Morgan Hill City Council
March 15, 2023

16 CITY COUNCIL STAFF REPORT
MEETING DATE: March 15, 2023
PREPARED BY:

Dat Nguyen, Finance Director
APPROVED BY: City Manager
RECEIVE MONTHLY BUDGET UPDATE AND JANUARY 2023

FINANCIAL AND INVESTMENT REPORTS

RECOMMENDATION(S)
Accept and file report.

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Preserving and Cultivating Public Trust
2022-2023 Strategic Priorities
Fiscal Sustainability
Community Outreach, Engagement, and Messaging
REPORT NARRATIVE:

As part of the City Council’s expectation to maintain a high level of transparency and to be responsible stewards of public funds, staff is providing this monthly budget update, along with the January 2023 financial and investment reports.

January 2023 Financial Report
The Revenue and Expense Summary through January 2023 is included on the first page of the monthly financial report. Overall, General Fund revenues total $24.4 million or about 48% of the budget. Expenditures, including encumbrances, amounted to $34.6 million or 60% of the budget, compared to prior year to date expenditures, including encumbrances, of $28.2 million. This represents an increase of $6.4 million in total year to date expenditures, including encumbrances, compared to the prior year to date.

Excluding the encumbrances, year to date expenditures increased by about $4.5 million mainly due to new programs launched this year, such as Innovative Transit and County Solid Waste Program, gradual recovery in Recreation Services, as well as additional staffing programmed in the current year along with better staff recruitment and retention efforts citywide.

Budget Update
There has been no material change to the City’s revenue since the last budget update to the Council on February 15, 2023. Recreation Services revenues continue to recover from the pandemic and are on target with budget. For water revenue, Morgan Hill

16 residents consumed about 14% less water through January compared to the prior threeyear average. As such, the 10% revenue stabilization water rate has been implemented.

COMMUNITY ENGAGEMENT:

Inform
Finance staff prepares these financial reports to inform City officials, the Council, the community, and various lenders and stakeholders about the financial health of the organization, which assists each one of the interested parties in making sound financial and investment decisions.

ALTERNATIVE ACTIONS:

No alternative action is recommended, as this is a monthly financial report on City transactions which have already occurred.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

The City Council receives and files the financial and investment report for each month.

At the September 16, 2015 meeting, City Council recommended monthly financial and investment reports be agendized under the Consent Agenda, and quarterly financial and investment reports be presented to City Council as an “Other Business” item.

FISCAL AND RESOURCE IMPACT:

The preparation of the report is a part of the Finance workplan.

CEQA (California Environmental Quality Act):

Not a Project
This report is not a project, as defined in Section 15378 of the State CEQA Guidelines.

Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.

FINANCE DEPARTMENT

CITY OF MORGAN HILL
January 31, 2023 - 58% of Year Complete
Prepared by:

Monthly Financial and Investment Reports

CITY OF MORGAN HILL, CALIFORNIA
FINANCIAL STATEMENT ANALYSIS - FISCAL YEAR 2022-23
FOR THE MONTH ENDED JANUARY 2023 – 58% OF YEAR COMPLETE  General Fund – Revenues through January totaled $24.4 million, or about 48% of the budgeted revenues. For property tax revenue, the most recent County estimates project the City will receive approximately $17.7 million for the current fiscal year, slightly more than the budget of $17.4 million.

As for sales tax, HdL, the City's sales tax consultant raised the City's current fiscal year sales tax revenue estimate to $12.5 million, an increase of approximately $0.5 million from the prior estimate in its most recent projection.

The chart below shows historical General Fund revenues by major revenue category from FY18-19 through FY21-22 Actual, FY22-23 Budget, and YTD as of January 31, 2023.

General Fund expenditures and encumbrances as of January 31, 2023 totaled $34.6 million, of which approximately $3.1 million is attributable to outstanding encumbrances, compared to prior year to date expenditures, including encumbrances, of $28.2 million. This represents an increase of $6.4 million in total year to date expenditures, including encumbrances, compared to the prior year to date. Excluding the encumbrances, year to date expenditures increased by about $4.5 million mainly due to new programs launched this year, such as Innovative Transit and County Solid Waste Program, gradual recovery in Recreation Services, as well as additional staffing programed in the current year along with better staff recruitment and retention efforts citywide.  Community Services – The Community Services Department’s recreation operations, as reflected in the schedule presented on page 7 of the Monthly Financial and Investments Reports, shows a negative impact to the General Fund of approximately $1.4 million as of January 31, 2023. Recreation Services revenues continue to recover from the pandemic and are on target with budget. $12.8 $14.5 $16.0 $16.7 $17.4
$8.0
$10.7 $9.7 $11.0 $12.9 $12.4
$5.4
$5.1 $4.6 $4.4
$5.9 $5.4
$2.3
$9.9 $8.3 $5.7
$7.5 $8.9
$5.3
$4.9 $3.6
$9.7
$9.1 $6.4
$3.4
$43.3 $40.6
$46.8
$52.1 $50.5
$24.4
0 10
20 30
40 50
60 FY18‐19 FY19‐20 FY20‐21 FY21‐22 Budget
FY22‐23
YTD
FY22‐23
Millions ($)
Historical GF Revenues
Property Tax Sales Tax Franchise and Hotel Taxes Service Charges Other

CITY OF MORGAN HILL, CALIFORNIA
FINANCIAL STATEMENT ANALYSIS - FISCAL YEAR 2022-23
FOR THE MONTH ENDED JANUARY 2023 – 58% OF YEAR COMPLETE The chart below shows the historical net impact of Recreation Operations to the general fund.

Due to longstanding governmental accounting and budgeting convention, the City’s recreation operations are not charged for indirect costs (known in Morgan Hill as “General Fund Administration”) from the central services departments of City Attorney, City Manager, and Administrative Services.

The City’s other governmental funds, such as Development Services, and the proprietary funds, such as Water and Wastewater, and the Information Services Fund, are assessed such charges through the City’s indirect cost allocation plan, prepared in compliance with the guidelines set forth in the Code of Federal Regulations Title 2, Chapter II, Part 200 (formerly OMB Circular No. A-87), which mandates certain calculation and cost allocation practices that must be followed in order to qualify for Federal grant funding, but which also represent best practice for non-grant funded City operations like utilities and information services.
 Development Services Fund – Revenues through January totaled $3.8 million compared to prior year to date amount of approximately $2.6 million, partially due to a result of the fees increase approved by the City Council on January 19, 2022. Expenditures, including encumbrances, totaled $3.5 million.  Debt Service Funds – Expenditures through January totaled $0.6 million. The debt service for the first half of the year includes both interest and principal, while the second half of the year will include interest only. Debt service payments were all scheduled when the bonds were issued and are budgeted for in the months delineated in the underlying bond documents. The General Fund’s portion of the annual debt service payments is approximately $200,000, less than one percent of the General Fund’s budgeted revenues.
($2.5)
($2.0)
($1.5)
($1.0)
($0.5)
$0.0
$0.5
FY13‐14 FY14‐15 FY15‐16 FY16‐17 FY17‐18 FY18‐19 FY19‐20 FY20‐21 FY21‐22 FY22‐23 Budget
Millions (S)
Historical Net GF Impact

CITY OF MORGAN HILL, CALIFORNIA
FINANCIAL STATEMENT ANALYSIS - FISCAL YEAR 2022-23
FOR THE MONTH ENDED JANUARY 2023 – 58% OF YEAR COMPLETE  Wastewater Operations – Revenues from Sewer Operations through January totaled $7.7 million.

Expenditures and outstanding encumbrances totaled $9.1 million or 56% of the budget. The table below shows historical Sewer Operations revenues and expenditures from FY18-19 through FY21-22 Actual, FY22-23 Budget, and YTD as of January 31, 2023.
(amount in millions) FY18‐19 FY19‐20 FY20‐21 FY21‐22
Budget
FY22‐23
YTD
FY22‐23
Revenues 11.4               11.9            13.3                         14.9              14.8                7.7 Expenditures              11.4 12.3            13.3                         14.8              16.3                9.1 Operating Margin                 (0.4) ‐                           ‐ 0.1                (1.5)                            (1.4) Operating Margin
without Encumbrances                 (0.1) 0.4                               ‐ 0.1                  (1.5)                              (1.3) Water Operations – Water Operations includes Utility Billing, Water Conservation, and Water Operations. Revenues from Water Operations through January totaled $9.5 million. Water Operations expenditures, including outstanding encumbrances, totaled $9.8 million. The table below shows Water Operations revenues and expenditures from FY18-19 through FY21-22 Actual, FY22-23 Budget, and YTD as of January 31, 2023.
(amount in millions) FY18‐19 FY19‐20 FY20‐21 FY21‐22
Budget
FY22‐23
YTD
FY22‐23
Revenues 14.2               15.3             16.5                         16.0               17.6 9.5 Expenditures              14.3            16.4 16.5                         15.2               17.6 9.8 Operating Margin               (0.1)             (1.1)              ‐                0.8                 ‐                (0.3) Operating Margin
without Encumbrances                 (0.1) 0.8                               ‐                  0.8                 ‐                   0.4  Investments – Six securities were purchased. Total interest earnings received on investments were $271,000 during the month.

% OF ACTUAL PLUS % OF

FUND NAME ACTUAL BUDGET ENCUMBRANCES BUDGET
General 24,406,147 $ 48% $ 34,616,142 60%
Development Services 3,783,695 61% 3,535,929 58%
Housing Successor Agency 260,628 112% 876,896 77%
Sewer Operations 7,748,933 53% 9,102,310 56%
Sewer Other 8,425,451 34% 10,682,765 19%
Water Operations 9,524,981 54% 9,767,815 55%
Water Other 3,219,991 53% 1,150,170 18%
Other Special Revenues * 2,524,369 49% 3,376,050 46%
Capital Projects & Streets 12,380,794 51% 23,827,588 45% Debt Service 397,762 59% 554,009 82%
Internal Service 7,605,082 61% 6,936,613 51%
TOTAL FOR ALL FUNDS 80,277,833 $ 49% $ 104,426,286 44%
* Includes all Special Revenue Funds except Development Services Fund, Street Funds, and RDA and Housing Successor Agencies.

REVENUES EXPENSES
0% 20% 40% 60% 80% 100% 120%
General
Development Services
Housing Successor Agency
Sewer Operations
Sewer Other
Water Operations
Water Other
Other Special Revenues *
Capital Projects & Streets
Debt Service
Internal Service
Morgan Hill YTD Revenue & Expense Summary
January 31, 2023 - 58% of Year Complete
Revenues to Budget Expenses to Budget
58%

% OF PRIOR YEAR % CHANGE FROM

REVENUE CATEGORY BUDGET ACTUAL BUDGET TO DATE PRIOR YEAR Property Tax 17,383,705 $ 8,019,244 $ 46% 7,372,660 $ 9% Sales Tax 12,395,413 5,454,588 44% 5,025,846 9%
Franchise Tax 2,760,000 980,611 36% 971,018 1%
Hotel Tax 2,600,000 1,309,950 50% 1,310,992 0%
Other Agencies 1,304,130 491,574 38% 242,263 103%
Service Charges 8,942,658 5,252,380 59% 4,358,318 21%
Interest/Other 1,980,126 1,143,398 58% 1,041,074 10%
Transfers In 3,145,538 1,754,401 56% 1,708,442 3%
TOTAL REVENUES $ 50,511,570 $ 24,406,147 48% 22,030,613 $ 11% 0% 10% 20% 30% 40% 50% 60% 70%
Property Tax
Sales Tax
Franchise Tax
Hotel Tax
Other Agencies
Service Charges
Interest/Other
Transfers In
Total Revenues
Percent of Actual to Budget
Morgan Hill YTD General Fund Revenues
January 31, 2023 - 58% of Year Complete
58%

ACTUAL PLUS PRIOR YTD PLUS % CHANGE FROM
EXPENDITURE CATEGORY BUDGET ENCUMBRANCES % OF BUDGET ENCUMBRANCES PRIOR YEAR Administration $ 6,720,240 $ 3,878,037 58% 2, $ 906,392 33% Community Services 16,221,529 9,489,692 59% 7, 160,605 33% Police 21,908,484 11,913,496 54% 10, 672,459 12%
Fire 8,653,847 5,223,983 60% 4, 443,458 18%
Transfers Out 4,647,315 4,110,934 88% 3, 046,125 35%
TOTAL EXPENDITURES $ 58,151,414 $ 34,616,142 60% 28, $ 229,040 23% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Administration
Community
Services
Police
Fire
Transfers Out
Total Expenditures
Percent of Actual to Budget
Morgan Hill YTD General Fund Expenditures
January 31, 2023 - 58% of Year Complete
58%

City of Morgan Hill
Recreation Report - Fiscal Year 2022-23
For the Month Ended January 31, 2023
58% of Year Complete
% of
Budget January 2023 YTD Budget
Revenues
Membership Services & Rec Programs 5,136,869 $ 388,132 $ 2,940,304 $ Facility Rentals 819,459 134,133 660,645
Community Services 127,498 1,825 38,823
Transfers in 75,000 6,250 43,750
Total Revenues 6,158,826 $ 530,340 $ 3,683,523 $ 60%
Less: Expenditures
Membership & Program Services 6,772,195 $ 397,841 $ 3,513,431 $ Facility Rentals 546,870 32,645 285,940
Community Services 644,107 38,434 314,361
Total Expenditures 7,963,173 $ 468,919 $ 4,113,732 $ 52% Net Impact without encumbrances (1,804,347) $ 61,421 $ (430,210) $ Encumbrances - - 1,008,420
Net Impact with encumbrances (1,804,347) $ 61,421 $ (1,438,630) $

