local supply growth.

We estimate total rooms revenue of approximately $41.6 million was added in Morgan Hill due to the addition of new supply (Courtyard and Residence Inn) between 2000 and 2014. In 2014, rooms revenues were about $5 million higher than they would have been if this new supply had not been introduced to the market. This represents a significant positive impact for TOT.

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41 3 Analyze supply and demand trends for the high-performing competitive set in Morgan Hill. Order a custom trend report from STR to evaluate how just the top 4-8 hotels are performing to see how new developers are looking at this market and whether they see development potential here.

The local market data indicate opportunities for potential hotel developments in Morgan Hill, as occupancy levels have exceeded 70% for top performers in recent years. Moreover, RevPAR levels have exceeded $90 for top performers in recent years, suggesting potential for additional upscale hotel development. Please refer to slides

22. 4. Analyze whether “unaccommodated” demand or “pent up” demand exists in the Morgan Hill market, and demonstrate some ways to quantify this or at least discuss whether a significant volume exists in this market.

A substantial amount of unaccommodated is estimated to exist in the Morgan Hill market, which should moderate the impact from potential new supply. Please refer to slide 29 and 30.

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42 5. Discuss what “new supply” circumstances can also bring “induced” demand in addition to unaccommodated demand.

When hotel brands which are new to the market are introduced, a new hotel can potentially induce demand due to its reservation system and sales team that was previously unrepresented in the local market. There are major brands missing from Morgan Hill, which present opportunities for potential hotel development. Please refer to slide 34, 35, 36, and 37.

6. Assess the local inventory of hotels and categorize Morgan Hill’s lodging inventory by Hotel Company, Brand, Chain Scale, and Age. Comment on what’s missing, if anything. Discuss general performance parameters required by those brands and chain scales that are currently missing. Compare these general performance parameters with Morgan Hill’s top-tier “competitive set” identified in #3 above.

Morgan Hill features three “upper midscale” brands currently. Some notable brands not represented in this chain scale include Fairfield Inn, TownePlace Suites, and Home2 Suites. Morgan Hill features two “upscale” brands currently. Some notable brands not represented in this chain scale include Hilton Garden Inn, Homewood Suites, Hotel Indigo, SpringHill Suites, Staybridge Suites, Hyatt Place, Aloft, and Cambria Hotel & Suites. Please refer to slides 34, 35, 36, and 37.

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Hans Detlefsen, MPP, MAI
President
Hotel Appraisers & Advisors
[email protected]
www.hotelappraisers.com
1 1 1 N W A B A S H A V E , S U I T E 1 7 1 7
C H I C A G O IL 60602
+ 1 ( 3 1 2 ) 5 2 6 - 3 8 8 5 D I R E C T
+ 1 ( 7 7 3 ) 3 0 6 - 6 0 4 6 M O B I L E

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Hotel Market Summary
Proposed Hotel – Morgan Hill, California
Submitted to: City of Morgan Hill
April 29, 2022

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2 Currently 14
Hotels in
Morgan Hill
* Orange highlighting indicates top-rated hotels. We have excluded the Paradise Motel, the Rancho Motel, and the Maple Leaf RV Park because these are not primarily considered as lodging facilities. Hotels Open Date Rooms 1 Budget Inn 1980 29
2 Courtyard by Marriott Morgan Hill 2001 90
3 Residence Inn Morgan Hill 2002 90
4 Extended Stay America Morgan Hill 1998 91
5 La Quinta Inn & Suites Morgan Hill 2016 104
6 Holiday Inn Express & Suites 1999 85
7 California Inn Morgan Hill 1985 83
8 Executive Inn Suites Morgan Hill 1991 31
9 Hampton Inn Morgan Hill 1993 106
10 Microtel Inn & Suites 1999 60
11 Comfort Inn Morgan Hill 1999 54
12 Holiday Motel 1960 26
13 Morgan Hill Inn 1983 23
14 Economy Inn 1946 26 Page 216 of 419
3 Six high-rated hotels lead the market in Morgan Hill… …Older, economy hotels nearing end of economic life
Sources: STR, HA&A
Hotels Affiliation Chainscale Affiliation
Date
Open Date Rooms
1 Budget Inn Independent Economy Class - 1980 29
2 Courtyard San Jose South Morgan Hill Marriott Upscale Class 2001 2001 90 3 Residence Inn Morgan Hill Marriott Upscale Class 2002 2002 90 4 Extended Stay America Morgan Hill Extended Stay America Economy Class 1998 1998 91 5 La Quinta Inns & Suites Morgan Hill Wyndham Upper Midscale Class 2016 2016 104 6 Holiday Inn Express & Suites Morgan Hill IHG Upper Midscale Class 1999 1999 85 7 California Inn Independent Midscale Class 2017 1985 83 8 Executive Inn Suites Morgan Hill Independent Midscale Class 1991 1991 31 9 Hampton Inn Morgan Hill Hilton Upper Midscale Class 2012 1993 106 10 Microtel Inn & Suites Wyndham Economy Class 1999 1999 60 11 Comfort Inn Morgan Hill Choice Upper Midscale Class 1999 1999 54 12 Holiday Motel Independent Economy Class 1960 1960 25 13 Morgan Hill Inn Independent Economy Class 1996 1996 23 14 Economy Inn Independent Economy Class 1946 1946 26
Total Properties: 14 897 Page 217 of 419
4 Strong Citywide Occupancies Pre-Covid
Year
Room
Supply
Room
Night
Supply
% Change Room Night
Demand % Change Occupancy
Average
Rate
% Change RevPAR % Change
2014 793 289,565 -- 198,648 -- 68.6% 110.69 -- 75.93 -- 2015 793 289,537 0.0% 214,379 7.9% 74.0% 125.95 13.8% 93.25 22.8% 2016 846 308,946 6.7% 222,923 4.0% 72.2% 130.12 3.3% 93.89 0.7% 2017 898 327,770 6.1% 240,038 7.7% 73.2% 131.63 1.2% 96.39 2.7% 2018 898 327,770 0.0% 242,639 1.1% 74.0% 141.36 7.4% 104.65 8.6% 2019 897 327,405 -0.1% 234,967 -3.2% 71.8% 140.35 -0.7% 100.72 -3.7% 2020 897 327,405 0.0% 168,837 -28.1% 51.6% 107.55 -23.4% 55.46 -44.9% 2021 897 327,405 0.0% 186,791 10.6% 57.1% 114.09 6.1% 65.09 17.4% YTD 2021 thru Feb 897 52,923 -- 20,647 -- 39.0% 94.85 -- 37.00 -- YTD 2022 thru Feb 897 52,923 0.0% 28,021 35.7% 52.9% 109.00 14.9% 57.71 56.0% Historical Annual Growth Rates 1.8% -0.9% 0.4% -2.2%
Sources: STR and HA&A Page 218 of 419
5 Long-Term Citywide Demand Growth Despite Shocks
Source: STR, HA&A
A Dot-com Bubble Bust and 9-11
B Pre-Recession Peak
C Great Recession
D Pre-COVID Peak
E COVID Pandemic
F Post COVID Recovery Page 219 of 419
6 Competitive Set
(Local Area)
Hotels
Open
Date Rooms
1 Courtyard by Marriott Morgan Hill 2001 90
2 Residence Inn Morgan Hill 2002 90
3 La Quinta Inn & Suites Morgan Hill 2016 104
4 Holiday Inn Express & Suites 1999 85
5 Comfort Inn Morgan Hill 1999 54
6 Hampton Inn Morgan Hill 1993 106
7 Hilton Garden Inn Gilroy 2001 137 Page 220 of 419
7 The 7 Highest-Rated Hotels in Morgan Hill / Gilroy…
…Achieved RevPARs above $110 Pre-Covid
Year
Room
Supply
Room
Night
Supply
% Change Room Night
Demand % Change Occupancy
Average
Rate
% Change RevPAR % Change
2014 561 204,885 -- 144,896 -- 70.7% 134.50 -- 95.12 -- 2015 561 204,857 0.0% 156,851 8.3% 76.6% 149.72 11.3% 114.63 20.5% 2016 614 224,266 9.5% 159,877 1.9% 71.3% 157.02 4.9% 111.94 -2.4% 2017 666 243,090 8.4% 178,356 11.6% 73.4% 154.46 -1.6% 113.33 1.2% 2018 666 243,090 0.0% 178,765 0.2% 73.5% 160.24 3.7% 117.84 4.0% 2019 666 243,090 0.0% 170,079 -4.9% 70.0% 159.76 -0.3% 111.78 -5.1% 2020 666 243,090 0.0% 113,815 -33.1% 46.8% 119.99 -24.9% 56.18 -49.7% 2021 666 243,090 0.0% 139,393 22.5% 57.3% 121.48 1.2% 69.66 24.0% YTD 2021 thru Feb 666 39,294 -- 14,643 -- 37.3% 99.30 -- 37.00 -- YTD 2022 thru Feb 666 39,294 0.0% 21,001 43.4% 53.4% 117.26 18.1% 62.67 69.4% Historical Annual Growth Rates 2.5% -0.6% -1.4% -4.4%
Sources: STR and HA&A Page 221 of 419
8 Strong occupancy patterns indicate…
…substantial unaccommodated demand
Morgan Hill/Gilroy Top 7 National
2014 2015 2016 2017 2018 2019 2020 2021
Jan 52.1 54.1 53.8 53.9 54.3 54.6 54.8 39.0
Feb 60.3 62.0 61.9 61.0 61.6 62.0 61.7 45.2
Mar 65.2 66.6 66.2 67.8 68.3 68.2 38.9 54.4
Apr 65.5 66.5 67.8 67.2 67.7 67.8 24.3 57.4
May 66.8 67.2 66.7 67.6 68.0 68.5 33.2 59.2
June 71.4 72.7 72.8 73.1 74.4 73.3 42.2 66.0
Jul 73.5 75.0 74.2 73.6 73.4 73.6 47.1 69.5
Aug 71.6 70.4 70.1 70.6 71.3 71.2 48.7 63.2
Sep 65.6 67.6 68.7 69.4 67.9 67.1 48.3 61.5
Oct 67.8 68.7 68.4 69.2 69.7 68.9 48.4 62.8
Nov 58.7 59.1 60.5 61.4 61.5 61.4 40.3 57.5
Dec 52.5 52.9 52.8 54.0 54.0 54.1 36.4 53.3
2014 2015 2016 2017 2018 2019 2020 2021
Jan 59.2 68.6 61.9 56.9 64.5 56.2 54.0 35.3
Feb 69.6 73.3 66.9 68.5 71.0 63.2 64.8 39.5
Mar 64.1 73.8 63.9 70.0 72.8 70.3 34.8 47.1
Apr 70.6 78.2 78.7 68.5 74.9 61.9 22.0 57.1
May 72.0 76.9 73.9 79.2 75.9 73.7 33.1 63.0
June 78.6 85.2 78.1 86.9 80.1 81.3 40.1 65.6
Jul 81.2 87.3 79.2 81.5 78.5 79.2 44.9 70.8
Aug 82.7 83.0 77.9 84.1 82.3 80.6 64.5 68.6
Sep 72.4 82.1 73.0 82.7 81.2 78.1 62.1 66.7
Oct 74.2 82.8 74.7 78.6 83.4 74.9 61.4 61.7
Nov 66.5 69.4 66.9 68.2 65.5 66.6 47.5 57.7
Dec 57.7 58.2 59.7 55.2 52.5 53.2 33.8 53.9
Occupancy
Over 70%
Over 80%
Over 90% Page 222 of 419
9 Significant Supply Growth Regionally…
…1,599 Rooms in Pipeline
* The list includes new hotels in Santa
Clara County. Some hotels in the list are
located over 40 miles from Morgan Hill.