The chart below shows cash balances by fund type reconciled to City's financial system:

City of Morgan Hill
Monthly Investment Report ‐ January 31, 2023
The following are the snapshots of City's investment portfolio as of January 31, 2023. The first chart shows the portfolio composition by investment type:

LAIF ‐ $13.7M
7%
CA Class ‐ $8.1M
5% Treasury Notes ‐
$22.1M
12%
Money Market ‐
$2.1M
1%
Treasury Bill ‐ $7.4M
4%
Federal Agency
Issues ‐ $119.2M
64%
Bond Reserves/Trust ‐
$13.6M
7%
Cash & Other
Deposits ‐ $(0.6M)
>1%
Investment Portfolio Composition ‐ $185.6 Million
LAIF ‐ $13.7M
CA Class ‐ $8.1M
Treasury Notes ‐ $22.1M
Money Market ‐ $2.1M
Treasury Bill ‐ $7.4M
Federal Agency Issues ‐
$119.2M
Bond Reserves/Trust ‐
$13.6M
Cash & Other Deposits ‐
$(0.6M)
General Fund,
$29.3M
Community
Development, $2.1M
Housing Successor
Agency/ CDBG, $4.4M
Water ‐ Operations,
$4.4M
Water Other, $20.6M
Sewer ‐ Operations,
$1.6M
Sewer Other,
$47.7M
Other Special
Revenue, $8.7M
Streets and Capital
Projects (except RDA),
$35.4M
Debt Service, $0.2M
Internal Service,
$22.5M
Agency Funds
(assessment
dists./refundable
deposits), $8.7M
Cash Balances by Fund Type
$185.6 Million

The following chart illustrates a yield comparison by month among the City's portfolio, LAIF and 2‐Year US Treasury:

The chart below illustrates monthly average days to maturity of the City's portfolio along with the weighted average yield for the past two years:

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%
Jan‐21
Feb‐21
Mar‐21
Apr‐21
May‐21
Jun‐21
Jul‐21
Aug‐21
Sep‐21
Oct‐21
Nov‐21
Dec‐21
Jan‐22
Feb‐22
Mar‐22
Apr‐22
May‐22
Jun‐22
Jul‐22
Aug‐22
Sep‐22
Oct‐22
Nov‐22
Dec‐22
Jan‐23
Yield Portfolio vs. Benchmarks
LAIF City 2 Yr US‐Treasury

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%
0 100
200
300
400
500
600
700
800
900
Jan‐21
Feb‐21
Mar‐21
Apr‐21
May‐21
Jun‐21
Jul‐21
Aug‐21
Sep‐21
Oct‐21
Nov‐21
Dec‐21
Jan‐22
Feb‐22
Mar‐22
Apr‐22
May‐22
Jun‐22
Jul‐22
Aug‐22
Sep‐22
Oct‐22
Nov‐22
Dec‐22
Jan‐23
Days Yield
Portfolio Yield and Maturity Trends
Avg Days to Maturity Yield

City of Morgan Hill
Investment Portfolio Detail
As of January 31, 2023
Investment Settlement Cost Book % of Market YTM Next Call Date of Type CUSIP Date Value Value Portfolio Value at Cost Date Maturity L A I F $       13,660,101 $         13,660,101 7.36% 13,405,876 $      2.43% California C L A S S             8,076,188              8,076,188 4.35% 8,076,188 $        4.52% City Managed
Treasury Bill 912796XY0 8/17/2022 2,423,428 $          $           2,459,147 1.33% $       2,439,725 3.22% 8/10/2023 8/10/2023 Treasury Bill 912796YA1 8/18/2022 4,925,304                           4,993,433 2.69%          4,991,050 3.04% 2/16/2023 2/16/2023 Treasury Note 912828Q29 4/30/2018 4,246,875                           4,491,685 2.42%          4,477,500 2.73% 3/31/2023 3/31/2023 Treasury Note 91282CCZ2 10/8/2021 1,987,656                           1,990,915 1.07%          1,803,980 1.00% 9/30/2026 9/30/2026 Treasury Note 91282CDR9 1/4/2022             1,999,141              1,999,605 1.08%          1,928,600 0.77% 12/31/2023 12/31/2023 Treasury Note 91282CDR9 1/19/2022 1,989,688                           1,995,156 1.08%          1,928,600 1.02% 12/31/2023 12/31/2023 Treasury Note 91282CDV0 2/11/2022 1,977,969                           1,988,816 1.07%          1,924,680 1.44% 1/31/2024 1/31/2024 Treasury Note 9128286R6 3/28/2022 1,996,320                           1,997,808 1.08%          1,942,120 2.34% 4/30/2024 4/30/2024 Treasury Note 912828S35 4/12/2022 1,985,703                           1,995,170 1.08%          1,972,900 1.97% 06/30/2023 6/30/2023 Treasury Note 912828U24 6/13/2022 1,904,688                           1,918,371 1.03%          1,876,960 3.16% 11/15/2026 11/15/2026 Treasury Note 912828ZP8 8/17/2022 2,446,680                           2,479,538 1.34%          2,467,775 3.04% 5/15/2023 5/15/2023 Treasury Note 91282CAW1 11/17/2022 1,246,984                           1,257,938 0.68%          1,254,344 4.49% 11/15/2023 11/15/2023 FFCB Bond 3133ELVX9 4/8/2020             2,000,000              2,000,000 1.08%          1,911,020 0.88% 4/8/2023 4/8/2024 FFCB Bond 3133ELC28 5/27/2020 2,000,000                           2,000,000 1.08%          1,845,540 0.73% 5/27/2023 5/27/2025 FHLMC Bond 3134GVYN2 6/3/2020             2,000,000              2,000,000 1.08%          1,870,200 0.60% 6/3/2023 12/3/2024 FHLMC Bond 3134GWZG4 10/20/2020 2,000,000                           2,000,000 1.08%          1,818,660 0.60% 4/20/2023 10/20/2025 FHLMC Bond 3134GW3X2 10/27/2020 2,000,000                           2,000,000 1.08%          1,818,960 0.63% 4/27/2023 10/27/2025 FHLMC Bond 3134GW6E1 11/2/2020 2,000,000                           2,000,000 1.08%          1,934,340 0.32% 5/2/2023 11/2/2023 FFCB Bond 3133EMFR8 11/3/2020 2,000,000                           2,000,000 1.08%          1,808,840 0.54% 5/3/2023 11/3/2025 FNMA Bond 3135GA4P3 11/18/2020 2,000,000                           2,000,000 1.08%          1,812,500 0.65% 5/18/2023 11/18/2025 FHLMC Bond 3134GXEJ9 11/24/2020 2,000,000                           2,000,000 1.08%          1,811,200 0.64% 5/24/2023 11/24/2025 FFCB Bond 3133EMHF2 11/24/2020 1,000,000                           1,000,000 0.54%             904,560 0.60% 5/24/2023 11/24/2025 FHLMC Bond 3134GXCS1 11/25/2020 3,000,000                           3,000,000 1.62%          2,715,450 0.63% 5/25/2023 11/25/2025 FHLMC Bond 3134GXFA7 11/30/2020 2,000,000                           2,000,000 1.08%          1,811,480 0.65% 5/26/2023 11/26/2025 FFCB Bond 3133EMLC4 12/22/2020 2,000,000                           2,000,000 1.08%          1,803,300 0.47% 6/22/2023 12/22/2025 FHLB Bond 3130AKQ74 1/22/2021 2,000,000                           2,000,000 1.08%          1,803,660 0.63% 7/22/2023 1/22/2026 FNMA Bond 3135G06R9 1/28/2021 2,000,000                           2,000,000 1.08%          1,798,720 0.55% 7/28/2023 1/28/2026 FHLB Bond 3130AKRN8 1/28/2021 2,000,000                           2,000,000 1.08%          1,804,240 0.65% 7/28/2023 1/28/2026 FHLB Bond 3130ALCV4 2/24/2021 2,000,000                           2,000,000 1.08%          1,802,000 0.75% 2/24/2023 2/24/2026 FHLB Bond 3130ALDB7 2/25/2021 2,000,000                           2,000,000 1.08%          1,796,780 0.66% 2/25/2023 2/25/2026 FHLB Bond 3130AKZ25 2/26/2021 2,000,000                           2,000,000 1.08%          1,796,060 0.65% 2/26/2023 2/26/2026 FHLB Bond 3130ALGS7 3/10/2021 2,000,000                           2,000,000 1.08%          1,809,100 0.85% 3/10/2023 3/10/2026 FHLB Bond 3130ALEP5 3/16/2021 2,000,000                           2,000,000 1.08%          1,799,720 0.70% 3/16/2023 3/16/2026 FHLB Bond 3130ALDN1 3/16/2021 2,000,000                           2,000,000 1.08%          1,805,480 0.80% 3/16/2023 3/16/2026 FHLB Bond 3130AMNH1 6/9/2021             2,000,000              2,000,000 1.08%          1,813,560 1.08% 6/9/2023 6/9/2026 FHLB Bond 3130AMYJ5 6/30/2021 2,000,000                           2,000,000 1.08%          1,806,260 1.00% 6/30/2023 6/30/2026 FHLB Bond 3130AMYP1 7/15/2021 3,000,000                           3,000,000 1.62%          2,712,720 1.13% 7/15/2023 7/15/2026 FHLB Bond 3130AMYS5 7/15/2021 2,000,000                           2,000,000 1.08%          1,843,420 0.85% 7/15/2023 7/15/2025 FHLB Bond 3130ANJC5 8/26/2021 2,000,000                           2,000,000 1.08%          1,781,920 0.80% 2/26/2023 8/26/2026 FHLB Bond 3130ANLW8 8/26/2021 3,000,000                           3,000,000 1.62%          2,692,230 1.00% 2/26/2023 8/26/2026 FHLB Bond 3130ANLZ1 8/26/2021 2,000,000                           2,000,000 1.08%          1,788,420 0.90% 2/26/2023 8/26/2026 FHLB Bond 3130A8XY4 9/13/2021 2,103,340                           2,074,717 1.12%          1,861,500 0.82% 3/11/2023 9/11/2026 FFCB Bond 3133EM4X7 9/28/2021 1,982,960                           1,987,579 1.07%          1,792,000 0.98% 3/10/2023 9/10/2026 FHLB Bond 3130APCH6 9/29/2021 3,000,000                           3,000,000 1.62%          2,701,110 1.13% 3/29/2023 9/29/2026 FHLB Bond 3130ANZE3 9/30/2021 2,000,000                           2,000,000 1.08%          1,782,980 0.88% 3/30/2023 9/30/2026 FHLB Bond 3130AP6N0 9/30/2021 3,000,000                           3,000,000 1.62%          2,693,640 1.05% 3/30/2023 9/30/2026 FHLB Bond 3130AP6M2 9/30/2021 3,000,000                           3,000,000 1.62%          2,690,670 1.02% 3/30/2023 9/30/2026 FHLB Bond 3130APCG8 10/19/2021 2,000,000                           2,000,000 1.08%          1,790,540 1.00% 4/19/2023 10/19/2026 FHLB Bond 3130APNX9 11/18/2021 2,000,000                           2,000,000 1.08%          1,812,320 1.30% 5/18/2023 11/18/2026 FHLB Bond 3130AQFL2 12/29/2021 2,000,000                           2,000,000 1.08%          1,926,700 0.75% 6/29/2023 12/29/2023 FHLB Bond 3130AQHU0 1/19/2022 2,000,000                           2,000,000 1.08%          1,849,000 1.74% 7/19/2023 1/19/2027 FHLB Bond 3130AQKT9 1/25/2022 2,000,000                           2,000,000 1.08%          1,880,300 1.51% 7/25/2023 7/25/2025 FHLB Bond 3130AR4F5 3/10/2022 2,000,000                           2,000,000 1.08%          1,920,500 3.48% 3/10/2023 3/10/2027

Investment Settlement Cost Book % of Market YTM Next Call Date of Type CUSIP Date Value Value Portfolio Value at Cost Date Maturity FHLB Bond 3130ARH20 3/30/2022 3,000,000                           3,000,000 1.62% 2,986,830           1.62% 3/30/2023 3/30/2023 FHLMC Bond 3137EAES4 5/3/2022             1,954,860              1,984,152 1.07%          1,963,680 2.25% 6/26/2023 6/26/2023 FHLB Bond 3130ASB65 5/27/2022 3,000,000                           3,000,000 1.62%          2,994,840 1.88% 2/23/2023 2/23/2023 FHLMC Bond 3134GXUZ5 6/15/2022 2,000,000                           2,000,000 1.08%          1,940,740 3.28% 6/15/2023 12/15/2025 FHLB Bond 3130ASPE3 7/28/2022 2,000,000                           2,000,000 1.08%          1,962,240 4.30% 7/28/2023 7/28/2027 FNMA Bond 3135GACZ2 11/25/2022 2,000,000                           2,000,000 1.08%          1,997,820 5.40% 5/25/2023 11/25/2024 FHLMC Bond 3134GY4B5 11/28/2022 2,000,000                           2,000,000 1.08%          1,992,520 5.00% 5/15/2023 11/15/2023 FFCB Bond 313312MF4 12/19/2022 1,930,440                           1,941,047 1.05%          1,938,500 4.65% 9/27/2023 9/27/2023 FHLMC Bond 3134GYC26 12/29/2022 2,000,000                           2,000,000 1.08%          1,992,720 4.80% 6/29/2023 12/29/2027 FHLB Bond 313384ED7 1/6/2023             1,976,552              1,982,788 1.07%          1,982,420 4.59% 4/10/2023 4/10/2023 FHLB Bond 313384CP2 1/6/2023             1,986,622              1,992,594 1.07%          1,992,220 4.35% 3/3/2023 3/3/2023 FHLB Bond 313384JC4 1/13/2023 1,953,994                           1,958,544 1.06%          1,957,120 4.72% 7/14/2023 7/14/2023 FHLB Bond 3130AUFT6 1/27/2023 2,000,000                           2,000,000 1.08%          2,002,480 5.43% 4/27/2023 1/27/2025 FHLB Bond 3130AUP32 1/27/2023 2,250,000                           2,250,000 1.21%          2,248,493 5.98% 4/27/2023 1/27/2028 FHLMCMTN Bond 3134GYGB2 1/30/2023 2,000,000                           2,000,000 1.08%          2,000,320 5.20% 10/26/2023 1/26/2028 Sub Total/Average $     148,269,203 $       148,739,003 80.15% 140,182,777 $   1.89% Money Market $         2,112,770 $           2,112,770 1.14% 2,112,770 $        4.23% Total City Managed/Average $     172,118,262 $       172,588,062 88.65% 163,777,611 $   2.09% Bond Reserve Accounts ‐ Held By Trustees $         6,788,452 $           6,788,452 3.66% 6,788,452 $ Cash/Deposits $           (587,148) $              ‐ (587,148) 0.32% $         (587,148) PARS and CALPERS CERBT Trust $         6,787,404 $           6,787,404 3.66% 7,390,486 $ GRAND TOTAL/AVERAGE $     185,106,970 $       185,576,771 100% 177,369,402 $

CITY OF MORGAN HILL CASH AND INVESTMENT REPORT
FOR THE MONTH OF JANUARY 31, 2023
FOR THE FISCAL YEAR OF 2022-23
Invested Book Value % of Market
in Fund Yield End of Month Total Value
Investments
State Treasurer LAIF - City All Funds Pooled 2.43% 7,262,310 $ 3.91% $ 7,127,153 2015 Wastewater Rev Bonds - CIP Wastewater Fund 2.43% 6,397,791 3.45% 6,278,723 California CLASS All Funds Pooled 4.52% 8,076,188 4.35% 8,076,188 Federal Issues All Funds Pooled 1.81% 119,171,422 64.22% 112,428,887 US Treasury Notes All Funds Pooled 2.05% 22,115,001 11.92% 20,323,115 US Treasury Bills All Funds Pooled 3.10% 7,452,581 4.02% 7,430,775 Dreyfus Treas Cash Management Acct All Funds Pooled 4.23% 2,112,770 1.14% 2,112,770 SUBTOTAL $ 172,588,062 93.00% 163,777,611 $
Bond Reserve Accounts - held by trustees
Zions Bank - Civic Center/Library Facility
Blackrock Liq Fund Debt Service 3.80% 312 0.00% 312
Zions Bank - MH Police Facility Lease Revenue Bonds
Blackrock Liq Fund Debt Service 3.80% 396 0.00% 396
BNY - RDA Bonds
Dreyfus Cash Mgmt 521 Agency Fund 0.00% 6,262,044 3.37% 6,262,044 Zions Bank - MH Ranch 2015
Blackrock Liq Funds Fed Fund -DI -2015 Agency Fund 3.80% 259,202 0.14% 259,202 Zions Bank - Madrone Bus Park Taxable/ Tax Exempt 2015
Blackrock Liquidity Temp Fund-2015 Agency Fund 3.80% 266,499 0.14% 266,499 SUBTOTAL 6,788,452 3.66% 6,788,452
Other Cash/Deposits
General Checking All Funds (633,148) -0.34% (633,148)
Workers' Comp Administrators Workers' Comp 30,000 0.02% 30,000 Petty Cash & Emergency Cash General Fund 16,000 0.01% 16,000 CALPERS CERBT - OPEB Trust 4,487,404 2.42% 4,900,333
PARS - PENSION Trust 1.24% 2,490,153 2,300,000
SUBTOTAL 6,200,256 3.34% 6,803,338
Total Cash and Investments 185,576,771 $ 100.00% $ 177,369,402

CASH ACTIVITY SUMMARY
FY 2022-23
07/1/22 Change in 1/31/2023
Fund Type Balance Cash Balance Balance
General Fund 26,535,041 $ 2,802,456 $ 29,337,497 $
Community Development 1,919,696 149,482 2,069,179
Housing Successor Agency/ CDBG 4,670,910 (239,429) 4,431,481 Water - Operations 2,980,708 1,450,495 4,431,203
Water Other 18,208,344 2,355,985 20,564,329
Sewer - Operations 1,663,439 (35,964) 1,627,475
Sewer Other 50,357,493 (2,701,456) 47,656,037
Other Special Revenue 8,482,063 187,393 8,669,456
Streets and Capital Projects (except RDA) 38,126,094 (2,707,789) 35,418,306 Debt Service 339,861 (154,169) 185,692
Internal Service 21,185,083 1,334,264 22,519,346
Agency Funds (assessment dists./refundable deposits) 9,072,901 (406,132) 8,666,769 Total $ 183,541,633 $ 2,035,138 $ 185,576,771
Note: See Investment Porfolio Detail for maturities of "Investments." Market values are obtained from the City's investment brokers' monthly reports.

I certify the information on the investment reports has been reconciled to the general ledger and bank statements and that there are sufficient funds to meet the expenditure requirements of the City for the next six months. The portfolio is in compliance with the City of Morgan Hill investment policy and all State laws and regulations.

Prepared by: ____________________________________ Approved by:

Gina Nazareno, Senior Accountant
Reviewed by: ____________________________________
Dat Nguyen, Finance Director Caitlin Jachimowicz, Treasurer

City of Morgan Hill
Year to Date Revenues - Fiscal Year 2022-23
For The Month Ended January 31, 2023
58% of Year Complete

CURRENT INCR (DECR)
ADOPTED AMENDED YTD % PRIOR FROM PRIOR %

BUDGET BUDGET ACTUAL OF BUDGET YTD YTD CHANGE
010 GENERAL FUND
TAXES
Property Tax - Secured/Unsecured $ 14,753,873 14,753,873 $ 6,836,592 46% $ 6,492,699 $ 343,894 5% Property Tax - RPTTF Residual Distribution 2,429,832 2,429,832 987,196 41% 808,731 178,466 22% Property Tax - Supplemental Roll 200,000 200,000 195,456 98% 71,230 124,225 174% Sales Tax 11,950,308 11,950,308 5,300,697 44% 4,834,237 466,460 10% Public Safety Sales Tax 445,105 445,105 153,891 35% 191,608 (37,717) -20% Transient Occupancy Taxes 2,600,000 2,600,000 1,309,950 50% 1,310,992 (1,042) 0% Franchise (Refuse ,Cable ,PG&E) 2,760,000 2,760,000 980,611 36% 971,018 9,593 1% Property Transfer Tax 500,000 500,000 198,276 40% 388,040 (189,764) -49% TOTAL TAXES 35,639,118 35,639,118 15,962,669 45% 15,068,556 894,114 6%

LICENSES/PERMITS
Business License 170,000 170,000 133,828 79% 163,512 (29,684) -18% Other Permits 53,975 53,975 222,727 413% 3,630 219,097 6036% TOTAL LICENSES/PERMITS 223,975 223,975 356,555 159% 167,142 189,413 113%

FINES AND PENALTIES
Parking Enforcement 2,932 2,932 3,061 104% 1,977 1,083 55% Bails & Fines 46,480 46,480 21,663 47% 21,340 323 2%
Administrative Citations 20,000 20,000 7,028 35% - 7,028 0% TOTAL FINES AND PENALTIES 69,412 69,412 31,752 46% 23,318 8,434 36%

OTHER AGENCIES
Motor Vehicle in-Lieu 40,000 40,000 n/a - - n/a -
Other Revenue - Other Agencies 1,304,130 1,304,130 491,574 38% 242,263 249,311 103% TOTAL OTHER AGENCIES 1,344,130 1,344,130 491,574 37% 242,263 249,311 103%

CHARGES CURRENT SERVICES
Police False Alarm Charge 32,280 32,280 18,973 59% 16,879 2,094 12% Business License Application Review 53,000 53,000 27,019 51% 24,377 2,642 11% Membership Services & Rec Programs 5,136,869 5,136,869 2,940,304 57% 2,400,054 540,250 23% Facility Rentals 819,459 819,459 660,645 81% 312,322 348,323 112% Community Services 127,498 127,498 38,823 30% 98,830 (60,007) -61% General Administration Overhead 1,775,408 1,775,408 1,035,655 58% 1,068,844 (33,189) -3% Other Charges Current Services 998,144 998,144 530,961 53% 437,011 93,950 21% TOTAL CURRENT SERVICES 8,942,658 8,942,658 5,252,380 59% 4,358,318 894,063 21%

OTHER REVENUE
Use of money/property 774,829 774,829 385,264 50% 301,834 83,430 28% Other Revenues 371,910 371,910 171,551 46% 160,740 10,811 7% TOTAL OTHER REVENUE 1,146,739 1,146,739 556,815 49% 462,574 94,241 20%

TRANSFERS IN
One Time Transfer 180,000 180,000 105,000 58% 61,250 43,750 71% Public Safety Facilities Fund 50,000 50,000 29,167 58% 58,324 (29,157) -50% Supplemental Law Enforcement Fund 100,000 100,000 100,000 100% 100,000 n/a - Countywide Solid Waste 355,000 355,000 207,083 58% 325,000 (117,917) -36% Streets 904,438 904,438 405,424 45% 324,267 81,156 25%
Park Maintenance 650,000 650,000 379,169 58% 379,169 n/a - Sewer Operations 375,000 375,000 218,750 58% 208,341 10,409 5% Water Operations 375,000 375,000 218,750 58% 208,341 10,409 5% Open Space 81,100 81,100 47,308 58% - 47,308 n/a
Park Development 75,000 75,000 43,750 58% - 43,750 n/a
TOTAL TRANSFERS IN 3,145,538 3,145,538 1,754,401 56% 1,708,442 45,959 3% TOTAL GENERAL FUND 50,511,570 50,511,570 24,406,147 48% 22,030,613 2,375,534 11%

SPECIAL REVENUE FUNDS
202 STREET MAINTENANCE
Gas Tax 2105 - 2107.5 909,478 909,478 413,734 45% 319,937 93,797 29% Interest / Other Revenue/Other Charges 5 58 8 2,143 3694% 394 1,749 444% 202 STREET MAINTENANCE 909,536 909,536 415,877 46% 320,331 95,545 30%

City of Morgan Hill
Year to Date Revenues - Fiscal Year 2022-23
For The Month Ended January 31, 2023
58% of Year Complete

CURRENT INCR (DECR)
ADOPTED AMENDED YTD % PRIOR FROM PRIOR %

BUDGET BUDGET ACTUAL OF BUDGET YTD YTD CHANGE

SPECIAL REVENUE FUNDS
205 SUPPLEMENTAL LAW ENFORCEMENT FUND
Interest Income 1,438 1,438 2,111 147% 589 1,522 258%
Police Grant/SLEF/JAG 100,000 100,000 98,605 99% 94,618 3,986 4% 205 SUPPLEMENTAL LAW ENFORCEMENT FUND 101,438 101,438 100,716 99% 95,207 5,508 6% 206 DEVELOPMENT SERVICES
Building Fees 3,433,600 3,433,600 2,248,518 65% 1,648,906 599,612 36% Planning Fees 1,259,167 1,259,167 454,254 36% 497,986 (43,732) -9% Engineering Fees 1,142,289 1,142,289 856,331 75% 361,430 494,902 137% Other Revenue/Current Charges 346,181 346,181 224,592 65% 112,311 112,281 100% 206 DEVELOPMENT SERVICES 6,181,237 6,181,237 3,783,695 61% 2,620,633 1,163,062 44% 207 LONG RANGE PLANNING 995,882 995,882 577,181 58% 406,411 170,770 42% 215 and 216 HCD BLOCK GRANT
Interest Income/Other Revenue 244 244 470 192% 167 302 181% 215 and 216 HCD BLOCK GRANT 244 244 470 192% 167 302 181% 225 ASSET SEIZURE 979 979 740 76% 361 380 105%
229 LIGHTING AND LANDSCAPE 199,916 199,916 110,675 55% 104,867 5,808 6% 230 COMMUNITY FACILITIES DISTRICT 37,591 37,591 26,714 71% 11,766 14,948 127% 232 ENVIRONMENTAL PROGRAMS 553,277 553,277 314,810 57% 307,233 7,577 2% 234 MOBILE HOME PARK RENT STAB. 441 441 6,105 1384% 7,982 (1,876) -24% 236 HOUSING MITIGATION 1,575,835 1,575,835 577,414 37% 827,680 (250,266) -30% 240 EMPLOYEE ASSISTANCE 20,673 20,673 4,751 23% 6,984 (2,232) -32% 246 COUNTYWIDE SOLID WASTE 1,628,603 1,628,603 803,802 49% 699,112 104,690 15% 247 ENVIRONMENT REMEDIATION 1,023 1,023 993 97% 1,225 (233) -19% 255 HOUSING SUCCESSOR AGENCY 233,641 233,641 260,628 112% 284,662 (24,035) -8% 260 PUBLIC ART 501 501 n/a - 1,100 (1,100) -100%
TOTAL SPECIAL REVENUE FUNDS 12,440,818 12,440,818 6,984,569 56% 5,695,721 1,288,848 23%