Hotel Location Opening Date Rooms
1 AC Hotel by Marriott Sunnyvale Moffett Park Sunnyvale Feb 2022 164 2 TETRA Hotel, Autograph Collection Sunnyvale Feb 2022 186 3 Element San Jose Milpitas Milpitas Mar 2022 194
4 M Social Sunnyvale Sunnyvale U/C 263
5 Hampton by Hilton Inn & Suites Sunnyvale Silicon Valley Sunnyvale U/C 162 6 Graduate Hotel Palo Alto Palo Alto U/C 100
7 SpringHill Suites Milpitas Silicon Valley Milpitas U/C 124 8 element San Jose Airport San Jose U/C 175
9 Holiday Inn Express San Jose Silicon Valley San Jose U/C 81 10 Hilton Garden Inn San Jose Airport San Jose U/C 150
Total New Supply 1,599 Page 223 of 419
Nearly 5,200 rooms
have been added in
Santa Clara County
since 2010
Hotel Location Opening Date Rooms
Courtyard San Jose Campbell Campbell, CA Feb 2010 162
Courtyard San Jose North Silicon Valley San Jose, CA Jan 2014 157 TownePlace Suites San Jose Santa Clara Santa Clara, CA Feb 2014 107 Courtyard Sunnyvale Mountain View Sunnyvale, CA Oct 2014 145 Hilton Garden Inn Palo Alto Palo Alto, CA Mar 2015 174
Homewood Suites by Hilton Palo Alto Palo Alto, CA Mar 2015 138 SpringHill Suites San Jose Airport San Jose, CA Jun 2015 145 Residence Inn San Jose Airport San Jose, CA Jun 2015 176 aloft Hotel Santa Clara San Jose, CA Sep 2015 175
La Quinta Inns & Suites Morgan Hill - San Jose South Morgan Hill, CA Jul 2016 104 AC Hotels by Marriott San Jose Downtown San Jose, CA Jan 2017 210 Residence Inn San Jose Cupertino Cupertino, CA Oct 2017 180 Homewood Suites by Hilton San Jose North San Jose, CA Oct 2017 145 AC Hotels by Marriott Sunnyvale Cupertino Sunnyvale, CA Dec 2018 183 Hyatt House San Jose Cupertino Cupertino, CA Apr 2019 148 Hyatt Centric Mountain View Mountain View, CA Jul 2019 167 Holiday Inn & Suites Silicon Valley - Milpitas Milpitas, CA Jul 2019 128 Residence Inn San Jose North/Silicon Valley San Jose, CA Aug 2019 147 Fairfield Inn & Suites San Jose North/Silicon Valley Alviso, CA Aug 2019 114 element Santa Clara Santa Clara, CA Aug 2019 175
AC Hotels by Marriott San Jose Santa Clara Santa Clara, CA Sep 2019 188 Hilton Garden Inn Sunnyvale Sunnyvale, CA Oct 2019 238
Wingate by Wyndham San Jose San Jose, CA Oct 2019 115
Hyatt House San Jose Airport San Jose, CA Nov 2019 165
Hampton by Hilton Inn & Suites San Jose Airport San Jose, CA Feb 2020 144 Hampton Inn & Suites Gilroy Gilroy, CA May 2020 103
Holiday Inn Express & Suites San Jose Airport San Jose, CA Feb 2021 146 Hyatt Place San Jose Airport San Jose, CA Aug 2019 190
AC Hotels by Marriott Palo Alto Palo Alto, CA Apr 2021 144 Homewood Suites by Hilton Sunnyvale-Silicon Valley Sunnyvale, CA May 2021 127 AC Hotel by Marriott Sunnyvale Moffett Park Sunnyvale, CA Feb 2022 164 TETRA Hotel, Autograph Collection Sunnyvale, CA Feb 2022 186 Element San Jose Milpitas Milpitas, CA Mar 2022 194
Total 5,184 Page 224 of 419
10 11
ADR & Demand Rebounding Strongly Post-Covid Citywide
New Supply (right axis)
ADR % Change (left axis)
Demand % Change (left axis)

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12 ADR & Demand Rebounding for the 7 top hotels in Morgan Hill/Gilroy New Supply (right axis)
ADR % Change (left axis)
Demand % Change (left axis)

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13 76% of Local TOT Revenue From 6 Highest-Rated Hotels Source: City of Morgan Hill
Top 6 Hotels
Others
In the most recent complete fiscal year (2020/2021), just 59% of Morgan Hill’s hotel rooms produced 79% of Morgan Hill’s Transient Occupancy Tax revenues.

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14 Morgan Hill experienced limited supply growth…
…Despite national supply cycles
Source: STR, HA&A

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Disclaimers
&
Disclosures

1. This analysis is for informational purposes only and is not intended as an offer or solicitation.

2. This report is intended to be presented in whole, and not in part.

3. This is not an appraisal and the consultants who contributed to this report were not acting as appraisers in the preparation of this analysis.

4. The projections included in this document are based on various factors, including the historical performance of certain hotels, comparative hotels’ actual financials, current market conditions, as well as HA&A’s judgement. There is no guarantee that any of these projections will be attained. Actual results will vary from the projections described in this document and may be material.

5. Prospective investors should not construe the contents of this document as legal or investment advice. Each investor should consult his/her own counsel, accountant and/or business advisor as to all matters concerning any investment described in this document.

6. No legal obligations are created by or on behalf of the investor or HA&A or any other party by this document or as a result of any of the discussions or negotiations preceding or following the delivery of this document.

7. Confidentiality Notice: the information contained in this document is strictly CONFIDENTIAL and may not be distributed to any other party than the intended recipient. By accepting this information, you agree to maintain the confidentiality of the information contained in this document.
15

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HA&A
www.hotelappraisers.com
Hotel Appraisers & Advisors
Hans Detlefsen, MPP, MAI
President
111 N Wabash Ave, Suite 1717
Chicago IL 60602
Direct +1 (312) 526-3885
Mobile +1 (773) 306-6046
Instagram: @hotelappraisers
[email protected]
16

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11 CITY COUNCIL STAFF REPORT
MEETING DATE: June 1, 2022
PREPARED BY:

Keri Russell, Maintenance Coordinator
APPROVED BY: City Manager

ADOPT RESOLUTION ORDERING ANNUAL ASSESSMENTS AND

RELATED ACTIONS FOR CITY OF MORGAN HILL LANDSCAPE
ASSESSMENT DISTRICT NUMBER 1

RECOMMENDATION(S)

1. Open and close the Public Hearing; and

2. Adopt resolution confirming Fiscal Year (FY) 2022-23 annual assessments and ordering the levy of assessments for the District.

Estimated Time: 5 Minutes

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Maintaining and Enhancing Infrastructure
2022-2023 Strategic Priorities
Fiscal Sustainability
REPORT NARRATIVE:

The City of Morgan Hill Landscape Assessment District No. 1 (District) was created to pay for the maintenance of the parks and common landscaping in neighborhoods benefiting from the open space within the District. The purpose of this item is to:

A) Provide an opportunity for public input;
B) Confirm the FY 2022-23 Assessments; and
C) Order the levy of the Assessments.

Per California Streets and Highways Code Sections 22623 to 22631, the Annual Report (Attachment 1) is required to set the annual assessments in the District. In addition to approving the report on May 4, 2022, the Council declared its intent to levy assessments in the District and established June 1, 2022 as the date of the official public hearing.

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11 COMMUNITY ENGAGEMENT:

Ongoing resident outreach is occurring in several of the subareas and City staff are striving to increase resident outreach to others. Some areas have more active homeowners groups that work with City staff in planning maintenance projects for their subareas, while residents of other subareas are less engaged. In recent years, City staff have successfully developed relationships with resident groups in several areas. Staff are closely working with active districts on the ongoing maintenance and budgets for their district. Although outreach with residents is typically positive, not all residents are satisfied with the service being provided within their subarea. This dissatisfaction is often due to the limitations of funding available to the subarea without an associated increase in assessment.

Staff is recommending increases to the assessments for the Oak Creek and Sparhawk sub areas as well as a decrease for Belle Estates. Staff have had resident meetings with both Oak Creek and Sparhawk. The Oak Creek increase is to help with enhancements in the area, whereas, the Sparhawk increase is to maintain the current level of service as costs increase.

ALTERNATIVE ACTIONS:

There is no other practical alternative action. The City Council could choose to provide staff with further direction on management of the District.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

In 1991, the City Council, under the Landscaping and Lighting Act of 1972, created the Fox Hollow/Murphy Springs Landscape Assessment District, and in 2010 chose to rename it to the City of Morgan Hill Landscape Assessment District No. 1.

On May 4, 2022, the City Council initiated the annual assessment process and approved the Engineer’s Annual Report, for FY 2022-23.

FISCAL AND RESOURCE IMPACT:

The cost for preparation of the Engineer's Annual Report will be paid for by the Assessment District. It is anticipated that the District will generate $198,650.38 in revenues in Fiscal Year 2022-23. Expenses are budgeted at $203,010 meaning that overall, the District's reserves are projected to be reduced by $4,359.62 in the upcoming fiscal year. Providing administrative oversight to the District is a core activity of the Community Services Department's work program.

CEQA (California Environmental Quality Act):

Categorical Exemption
The planned maintenance and management of the sub-areas within the lighting and landscape assessment district fall within the CEQA categorical exemption of Class 1, Existing Facilities.

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nbsgov.com
Prepared by:

Corporate Headquarters
32605 Temecula Parkway, Suite 100
Temecula, CA 92592
Toll free: 800.676.7516
Fiscal Year 2022/23 Engineer’s Report For:

Landscape Assessment District No. 1
May 2022

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CITY OF MORGAN HILL
17575 Peak Avenue
Morgan Hill, CA 95037-4128
Phone: (408) 779-7271
Fax: (408) 778-1564

CITY COUNCIL
Rich Constantine, Mayor
Gino Borgioli, Mayor Pro Tem
John K. McKay, Council Member
Yvonne Martinez Beltran, Council Member
Rene Spring, Council Member

CITY STAFF
Christina Turner, City Manager
Chris Ghione, Public Services Director
Keri Russell, Maintenance Coordinator
Mariah Dabel, Financial & Policy Analyst
NBS
Adina McCargo, Project Manager
Greg Davidson, Client Service Director

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TABLE OF CONTENTS

1. Engineer’s Letter.............................................................................................................1

2. Overview........................................................................................................................2

2.1 Introduction ..............................................................................................................2

2.2 Description of Boundaries ........................................................................................2

2.3 Description of Improvements and Services..............................................................2

3. Estimate of Costs............................................................................................................3

3.1 Definitions of Budget Items......................................................................................3

3.2 Zone Budgets............................................................................................................4

4. Assessments...................................................................................................................5

4.1 Method of Apportionment.......................................................................................5

4.2 Belle Estates Zone.....................................................................................................5

4.3 Chang/Bertelone Zone..............................................................................................6

4.4 Conte Gardens Zone .................................................................................................6

4.5 Diana Estates Zone....................................................................................................7

4.6 Fox Hollow/Murphy Springs Zone ............................................................................7

4.7 Hamilton Square Zone ..............................................................................................8

4.8 Jackson Meadows 6A/6B Zone .................................................................................8

4.9 Jackson Meadows Number 7 Zone...........................................................................8

4.10 La Grande Estates Zone ............................................................................................9

4.11 Lacrosse/Gera Zone ..................................................................................................9

4.12 Llagas Creek Estates Zone.......................................................................................10

4.13 Llagas/Obata Zone ..................................................................................................10

4.14 Mill Creek Zone.......................................................................................................11

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4.15 Oak Creek I, II, III .....................................................................................................11

4.16 Parsons Corner Zone...............................................................................................12

4.17 Rose Haven Zone ....................................................................................................12

4.18 Sandalwood Zone ...................................................................................................12

4.19 Sparhawk Zone .......................................................................................................13

4.20 Stone Creek Zone....................................................................................................13

4.21 Sunnyside/Stone Gate Zone ...................................................................................14

5. Assessment Diagrams................................................................................................... 15

6. Assessment Roll............................................................................................................ 16

7. Historical Assessment Rates.......................................................................................... 17

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 1

1. ENGINEER’S LETTER
WHEREAS, the City Council of the City of Morgan Hill (the “City”), State of California, directed NBS to prepare and file a report, in accordance with Chapter 1, Article 4 of the Landscaping and Lighting Act of 1972 (the “Act”), presenting the plans and specifications describing the general nature, location and extent of the improvements to be maintained, an estimate of the costs of the maintenance, operations and servicing of the improvements for the City’s Landscape Assessment District No. 1 (the “District”) for Fiscal Year 2022/23. The report includes a diagram for the District, showing the area and properties proposed to be assessed, an assessment of the estimated costs of the maintenance, operations and servicing the improvements, and the net amount upon all assessable lots and/or parcels within the District in proportion to the special benefit received and;
WHEREAS, the assessment for each parcel is in compliance with the Proposition 218 Omnibus Implementation Act and Section 4 of Article XIII D of the California Constitution. The proposed assessments are not proposed to increase by more than the approved maximum allowable increases.