CAPITAL PROJECTS FUNDS
301 PARK DEVELOPMENT 1,369,271 1,369,271 1,645,268 120% 5,934,606 (4,289,337) -72% 302 PARK MAINTENANCE 540,773 540,773 507,669 94% 458,182 49,487 11% 303 LOCAL DRAINAGE 374,484 374,484 924,926 247% 585,911 339,015 58% 304 LOCAL DRAINAGE/NON AB1600 29,166 29,166 97,911 336% 86,905 11,006 13% 306 AGRICULTURE & OPEN SPACE PRESERVATION 5,058 5,058 51,218 1013% 120,474 (69,255) -57% 308 STREET CIP 5,662,650 5,662,650 2,560,069 45% 3,110,049 (549,980) -18% 309 TRAFFIC IMPACT 5,019,799 5,019,799 3,529,365 70% 6,726,984 (3,197,620) -48% 315 PUBLIC SAFETY FACILITIES IMPACT 6,221,575 6,221,575 86,764 1% 148,515 (61,751) -42% 346 PUBLIC FACILITIES NON-AB1600 1,165,537 1,165,537 382,591 33% 35,760 346,831 970% 347 PUBLIC FACILITIES IMPACT 138,168 138,168 25,144 18% 35,706 (10,561) -30% 348 LIBRARY 480,582 480,582 65,709 14% 161,665 (95,956) -59% 350 UNDERGROUNDING 29,592 29,592 12,098 41% 403,828 (391,731) -97% 355 SCHOOL PEDESTRIAN/TRAFFIC SAFETY 482,291 482,291 208,925 43% 29,720 179,205 603% 360 COMMUNITY/REC IMPACT FUND 1,335,488 1,335,488 319,991 24% 202,144 117,847 58% 375 QUIMBY FEE 653,451 653,451 1,547,270 237% 1,547,270 - n/a TOTAL CAPITAL PROJECTS FUNDS 23,507,885 23,507,885 11,964,918 51% 18,040,448 (6,075,530) -34%

DEBT SERVICE FUNDS
420 CIVIC CENTER DEBT 292,184 292,184 171,649 59% 178,367 (6,718) -4% 441 POLICE FACILITY BOND 387,490 387,490 226,114 58% 224,177 1,936 1% TOTAL DEBT SERVICE FUNDS 679,674 679,674 397,762 59% 402,544 (4,782) -1%

City of Morgan Hill
Year to Date Revenues - Fiscal Year 2022-23
For The Month Ended January 31, 2023
58% of Year Complete

CURRENT INCR (DECR)
ADOPTED AMENDED YTD % PRIOR FROM PRIOR %

BUDGET BUDGET ACTUAL OF BUDGET YTD YTD CHANGE

ENTERPRISE FUNDS
640 SEWER OPERATION
Sewer Service Fees 14,400,000 14,400,000 7,477,680 52% 7,176,755 300,925 4% Interest Income/Transfers 38,548 38,548 20,402 53% 5,723 14,679 256% Other Revenue/Current Charges 319,809 319,809 250,850 78% 198,057 52,793 27% 640 SEWER OPERATION 14,758,357 14,758,357 7,748,933 53% 7,380,535 368,398 5% 641 SEWER EXPANSION
Interest Income 64,455 64,455 173,506 269% 60,975 112,531 185% Development Impact Fee 4,336,657 4,336,657 505,602 12% 1,930,692 (1,425,090) -74% Transfer From-643 (Sewer Replacement) 13,310,782 13,310,782 3,748,942 28% - 3,748,942 n/a 641 SEWER EXPANSION 17,711,894 17,711,894 4,428,050 25% 1,991,667 2,436,383 122% 642 SEWER RATE STABILIZATION 50,000 50,000 49,692 99% 94,487 (44,796) -47% 643 SEWER-CAPITAL PROJECT 6,710,456 6,710,456 3,947,709 59% 2,754,522 1,193,187 43% TOTAL SEWER FUNDS 39,230,707 39,230,707 16,174,383 41% 12,221,212 3,953,172 32% 650 WATER OPERATION
Water Sales 16,400,000 16,400,000 8,667,639 53% 7,422,512 1,245,127 17% Meter Install & Service 50,000 50,000 63,278 127% 36,611 26,667 73% Transfers-In / Interest Income 580,372 580,372 351,530 61% 284,872 66,658 23% Other Revenue/Current Charges 614,770 614,770 442,534 72% 507,250 (64,717) -13% 650 WATER OPERATION 17,645,142 17,645,142 9,524,981 54% 8,251,245 1,273,735 15% 651 WATER EXPANSION
Interest Income/Other Revenue/Transfer 21,044 21,044 21,058 100% 8,764 12,294 140% Development Impact Fee 918,214 918,214 140,572 15% 341,051 (200,479) -59% 651 WATER EXPANSION 939,258 939,258 161,630 17% 349,815 (188,185) -54% 652 WATER RATE STABILIZATION - - 23,629 n/a 81,093 (57,464) -71% 653 WATER CAPITAL PROJECT 5,128,809 5,128,809 3,034,732 59% 2,959,590 75,142 3% TOTAL WATER FUNDS 23,713,209 23,713,209 12,744,972 54% 11,641,743 1,103,229 9% TOTAL ENTERPRISE FUNDS 62,943,916 62,943,916 28,919,355 46% 23,862,955 5,056,400 21%

INTERNAL SERVICE FUNDS
730 INFORMATION SYSTEMS 2,233,768 2,233,768 1,307,526 59% 1,312,657 (5,131) 0% 740 BUILDING MAINTENANCE 1,655,704 1,655,704 965,867 58% 659,621 306,246 46% 741 BUILDING REPLACEMENT 836,114 836,114 500,919 60% 410,063 90,856 22% 745 CIP ADMINISTRATION 1,977,307 1,977,307 1,060,606 54% 1,106,214 (45,608) -4% 760 UNEMPLOYMENT INSURANCE 2,317 2,317 2,173 94% 840 1,333 159% 770 WORKERS COMPENSATION 719,150 719,150 514,043 71% 444,608 69,435 16% 790 EQUIPMENT REPLACEMENT 2,219,595 2,219,595 1,622,284 73% 654,094 968,189 148% 791EMPLOYEE BENEFITS 813,718 813,718 473,120 58% 355,179 117,941 33% 795 GENERAL LIABILITY INSURANCE 1,981,019 1,981,019 1,158,543 58% 1,003,144 155,399 15% TOTAL INTERNAL SERVICE FUNDS 12,438,692 12,438,692 7,605,082 61% 5,946,421 1,658,661 28% TOTAL FOR ALL FUNDS 162,522,555 $ 162,522,555 $ 80,277,833 $ 49% 75,978,702 $ 4,299,131 $ 6%

City of Morgan Hill
Year to Date Expenses - Fiscal Year 2022-23
For the Month Ended January 31, 2023
58% of Year Complete

CURRENT

FUND MONTH PERCENT OF
NO. FUND/ACTIVITY ACTUAL AMENDED YTD OUTSTANDING TOTAL TOTAL TO PRIOR

EXPENSES BUDGET EXPENSES ENCUMBRANCE ALLOCATED BUDGET YTD 010 GENERAL FUND
I. ADMINISTRATION
CITY COUNCIL 17,335 $ 430,915 $ 251,675 $ - $ 251,675 $ 58% 224,067 $ CITY ATTORNEY 64,359 1,081,769 453,995 160,604 614,599 57% 401,870 CITY MANAGER 46,618 854,800 356,068 10,150 366,218 43% 362,885 HUMAN RESOURCES 59,508 847,361 473,575 - 473,575 56% 404,758

COUNCIL SVCS & RECORDS MGMT
Council Svcs & Records Mgmt 47,160 595,414 315,410 1,600 317,010 53% 351,760 Elections 198,410 357,836 208,160 - 208,160 58% 13,941
COUNCIL SVCS & RECORDS MGMT 245,570 953,250 523,570 1,600 525,170 55% 365,700 FINANCE 137,684 2,552,145 996,807 649,993 1,646,800 65% 907,710 TOTAL ADMINISTRATION 571,075 6,720,240 3,055,690 822,347 3,878,037 58% 2,666,991 II. COMMUNITY SERVICES
Membership Services & Rec. Programs 397,841 6,772,195 3,513,431 918,537 4,431,967 65% 2,877,255 Recreation Facility Rentals 32,645 546,870 285,940 31,325 317,265 58% 307,660 Innovative Transit 56,532 887,471 250,687 601,332 852,019 96% - Community Services 38,434 644,107 314,361 58,559 372,920 58% 288,050 Park Maintenance 89,496 1,495,918 707,301 56,250 763,551 51% 598,513 Environmental Services 29,397 390,733 140,459 - 140,459 36% 120,516 Countywide Solid Waste Program 29,901 354,416 206,149 - 206,149 58% 95,925 Street Maintenance 316,866 2,710,389 1,342,416 119,056 1,461,472 54% 1,235,007 Downtown Maintenance 14,949 325,886 102,417 18,987 121,404 37% 155,309 Cable Television 14,328 74,758 23,674 - 23,674 32% 19,173 COMMUNITY SERVICES 1,020,389 14,202,742 6,886,835 1,804,046 8,690,881 61% 5,697,408 CODE COMPLIANCE 18,884 319,550 104,270 - 104,270 33% 101,686 INFRASTRUCTURE PLANNING & CONGESTION MGMT 491,888 24,462 180,282 8,031 188,313 38% 172,923 ECONOMIC DEVELOPMENT PROGRAMS 58,902 1,207,348 462,062 44,166 506,228 42% 411,432 TOTAL COMMUNITY SERVICES 1,122,637 16,221,529 7,633,449 1,856,243 9,489,692 59% 6,383,450 III. PUBLIC SAFETY
POLICE
PD Administration 104,584 1,676,697 887,282 38,311 925,593 55% 981,936 Field Operations 761,503 10,591,376 5,769,161 22,969 5,792,130 55% 5,300,715 Support Services 214,105 3,389,174 1,596,119 - 1,596,119 47% 1,498,329 Emergency Services/Haz Mat 17,562 234,368 120,603 - 120,603 51% 111,419 Special Operations 301,758 3,900,732 2,308,177 - 2,308,177 59% 1,560,573 Dispatch Services 154,989 2,116,137 1,170,875 - 1,170,875 55% 1,030,987 POLICE 1,554,500 21,908,484 11,852,216 61,280 11,913,496 54% 10,483,958 FIRE 763,228 8,653,847 4,845,459 378,524 5,223,983 60% 4,441,733 TOTAL PUBLIC SAFETY 2,317,728 30,562,331 16,697,675 439,804 17,137,479 56% 14,925,691 IV. TRANSFERS
Other 1,067,276 4,647,315 4,110,934 4,110,934 - 88% 3,046,125 TOTAL TRANSFERS 1,067,276 4,647,315 4,110,934 4,110,934 - 88% 3,046,125 TOTAL GENERAL FUND 5,078,717 58,151,414 31,497,748 3,118,394 34,616,142 60% 27,022,256

City of Morgan Hill
Year to Date Expenses - Fiscal Year 2022-23
For the Month Ended January 31, 2023
58% of Year Complete

CURRENT

FUND MONTH PERCENT OF
NO. FUND/ACTIVITY ACTUAL AMENDED YTD OUTSTANDING TOTAL TOTAL TO PRIOR

EXPENSES BUDGET EXPENSES ENCUMBRANCE ALLOCATED BUDGET YTD

SPECIAL REVENUE FUNDS
202 STREET MAINTENANCE 405,844 909,478 408,364 - 408,364 45% 326,794 205 PUBLIC SAFETY/SUPP.LAW 100,104 101,252 100,730 - 100,730 99% 104,228 206 DEVELOPMENT SERVICES FUND
Planning 133,605 1,772,972 929,786 931 930,717 52% 1,161,783 Building 209,901 2,452,139 1,259,649 134,548 1,394,196 57% 1,230,970 Engineering 130,349 1,907,855 933,494 277,521 1,211,016 63% 863,597 206 DEVELOPMENT SERVICES FUND 473,855 6,132,966 3,122,929 413,000 3,535,929 58% 3,256,350 207 LONG RANGE PLANNING 81,945 936,040 523,456 34,985 558,441 60% 349,241 215/216 CDBG 7 81 47 - 58% 47 3,206
225 ASSET SEIZURE 63 759 443 - 58% 443 14,232
229 LIGHTING AND LANDSCAPE 8,482 224,538 103,187 17,646 120,833 54% 93,356 230 COMMUNITY FACILITIES DISTRICT 1,488 39,852 19,070 - 19,070 48% 15,236 232 ENVIRONMENT PROGRAMS 40,953 525,533 285,478 12,290 297,768 57% 231,632 234 MOBILE HOME PARK 73 881 514 - 58% 514 259
236 HOUSING MITIGATION 63,170 1,900,261 458,984 166,786 625,770 33% 396,427 240 EMPLOYEE ASSISTANCE 3,340 20,919 7,730 - 7,730 37% 9,613 246 COUNTYWIDE SOLID WASTE PROGRAM 130,917 1,842,223 869,207 757,447 1,626,655 88% 615,036 255 HOUSING SUCCESSOR AGENCY 48,796 1,143,490 693,563 183,333 876,896 77% 644,544 260 PUBLIC ART 57 17,000 18,050 - 18,050 106% 3,993
TOTAL SPECIAL REVENUE FUNDS 1,359,095 13,795,273 6,611,751 1,585,488 8,197,240 59% 6,064,150

CAPITAL PROJECT FUNDS
301 PARK DEVELOPMENT - 2,961,569 672,472 277,463 949,934 32% 4,149,377 302 PARK MAINTENANCE 59,441 664,980 390,797 - 390,797 59% 394,165 303 LOCAL DRAINAGE 10,928 11,167,922 756,791 1,037,694 1,794,485 16% 37,090 304 LOCAL DRAIN. NON-AB1600 2,559 279,113 45,810 21,332 67,142 24% 2,085 306 AGRICULTURE & OPEN SPACE PRESERVATIO 275,854 10,488 73,415 - 73,415 27% 5,400,261 308 STREET CIP 513,866 8,318,556 6,812,727 1,021,660 7,834,387 94% 2,894,890 309 TRAFFIC IMPACT 465,880 9,301,872 4,126,884 5,124,624 9,251,507 99% 6,634,065 315 PUBLIC SAFETY FACILITIES IMPACT 177,534 10,050,626 548,990 386,034 935,024 9% 138,922 346 PUBLIC FAC.NON AB1600 1,259 3,413,224 24,131 466 24,598 1% 88,029 347 PUBLIC FACILITIES IMPACT 2,429 279,154 17,006 - 17,006 6% 15,939 348 LIBRARY IMPACT 18,576 222,916 130,034 - 130,034 58% 128,041 350 UNDERGROUNDING 95 1,194,704 666 - 666 0% 665
355 SCHOOL PEDESTRIAN & TRAFFIC SAFETY 4,359 443,838 41,322 1,350 42,672 10% 1,149,060 360 COMM/REC CENTER IMPACT 103,187 2,326,276 690,587 790,569 1,481,156 64% 218,671 375 QUIMBY FEE 102,510 1,564,865 176,764 249,634 426,398 27% 114 TOTAL CAPITAL PROJECTS FUNDS 1,473,111 52,465,468 14,508,397 8,910,827 23,419,224 45% 21,251,373

DEBT SERVICE FUNDS
420 CIVIC CENTER DEBT 1,032 292,184 236,106 - 236,106 81% 233,828 441 POLICE FACILITY BOND DEBT 1,327 387,490 317,903 - 317,903 82% 312,609 TOTAL DEBT SERVICE FUNDS 2,359 679,674 554,009 - 554,009 82% 546,437

City of Morgan Hill
Year to Date Expenses - Fiscal Year 2022-23
For the Month Ended January 31, 2023
58% of Year Complete

CURRENT

FUND MONTH PERCENT OF
NO. FUND/ACTIVITY ACTUAL AMENDED YTD OUTSTANDING TOTAL TOTAL TO PRIOR

EXPENSES BUDGET EXPENSES ENCUMBRANCE ALLOCATED BUDGET YTD

ENTERPRISE FUNDS
SEWER
640 SEWER OPERATIONS 951,475 16,300,411 8,969,493 132,817 9,102,310 56% 7,365,690 641 SEWER CAPITAL EXPANSION 84,890 32,172,615 2,440,496 1,089,320 3,529,816 11% 297,983 642 SEWER RATE STABILIZATION 151 1,818 1,060 - 1,060 58% 665 643 SEWER-CAPITAL PROJECTS (6,626,035) 23,759,295 6,405,685 746,204 7,151,889 30% 5,251,172 TOTAL SEWER FUND(S) (5,589,518) 72,234,139 17,816,734 1,968,341 19,785,075 27% 12,915,510 WATER
Water Operations 1,105,016 16,045,940 8,342,484 644,872 8,987,356 56% 7,766,859 Utility Billing 97,178 1,147,979 540,507 55,120 595,627 52% 505,300 Water Conservation 19,304 439,985 141,666 43,165 184,832 42% 62,719 650 WATER OPERATIONS 1,221,497 17,633,904 9,024,657 743,157 9,767,815 55% 8,334,878 651 WATER CAPITAL EXPANSION 59,823 893,125 417,624 20,315 437,939 49% 480,220 652 WATER RATE STABILIZATION 113 1,362 794 - 58% 794 217 653 WATER-CAPITAL PROJECTS 23,186 5,617,611 305,433 406,004 711,437 13% 543,193 TOTAL WATER FUND(S) 1,304,620 24,146,001 9,748,509 1,169,476 10,917,985 45% 9,358,509 TOTAL ENTERPRISE FUNDS (4,284,899) 96,380,140 27,565,243 3,137,817 30,703,060 32% 22,274,018

INTERNAL SERVICE FUNDS
730 INFORMATION SYSTEMS 140,975 2,619,930 1,197,624 134,825 1,332,449 51% 1,004,905 740 BUILDING MAINTENANCE 138,276 1,668,218 756,147 94,339 850,485 51% 603,732 741 BUILDING REPLACEMENT 20,484 1,836,451 89,010 56,894 145,904 8% 181,156 745 CIP ADMINISTRATION 143,828 1,982,153 1,055,523 11,290 1,066,813 54% 981,273 760 UNEMPLOYMENT - 15,000 10,642 - 10,642 71% 3,846
770 WORKERS COMPENSATION 40,584 1,106,358 656,847 - 656,847 59% 707,534 790 EQUIPMENT REPLACEMENT 48,019 1,805,964 374,085 266,014 640,098 35% 423,735 791 EMPLOYEE BENEFITS FUND 107,405 700,000 530,446 - 530,446 76% 536,268 795 GEN. LIABILITY INSURANCE 10,100 1,893,436 1,698,279 4,650 1,702,929 90% 1,493,139 TOTAL INTERNAL SERVICE FUNDS 649,672 13,627,510 6,368,601 568,011 6,936,613 51% 5,935,587 REPORT TOTAL $ 4,278,056 $ 235,099,480 $ 87,105,749 $ 17,320,537 $ 104,426,286 44% 83,093,822 $

City of Morgan Hill
Fund Activity Summary - Fiscal Year 2022-23
For The Month Ended January 31, 2023
58% of Year Complete
Beginning Year to-Date
Fund Fund Balance YTD % of YTD % of Deficit or
No. Fund 07-01-22 Actual Budget Actual Budget Carryover Reserved1 Unreserved 010 GENERAL FUND 33,685,888 $ 24,406,147 $ 48% 31,497,748 $ 54% (7,091,601) $ $ 3,118,394 $ 23,475,893 TOTAL GENERAL FUND 33,685,888 $ $ 24,406,147 48% $ 31,497,748 54% $ (7,091,601) $ 3,118,394 $ 23,475,893 202 STREET MAINTENANCE 63,915 $ 415,877 46% 408,364 $ 51% $ 7,512 $ - $ 71,427 205 PUBLIC SAFETY/SUPPL. LAW 251,291 100,716 99% 100,730 49% (15) - 251,276 206 DEVELOPMENT SERVICES (495,437) 3,783,695 61% 3,122,929 51% 660,766 413,000 (247,672) 207 LONG RANGE PLANNING 1,197,975 577,181 58% 523,456 56% 53,725 34,985 1,216,715 215 / 216 CDBG 29,812 470 192% 47 58% 422 - 30,234
225 ASSET SEIZURE 740 101,644 76% 443 58% 298 - 101,942 229 LIGHTING AND LANDSCAPE 190,530 110,675 55% 103,187 46% 7,489 17,646 180,372 230 COMMUNITY FACILITIES DISTRICT 132,368 26,714 71% 19,070 48% 7,644 - 140,012 232 ENVIRONMENTAL PROGRAMS 236,258 314,810 57% 285,478 54% 29,332 12,290 253,300 234 MOBILE HOME PK RENT STAB. 69,992 6,105 1384% 514 58% 5,591 - 75,583 235 SENIOR HOUSING 236,079 - n/a - n/a - - 236,079
236 HOUSING MITIGATION 5,879,386 577,414 37% 458,984 24% 118,430 166,786 5,831,030 240 EMPLOYEE ASSISTANCE 61,964 4,751 23% 7,730 37% (2,978) - 58,986 246 COUNTYWIDE SOLID WASTE 129,862 803,802 97% 869,207 47% (65,406) 757,447 (692,991) 247 ENVIRONMENT REMEDIATION 139,118 993 97% - n/a 993 - 140,111 255 HOUSING SUCCESSOR AGENCY 3,091,721 260,628 112% 693,563 61% (432,935) 183,333 2,475,452 260 PUBLIC ART 67,129 - n/a 18,050 106% (18,050) - 49,079 TOTAL SPECIAL REVENUE FUNDS $ 11,383,607 $ 6,984,569 56% $ 6,611,751 48% $ 372,817 $ 1,585,488 $ 10,170,936 301 PARK DEV. IMPACT FUND $ (822,989) $ 1,645,268 120% 672,472 $ 23% 972,797 $ $ 277,463 $ (127,655) 302 PARK MAINTENANCE 2,567,344 507,669 94% 390,797 59% 116,872 - 2,684,216 303 LOCAL DRAINAGE 11,596,359 924,926 247% 756,791 7% 168,135 1,037,694 10,726,800 304 LOCAL DRAINAGE/NON-AB1600 1,374,682 97,911 336% 45,810 16% 52,101 21,332 1,405,451 306 AG. AND OPEN SPACE PRESERVATION 51,218 589,238 1013% 73,415 27% (22,196) - 567,042 308 STREET CIP 5,741,205 2,560,069 45% 6,812,727 82% (4,252,658) 1,021,660 466,887 309 TRAFFIC IMPACT FUND 1,187,038 3,529,365 70% 4,126,884 44% (597,519) 5,124,624 (4,535,105) 315 PUBLIC SAFETY FACILITIES IMPACT 3,221,824 86,764 1% 548,990 5% (462,227) 386,034 2,373,563 346 PUBLIC FACILITIES NON-AB1600 2,878,803 382,591 33% 24,131 1% 358,459 466 3,236,796 347 PUBLIC FACILITIES IMPACT FUND 1,017,051 25,144 18% 17,006 6% 8,138 - 1,025,189 348 LIBRARY IMPACT FUND 1,444,583 65,709 14% 130,034 58% (64,325) - 1,380,258 350 UNDERGROUNDING 1,600,648 12,098 41% 666 0% 11,432 - 1,612,080 355 SCHOOL PEDESTRIAN/TRAFFIC SFTY (46,063) 208,925 43% 41,322 9% 167,602 1,350 120,189 360 COMM/REC CTR IMPACT FUND 1,295,025 319,991 24% 690,587 30% (370,596) 790,569 133,860 375 QUIMBY FEE 839,370 1,547,270 237% 176,764 11% 1,370,506 249,634 1,960,242 TOTAL CAPITAL PROJECT FUNDS $ 34,484,118 $ 11,964,918 51% $ 14,508,397 28% $ (2,543,479) $ 8,910,827 $ 23,029,812 420 CIVIC CENTER DEBT $ 173,445 $ 171,649 59% 236,106 $ 81% (64,457) $ $ 312 $ 108,677 441 POLICE FACILITY BOND DEBT 166,744 226,114 58% 317,903 82% (91,790) 396 74,558 TOTAL DEBT SERVICE FUNDS $ 340,189 $ 397,762 59% $ 554,009 82% $ (156,247) $ 707 $ 183,234 640 SEWER OPERATIONS $ 4,567,000 $ 7,748,933 53% 8,969,493 $ 55% (1,220,560) $ 132,817 3,213,623 641 SEWER IMPACT FUND* 20,552,531 4,428,050 25% 2,440,496 8% 1,987,554 1,089,320 21,450,765 642 SEWER RATE STABILIZATION 2,726,339 49,692 99% 1,060 58% 48,631 - 2,774,970 643 SEWER-CAPITAL PROJECTS 22,007,034 3,947,709 59% 6,405,685 27% (2,457,976) 746,204 18,802,854 650 WATER OPERATIONS 4,289,349 9,524,981 54% 9,024,657 51% 500,323 743,157 4,046,515 651 WATER IMPACT FUND* 2,924,596 161,630 17% 417,624 47% (255,994) 20,315 2,648,287 652 WATER RATE STABILIZATION 3,154,313 23,629 n/a 794 58% 22,835 - 3,177,148 653 WATER -CAPITAL PROJECT 10,397,946 3,034,732 59% 305,433 5% 2,729,299 406,004 12,721,241 TOTAL ENTERPRISE FUNDS $ 70,619,108 $ 28,919,355 46% $ 27,565,243 29% $ 1,354,112 $ 3,137,817 $ 68,835,404 730 INFORMATION SERVICES $ 795,800 $ 1,307,526 59% 1,197,624 $ 46% 109,902 $ $ 134,825 $ 770,877 740 BUILDING MAINTENANCE (166,058) 965,867 58% 756,147 45% 209,720 94,339 (50,676) 741 BUILDING REPLACEMENT 3,719,439 500,919 60% 89,010 5% 411,910 56,894 4,074,455 745 CIP ENGINEERING 8,327 1,060,606 54% 1,055,523 53% 5,084 11,290 2,120 760 UNEMPLOYMENT 316,781 2,173 94% 10,642 71% (8,469) - 308,312 770 WORKERS COMPENSATION 1,944,442 514,043 71% 656,847 59% (142,804) 30,000 1,771,638 790 EQUIPMENT REPLACEMENT 6,113,244 1,622,284 73% 374,085 21% 1,248,199 266,014 7,095,429 791 EMPLOYEE BENEFITS FUNDS (161,343) 473,120 58% 530,446 76% (57,325) - (218,668) 795 GEN. LIABILITY INSURANCE 1,123,565 1,158,543 58% 1,698,279 90% (539,736) 4,650 579,179 TOTAL INTERNAL SERVICE FUNDS $ 13,694,197 $ 7,605,082 61% $ 6,368,601 47% $ 1,236,481 $ 598,011 $ 14,332,666