NOW THEREFORE, assessments have been levied in accordance with the assessment methodology adopted and approved by the City Council at the time of District formation, and are made to cover the portion of the estimated costs of maintenance, operation, and servicing of the improvements, to be paid by the assessable real property within the District in proportion to the special benefit received:

Zone Units
FY 2022/23
Maximum
Assessment Rate
FY 2022/23 Actual
Assessment Rate
Total
Assessment(1)
Belle Estates 36 $502.22 $310.00 $11,160.00
Chang/Bertelone 8 1,215.00 550.00 4,400.00
Conte Gardens 11 477.82 365.00 4,015.00
Diana Estates 64 139.39 139.39 8,920.96
Fox Hollow(2) 75 233.21 173.53 13,014.75
Hamilton Square 38 425.54 325.00 12,350.00
Jackson Meadows #6 70 108.10 108.00 7,560.00
Jackson Meadows #7 10 314.58 100.00 1,000.00
La Grande Estates 32 88.00 88.00 2,816.00
Lacrosse/Gera 24 142.99 50.00 1,200.00
Llagas Creek(2) 71 314.04 233.67 16,590.57
Llagas/Obata 5 629.16 400.00 2,000.00
Mill Creek(2,4) 84 302.35 285.00 23,940.00
Oak Creek I, II, III 119 453.82 425.00 50,575.00
Parsons Corner(3) NOT APPLICABLE
Rose Haven 27 488.47 400.00 10,800.00
Sandalwood(4) 11 450.00 450.00 4,950.00
Sparhawk(2) 18 334.40 334.00 6,012.00
Stone Creek(2) 35 522.05 388.46 13,596.10
Sunnyside/Stonegate(2) 10 765.07 375.00 3,750.00
Totals: 748 $198,650.38
(1) Actual amount placed on secured tax roll may be less due to Santa Clara County submittal requirements. Amounts placed on the tax roll must be rounded down to an even number.
(2) Maximum Assessment Rate increases by 3% annually.
(3) Detachment of Parsons Corner Zone was approved in April 2019. (4) Includes increased maximum assessment rate approved by property owners.

Page 238 of 419 ends

City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 2

2. OVERVIEW

2.1 Introduction
In 1991, the City Council created the Fox Hollow/Murphy Springs Landscape Assessment District, under the Act, and in 2010 chose to rename it to the City of Morgan Hill Landscape Assessment District No. 1. The District was formed in order to provide for the continued maintenance, operation, and administration of various improvements within the boundaries of the District. Following the initial formation, additional territory was annexed to the District as separate Zones. Currently, the District is comprised of 19 Zones (which decreased from 20 as a result of property owners within Parsons Corner electing to detach from the District in April 2019).

The District provides for and ensures the continued maintenance, servicing, administration, and operation of various landscaping improvements and associated appurtenances located within the public right-of-way and dedicated easements within the boundaries of the District.

2.2 Description of Boundaries
Exhibits from the Engineer’s Report at the formation of the District define the boundaries and maintenance areas of each Zone within the District. These exhibits are on file and available for review at the Office of the City Engineer and, in conjunction with the County of Santa Clara (the “County”) Assessor's maps of the areas annexed, comprise the assessment diagrams for the respective annexations. The Assessor's maps are on file in the office of the County Assessor and are, by reference, made a part of this Report.

2.3 Description of Improvements and Services
The improvements include the construction, operation, maintenance, and servicing of landscaping and appurtenant facilities; including, but not limited to, personnel, electrical energy, utilities such as water and gas, materials, contracting services, and other items necessary for the satisfactory operation of the following services:
“Landscape improvements provided within the District may include, but are not limited to:
ground cover, shrubs, plants and trees, irrigation and drainage systems, graffiti removal, entry monuments, and associated appurtenant facilities. Services provided include all necessary service, operations, administration, and maintenance required to keep the above-mentioned improvements in a healthy, vigorous, and satisfactory condition.” Reference is made to the Plans and Specifications for the improvements, which is on file with the City.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 3

3. ESTIMATE OF COSTS

3.1 Definitions of Budget Items
The following definitions describe some of the services and costs that may be included in the Zone Budgets:

Direct Expenses
Maintenance: Includes all regularly scheduled labor, material (i.e. pipe, fertilizer, insecticides, paint, etc.) and equipment required to properly maintain and ensure the satisfactory condition of all landscaping, irrigation and drainage systems, and appurtenant facilities.

Extra Contract Costs: Includes all labor, equipment, and material costs associated with unscheduled repairs and improvements needed to ensure the satisfactory condition of all landscaping, irrigation and drainage systems, and appurtenant facilities.

Water/Sewer: Includes the furnishing of water required for the operation and maintenance of the landscaping facilities.

Electricity Costs: Includes the furnishing of electricity required for irrigation systems for the operation and maintenance of the landscaping facilities.

Other Supplies: Includes costs that are generally unforeseen and not normally included in the yearly maintenance contract costs. This may include repair of damaged amenities due to vandalism, storms, heavy frost, etc. Also included may be planned upgrades that provide a direct benefit to the District. These upgrades could include replacing plant materials and/or renovation of irrigation systems.

Administrative Expenses
Salaries: Includes the cost to particular departments and staff of the City to provide the coordination of District services, operations, and maintenance of the improvements, response to public concerns and education, and procedures associated with the levy and collection of assessments.

Postage/Advertising: Includes the cost of providing any mailed notice to the property owners and publishing and posting the Resolution of Intention as required by the Act.

Internal Services: Includes overhead costs allocated to the District for various City staff services.

Administrative/Engineering Contract: Includes the costs associated with contracting with professionals to provide services specific to the administration of the levy.

Contingency/Capital Replacement Fund Balance (Reduction)/Reserve Positive amounts are collected for various reasons that include, but are not limited to, any or all of the following:
• To maintain reserves which enable the City to pay for costs associated with the District during the first six months of the fiscal year,

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 4
Contingency/Capital Replacement Fund Balance (Reduction)/Reserve (continued) • To reduce the current fund balance deficit (if any) that exists as of the beginning of the fiscal year, and
• To plan for the replacement of capital improvements in the future.

3.2 Zone Budgets
The estimated costs of servicing, maintaining, repairing, and replacing the actual improvements for each Zone for Fiscal Year 2022/23 are shown on the following pages.

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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone
Belle Estates

DIRECT EXPENSES
Maintenance $3,862.00
Extra Contract Costs 2,000.00
Water/Sewer 2,750.00
Electricity Costs 0.00
Other Supplies 525.00
Subtotal Direct Expenses $9,137.00

ADMINISTRATIVE EXPENSES
Salaries $1,089.27
Postage/Advertising 10.03
Internal Services 796.35
Administrative/Engineering Contract 370.61
Subtotal Administrative Expenses $2,266.27
SUBTOTAL ZONE COST $11,403.27
Fund Balance (Reduction)/Reserve (243.27)
TOTAL BALANCE TO LEVY $11,160.00
Number of Assessable Units 36
Assessment Rate per Unit $310.00
Estimated Beginning Fund Balance July 1, 2022 $15,231.33 Fund Balance Change (243.27)
Estimated Ending Fund Balance June 30, 2023 $14,988.06
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 1,000.00

0.00 400.00
$3,618.00
$242.06

2.23 176.97

82.36 $503.62
$4,121.62
278.38
$4,400.00
8 $550.00
$11,288.45
278.38
$11,566.84
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

3.06 243.33
113.24
$692.47
$4,032.47
(17.47)
$4,015.00
11 $365.00
$14,009.82
(17.47)
$13,992.35
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00
$5,200.00
$1,936.49

17.83 1,415.74
658.87
$4,028.92
$9,228.92
(307.96)
$8,920.96
64 $139.39
$8,311.50
(307.96)
$8,003.54
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 500.00
$9,318.00
$2,269.32

20.89 1,659.07
772.11
$4,721.39
$14,039.39
(1,024.64)
$13,014.75
75 $173.53
$14,506.36
(1,024.64)
$13,481.72
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 4,500.00
318.00
1,000.00
$14,103.17
$1,149.79

10.58 840.60
391.20
$2,392.17
$16,495.34
(4,145.34)
$12,350.00
38 $325.00
$13,343.41
(4,145.34)
$9,198.08
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 456.00

0.00 $2,726.57
$2,118.03

19.50 1,548.46
720.64
$4,406.63
$7,133.21
426.79
$7,560.00
70 $108.00
$1,498.26
426.79
$1,925.05
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00

0.00 0.00
$1,092.00
$302.58

2.79 221.21
102.95
$629.52
$1,721.52
(721.52)
$1,000.00
10 $100.00
$5,680.88
(721.52)
$4,959.36
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00

0.00 0.00
$0.00
$968.24

8.91 707.87
329.43
$2,014.46
$2,014.46
801.54
$2,816.00
32 $88.00
($8,442.17)
801.54
($7,640.63)
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00

0.00 0.00
$1,092.00
$363.09

3.34 265.45
123.54
$755.42
$1,847.42
(647.42)
$1,200.00
24 $50.00
$2,704.14
(647.42)
$2,056.72
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00
$12,298.00
$2,148.29

19.78 1,570.59
730.93
$4,469.59
$16,767.59
(177.02)
$16,590.57
71 $233.67
$8,134.94
(177.02)
$7,957.92
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 320.00

0.00 0.00
$1,625.00
$151.29

1.39 110.60

51.47 $314.76
$1,939.76

60.24 $2,000.00
5 $400.00
$673.98

60.24 $734.22
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

23.40 1,858.16
864.77
$5,287.96
$21,013.70
2,926.30
$23,940.00
84 $285.00
$11,289.64
2,926.30
$14,215.94
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

33.15 2,632.39
1,225.09
$7,491.28
$55,995.46
(5,420.46)
$50,575.00
119
$425.00
$39,392.00
(5,420.46)
$33,971.54
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

7.52 597.26
277.96
$1,699.70
$11,322.29
(522.29)
$10,800.00
27 $400.00
$22,389.43
(522.29)
$21,867.14
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00

0.00 0.00
$326.00
$332.83

3.06 243.33
113.24
$692.47
$1,018.47
3,931.53
$4,950.00
11 $450.00
$8,979.46
3,931.53
$12,910.99
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00
$5,093.00
$544.64

5.01 398.18
185.31
$1,133.13
$6,226.13
(214.13)
$6,012.00
18 $334.00
$589.62
(214.13)
$375.49
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 0.00
$10,680.00
$1,059.02

9.75 774.23
360.32
$2,203.32
$12,883.32
712.78
$13,596.10
35 $388.46
$4,281.46
712.78
$4,994.24
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

0.00 400.00
$3,176.15
$302.58

2.79 221.21
102.95
$629.52
$3,805.67
(55.67)
$3,750.00
10 $375.00
$14,767.02
(55.67)
$14,711.36
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23 Budget by Zone

DIRECT EXPENSES
Maintenance
Extra Contract Costs
Water/Sewer
Electricity Costs
Other Supplies
Subtotal Direct Expenses

ADMINISTRATIVE EXPENSES
Salaries
Postage/Advertising
Internal Services
Administrative/Engineering Contract
Subtotal Administrative Expenses

SUBTOTAL ZONE COST
Fund Balance (Reduction)/Reserve

TOTAL BALANCE TO LEVY
Number of Assessable Units
Assessment Rate per Unit
Estimated Beginning Fund Balance July 1, 2022
Fund Balance Change
Estimated Ending Fund Balance June 30, 2023
Total of all Zones
$82,195.40
18,750.00
42,920.00
5,087.00
7,725.00
$156,677.40
$22,269.60
205.00
16,281.00
7,577.00
$46,332.60
$203,010.00
(4,359.62)
$198,650.38
748
N/A
$188,629.55
(4,359.62)
$184,269.93
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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 5

4. ASSESSMENTS
The amount of the actual assessment for the Fiscal Year 2022/23 apportioned to each parcel, as shown on the latest equalized roll at the County Assessor’s office, is listed in Section 6 of this Report. The description of each lot or parcel is part of the records of the County Assessor and such records are, by reference, made part of this Report.

4.1 Method of Apportionment
The assessments are levied in accordance with the assessment methodology adopted and approved by the City Council at the time of District formation.

Pursuant to the Act and Article XIII D of the Constitution of the State of California, all parcels that have special benefit conferred upon them as a result of the maintenance and operation of improvements shall be identified and the proportionate special benefit derived by each identified parcel shall be determined in relation to the entire cost of the maintenance and operation of the improvements. Only parcels that receive direct special benefit are assessed, and each parcel is assessed in proportion to the estimated benefit received.

Several Zones have been annexed into the District and it has been determined that by reason of variations in the nature, location, and extent of the improvements, those areas will receive differing degrees of benefit from the improvements.