SUMMARY BY FUND TYPE
GENERAL FUND GROUP 33,685,888 $ 24,406,147 $ 48% 31,497,748 $ 54% (7,091,601) $ $ 3,118,394 $ 23,475,893 SPECIAL REVENUE GROUP 11, 6,984,569 383,607 56% 6,611,751 48% 372,817 1,585,488 10,170,936 DEBT SERVICE GROUP 340,189 397,762 59% 554,009 82% (156,247) 707 183,234 CAPITAL PROJECTS GROUP 34,484,118 11,964,918 51% 14,508,397 28% (2,543,479) 8,910,827 23,029,812 ENTERPRISE GROUP 70,619,108 28,919,355 46% 27,565,243 29% 1,354,112 3,137,817 68,835,404 INTERNAL SERVICE GROUP 13,694,197 7,605,082 61% 6,368,601 47% 1,236,481 598,011 14,332,666 TOTAL ALL GROUPS 164,207,107 $ 80,277,833 $ 49% $ 37 87,105,749 % $ (6,827,916) $ 17,351,244 $ 140,027,946 For Enterprise Funds: Unrestricted fund balance = Fund balance net of fixed assets and long-term liabilities. *Unreserved fund balance includes bond proceeds reserved for projects listed in bond documents. 1 Amount restricted for encumbrances, fixed asset replacement, long-term receivables, and bond reserves.

Revenues Expenses Ending Fund Balance

17 CITY COUNCIL STAFF REPORT
MEETING DATE: March 15, 2023
PREPARED BY:

Cynthia Hasson, Assistant City Attorney
APPROVED BY: City Manager

TERMINATE LOCAL EMERGENCY PROCLAMATION

RECOMMENDATION(S)
Proclaim the termination of the local emergency related to the winter storms.

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Enhancing Public Safety
Preserving and Cultivating Public Trust
2022-2023 Strategic Priorities
Fiscal Sustainability
REPORT NARRATIVE:

The City of Morgan Hill experienced significant winter storms that commenced on December 31, 2022. Due to the extensive size of the storm, the Governor of California proclaimed a state of emergency throughout California on January 4, 2023. On January 5, 2023, the Morgan Hill Director of Emergency Services proclaimed a local emergency due to the ongoing winter storm causing damage throughout the City of Morgan Hill. City Council ratified the proclamation on January 11, 2023. Heavy rains, high winds, and flooding caused damage in several areas of the City. The emergency proclamation allowed the City’s emergency operations team to issue orders and regulations necessary to protect public health and safety. The proclamation also allows the City to seek reimbursement for activities taken in response to the emergency. The City expended extensive resources to support the protection of public infrastructure and to support the health and safety of its residents. Now that this winter storm event is concluded, staff recommends the City Council terminate the local emergency.

COMMUNITY ENGAGEMENT:

Inform. City staff took extensive action during the emergency to inform residents about the storm threat, including frequent e-mail and social media updates and operating a 24/7 call center specific to the storm.

17 ALTERNATIVE ACTIONS:

None. The City is required to proclaim the termination of the local emergency at the earliest possible date that conditions warrant.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

On January 5, 2023, the Director of Emergency Services proclaimed a local emergency due to the ongoing winter storm causing damage throughout the City of Morgan Hill.

City Council ratified the proclamation on January 11, 2023.

FISCAL AND RESOURCE IMPACT:

The estimated cost of the damage within the City is approximately $500,000. The City is currently working with FEMA to obtain financial assistance.

CEQA (California Environmental Quality Act):

Not a Project. This is an organizational or administrative activity of government that will not result in direct or indirect physical changes in the environment.

18 CITY COUNCIL STAFF REPORT
MEETING DATE: March 15, 2023
PREPARED BY:

Dat Nguyen, Finance Director
APPROVED BY: City Manager

ADOPT UPDATED WATER CAPACITY (IMPACT) FEES

RECOMMENDATION(S)

1. Open/Close Public Hearing; and

2. Adopt resolution approving the 2023 NBS Water Capacity Fee Analysis and updating the Water Capacity (Impact) Fee as proposed in the study.

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Maintaining and Enhancing Infrastructure
2022-2023 Strategic Priorities
Fiscal Sustainability
Guiding Documents
Water System Master Plan
REPORT NARRATIVE:

The City engaged NBS to conduct a water capacity (impact) fee study in conjunction with the recent water rate study update for two primary reasons: (1) to ensure that the fees are updated to comply with legal requirements and industry standards, and (2) to ensure that these fees reflect the cost of capital infrastructure needed to serve new connections or any person requesting additional capacity in the City’s water utility.

The fees updated in this study are commonly referred to as “connection fees,” “development impact fees,” “capital facility fees,” or, in this case, “capacity fees.” The terms are often used interchangeably, and California Government Code Section 66013 defines these types of fees (referred to as a “capacity charge”) as a one-time “charge for public facilities in existence at the time a charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense relating to its use of existing or new public facilities.” Whereas water rate increases imposed on existing customers require a protest ballot

18 under Proposition 218, capacity fees do not because they are considered an appropriate funding mechanism for facilities that benefit new development citywide.

Therefore, these fees may be imposed by a majority vote of the governing legislative body which, in this case, is the Morgan Hill City Council.

NBS has calculated the new water capacity fees by meter size. A typical residential home uses the meter size of 5/8 to 1 inch. The proposed updated water capacity fee as calculated by NBS is $11,692 per unit/meter versus an existing fee of $4,908. The City uses capacity fee proceeds to fund capital investments in the water system, which include the future design and construction of planned facilities. The City has made investments in water infrastructure and plans to invest further in expanded and upgraded facilities. These investments make possible the availability and continued reliable service of high-quality water sufficient to meet the demands of growth within the City’s service area. Significant inflationary and regulatory factors are driving increased capital costs, which are partially driving increased fees. Without these fees being increased for development, the City will not have appropriate resources to properly fund the required expansion of the system for that new development, which will put the City’s water system and ratepayers at risk in the future.

The table below shows the proposed updated water capacity fees by meter size:

Meter Size Capacity Fee Per Meter Size
5/8-
1 inch meter
$11,692

1.5-
inch meter
$23,385
2-
inch meter
$37,415
3-
inch meter
$74,830
4-
inch meter
$116,923
6-
inch meter
$233,845
8-
inch meter
$374,152
COMMUNITY ENGAGEMENT:

Inform
Public Notices related to water capacity fees consideration by the City Council have been distributed and advertised in accordance with the provisions of Sections 66016 through 66018 of the California Government Code.

A virtual public meeting with the developers and community members was held on

18 February 9, 2023.

ALTERNATIVE ACTIONS:

The City Council could direct staff to make adjustments to the proposed updated water capacity fees, phase in the increases, or delay updating the fees.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

December 5, 2007, City Council adopted updated certain impact fees, including Water Capacity Fee.

FISCAL AND RESOURCE IMPACT:

The fiscal impact of preparing this report is included in the staff’s annual workplan. The proposed updated water capacity fees would provide sufficient funding from new development for capital improvements related to that development. The effective date of the updated fees will be 60 days from the adoption date by the City Council.

CEQA (California Environmental Quality Act):

Not a Project
The creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project that may result in a potentially significant physical impact on the environment.

WATER AND WASTEWATER

CONNECTION FEE ANALYSIS
Administrative Draft Report
October 2018
OFFICE LOCATIONS:

Temecula – Corporate Headquarters
32605 Temecula Parkway, Suite 100
Temecula, CA 92592
San Francisco – Regional Office
870 Market Street, Suite 1223
San Francisco, CA 94102
California Satellite Offices
Atascadero, Davis
Huntington Beach,
Joshua Tree, Riverside
Sacramento, San Jose
www.nbsgov.com

FINAL REPORT
Water Capacity Fee Analysis
City of Morgan Hill
January 2023

Prepared by NBS – January 2023 TOC
Water Capacity Fee Study Report – City of Morgan Hill

TABLE OF CONTENTS
Table of Figures .................................................................................................................................1 Section 1. Executive Summary............................................................................................................1 Background and Purpose................................................................................................... 1 Overview of Capacity Fee Program Methodology................................................................ 1 Section 2. Water Capacity Fee Study...................................................................................................3 Existing Connections and Projected Future Growth............................................................. 3 Existing and Planned Assets............................................................................................... 4 Adjustments to the Cost Basis............................................................................................ 6 Calculated Capacity Fees ................................................................................................... 7 Water Capacity Fee Findings Statements............................................................................ 8 Section 3. Recommendations and Next Steps......................................................................................9 Consultant Recommendations and Next Steps.................................................................... 9 Principal Assumptions and Considerations.......................................................................... 9 Appendix - Water Capacity Fee Study Summary Tables.....................................................................10

Prepared by NBS – January 2023 TOF
Water Capacity Fee Study Report – City of Morgan Hill
Table of Figures
Figure Page
Figure 1. Current Water Customers..............................................................................................................3 Figure 2. Existing and Projected Service Numbers .......................................................................................4 Figure 3. Summary of Existing Asset Values .................................................................................................5 Figure 4. Planned Assets Allocated to Current & Future Customers............................................................6 Figure 5. Cash Reserves Allocated to Future Customers..............................................................................6 Figure 7. Summary of Cost Basis Allocated to Future Customers ................................................................7 Figure 8. Summary of New Base Capacity Fees............................................................................................7 Figure 9. Updated Water Capacity Fees .......................................................................................................8

Prepared by NBS – January 2023 1
Water Capacity Fee Study Report – City of Morgan Hill
Section 1. Executive Summary
Background and Purpose
The City of Morgan Hill retained NBS to conduct a water capacity fee study in conjunction with the recent water rate study update for two primary reasons: (1) to ensure that the fees are updated to comply with legal requirements and industry standards, and (2) to ensure that these fees reflect the cost of capital infrastructure needed to serve new connections or any person requesting additional capacity in the City’s water utility (referred to throughout as “future customers”).

The fees updated in this study are commonly referred to as “connection fees,” “development impact fees,” “capital facility fees,” or, in this case, “capacity fees.” The terms are often used interchangeably, and California Government Code Section 66013 defines these types of fees (referred to as a “capacity charge”) as a one-time “charge for public facilities in existence at the time a charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense relating to its use of existing or new public facilities.”
This authorizes public agencies to impose capacity fees on customers connecting to, or upsizing their connection to the water system, to ensure that they pay their fair share of existing utility asset costs plus the costs of new facilities needed to serve them. In its simplest form, capacity fees are the result of dividing the cost (or value) of the Utility’s current system assets, plus planned capital improvements, by the expected number of future customers. As a result, future customers connecting to the City’s water utility would enter as equal participants with current customers regarding their financial commitment and obligations to the Utility.

Whereas water rate increases imposed on existing customers require a protest ballot under Proposition 218, capacity fees do not because they are considered an appropriate funding mechanism for facilities that benefit new development citywide. Therefore, these fees may be imposed by a majority vote of the governing legislative body which, in this case, is the Morgan Hill City Council. This report provides the documentation and findings necessary for the adoption of the proposed capacity fees.

Overview of Capacity Fee Program Methodology
Various methodologies have been and are currently used to calculate water capacity fees. The following lists the most common methodologies from the American Water Works Association’s Principles of Water Rates, Fees, and Charges,
1 also referred to as Manual M1:
• The value of existing (historical) system assets, often called a “system buy-in” methodology. • The value of planned future improvements, also called the “incremental” or “system development” methodology.
1 Principles of Water Rates, Fees, and Charges, Manual of Water Supply Practices, Manual M1, American Water Works Association (AWWA), Seventh Edition, 2017.

Prepared by NBS – January 2023 2
Water Capacity Fee Study Report – City of Morgan Hill
• A combination of these two approaches.

This analysis uses the “Combination Approach,”
2 which requires new customers to pay both their fair
share of existing system assets as well as their share of the planned future capital improvements needed to provide them with capacity in the City’s water system. • Costs of planned future facilities and improvements required to serve new development are those that can reasonably be allocated to future development. • The number of new units (i.e., growth) are those units projected to occur within the timeframe covered by the capacity fee analysis.

Capacity fees are one-time fees intended to reflect the cost of existing infrastructure and planned improvements available to new services which place new utility customers, or existing customers requesting an increase in service capacity, on equal basis with existing rate customers. Once new customers are added to the system, they then incur the obligation to pay the same service charges or water rates that existing customers pay.