Within the Zones, each parcel is allocated a number of units, where each such unit is deemed to receive the same proportional special benefit from the maintenance and operation of the improvements within that Zone. The typical parcel, with a single-family residential use, will have one unit assigned. If the use or nature of a parcel confers special benefit in a greater or lesser degree than that typical use, that parcel may have greater than or less than one unit assigned.

4.2 Belle Estates Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $502.22 per unit. There is currently no inflator associated with the Belle Estates Zone assessments.

There are currently 36 parcels within this Zone, and the total Zone costs are spread to each of the 36 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $11,160.00 Total Units 36
Fiscal Year 2022/23 Actual Assessment Per Unit $310.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $502.22

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 6
Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $320.00
Fiscal Year 2022/23 Actual Assessment Per Unit $310.00
Change in the Actual Assessment Rate ($10.00)

4.3 Chang/Bertelone Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $1,215.00 per unit. There is currently no inflator associated with the Chang/Bertelone Zone assessments.

There are currently eight (8) parcels within this Zone, and the total Zone costs are spread to each of the eight (8) units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $4,400.00 Total Units 8
Fiscal Year 2022/23 Actual Assessment Per Unit $550.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $1,215.00 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $550.00
Fiscal Year 2022/23 Actual Assessment Per Unit $550.00
Change in the Actual Assessment Rate $0.00

4.4 Conte Gardens Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $477.82 per unit. There is currently no inflator associated with the Conte Gardens Zone assessments.

There are currently 11 parcels within this Zone, and the total Zone costs are spread to each of the 11 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $4,015.00 Total Units 11
Fiscal Year 2022/23 Actual Assessment Per Unit $365.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $477.82 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $365.00
Fiscal Year 2022/23 Actual Assessment Per Unit $365.00
Change in the Actual Assessment Rate $0.00

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 7

4.5 Diana Estates Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $139.39 per unit. There is currently no inflator associated with the Diana Estates Zone assessments.

There are currently 64 parcels within this Zone, and the total Zone costs are spread to each of the 64 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $8,920.96 Total Units 64
Fiscal Year 2022/23 Actual Assessment Per Unit(1) $139.39 Fiscal Year 2022/23 Maximum Assessment Per Unit $139.39 (1) May be rounded down to even cents per parcel for County Tax Roll purposes.

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $139.39
Fiscal Year 2022/23 Actual Assessment Per Unit $139.39
Change in the Actual Assessment Rate $0.00

4.6 Fox Hollow/Murphy Springs Zone
The assessment rate originally approved at the time of District formation was $106.15 per unit. In July 2005, the City conducted Proposition 218 proceedings to increase the maximum assessment rate and add an annual inflator of 3% for the Zone. Property owners approved the rate increase and the inflator. Each year the maximum assessment rate is increased by 3% over the previous year’s maximum assessment rate.

The rate increase took effect in Fiscal Year 2005/06 and the 3% inflator took effect in Fiscal Year 2006/07.

There are currently 75 parcels within this Zone, and the total Zone costs are spread to each of the 75 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $13,014.75 Total Units 75
Fiscal Year 2022/23 Actual Assessment Per Unit(1) $173.53 Fiscal Year 2022/23 Maximum Assessment Per Unit $233.21 (1) May be rounded down to even cents per parcel for County Tax Roll purposes.

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $173.53
Fiscal Year 2022/23 Actual Assessment Per Unit $173.53
Change in the Actual Assessment Rate $0.00

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 8

4.7 Hamilton Square Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $425.54 per unit. There is currently no inflator associated with the Hamilton Square Zone assessments.

There are currently 38 parcels within this Zone, and the total Zone costs are spread to each of the 38 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $12,350.00 Total Units 38
Fiscal Year 2022/23 Actual Assessment Per Unit $325.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $425.54 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $325.00
Fiscal Year 2022/23 Actual Assessment Per Unit $325.00
Change in the Actual Assessment Rate $0.00

4.8 Jackson Meadows 6A/6B Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $108.10 per unit. There is currently no inflator associated with the Jackson Meadows 6A/6B Zone assessments.

There are currently 70 parcels within this Zone, and the total Zone costs are spread to each of the 70 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $7,560.00 Total Units 70
Fiscal Year 2022/23 Actual Assessment Per Unit $108.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $108.10 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $108.00
Fiscal Year 2022/23 Actual Assessment Per Unit $108.00
Change in the Actual Assessment Rate $0.00

4.9 Jackson Meadows Number 7 Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $314.58 per unit. There is currently no inflator associated with the Jackson Meadows Number 7 Zone assessments.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 9
There are currently 10 parcels within this Zone, and the total Zone costs are spread to each of the 10 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $1,000.00 Total Units 10
Fiscal Year 2022/23 Actual Assessment Per Unit $100.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $314.58 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $100.00
Fiscal Year 2022/23 Actual Assessment Per Unit $100.00
Change in the Actual Assessment Rate $0.00

4.10 La Grande Estates Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $88.00 per unit. There is currently no inflator associated with the La Grande Estates Zone assessments.

There are currently 32 parcels within this Zone, and the total Zone costs are spread to each of the 32 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $2,816.00 Total Units 32
Fiscal Year 2022/23 Actual Assessment Per Unit $88.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $88.00
Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $88.00
Fiscal Year 2022/23 Actual Assessment Per Unit $88.00
Change in the Actual Assessment Rate $0.00

4.11 Lacrosse/Gera Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $142.99 per unit. There is currently no inflator associated with the Lacrosse/Gera Zone assessments.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 10
There are currently 24 parcels within this Zone, and the total Zone costs are spread to each of the 24 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $1,200.00 Total Units 24
Fiscal Year 2022/23 Actual Assessment Per Unit $50.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $142.99

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $50.00
Fiscal Year 2022/23 Actual Assessment Per Unit $50.00
Change in the Actual Assessment Rate $0.00

4.12 Llagas Creek Estates Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $140.84 per unit. In July 2005, the City conducted Proposition 218 proceedings to increase the maximum assessment rate and add an annual inflator of 3% for the Zone. Property owners approved the rate increase and the inflator. Each year the maximum assessment rate is increased by 3% over the previous year’s maximum assessment rate. The rate increase took effect in Fiscal Year 2005/06 and the 3% inflator took effect in Fiscal Year 2006/07.

There are currently 71 parcels within this Zone, and the total Zone costs are spread to each of the 71 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $16,590.57 Total Units 71
Fiscal Year 2022/23 Actual Assessment Per Unit(1) $233.67 Fiscal Year 2022/23 Maximum Assessment Per Unit $314.04 (1) May be rounded down to even cents per parcel for County Tax Roll purposes.

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $233.67
Fiscal Year 2022/23 Actual Assessment Per Unit $233.67
Change in the Actual Assessment Rate $0.00

4.13 Llagas/Obata Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $629.16 per unit. There is currently no inflator associated with the Llagas/Obata Zone assessments.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 11
There are currently five (5) parcels within this Zone, and the total Zone costs are spread to each of the five (5) units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $2,000.00 Total Units 5
Fiscal Year 2022/23 Actual Assessment Per Unit $400.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $629.16 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $400.00
Fiscal Year 2022/23 Actual Assessment Per Unit $400.00
Change in the Actual Assessment Rate $0.00

4.14 Mill Creek Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $186.82 per unit. In February 2020, the City conducted Proposition 218 proceedings to increase the maximum assessment rate and add an annual inflator of 3% for the Zone. Property owners approved the assessment rate increase to $285.00 per unit and the inflator. The rate increase took effect in Fiscal Year 2020/21 and the 3% inflator takes effect in Fiscal Year 2021/22.

There are currently 84 parcels within this Zone, and the total Zone costs are spread to each of the 84 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $23,940.00 Total Units 84
Fiscal Year 2022/23 Actual Assessment Per Unit $285.00
Fiscal Year 2022/23 Maximum Assessment Per Unit(1) $302.35 (1) Assessment Rate increase approved by property owners in February 2020.

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $285.00
Fiscal Year 2022/23 Actual Assessment Per Unit $285.00
Change in the Actual Assessment Rate $0.00

4.15 Oak Creek I, II, III
The assessment rate originally approved at the time of annexing this Zone into the District was $453.82 per unit. There is currently no inflator associated with the Oak Creek I, II, III Zone assessments.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 12
There are currently 119 parcels within this Zone, and the total Zone costs are spread to each of the 119 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $50,575.00 Total Units 119
Fiscal Year 2022/23 Actual Assessment Per Unit $425.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $453.82 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $350.00
Fiscal Year 2022/23 Actual Assessment Per Unit $425.00
Change in the Actual Assessment Rate $75.00

4.16 Parsons Corner Zone
In April 2019, property owners in the Parsons Corner Zone voted to detach from the District. Therefore, there is no assessment for the Parsons Corner Zone.

4.17 Rose Haven Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $488.47 per unit. There is currently no inflator associated with the Rose Haven Zone assessments.

There are currently 24 parcels with a total of 27 units within this Zone, and the total Zone costs are spread to each of the 27 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $10,800.00 Total Units 27
Fiscal Year 2022/23 Actual Assessment Per Unit $400.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $488.47 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $400.00
Fiscal Year 2022/23 Actual Assessment Per Unit $400.00
Change in the Actual Assessment Rate $0.00

4.18 Sandalwood Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $192.39 per unit. In April 2018, property owners approved the assessment rate increase to $450.00 per unit. There is currently no inflator associated with the Sandalwood Zone assessments.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 13
There are currently 11 parcels within this Zone, and the total Zone costs are spread to each of the 11 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $4,950.00 Total Units 11
Fiscal Year 2022/23 Actual Assessment Per Unit $450.00
Fiscal Year 2022/23 Maximum Assessment Per Unit(1) $450.00 (1) Assessment Rate increase approved by property owners in April 2018.

Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $450.00
Fiscal Year 2022/23 Actual Assessment Per Unit $450.00
Change in the Actual Assessment Rate $0.00

4.19 Sparhawk Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $174.77 per unit. In July 2005, the City conducted Proposition 218 proceedings to increase the maximum assessment rate and add an annual inflator of 3% for the Zone. Property owners approved the rate increase and the inflator. Each year the maximum assessment rate is increased by 3% over the previous year’s maximum assessment rate. The rate increase took effect in Fiscal Year 2005/06 and the 3% inflator took effect in Fiscal Year 2006/07.

There are currently 18 parcels within this Zone, and the total Zone costs are spread to each of the 18 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $6,012.00 Total Units 18
Fiscal Year 2022/23 Actual Assessment Per Unit $334.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $334.40 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $248.82
Fiscal Year 2022/23 Actual Assessment Per Unit $334.00
Change in the Actual Assessment Rate $85.18

4.20 Stone Creek Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $306.66 per unit. In July 2005, the City conducted Proposition 218 proceedings to add an annual inflator of 3% for the

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 14
Zone. Property owners approved the inflator. Each year the maximum assessment rate is increased by 3% over the previous year’s maximum assessment rate. The inflator took effect in Fiscal Year 2005/06.

There are currently 35 parcels within this Zone, and the total Zone costs are spread to each of the 35 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $13,596.10 Total Units 35
Fiscal Year 2022/23 Actual Assessment Per Unit $388.46
Fiscal Year 2022/23 Maximum Assessment Per Unit $522.05 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $388.46
Fiscal Year 2022/23 Actual Assessment Per Unit $388.46
Change in the Actual Assessment Rate $0.00

4.21 Sunnyside/Stone Gate Zone
The assessment rate originally approved at the time of annexing this Zone into the District was $449.40 per unit. In July 2005, the City conducted Proposition 218 proceedings to add an annual inflator of 3% for the Zone. Property owners approved the inflator. Each year the maximum assessment rate is increased by 3% over the previous year’s maximum assessment rate. The inflator took effect in Fiscal Year 2005/06.

There are currently 10 parcels within this Zone, and the total Zone costs are spread to each of the 10 units as follows:

Estimated Fiscal Year 2022/23 Costs and Fund Adjustment $3,750.00 Total Units 10
Fiscal Year 2022/23 Actual Assessment Per Unit $375.00
Fiscal Year 2022/23 Maximum Assessment Per Unit $765.07 Any change in the assessment rate from the previous fiscal year is identified below:

Fiscal Year 2021/22 Actual Assessment Per Unit $375.00
Fiscal Year 2022/23 Actual Assessment Per Unit $375.00
Change in the Actual Assessment Rate $0.00

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 15

5. ASSESSMENT DIAGRAMS
The Assessment Diagrams for each Zone in the District have been submitted to the City Clerk in the format required under the provisions of the Act. Copies of the diagrams are included herein. The lines and dimensions shown on maps of the County Assessor for the current year are, by reference, made part of this Report as well.

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 16

6. ASSESSMENT ROLL
The listing of Fiscal Year 2022/23 assessments is provided per Zone on the following pages. The description of each lot or parcel as part of the records of the County Assessor are, by reference, made part of this Report as well.

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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Belle Estates 726-16-043 $310.00 1.00 $0.00 $310.00
Belle Estates 726-16-044 310.00 1.00 0.00 310.00
Belle Estates 726-16-045 310.00 1.00 0.00 310.00
Belle Estates 726-16-046 310.00 1.00 0.00 310.00
Belle Estates 726-16-048 310.00 1.00 0.00 310.00
Belle Estates 726-16-050 310.00 1.00 0.00 310.00
Belle Estates 726-16-051 310.00 1.00 0.00 310.00
Belle Estates 726-16-052 310.00 1.00 0.00 310.00
Belle Estates 726-16-053 310.00 1.00 0.00 310.00
Belle Estates 726-16-054 310.00 1.00 0.00 310.00
Belle Estates 726-16-055 310.00 1.00 0.00 310.00
Belle Estates 726-16-056 310.00 1.00 0.00 310.00
Belle Estates 726-16-057 310.00 1.00 0.00 310.00
Belle Estates 726-16-058 310.00 1.00 0.00 310.00
Belle Estates 726-16-059 310.00 1.00 0.00 310.00
Belle Estates 726-16-060 310.00 1.00 0.00 310.00
Belle Estates 726-16-061 310.00 1.00 0.00 310.00
Belle Estates 726-16-062 310.00 1.00 0.00 310.00
Belle Estates 726-16-063 310.00 1.00 0.00 310.00
Belle Estates 726-16-064 310.00 1.00 0.00 310.00
Belle Estates 726-16-065 310.00 1.00 0.00 310.00
Belle Estates 726-16-066 310.00 1.00 0.00 310.00
Belle Estates 726-16-068 310.00 1.00 0.00 310.00
Belle Estates 726-16-069 310.00 1.00 0.00 310.00
Belle Estates 726-16-070 310.00 1.00 0.00 310.00
Belle Estates 726-16-071 310.00 1.00 0.00 310.00
Belle Estates 726-16-072 310.00 1.00 0.00 310.00
Belle Estates 726-16-074 310.00 1.00 0.00 310.00
Belle Estates 726-16-075 310.00 1.00 0.00 310.00
Belle Estates 726-16-076 310.00 1.00 0.00 310.00
Belle Estates 726-16-077 310.00 1.00 0.00 310.00
Belle Estates 726-16-078 310.00 1.00 0.00 310.00
Belle Estates 726-16-079 310.00 1.00 0.00 310.00
Belle Estates 726-16-080 310.00 1.00 0.00 310.00
Belle Estates 726-16-081 310.00 1.00 0.00 310.00
Belle Estates 726-16-082 310.00 1.00 0.00 310.00
Chang/Bertelone 764-23-050 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-051 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-052 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-053 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-057 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-058 550.00 1.00 0.00 550.00
Chang/Bertelone 764-23-059 550.00 1.00 0.00 550.00
1 of 18

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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Chang/Bertelone 764-23-060 550.00 1.00 0.00 550.00
Conte Gardens 728-10-010 365.00 1.00 0.00 365.00
Conte Gardens 728-10-011 365.00 1.00 0.00 365.00
Conte Gardens 728-10-012 365.00 1.00 0.00 365.00
Conte Gardens 728-10-013 365.00 1.00 0.00 365.00
Conte Gardens 728-10-014 365.00 1.00 0.00 365.00
Conte Gardens 728-10-015 365.00 1.00 0.00 365.00
Conte Gardens 728-10-016 365.00 1.00 0.00 365.00
Conte Gardens 728-10-017 365.00 1.00 0.00 365.00
Conte Gardens 728-10-018 365.00 1.00 0.00 365.00
Conte Gardens 728-10-019 365.00 1.00 0.00 365.00
Conte Gardens 728-10-020 365.00 1.00 0.00 365.00
Diana Estates 726-07-042 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-043 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-044 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-045 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-055 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-056 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-057 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-058 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-059 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-060 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-061 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-062 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-063 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-064 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-065 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-066 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-067 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-068 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-069 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-070 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-071 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-072 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-073 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-074 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-075 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-077 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-078 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-080 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-081 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-082 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-083 139.39 1.00 (0.01) 139.38
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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Diana Estates 726-07-084 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-085 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-086 139.39 1.00 (0.01) 139.38
Diana Estates 726-07-087 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-031 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-032 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-033 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-034 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-035 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-036 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-046 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-047 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-048 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-049 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-050 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-051 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-052 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-053 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-054 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-055 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-056 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-057 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-058 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-059 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-060 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-061 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-062 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-063 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-064 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-065 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-066 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-067 139.39 1.00 (0.01) 139.38
Diana Estates 726-08-068 139.39 1.00 (0.01) 139.38
Fox Hollow 764-47-001 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-002 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-003 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-004 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-005 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-006 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-007 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-008 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-009 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-010 173.53 1.00 (0.01) 173.52
3 of 18

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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Fox Hollow 764-47-011 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-012 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-013 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-014 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-015 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-016 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-017 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-018 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-020 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-021 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-022 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-023 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-024 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-025 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-026 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-027 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-028 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-029 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-030 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-031 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-032 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-033 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-034 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-035 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-036 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-037 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-038 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-039 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-040 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-041 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-042 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-043 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-044 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-045 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-046 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-047 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-048 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-049 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-050 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-051 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-052 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-053 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-054 173.53 1.00 (0.01) 173.52
4 of 18

Page 303 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Fox Hollow 764-47-055 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-056 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-057 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-058 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-059 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-060 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-061 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-062 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-063 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-064 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-065 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-066 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-067 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-068 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-069 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-070 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-071 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-072 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-073 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-074 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-075 173.53 1.00 (0.01) 173.52
Fox Hollow 764-47-079 173.53 1.00 (0.01) 173.52
Hamilton Square 767-36-044 325.00 1.00 0.00 325.00
Hamilton Square 767-36-045 325.00 1.00 0.00 325.00
Hamilton Square 767-36-046 325.00 1.00 0.00 325.00
Hamilton Square 767-36-047 325.00 1.00 0.00 325.00
Hamilton Square 767-36-048 325.00 1.00 0.00 325.00
Hamilton Square 767-36-049 325.00 1.00 0.00 325.00
Hamilton Square 767-36-050 325.00 1.00 0.00 325.00
Hamilton Square 767-36-051 325.00 1.00 0.00 325.00
Hamilton Square 767-36-052 325.00 1.00 0.00 325.00
Hamilton Square 767-36-053 325.00 1.00 0.00 325.00
Hamilton Square 767-36-054 325.00 1.00 0.00 325.00
Hamilton Square 767-36-055 325.00 1.00 0.00 325.00
Hamilton Square 767-36-056 325.00 1.00 0.00 325.00
Hamilton Square 767-36-057 325.00 1.00 0.00 325.00
Hamilton Square 767-36-058 325.00 1.00 0.00 325.00
Hamilton Square 767-36-059 325.00 1.00 0.00 325.00
Hamilton Square 767-36-060 325.00 1.00 0.00 325.00
Hamilton Square 767-36-061 325.00 1.00 0.00 325.00
Hamilton Square 767-36-062 325.00 1.00 0.00 325.00
Hamilton Square 767-36-063 325.00 1.00 0.00 325.00
Hamilton Square 767-36-064 325.00 1.00 0.00 325.00
5 of 18

Page 304 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Hamilton Square 767-36-065 325.00 1.00 0.00 325.00
Hamilton Square 767-36-066 325.00 1.00 0.00 325.00
Hamilton Square 767-36-068 325.00 1.00 0.00 325.00
Hamilton Square 767-36-069 325.00 1.00 0.00 325.00
Hamilton Square 767-36-070 325.00 1.00 0.00 325.00
Hamilton Square 767-36-071 325.00 1.00 0.00 325.00
Hamilton Square 767-36-072 325.00 1.00 0.00 325.00
Hamilton Square 767-36-073 325.00 1.00 0.00 325.00
Hamilton Square 767-36-074 325.00 1.00 0.00 325.00
Hamilton Square 767-36-075 325.00 1.00 0.00 325.00
Hamilton Square 767-36-076 325.00 1.00 0.00 325.00
Hamilton Square 767-36-077 325.00 1.00 0.00 325.00
Hamilton Square 767-36-078 325.00 1.00 0.00 325.00
Hamilton Square 767-36-079 325.00 1.00 0.00 325.00
Hamilton Square 767-36-080 325.00 1.00 0.00 325.00
Hamilton Square 767-36-081 325.00 1.00 0.00 325.00
Hamilton Square 767-36-082 325.00 1.00 0.00 325.00
Jackson Meadows #6 817-26-047 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-048 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-049 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-066 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-067 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-068 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-069 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-070 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-071 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-072 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-073 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-075 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-076 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-077 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-078 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-079 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-080 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-081 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-082 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-083 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-084 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-085 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-086 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-087 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-088 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-089 108.00 1.00 0.00 108.00
6 of 18

Page 305 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Jackson Meadows #6 817-26-090 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-091 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-092 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-093 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-095 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-096 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-097 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-098 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-099 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-100 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-101 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-102 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-103 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-104 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-105 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-106 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-107 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-108 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-109 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-110 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-111 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-112 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-113 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-114 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-115 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-116 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-117 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-118 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-119 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-120 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-122 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-123 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-124 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-125 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-126 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-127 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-129 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-130 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-131 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-132 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-133 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-134 108.00 1.00 0.00 108.00
Jackson Meadows #6 817-26-135 108.00 1.00 0.00 108.00
7 of 18

Page 306 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Jackson Meadows #6 817-26-136 108.00 1.00 0.00 108.00
Jackson Meadows #7 817-70-001 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-002 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-003 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-004 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-005 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-006 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-007 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-008 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-009 100.00 1.00 0.00 100.00
Jackson Meadows #7 817-70-017 100.00 1.00 0.00 100.00
La Grande Estates 767-45-032 88.00 1.00 0.00 88.00
La Grande Estates 767-45-033 88.00 1.00 0.00 88.00
La Grande Estates 767-45-034 88.00 1.00 0.00 88.00
La Grande Estates 767-45-037 88.00 1.00 0.00 88.00
La Grande Estates 767-45-038 88.00 1.00 0.00 88.00
La Grande Estates 767-45-039 88.00 1.00 0.00 88.00
La Grande Estates 767-45-040 88.00 1.00 0.00 88.00
La Grande Estates 767-45-041 88.00 1.00 0.00 88.00
La Grande Estates 767-45-042 88.00 1.00 0.00 88.00
La Grande Estates 767-45-043 88.00 1.00 0.00 88.00
La Grande Estates 767-45-044 88.00 1.00 0.00 88.00
La Grande Estates 767-45-045 88.00 1.00 0.00 88.00
La Grande Estates 767-45-046 88.00 1.00 0.00 88.00
La Grande Estates 767-45-047 88.00 1.00 0.00 88.00
La Grande Estates 767-45-048 88.00 1.00 0.00 88.00
La Grande Estates 767-45-049 88.00 1.00 0.00 88.00
La Grande Estates 767-45-050 88.00 1.00 0.00 88.00
La Grande Estates 767-45-051 88.00 1.00 0.00 88.00
La Grande Estates 767-45-052 88.00 1.00 0.00 88.00
La Grande Estates 767-45-053 88.00 1.00 0.00 88.00
La Grande Estates 767-45-054 88.00 1.00 0.00 88.00
La Grande Estates 767-45-055 88.00 1.00 0.00 88.00
La Grande Estates 767-45-056 88.00 1.00 0.00 88.00
La Grande Estates 767-45-057 88.00 1.00 0.00 88.00
La Grande Estates 767-45-058 88.00 1.00 0.00 88.00
La Grande Estates 767-45-059 88.00 1.00 0.00 88.00
La Grande Estates 767-45-060 88.00 1.00 0.00 88.00
La Grande Estates 767-45-061 88.00 1.00 0.00 88.00
La Grande Estates 767-45-062 88.00 1.00 0.00 88.00
La Grande Estates 767-45-063 88.00 1.00 0.00 88.00
La Grande Estates 767-45-064 88.00 1.00 0.00 88.00
La Grande Estates 767-45-065 88.00 1.00 0.00 88.00
8 of 18

Page 307 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Lacrosse/Gera 767-46-001 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-002 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-003 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-004 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-005 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-006 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-007 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-008 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-009 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-010 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-011 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-012 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-013 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-014 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-015 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-018 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-019 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-020 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-021 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-022 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-023 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-024 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-025 50.00 1.00 0.00 50.00
Lacrosse/Gera 767-46-026 50.00 1.00 0.00 50.00
Llagas Creek 764-49-002 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-003 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-004 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-005 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-006 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-007 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-008 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-009 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-010 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-011 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-012 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-013 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-014 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-015 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-016 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-017 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-018 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-019 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-020 233.67 1.00 (0.01) 233.66
9 of 18

Page 308 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Llagas Creek 764-49-021 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-022 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-023 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-024 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-025 233.67 1.00 (0.01) 233.66
Llagas Creek 764-49-026 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-001 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-002 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-003 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-004 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-005 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-006 233.67 1.00 (0.01) 233.66
Llagas Creek 764-50-007 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-001 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-004 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-005 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-010 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-011 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-012 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-013 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-014 233.67 1.00 (0.01) 233.66
Llagas Creek 764-51-015 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-001 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-002 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-003 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-004 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-005 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-006 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-008 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-009 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-010 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-011 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-012 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-013 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-014 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-015 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-016 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-017 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-018 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-019 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-020 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-021 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-022 233.67 1.00 (0.01) 233.66
10 of 18

Page 309 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Llagas Creek 764-52-023 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-024 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-025 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-026 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-027 233.67 1.00 (0.01) 233.66
Llagas Creek 764-52-028 233.67 1.00 (0.01) 233.66
Llagas Creek 764-53-003 233.67 1.00 (0.01) 233.66
Llagas Creek 764-53-004 233.67 1.00 (0.01) 233.66
Llagas Creek 764-53-005 233.67 1.00 (0.01) 233.66
Llagas/Obata 764-23-032 400.00 1.00 0.00 400.00
Llagas/Obata 764-23-033 400.00 1.00 0.00 400.00
Llagas/Obata 764-23-034 400.00 1.00 0.00 400.00
Llagas/Obata 764-23-035 400.00 1.00 0.00 400.00
Llagas/Obata 764-23-036 400.00 1.00 0.00 400.00
Mill Creek 767-47-001 285.00 1.00 0.00 285.00
Mill Creek 767-47-002 285.00 1.00 0.00 285.00
Mill Creek 767-47-003 285.00 1.00 0.00 285.00
Mill Creek 767-47-004 285.00 1.00 0.00 285.00
Mill Creek 767-47-005 285.00 1.00 0.00 285.00
Mill Creek 767-47-006 285.00 1.00 0.00 285.00
Mill Creek 767-47-007 285.00 1.00 0.00 285.00
Mill Creek 767-47-008 285.00 1.00 0.00 285.00
Mill Creek 767-47-009 285.00 1.00 0.00 285.00
Mill Creek 767-47-010 285.00 1.00 0.00 285.00
Mill Creek 767-47-011 285.00 1.00 0.00 285.00
Mill Creek 767-47-012 285.00 1.00 0.00 285.00
Mill Creek 767-47-013 285.00 1.00 0.00 285.00
Mill Creek 767-47-014 285.00 1.00 0.00 285.00
Mill Creek 767-47-015 285.00 1.00 0.00 285.00
Mill Creek 767-47-016 285.00 1.00 0.00 285.00
Mill Creek 767-47-017 285.00 1.00 0.00 285.00
Mill Creek 767-47-018 285.00 1.00 0.00 285.00
Mill Creek 767-47-019 285.00 1.00 0.00 285.00
Mill Creek 767-47-020 285.00 1.00 0.00 285.00
Mill Creek 767-47-021 285.00 1.00 0.00 285.00
Mill Creek 767-47-022 285.00 1.00 0.00 285.00
Mill Creek 767-47-023 285.00 1.00 0.00 285.00
Mill Creek 767-47-029 285.00 1.00 0.00 285.00
Mill Creek 767-47-030 285.00 1.00 0.00 285.00
Mill Creek 767-47-031 285.00 1.00 0.00 285.00
Mill Creek 767-47-032 285.00 1.00 0.00 285.00
Mill Creek 767-47-033 285.00 1.00 0.00 285.00
Mill Creek 767-47-034 285.00 1.00 0.00 285.00
11 of 18

Page 310 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Mill Creek 767-47-035 285.00 1.00 0.00 285.00
Mill Creek 767-47-036 285.00 1.00 0.00 285.00
Mill Creek 767-47-037 285.00 1.00 0.00 285.00
Mill Creek 767-47-038 285.00 1.00 0.00 285.00
Mill Creek 767-47-039 285.00 1.00 0.00 285.00
Mill Creek 767-47-040 285.00 1.00 0.00 285.00
Mill Creek 767-47-041 285.00 1.00 0.00 285.00
Mill Creek 767-47-042 285.00 1.00 0.00 285.00
Mill Creek 767-47-043 285.00 1.00 0.00 285.00
Mill Creek 767-47-044 285.00 1.00 0.00 285.00
Mill Creek 767-47-045 285.00 1.00 0.00 285.00
Mill Creek 767-47-046 285.00 1.00 0.00 285.00
Mill Creek 767-47-047 285.00 1.00 0.00 285.00
Mill Creek 767-47-048 285.00 1.00 0.00 285.00
Mill Creek 767-47-049 285.00 1.00 0.00 285.00
Mill Creek 767-47-050 285.00 1.00 0.00 285.00
Mill Creek 767-47-051 285.00 1.00 0.00 285.00
Mill Creek 767-47-052 285.00 1.00 0.00 285.00
Mill Creek 767-47-053 285.00 1.00 0.00 285.00
Mill Creek 767-47-054 285.00 1.00 0.00 285.00
Mill Creek 767-47-055 285.00 1.00 0.00 285.00
Mill Creek 767-47-057 285.00 1.00 0.00 285.00
Mill Creek 767-47-058 285.00 1.00 0.00 285.00
Mill Creek 767-47-059 285.00 1.00 0.00 285.00
Mill Creek 767-47-060 285.00 1.00 0.00 285.00
Mill Creek 767-47-061 285.00 1.00 0.00 285.00
Mill Creek 767-47-062 285.00 1.00 0.00 285.00
Mill Creek 767-47-063 285.00 1.00 0.00 285.00
Mill Creek 767-47-064 285.00 1.00 0.00 285.00
Mill Creek 767-47-065 285.00 1.00 0.00 285.00
Mill Creek 767-47-066 285.00 1.00 0.00 285.00
Mill Creek 767-47-067 285.00 1.00 0.00 285.00
Mill Creek 767-47-068 285.00 1.00 0.00 285.00
Mill Creek 767-47-069 285.00 1.00 0.00 285.00
Mill Creek 767-47-070 285.00 1.00 0.00 285.00
Mill Creek 767-47-071 285.00 1.00 0.00 285.00
Mill Creek 767-47-072 285.00 1.00 0.00 285.00
Mill Creek 767-47-073 285.00 1.00 0.00 285.00
Mill Creek 767-47-074 285.00 1.00 0.00 285.00
Mill Creek 767-47-075 285.00 1.00 0.00 285.00
Mill Creek 767-47-076 285.00 1.00 0.00 285.00
Mill Creek 767-47-077 285.00 1.00 0.00 285.00
Mill Creek 767-47-078 285.00 1.00 0.00 285.00
12 of 18

Page 311 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Mill Creek 767-47-079 285.00 1.00 0.00 285.00
Mill Creek 767-47-080 285.00 1.00 0.00 285.00
Mill Creek 767-47-081 285.00 1.00 0.00 285.00
Mill Creek 767-47-082 285.00 1.00 0.00 285.00
Mill Creek 767-47-083 285.00 1.00 0.00 285.00
Mill Creek 767-47-084 285.00 1.00 0.00 285.00
Mill Creek 767-47-085 285.00 1.00 0.00 285.00
Mill Creek 767-47-086 285.00 1.00 0.00 285.00
Mill Creek 767-47-087 285.00 1.00 0.00 285.00
Mill Creek 767-47-088 285.00 1.00 0.00 285.00
Mill Creek 767-47-089 285.00 1.00 0.00 285.00
Mill Creek 767-47-090 285.00 1.00 0.00 285.00
Oak Creek I, II, III 779-51-001 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-002 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-003 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-004 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-005 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-006 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-007 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-008 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-009 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-010 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-011 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-012 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-013 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-014 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-015 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-016 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-017 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-018 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-019 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-020 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-021 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-022 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-023 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-024 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-030 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-031 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-032 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-033 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-034 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-035 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-036 425.00 1.00 0.00 425.00 13 of 18

Page 312 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Oak Creek I, II, III 779-51-037 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-038 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-039 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-040 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-041 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-042 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-043 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-044 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-045 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-046 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-047 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-048 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-049 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-050 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-051 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-052 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-053 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-51-054 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-004 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-005 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-006 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-007 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-008 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-009 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-010 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-011 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-012 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-013 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-014 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-015 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-016 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-017 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-018 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-019 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-020 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-021 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-022 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-023 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-024 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-025 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-026 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-027 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-028 425.00 1.00 0.00 425.00 14 of 18

Page 313 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Oak Creek I, II, III 779-52-029 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-030 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-031 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-032 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-033 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-034 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-035 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-037 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-038 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-039 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-040 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-041 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-047 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-055 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-056 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-057 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-058 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-059 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-060 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-061 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-062 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-063 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-064 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-065 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-066 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-067 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-068 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-069 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-070 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-071 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-072 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-073 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-074 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-075 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-076 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-077 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-078 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-079 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-080 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-081 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-082 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-083 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-084 425.00 1.00 0.00 425.00 15 of 18

Page 314 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Oak Creek I, II, III 779-52-085 425.00 1.00 0.00 425.00 Oak Creek I, II, III 779-52-086 425.00 1.00 0.00 425.00 Rosehaven 817-10-005 400.00 1.00 0.00 400.00
Rosehaven 817-10-006 400.00 1.00 0.00 400.00
Rosehaven 817-10-007 400.00 1.00 0.00 400.00
Rosehaven 817-10-008 400.00 1.00 0.00 400.00
Rosehaven 817-10-010 400.00 1.00 0.00 400.00
Rosehaven 817-10-011 400.00 2.00 0.00 800.00
Rosehaven 817-10-012 400.00 1.00 0.00 400.00
Rosehaven 817-10-013 400.00 1.00 0.00 400.00
Rosehaven 817-10-014 400.00 1.00 0.00 400.00
Rosehaven 817-10-015 400.00 1.00 0.00 400.00
Rosehaven 817-10-016 400.00 1.00 0.00 400.00
Rosehaven 817-10-017 400.00 1.00 0.00 400.00
Rosehaven 817-10-018 400.00 1.00 0.00 400.00
Rosehaven 817-10-019 400.00 1.00 0.00 400.00
Rosehaven 817-10-020 400.00 1.00 0.00 400.00
Rosehaven 817-10-021 400.00 2.00 0.00 800.00
Rosehaven 817-10-022 400.00 1.00 0.00 400.00
Rosehaven 817-10-023 400.00 1.00 0.00 400.00
Rosehaven 817-10-024 400.00 1.00 0.00 400.00
Rosehaven 817-10-025 400.00 1.00 0.00 400.00
Rosehaven 817-10-026 400.00 2.00 0.00 800.00
Rosehaven 817-10-027 400.00 1.00 0.00 400.00
Rosehaven 817-10-028 400.00 1.00 0.00 400.00
Rosehaven 817-10-029 400.00 1.00 0.00 400.00
Sandalwood 728-11-027 450.00 1.00 0.00 450.00
Sandalwood 728-11-028 450.00 1.00 0.00 450.00
Sandalwood 728-11-029 450.00 1.00 0.00 450.00
Sandalwood 728-11-030 450.00 1.00 0.00 450.00
Sandalwood 728-11-031 450.00 1.00 0.00 450.00
Sandalwood 728-11-032 450.00 1.00 0.00 450.00
Sandalwood 728-11-033 450.00 1.00 0.00 450.00
Sandalwood 728-11-034 450.00 1.00 0.00 450.00
Sandalwood 728-11-035 450.00 1.00 0.00 450.00
Sandalwood 728-11-036 450.00 1.00 0.00 450.00
Sandalwood 728-11-037 450.00 1.00 0.00 450.00
Sparhawk 764-31-025 334.00 1.00 0.00 334.00
Sparhawk 764-31-026 334.00 1.00 0.00 334.00
Sparhawk 764-31-027 334.00 1.00 0.00 334.00
Sparhawk 764-31-028 334.00 1.00 0.00 334.00
Sparhawk 764-31-029 334.00 1.00 0.00 334.00
Sparhawk 764-31-030 334.00 1.00 0.00 334.00
16 of 18

Page 315 of 419 ends

City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Sparhawk 764-31-031 334.00 1.00 0.00 334.00
Sparhawk 764-31-032 334.00 1.00 0.00 334.00
Sparhawk 764-31-033 334.00 1.00 0.00 334.00
Sparhawk 764-31-034 334.00 1.00 0.00 334.00
Sparhawk 764-31-035 334.00 1.00 0.00 334.00
Sparhawk 764-31-036 334.00 1.00 0.00 334.00
Sparhawk 764-31-037 334.00 1.00 0.00 334.00
Sparhawk 764-31-038 334.00 1.00 0.00 334.00
Sparhawk 764-31-039 334.00 1.00 0.00 334.00
Sparhawk 764-31-040 334.00 1.00 0.00 334.00
Sparhawk 764-31-041 334.00 1.00 0.00 334.00
Sparhawk 764-31-042 334.00 1.00 0.00 334.00
Stone Creek 726-06-016 388.46 1.00 0.00 388.46
Stone Creek 726-06-017 388.46 1.00 0.00 388.46
Stone Creek 726-06-018 388.46 1.00 0.00 388.46
Stone Creek 726-06-019 388.46 1.00 0.00 388.46
Stone Creek 726-06-020 388.46 1.00 0.00 388.46
Stone Creek 726-06-021 388.46 1.00 0.00 388.46
Stone Creek 726-06-022 388.46 1.00 0.00 388.46
Stone Creek 726-06-023 388.46 1.00 0.00 388.46
Stone Creek 726-06-024 388.46 1.00 0.00 388.46
Stone Creek 726-06-025 388.46 1.00 0.00 388.46
Stone Creek 726-06-026 388.46 1.00 0.00 388.46
Stone Creek 726-06-027 388.46 1.00 0.00 388.46
Stone Creek 726-06-028 388.46 1.00 0.00 388.46
Stone Creek 726-06-029 388.46 1.00 0.00 388.46
Stone Creek 726-06-030 388.46 1.00 0.00 388.46
Stone Creek 726-06-034 388.46 1.00 0.00 388.46
Stone Creek 726-06-035 388.46 1.00 0.00 388.46
Stone Creek 726-06-036 388.46 1.00 0.00 388.46
Stone Creek 726-06-037 388.46 1.00 0.00 388.46
Stone Creek 726-06-038 388.46 1.00 0.00 388.46
Stone Creek 726-06-044 388.46 1.00 0.00 388.46
Stone Creek 726-06-045 388.46 1.00 0.00 388.46
Stone Creek 726-06-046 388.46 1.00 0.00 388.46
Stone Creek 726-06-047 388.46 1.00 0.00 388.46
Stone Creek 726-06-048 388.46 1.00 0.00 388.46
Stone Creek 726-06-049 388.46 1.00 0.00 388.46
Stone Creek 726-06-050 388.46 1.00 0.00 388.46
Stone Creek 726-06-051 388.46 1.00 0.00 388.46
Stone Creek 726-06-052 388.46 1.00 0.00 388.46
Stone Creek 726-06-053 388.46 1.00 0.00 388.46
Stone Creek 726-06-054 388.46 1.00 0.00 388.46
17 of 18

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City of Morgan Hill
Landscape Assessment District No. 1
Fiscal Year 2022/23
Assessment Roll
Zone APN
Rate Per
Unit Units
Rounding
Adjustment
2022/23
Assessment (1)
Stone Creek 726-06-055 388.46 1.00 0.00 388.46
Stone Creek 726-06-056 388.46 1.00 0.00 388.46
Stone Creek 726-06-057 388.46 1.00 0.00 388.46
Stone Creek 726-06-058 388.46 1.00 0.00 388.46
Sunnyside/Stonegate 773-31-034 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-035 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-036 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-037 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-038 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-039 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-040 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-043 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-044 375.00 1.00 0.00 375.00
Sunnyside/Stonegate 773-31-045 375.00 1.00 0.00 375.00
Totals: 748.00 ($2.10) $198,648.28
(1) Amounts placed on the tax roll must be rounded down to an even number. The Assessment includes the rounding adjustment.
18 of 18

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City of Morgan Hill Landscape Assessment District No. 1 Engineer’s Report Fiscal Year 2022/23 17

7. HISTORICAL ASSESSMENT RATES
The historical assessment rates per Zone are identified on the following pages.

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City of Morgan Hill
Landscape Assessment District No. 1
Actual Historical Assessment Rates Per Zone
ZoneBelle EstatesChang/BerteloneConte GardensDiana EstatesFox Hollow / Murphy Sp.Hamilton SquareJackson Meadows #6Jackson Meadows #7La Grande EstatesLacrosse/Gera Annexation
Number
93-03 93-05 92-10 94-01 Original 94-03 93-06 91-03 95-03 91-04 Original
Rate
$502.22 $1,215.00 $477.82 $139.39 $106.15 $425.54 $108.10 $314.58 $88.00 $142.99 Unit Count 36 8 11 64 75 38 70 10 32 24
1991/92 - - - $139.39 - - - $314.58 - $142.99
1992/93 - - - - - - - - - -
1993/94 - - - 69.80 - - - 77.35 - 8.93
1994/95 - - - 69.80 $106.15 - - 77.35 - 8.93
1995/96 $502.00 $1,215.00 $285.98 54.14 79.92 $425.54 $108.10 88.66 - 8.93 1996/97 71.00 8.93 477.82 21.94 49.11 214.08 76.04 194.70 - 8.93 1997/98 71.00 8.93 477.82 21.94 49.11 214.08 76.04 194.70 - 8.93 1998/99 71.00 8.93 477.82 21.94 49.11 214.08 76.04 194.70 - 8.93 1999/00 147.81 8.93 477.82 81.03 49.11 399.71 108.10 314.50 $88.00 8.93 2000/01 147.81 8.93 477.82 81.03 49.11 399.71 108.10 314.50 88.00 8.93 2001/02 147.80 8.92 477.82 54.80 49.10 399.70 86.38 314.50 88.00 8.92 2002/03 147.80 8.92 477.82 70.00 101.10 399.70 104.18 314.50 88.00 8.92 2003/04 175.00 8.92 477.82 80.00 101.10 399.70 104.18 314.50 88.00 8.92 2004/05 180.00 8.92 477.82 80.00 101.10 399.70 108.10 314.50 88.00 8.92 2005/06 180.00 94.92 477.82 105.00 141.10 399.70 108.10 314.50 88.00 8.92 2006/07 180.00 94.92 477.82 105.00 141.10 399.70 108.10 314.50 88.00 8.92 2007/08 194.00 94.92 477.82 135.00 141.10 399.70 108.10 314.50 88.00 8.92 2008/09 234.00 94.92 477.82 139.39 149.69 425.54 108.10 314.50 88.00 130.00 2009/10 234.00 200.00 477.82 139.39 149.69 425.54 108.10 314.50 88.00 130.00 2010/11 234.00 300.00 477.82 139.39 149.69 425.54 108.10 314.50 88.00 130.00 2011/12 282.00 400.00 477.82 139.39 168.48 425.54 108.10 314.50 88.00 50.00 2012/13 282.00 400.00 477.82 139.39 173.53 425.54 98.10 140.00 88.00 50.00 2013/14 320.00 500.00 477.82 139.39 173.53 425.54 98.10 140.00 88.00 50.00 2014/15 320.00 500.00 477.82 139.39 173.53 425.54 98.10 140.00 88.00 50.00 2015/16 320.00 550.00 400.00 139.39 173.53 425.54 108.00 140.00 88.00 50.00 2016/17 320.00 550.00 400.00 139.39 173.53 425.54 108.00 100.00 88.00 50.00 2017/18 320.00 550.00 400.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00 2018/19 320.00 550.00 365.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00 2019/20 320.00 550.00 365.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00 2020/21 320.00 550.00 365.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00 2021/22 320.00 550.00 365.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00 2022/23 310.00 550.00 365.00 139.39 173.53 325.00 108.00 100.00 88.00 50.00

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City of Morgan Hill
Landscape Assessment District No. 1
Actual Historical Assessment Rates Per Zone
Zone
Annexation
Number
Original
Rate
Unit Count
1991/92
1992/93
1993/94
1994/95
1995/96
1996/97
1997/98
1998/99
1999/00
2000/01
2001/02
2002/03
2003/04
2004/05
2005/06
2006/07
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
Llagas Creek EstatesLlagas/ObataMill CreekOak CreekParsons CornerRose HavenSandalwoodSparhawkStone CreekSunnyside / Stone Gate 91-05 91-07 93-01 94-04 95-02 95-01 96-01 91-06 94-02 91-01 $140.84 $629.16 $186.82 $453.82 $568.32 $488.47 $192.39 $174.77 $306.66 $449.40 71 5 84 119 10 27 11 18 35 10
$140.85 $629.16 - - - - - $174.77 - $449.40
- - - - - - - - - -

19.13 335.37 - - - - - 93.03 - 15.05

19.13 15.05 - - - - - 308.84 - 15.04

76.60 15.05 $186.82 $453.82 - - - 226.46 $306.66 15.04

59.54 8.93 64.57 47.67 $568.32 $488.47 - 147.33 146.66 8.93

59.54 8.93 64.57 47.67 457.40 189.73 - 147.33 146.66 8.93

59.54 8.93 64.57 337.09 457.40 189.73 - 147.33 146.66 8.93 140.85 8.93 95.83 320.52 457.40 189.73 $192.36 147.33 275.00 8.93 140.85 8.93 158.64 245.16 457.40 189.73 192.36 147.33 275.00 8.93 105.86 8.92 158.64 150.00 457.40 189.72 192.36 147.32 275.00 8.92 140.00 8.92 182.64 250.00 300.00 300.00 192.36 147.32 275.00 275.00 140.00 8.92 120.00 300.00 300.00 300.00 192.36 147.32 275.00 192.50 140.00 8.92 120.00 300.00 300.00 300.00 192.36 147.32 306.66 192.50 190.00 53.92 138.00 300.00 430.00 300.00 192.36 202.32 306.66 332.50 190.00 53.92 138.00 300.00 430.00 300.00 192.36 202.32 306.66 332.50 190.00 53.92 168.00 300.00 460.00 330.00 192.36 208.38 306.66 332.50 195.70 53.92 186.82 300.00 460.00 370.00 192.36 214.64 306.66 332.50 195.70 53.92 186.82 300.00 460.00 370.00 192.36 214.64 306.66 332.50 195.70 53.92 186.82 300.00 460.00 370.00 192.36 214.64 306.66 332.50 195.70 53.92 186.82 350.00 250.00 450.00 192.36 241.58 306.66 332.50 195.70 53.92 186.82 350.00 250.00 450.00 192.36 248.82 388.46 332.50 233.67 53.92 186.82 350.00 250.00 450.00 192.36 248.82 388.46 412.50 233.67 53.92 186.82 350.00 250.00 450.00 192.36 248.82 388.46 412.50 233.67 143.92 186.82 350.00 250.00 450.00 192.36 248.82 388.46 375.00 233.67 143.92 186.82 350.00 250.00 488.00 192.36 248.82 388.46 375.00 233.67 143.92 186.82 350.00 250.00 488.00 192.36 248.82 388.46 375.00 233.67 400.00 186.82 350.00 250.00 400.00 450.00 248.82 388.46 375.00 233.67 400.00 186.82 350.00 0.00 400.00 450.00 248.82 388.46 375.00 233.67 400.00 285.00 350.00 0.00 400.00 450.00 248.82 388.46 375.00 233.67 400.00 285.00 350.00 0.00 400.00 450.00 248.82 388.46 375.00 233.67 400.00 285.00 425.00 0.00 400.00 450.00 334.00 388.46 375.00

Page 2 of 2 ends

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RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF MORGAN HILL, CALIFORNIA, CONFIRMING THE

ASSESSMENT AND ORDERING THE LEVY FOR THE CITY

OF MORGAN HILL LANDSCAPE ASSESSMENT DISTRICT
NO. 1 FOR FISCAL YEAR 2022/23
WHEREAS, the City Council of the City of Morgan Hill (hereafter referred to as the “City Council”) previously completed its proceedings in accordance with and pursuant to the Landscaping and Lighting Act of 1972, Part 2, Division 15 of the California Streets and Highways Code (commencing with Section 22500) (the “Act”) to establish the City of Morgan Hill (the “City”) Fox Hollow/Murphy Springs Landscape Assessment District and has by previous resolution changed the name of said district to the City of Morgan Hill Landscape Assessment District No. 1 (the “Assessment District”); and, WHEREAS, the City has retained NBS for the purposes of assisting with the annual levy of the Assessment District, and the preparation and filing of an Annual Report; and WHEREAS, NBS has not been required to update the Annual Report since the City Council’s preliminary approval on May 4, 2022; and
WHEREAS, the City Council has, by previous resolution, declared its intention to hold a Public Hearing concerning the levy and collection of assessments within the Assessment District; and
WHEREAS, notice of such Public Hearing was duly given in accordance with Section 22626 of the Act; and
WHEREAS, at the time and place specified in the aforementioned notice the City Council held and conducted such Public Hearing, and considered all objections to the assessment.

NOW, THEREFORE BE IT RESOLVED, DETERMINED, AND ORDERED BY THE COUNCIL, AS FOLLOWS:

1. Final Approval of Report: The City Council approves the Annual Report concerning the levy of assessments for the fiscal year commencing July 1, 2022 and ending June 30, 2023.

2. Confirmation of Assessment and Diagram: The City Council hereby confirms the assessment and the diagram as is described in full detail in the Annual Report on file with the City Clerk.

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3. Levy of Assessment: Pursuant to Section 22631 of the Act, the adoption of this resolution shall constitute the levy of an assessment for the fiscal year commencing July 1, 2022 and ending June 30, 2023.

4. Ordering of the Levy: The City Council hereby orders NBS to prepare and submit the levy of assessments to Santa Clara County for placement on the Fiscal Year 2022/23 secured property tax roll.

PASSED, APPROVED AND ADOPTED by the City Council of Morgan Hill at a regular meeting held on the 1st day of June 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. ____, adopted by the City Council at the meeting held on June 1, 2022.

WITNESS MY HAND AND THE SEAL OF THE CITY OF MORGAN HILL.

DATE:______________________ _______________________________________ Michelle Bigelow, CITY CLERK

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12 CITY COUNCIL STAFF REPORT
MEETING DATE: June 1, 2022
PREPARED BY:

Dat Nguyen, Finance Director
APPROVED BY: City Manager

HOLD PUBLIC HEARING REGARDING REVISIONS TO WATER RATE

ADJUSTMENTS

RECOMMENDATION(S)

1. Receive and adopt final 2022 Water Rate Study Report prepared by NBS;

2. Open public hearing and receive public comment;

3. Request submission or withdrawal of proposition 218 protest letters from the public/audience;

4. Suspend public hearing and allow City Clerk, or designee, to tabulate final Proposition 218 protest letter count;

5. Reconvene meeting and reopen public hearing;

6. Receive and accept verbal report from City Clerk, or designee, on ballot tabulation results;

7. Close public hearing; and

8. Adopt resolution approving water rate adjustments.

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 Maintaining and Enhancing Infrastructure
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

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12 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.

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 %
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

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12 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.

The table below shows the proposed volumetric charges per water unit (hcf) with revenue-stabilization rates for FY 2022/23 through FY 2026/27 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 three years) 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; or  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.

Public Hearing
This Public Hearing regarding water rate adjustments is a requirement of the

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12 Proposition 218 process. It is being held after a minimum of 45 days have passed since the mailing of the official notification of the proposed rate adjustments to all affected property owners. The Proposition 218 official notice (Attachment No. 2) includes a description of proposed rates and information detailing the protest process requirements. To meet legal requirements, protests submitted by email or other electronic means cannot be accepted. Per statute, only one written protest will be counted per identified parcel. However, the City had, in the past, counted all written protests received whether they came from the property owners or account holders and will continue to do so with tonight's count. All written protests must be received (not postmarked) before the close of the Public Hearing. The Council shall accept all protest votes received up to and including the time of the public hearing. If a majority (50% plus one) of customers oppose the proposed rate adjustments, City Council cannot implement the proposed adjustment. If a majority protest is not received and the City Council elects to approve the recommended water rate adjustments by adopting the resolution (Attachment No. 3), the first of the approved increases would become effective for water consumption beginning July 1, 2022.

COMMUNITY ENGAGEMENT:

March 24, 2022 - A virtual townhall meeting for community members was held.

All rate payers in Morgan Hill were mailed a Proposition 218 notice detailing the proposed rate adjustments. Those wishing to protest the proposed adjustments have provided written communication stating their opposition. The City has maintained a voting box in the City Hall lobby to accommodate anyone wishing to drop off a protest.

The public hearing was noticed in the local newspaper 10 days prior to today's public hearing.

ALTERNATIVE ACTIONS:

City Council could 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.

On April 6, 2022, the water rate study was introduced to the City Council and the Community and the City Council adopted a resolution of intent to adjust water rates, authorized commencement of proposition 218 noticing, and set the date of public hearing and adoption of new water rates.

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.

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12 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.

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.

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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

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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

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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

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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.

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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.

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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.

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• 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 339 of 419
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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 $38.60 $41.30 $42.54
3/4 inch $31.14 $33.10 $36.08 $38.60 $41.30 $42.54
1 inch $31.14 $33.10 $36.08 $38.60 $41.30 $42.54

1.5 inch $58.72 $62.72 $68.37 $73.15 $78.28 $80.62
2 inch $91.81 $98.27 $107.12 $114.62 $122.64 $126.32
4 inch $279.36 $299.73 $326.70 $349.57 $374.04 $385.26
6 inch $555.17 $595.98 $649.62 $695.09 $743.75 $766.06
Non-Residential:
5/8 inch $47.23 $53.62 $58.44 $62.53 $66.91 $68.92
3/4 inch $47.23 $53.62 $58.44 $62.53 $66.91 $68.92
1 inch $47.23 $53.62 $58.44 $62.53 $66.91 $68.92

1.5 inch $90.90 $103.76 $113.10 $121.02 $129.49 $133.37 2 inch $143.31 $163.94 $178.69 $191.20 $204.58 $210.72
3 inch $283.06 $324.40 $353.59 $378.35 $404.83 $416.98
4 inch $440.28 $504.92 $550.36 $588.89 $630.11 $649.01
6 inch $877.00 $1,006.37 $1,096.94 $1,173.73 $1,255.89 $1,293.56 8 inch $1,401.07 $1,608.11 $1,752.84 $1,875.53 $2,006.82 $2,067.03 Fire Service:
5/8 inch $4.02 $4.05 $4.42 $4.73 $5.06 $5.21
3/4 inch $4.25 $4.34 $4.73 $5.06 $5.42 $5.58
1 inch $4.71 $4.92 $5.36 $5.74 $6.14 $6.33

1.5 inch $5.86 $6.37 $6.94 $7.43 $7.95 $8.19
2 inch $7.24 $8.11 $8.84 $9.46 $10.12 $10.42
3 inch $11.61 $13.61 $14.84 $15.88 $16.99 $17.50
4 inch $19.66 $23.75 $25.89 $27.70 $29.64 $30.53
6 inch $40.37 $49.83 $54.31 $58.11 $62.18 $64.05
8 inch $67.98 $84.59 $92.21 $98.66 $105.57 $108.74
10 inch $104.79 $130.95 $142.74 $152.73 $163.42 $168.32 Volumetric Charges
Uniform Rate, All Customers $2.57 $2.89 $3.15 $3.37 $3.60 $3.71

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

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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

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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

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City of Morgan Hill – Water Rate Study 17
Prepared by NBS City of
Figure 16. Comparison of Monthly Water Bills for Commercial Customers

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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

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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 349 of 419 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

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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.

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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.

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City of Morgan Hill – Water Rate Study 23
Prepared by NBS City of

APPENDIX - WATER RATE ANALYSIS

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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 Income
1 180,121 176,388 164,908 110,214 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 Expenses
2 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 Increases
3 - 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
Web: www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 1 of 45

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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 Cash
1 14,627,203 $
Water Operations Fund (650)
Beginning Reserve Balance
1 2,958,793 $ 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 $ 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 2,946,301 $ 3,256,920 $ 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 Balance
1 8,513,872 $ 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 $ 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 (978,736) (976,266) (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 2,953,600 $ 3,300,600 $ 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 $ 3,035,830 $ 3,083,492 $ 3,131,903 $ 3,181,074 $ 3,231,017 $ 3,281,744 $ 3,333,267 $ 3,385,599 $ 3,438,753 $ Plus: Contributions to Rate Stabilization Fund - - - - - - - - - - Plus: Interest Earnings
5 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
Web: www.nbsgov.com | Toll-Free: 800.676.7516 Financial Plan, 2 of 45

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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 Balance
1 3,397,655 $ 2,123,277 $ - $ - $ - $ - $ - $ - $ - $ - $ Plus: Interest Earnings
5 64,003 33,335 - - - - - - - -
Plus: Impact Fee Revenue
7 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 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 (680,139) (678,422) (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.

4. The Water System Replacement reserve target is set to 6% of net assets.

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 45

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CITY OF MORGAN HILL Charts & Tables

WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 1
$.Mil.
$5.Mil.
$30.Mil.
$25.Mil.
$20.Mil.
$15.Mil.
$10.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
www.nbsgov.com | Toll-Free: 800.676.7516
Charts and Tables, 4 of 45

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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

8.00 7.00

6.00 5.00

4.00 3.00

2.00 1.00

0.00 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
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Charts and Tables, 5 of 45

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CITY OF MORGAN HILL Charts & Tables

WATER RATE STUDY
Rate Adjustment Charts and Report Tables
CHART 3
$.Mil.
$8.Mil.
$6.Mil.
$4.Mil.
$2.Mil.
$16.Mil.
$14.Mil.
$12.Mil.
$10.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
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Charts and Tables, 6 of 45

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CITY OF MORGAN HILL EXHIBIT 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 4 : REVENUE FORECAST
1 WATER OPERATIONS Basis 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Water Operations Fund (650)

INTEREST INCOME
2 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 INCOME
2 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 INCOME
2 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 45

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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 INCOME
2 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 INCOME
2 64,003 - - - - - - - - -
Water Rate Stabilization Fund (652)

RATE STABILIZATION REVENUE - - - - - - - - - -

INTEREST INCOME
2 16,222 - - - - - - - - -
Water System Replacement Fund (653)

SYSTEM REPLACEMENT REVENUE - - - - - - - - - -

INTEREST INCOME
2 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 45

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CITY OF MORGAN HILL EXHIBIT 1

WATER RATE STUDY
Operating Revenue and Expenses
TABLE 6 : OPERATING EXPENSE FORECAST
1 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 45

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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.

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Exhibit 1 (O&M), 10 of 45

Page 363 of 419 ends

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.

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Exhibit 1 (O&M), 11 of 45

Page 364 of 419 ends

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 $

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Exhibit 1 (O&M), 12 of 45

Page 365 of 419 ends

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.

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Exhibit 1 (O&M), 13 of 45

Page 366 of 419 ends

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

CONSTRUCTION
4 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

CONSTRUCTION
4 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).

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Exhibit 1 (O&M), 14 of 45

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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 Growth
5 2.10% 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 Inflation
7 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5 Energy Cost Inflation
7 5.00% 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
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Exhibit 1 (O&M), 15 of 45

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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 Reserves
1 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.

TABLE 15 : CAPITAL IMPROVEMENT PROGRAM COSTS (in Future-Year Dollars) Capital Improvement Program Projects
1 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 Pump Station Capacity Improvements
5-Year Rate Adoption Period Projected
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CITY OF MORGAN HILL EXHIBIT 2

WATER RATE STUDY
Capital Improvement Plan Expenditures
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 Projects
2 653 - - - - -
Total: Capital Improvement Program Costs (Current-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

2. Estimated future expenditures for FY 2026/27 through 2040/41 are calculated based on the City's 5-year average.

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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, $21,975,000
1,2
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 Requirement
3 - $ - $ - $ - $ - $ - $ - $ - $ - $ - $
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 Sources
4 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.

Annual Repayment Schedules

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). 5-Year Rate Adoption Period Projected
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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.

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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% Fire
Protection
Direct Alloc.

Zonal Elev.

Basis of Classification
Budget Categories
Total Revenue
Requirements
Commodity Capacity Customer
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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% Fire
Protection
Commodity Capacity Customer Zonal Basis of Classification Budget Categories
Total Revenue
Requirements
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Page 374 of 419 ends

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% Fire
Protection
Customer
Direct Alloc.

Zonal Elev. Budget Categories
Total Revenue
Requirements
Commodity Capacity Basis of Classification
Prepared by NBS
www.nbsgov.com | Toll-Free: 800.676.7516 Funct. & Classification, 22 of 45

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Morgan Hill City CouncilJune 1, 2022

Morgan Hill City Council
June 1, 2022