This capacity fee study and the recommended fees assume a given level of development activity over the course of the study period based on data available from the City’s 2021 Water Supply Master Plan. The development that occurs may result in both different impacts and fee revenues than those that are calculated in this study. For that reason, regular updates are recommended to adjust the fees to match the needs created by the rate of actual development.

In developing the proposed fees, NBS worked cooperatively with City staff. The fees presented in this study reflect input provided by City staff regarding financial matters, available capacity in the water system, existing asset values, and planned capital improvements.

Section 2 discusses in more detail the development of the water capacity fees and presents the updated fees recommended for new and upsized connections.
2 Method of calculating capital facility fees (also known as System Development Fees, Connection Fees, Capacity Fees) are set forth in the American Water Works Association’s Principles of Water Rates, Fees and Charges, Seventh Edition (2017), pages 311 to 347.

Prepared by NBS – January 2023 3
Water Capacity Fee Study Report – City of Morgan Hill
Section 2. Water Capacity Fee Study
Existing Connections and Projected Future Growth
The City currently has approximately 17,086 equivalent 1-inch water meters connected to the water system. The City has now implemented 1-inch meters as the standard (or base) meter size installed, but there are over 13,000 5/8- and 3/4-inch meters connected to the system. For the purpose of this study, 5/8- and 3/4-inch meters are treated the same as 1-inch meters, which is a common industry practice when setting rates and fees for smaller meter sizes. Figure 1 shows the current number of meters connected to the system by size, meter equivalency factors, and meter equivalent units.

Figure 1. Current Water Customers
Larger meters have the potential to use more of the system’s capacity compared to smaller meters. The potential capacity demanded by each meter is proportional to the maximum hydraulic flow through each meter size as established by AWWA’s hydraulic capacity ratios. The hydraulic capacity ratios (also known as flow factors or meter equivalencies) used in this study are shown in the fourth column of Figure 1. The maximum flow rate, in gallons per minute (gpm) for each size meter, is used to determine the number of equivalent 1-inch meter units currently connected to the water system.

For example, a 2-inch meter has a greater capacity, or potential peak demand, than a 1-inch meter. The “equivalency to a 1-inch meter” is calculated by dividing the maximum capacity or flow of larger meters by the capacity of the base (1-inch) meter size. The meter capacity factors shown in Figure 1 are the ratio of potential flow through each meter size compared to the flow through a 1-inch meter. The 1-inch meter is the base meter size for the Utility and is used to compare the capacities of the larger meters. For instance, column 4 in Figure 1 shows that the equivalency of a 2-inch meter is 3.20 times greater compared to a 1-inch meter.

The actual number of meters by size is multiplied by the corresponding meter equivalency 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. A significant portion of a water system’s peak capacity and, in turn, the Utility’s fixed capital costs, is related to meeting system capacity Maximum
Flow (gpm)2
Equivalency
to 1-inch
meter
5/8-1 inch meter 13,684 50 1.00 13,684

1.5-inch meter 401 100 2.00 802
2-inch meter 609 160 3.20 1,949
3-inch meter 14 320 6.40 90
4-inch meter 43 500 10.00 430
6-inch meter 5 1,000 20.00 100
8-inch meter 1 1,600 32.00 32
Total 14,757 17,086

1. Number of meters by size and customer class for May 2021.

2. Meter flow rates are from AWWA M-1 Table B-1.

Meter Size
Meter Equivalence 1-inch Meter
Equivalent
Units
Existing
Water
Meters1

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Water Capacity Fee Study Report – City of Morgan Hill
requirements. Therefore, the capacity fee for a new connection will be proportional to the service’s meter equivalence.

The equivalent meter calculation is summarized for standard use meters in Figure 1. Given that the State now requires fire suppression systems in all new single-family home construction, the minimum meter size going forward is a 1-inch meter. This difference has not changed the expected use within the home.

Consequently, the City has chosen to treat 5/8-inch and 3/4-inch meters equivalent to 1-inch meters for the following reasons:
• The desire for a single, fixed meter charge across all customer classes. • The overwhelming number of meters between 3/4-inch and 1- inch are for single-family or small multi-family residential properties.

The result of this analysis, summarized in Figure 1, is that while there are currently 14,757 connections to the potable water system, there are 17,086 equivalent (i.e., 1-inch) potable water meter units.

Figure 2 shows the existing and projected service numbers for the water utility. The anticipated future connections are based on the City’s planned customer growth rate of 2.1% annually for the next 16 years (per historical population growth). Existing capacity in the City’s water utility is allocated to current and future customers and the percentage assigned to current and future customers is based upon their assigned share of 1-inch meter equivalent units. As shown in Figure 2, new customers will be allocated about 29.8% of existing assets, planned assets, cash, and debt in the capacity fee calculation. This is calculated by taking the expected number of units (7,421) divided by the projected number of equivalent meters (24,327).

Figure 2. Existing and Projected Service Numbers
Existing and Planned Assets
The capital assets addressed in this study include existing assets and planned capital improvements (i.e., the system buy-in and incremental assets). An important aspect of this study is how the value of existing utility assets is determined. For example, the purchase price does not account for wear and tear, and current book value (i.e., purchase price less accumulated depreciation) typically underestimates the “true value” of facilities as it does not account for cost increases over time. Therefore, this study uses the replacement-cost-new-less-depreciation (RCNLD) approach summarized in Figure 3 to estimate existing asset values that reflect estimated cost inflation and depreciation.

Existing
Customers
New
Customers
Number
of Units
%
Increase
Equivalent Meters 17,086 24,327 70.2% 29.8% 7,241 42.4%

1. Customer growth is based on the historical population growth.

Estimated
Growth
thru 20381
Demographic Statistics Existing
% Allocation Factors Cumulative Change

Prepared by NBS – January 2023 5
Water Capacity Fee Study Report – City of Morgan Hill
Figure 3. Summary of Existing Asset Values
The RCNLD is calculated by escalating the book value of existing assets to current-day values using inflation factors from the Handy-Whitman Index of Public Utility Construction Costs for Water Utility Construction.

Figure 3 summarizes the System Buy-In Cost Basis by Asset Category for the water utility. For this analysis, assets that have exceeded their useful life (as defined in the City’s asset records) were considered to have no remaining value. This approach was used for all assets, except land, which does not depreciate and is excluded from the analysis.

Most of the RCNLD costs were allocated to current customers based on the 70.2% allocation factor previously shown in Figure 2. When certain assets are considered to only serve current customers, they are allocated 100% to current customers. For example, existing meters are allocated 100% to current customers since they do not benefit future customers. Figure 3 shows the allocation of the $83.9 million system buy-in costs to current and future customers. Future customers are allocated approximately $24 million of the existing water utility assets, or about 28.7%, due to some assets being excluded from the calculation.

The City’s capital improvement plans for the water utility extend to FY 2037/38 in the 2021 Water System Master Plan. Some of the cost estimates for planned future improvements used to calculate the system development component of the capacity fees are allocated using the allocation factors developed in the Master Plan, as these projects benefit both current and future customers. Figure 4 includes a list of future capital improvement projects, where future customers are allocated about $59.4 million of the planned asset costs.

Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
WATER BUILDING AND IMPROVEMENTS $ 34,732,548 70.2% 29.8% $ 24,394,899 $ 10,337,649 WATER INFRASTRUCTURE 44,798,230 70.2% 29.8% 31,464,674 13,333,556 WATER EQUIPMENT/METERS 3,037,257 100.0% 0.0% 3,037,257 - WATER LAND - 0.0% 0.0% - -
VEHICLES 1,368,762 70.2% 29.8% 961,369 407,392
Total Capital Facilities & Equipment $ 83,936,797 71.3% 28.7% $ 59,858,200 $ 24,078,597

1. Source file for Morgan Hill current water assets as of July 2022: FA1. Water.xls

2. Based on proportionate allocation between existing and future users. See Table 2 in Exhibit 1 for demographic expectations.

Some assets are excluded or allocated to existing customer only because rate payers will incur these expenses once connected to system.

Land is excluded from the analysis as it is not a depreciable asset.

Asset Category1
System
Buy-In
Cost Basis
Allocation Basis (%)2 Distribution of Cost Basis ($)

Prepared by NBS – January 2023 6
Water Capacity Fee Study Report – City of Morgan Hill
Figure 4. Planned Assets Allocated to Current & Future Customers The City may have additional capital projects that are needed to serve future developments, and the costs of such projects may be recovered through a development agreement. This will be evaluated on a caseby-case basis as part of the development review process.

Adjustments to the Cost Basis
Before the capacity fees are developed, an adjustment is applied to the cost basis to account for existing un-restricted cash reserves and outstanding debt principal. Existing cash reserves are treated as an asset because they were funded by current customers and are available to pay for capital and/or operating costs of the water utility that future customers will benefit from, once connected. The cash reserves are, in a sense, no different than any other water utility asset. The existing cash reserves allocated to current and future customers are summarized in Figure 5 using the same allocation factors from Figure 2. Future customers are allocated about $6 million in cash reserves.

Figure 5. Cash Reserves Allocated to Future Customers
Since the water utility is including current debt service towards the capacity fees, the capacity fee calculation must include an adjustment to the cost basis to account for this. Since new connections pay Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
Pipeline Capacity Improvements $ 16,603,707 6.8% 93.2% $ 1,135,717 $ 15,467,990 Storage Reservoir Capacity Improvements $ 16,712,442 50.6% 49.4% $ 8,453,440 $ 8,259,002 Groundwater Well Capacity Improvements $ 30,240,228 18.5% 81.5% $ 5,605,821 $ 24,634,407 Pump Station Capacity Improvements $ 5,846,185 50.3% 49.7% $ 2,938,790 $ 2,907,395 Pressure Reducing Valve Capacity Improvements $ 101,878 55.0% 45.0% $ 56,033 $ 45,845 Known Pipeline Renewal and Replacement $ 3,267,410 100.0% 0.0% $ 3,267,410 $ - Recommended Annual Pipeline Condition Renewal
and Replacement (10-year) $ 18,297,698 100.0% 0.0% $ 18,297,698 $ - Reservoir Condition Improvements $ 3,863,750 100.0% 0.0% $ 3,863,750 $ - 5-Year Improvement Projects $ 3,900,000 100.0% 0.0% $ 3,900,000 $ - Comprehensive Plan Updates $ 1,782,000 65.0% 35.0% $ 1,158,300 $ 623,700 Calendar Year Budget Expansion $ 7,500,000 0.0% 100.0% $ - $ 7,500,000 Total $ 108,115,298 45.0% 55.0% $ 48,676,959 $ 59,438,339

1. Capital Improvement Program projects and allocation to future customers from Water Supply Management Plan projects.

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 Capital Project Description1
Future Cost
Estimate
(2020-2038)1
% Allocation Distribution of Cost Basis ($)
Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
Un-restricted Reserves
Water Operations Fund (650) $ 2,842,432 70.2% 29.8% $ 1,996,423 $ 846,009 Water System Replacement Fund (653) $ 11,271,126 70.2% 29.8% $ 7,916,436 $ 3,354,690 Rate Stabilization Fund (652) $ 3,151,127 70.2% 29.8% $ 2,213,239 $ 937,888 - -
Restricted Reserves
Impact Fund (651) $ 2,941,398 70.2% 29.8% $ 2,065,933 $ 875,465 Total Beginning Cash $ 20,206,083 70.2% 29.8% $14,192,030 $ 6,014,053

2. 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: Cash balance as of 6-30-22.xlsx $ - Allocation Beginning
Cash2
% Allocation
Cash Reserves

Prepared by NBS – January 2023 7
Water Capacity Fee Study Report – City of Morgan Hill
their share of existing asset values, including the debt payment principals on those same assets would double count the asset values included in the capacity fees. Therefore, future customers are credited approximately $4.8 million as shown in Figure 6.

Figure 6: Debt Service Allocated to Future Customers
Calculated Capacity Fees
The sum of the existing and future planned asset values (i.e., the system buy-in and system development costs), along with the adjustment for cash reserves, defines the total cost basis allocated to future customers. Figure 7 summarizes this calculation.

Figure 7. Summary of Cost Basis Allocated to Future Customers The total adjusted cost basis is then divided by the number of future customers, measured in 1-inch meter equivalents, expected to connect to the water utility (that is, the 7,241-meter equivalents) in order to determine the base capacity charge for a 1-inch water meter. This calculation is shown in Figure 8.

Figure 8. Summary of New Base Capacity Fees
Based on the combined system buy-in and incremental capacity fee methodology, and the assumptions used in this analysis, NBS has calculated the new water capacity fees by meter size, as shown in Figure 9.

The updated fees represent the maximum that the City can charge for new connections.

Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
2014 Water Refunding & CIP Revenue Bonds $ 6,711,700 70.2% 29.8% $ 4,714,058 $ 1,997,642 2014 Water Refunding & CIP Revenue Bonds $ 9,658,300 70.2% 29.8% $ 6,783,644 $ 2,874,656 Grand Total $ 16,370,000 70.2% 29.8% $11,497,702 $ 4,872,298

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. $ - Allocation
Bond Issue
Outstanding
Principal1
(Fund
651/653)
% Allocation System Asset Values Allocated to Future Development Costs Included in Existing System Buy-In:

Existing Assets $ 24,078,597
Planned, Future Capital Projects 59,438,339
Total: Existing & Future System Costs $ 83,516,936
Adjustments to Cost Basis:

Cash Reserves $ 6,014,053
Outstanding Long-Term Debt (Principal) (4,872,298)
Total: Adjustments to Cost Basis $ 1,141,756
Total Cost Basis for New Development $ 84,658,692
Summary of Capacity Fee Calculation
Adjusted
System
Cost Basis
Build-Out
Total
(Units)
Base Capacity
Fee
Proposed Capacity Fee $ 84,658,692 7,241 $11,692 Page 318 of 412 Prepared by NBS – January 2023 8
Water Capacity Fee Study Report – City of Morgan Hill
Figure 9. Updated Water Capacity Fees
Water Capacity Fee Findings Statements
The new water capacity fees calculated in this report are based on regulatory requirements and generally accepted industry standards, and further detailed in Appendix A. This study concludes the following findings:
• The purpose of the City’s water capacity fees is to ensure that new and upsized connections reimburse and/or mitigate a reasonable portion of the City’s planned capital investment projects.

These investments benefit and/or are necessary to accommodate the increased demand for water services.
• The City uses capacity fee proceeds to fund capital investments in the water system, which include the future design and construction of planned facilities. • Capacity fees for new water customers vary depending on the size of the water meter serving the connection. Meter size is generally proportionate to the demands that a parcel places on the water utility system, specifically the peaking requirements related to the meter size. • The City has made investments in water infrastructure and plans to invest further in expanded and upgraded facilities. These investments make possible the availability and continued reliable service of high-quality water sufficient to meet the demands of growth within the City’s service area.
• Without capital investment in existing facilities, the water system capacity available to serve the needs of future connections would be uncertain. Without planned investments in future facilities, water service would not be sustainable at the level of service received by current users.

The total value of planned water system assets that are attributable to serving future connections is identified in Appendix A.
• Upon payment of a capacity fee, a new customer incurs the obligation to pay the same ongoing service rates as existing customers, regardless of the date of connection to the system or the actual start of service. These fees ensure that, over time, ongoing service rates are not disproportionately burdened by the accommodation of system growth.

Equivalency Factor
Maximum
Continuous
Flow (gpm)1
Equivalency
to 1-inch
meter
5/8-1 inch meter 50 1.00 $11,692

1.5-inch meter 100 2.00 $23,385
2-inch meter 160 3.20 $37,415
3-inch meter 320 6.40 $74,830
4-inch meter 500 10.00 $116,923
6-inch meter 1,000 20.00 $233,845
8-inch meter 1,600 32.00 $374,152

1. Source: AWWA M1, Table B-2. Assumes displacement meters for 3/4” through 2”, Compound Class I for 3" through 6", and Turbine Class II for 8" through 10".

Meter Size
Capacity Fee
Per Meter
Size

Prepared by NBS – January 2023 9
Water Capacity Fee Study Report – City of Morgan Hill
Section 3. Recommendations and Next Steps
Consultant Recommendations and Next Steps
NBS recommends the City take the following actions:
• Approve and Accept this Study Report: NBS recommends the City Council formally approve and adopt this study and its recommendations and proceed with the steps outlined below to implement the new capacity fees. This will provide documentation of the study and the basis for adopting the new capacity fees.
• Implement New Water Capacity Fees: Based on the analysis presented in this report, the City Council should implement the new water capacity fee of $11,692 per 1-inch equivalent water meter unit, as described in this study.
• Periodically Review Capacity Fees: Any time an Agency adopts capacity fees, they should be periodically reviewed to incorporate new capital facility plans, significant repair and replacement projects, or new planning data (i.e., customer growth estimates). This will help ensure the fees generate sufficient revenue to cover the cost of capital projects, support the fiscal health of the City, and ensure that future customers bear their fair share of infrastructure costs. NBS also recommends applying an inflation factor to the capacity fees on an annual basis. Annually, the City should review the Engineering News Record’s Construction Cost Indices and calculate the percentage change in construction costs and apply that change to the capacity fees to ensure they keep pace with cost inflation.

Beginning January 1, 2022, the nexus study must be updated every eight years. • The Mitigation Fee Act requires an agency to prepare a Development Impact Fee Report within 180 days of the last day of the fiscal year. This report should identify the beginning and ending balances in the fee report, the fees collected in the preceding year, the projects the fees were used for along with the percentage of the total project costs funded with fees, and the date expected projects are to start.

Principal Assumptions and Considerations
In preparing this study 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, asset records, planned capital improvements, and other conditions and events that may occur in the future.

This information and assumptions 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 Study 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.

Prepared by NBS – January 2023 10
Water Capacity Fee Study Report – City of Morgan Hill
Appendix - Water Capacity Fee Study Summary Tables

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Water Capacity Fee Study Report – City of Morgan Hill
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CITY OF MORGAN HILL EXHIBIT 1
Water Capacity Fee Analysis
Demographic Data and Projections
TABLE 1 - METER EQUIVALENT UNITS
Maximum
Flow
(gpm)2
Equivalency
to 1-inch
meter
5/8-1 inch meter 13,684 50 1.00 13,684

1.5-inch meter 401 100 2.00 802
2-inch meter 609 160 3.20 1,949
3-inch meter 14 320 6.40 90
4-inch meter 43 500 10.00 430
6-inch meter 5 1,000 20.00 100
8-inch meter 1 1,600 32.00 32
Total 14,757 17,086

1. Number of meters by size and customer class for May 2021.

2. Meter flow rates are from AWWA M-1 Table B-1.

TABLE 2 - EXISTING AND PROJECTED SERVICE NUMBERS
Existing
Customers
New
Customers
Number
of Units
%
Increase
Equivalent Meters 17,086 24,327 70.2% 29.8% 7,241 42.4%

1. Customer growth is based on the historical population growth.

Meter Size
Estimated
Growth thru
20381
Demographic Statistics Existing
% Allocation Factors Cumulative Change
Meter Equivalence 1-inch
Meter
Equivalent
Units
Existing
Water
Meters1
Prepared by NBS
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CITY OF MORGAN HILL EXHIBIT 2
Water Capacity Fee Analysis
Existing Capital Facilities and Equipment for Consideration (System Buy-In) TABLE 3 - EXISTING ASSETS, ALLOCATION TO EXISTING AND FUTURE CUSTOMERS Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
WATER BUILDING AND IMPROVEMENTS $ 34,732,548 70.2% 29.8% $ 24,394,899 $ 10,337,649 WATER INFRASTRUCTURE 44,798,230 70.2% 29.8% 31,464,674 13,333,556 WATER EQUIPMENT/METERS 3,037,257 100.0% 0.0% 3,037,257 - WATER LAND - 0.0% 0.0% - -
VEHICLES 1,368,762 70.2% 29.8% 961,369 407,392
Total Capital Facilities & Equipment $ 83,936,797 71.3% 28.7% $ 59,858,200 $ 24,078,597

1. Source file for Morgan Hill current water assets as of July 2022: FA1. Water.xls

2. Based on proportionate allocation between existing and future users. See Table 2 in Exhibit 1 for demographic expectations.

Some assets are excluded or allocated to existing customer only because rate payers will incur these expenses once connected to the system.Land is excluded from the analysis as it is not a depreciable asset.

Asset Category1
System
Buy-In
Cost Basis
Allocation Basis (%)2 Distribution of Cost Basis ($)
Prepared by NBS
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CITY OF MORGAN HILL EXHIBIT 3
Water Capacity Fee Analysis
Allocation of Cash Reserves and Outstanding Debt to Existing and Future Services TABLE 4 - ALLOCATION OF DEBT TO EXISTING AND FUTURE USERS Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
2014 Water Refunding & CIP Revenue Bonds $ 6,711,700 70.2% 29.8% $ 4,714,058 $ 1,997,642 2014 Water Refunding & CIP Revenue Bonds $ 9,658,300 70.2% 29.8% $ 6,783,644 $ 2,874,656 Grand Total $ 16,370,000 70.2% 29.8% $ 11,497,702 $ 4,872,298

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.

TABLE 5 - ALLOCATION OF CASH RESERVES TO EXISTING AND FUTURE USERS Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
Un-restricted Reserves
Water Operations Fund (650) $ 2,842,432 70.2% 29.8% $ 1,996,423 $ 846,009 Water System Replacement Fund (653) $ 11,271,126 70.2% 29.8% $ 7,916,436 $ 3,354,690 Rate Stabilization Fund (652) $ 3,151,127 70.2% 29.8% $ 2,213,239 $ 937,888 - -
Restricted Reserves
Impact Fund (651) $ 2,941,398 70.2% 29.8% $ 2,065,933 $ 875,465 Total Beginning Cash $ 20,206,083 70.2% 29.8% $ 14,192,030 $ 6,014,053

2. 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: Cash balance as of 6-30-22.xlsx $ - Allocation
$ - Allocation Beginning
Cash2
% Allocation
Bond Issue
Outstanding
Principal1
(Fund 651/653)
% Allocation
Cash Reserves
Prepared by NBS
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CITY OF MORGAN HILL EXHIBIT 4
Water Capacity Fee Analysis
Water Planned Capital Facilities and Equipment for Consideration (System Development) TABLE 6 - PLANNED CAPITAL IMPROVEMENT COSTS, ALLOCATED TO EXISTING AND FUTURE CUSTOMERS Existing
Customers
Future
Customers
Existing
Customers
Future
Customers
Pipeline Capacity Improvements $ 16,603,707 6.8% 93.2% $ 1,135,717 $ 15,467,990 Storage Reservoir Capacity Improvements $ 16,712,442 50.6% 49.4% $ 8,453,440 $ 8,259,002 Groundwater Well Capacity Improvements $ 30,240,228 18.5% 81.5% $ 5,605,821 $ 24,634,407 Pump Station Capacity Improvements $ 5,846,185 50.3% 49.7% $ 2,938,790 $ 2,907,395 Pressure Reducing Valve Capacity Improvements $ 101,878 55.0% 45.0% $ 56,033 $ 45,845 Known Pipeline Renewal and Replacement $ 3,267,410 100.0% 0.0% $ 3,267,410 $ - Recommended Annual Pipeline Condition Renewal
and Replacement (10-year) $ 100.0% 0.0% 18,297,698 18,297,698 $ - $ Reservoir Condition Improvements $ 3,863,750 100.0% 0.0% $ 3,863,750 $ - 5-Year Improvement Projects $ 3,900,000 100.0% 0.0% $ 3,900,000 $ - Comprehensive Plan Updates $ 1,782,000 65.0% 35.0% $ 1,158,300 $ 623,700 Calendar Year Budget Expansion $ 7,500,000 0.0% 100.0% $ - $ 7,500,000 Total $ 108,115,298 45.0% 55.0% $ 48,676,959 $ 59,438,339

1. Capital Improvement Program projects and allocation to future customers from Water Supply Management Plan projects.

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 Capital Project Description1
Future Cost
Estimate
(2020-2038)1
% Allocation Distribution of Cost Basis ($)
Prepared by NBS
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CITY OF MORGAN HILL EXHIBIT 5
Water Capacity Fee Analysis
Unit Cost Calculation
TABLE 7 - DEVELOPMENT OF THE COST BASIS FOR NEW CUSTOMERS System Asset Values Allocated to Future Development
Costs Included in Existing System Buy-In:

Existing Assets $ 24,078,597
Planned, Future Capital Projects 59,438,339
Total: Existing & Future System Costs $ 83,516,936
Adjustments to Cost Basis:

Cash Reserves $ 6,014,053
Outstanding Long-Term Debt (Principal) (4,872,298)
Total: Adjustments to Cost Basis $ 1,141,756
Total Cost Basis for New Development $ 84,658,692
TABLE 8 - DEVELOPMENT OF THE MAXIMUM CAPACITY FEE PER METER EQUIVALENT Summary of Capacity Fee Calculation
Adjusted
System
Cost Basis
Build-Out
Total
(Units)
Base Capacity
Fee
Proposed Capacity Fee $ 84,658,692 7,241 $11,692

1. Refer to Exhibits 2 and 7 for detail of existing assets.

2. Refer to Exhibit 4 for detail related to planned assets.

3. Refer to Exhibit 3 for detail related to cash reserves and outstanding debt.

4. Refer to Exhibit 1 (Demographics) for growth projections.

Prepared by NBS
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CITY OF MORGAN HILL EXHIBIT 6
Water Capacity Fee Analysis
Water Fee Classification and Calculation of Maximum Fee TABLE 9 - WATER CAPACITY FEE BASED ON METER SIZE
Equivalency Factor
Maximum
Continuous
Flow (gpm)1
Equivalency
to 1-inch
meter
5/8-1 inch meter 50 1.00 $11,692

1.5-inch meter 100 2.00 $23,385
2-inch meter 160 3.20 $37,415
3-inch meter 320 6.40 $74,830
4-inch meter 500 10.00 $116,923
6-inch meter 1,000 20.00 $233,845
8-inch meter 1,600 32.00 $374,152

1. Source: AWWA M1, Table B-2. Assumes displacement meters for 3/4” through 2”, Compound Class I for 3" through 6", and Turbine Class II for 8" through 10".

Meter Size Capacity Fee
Per Meter Size
Prepared by NBS
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1 Dat Nguyen
From: Dat Nguyen
Sent: Tuesday, February 21, 2023 9:51 AM
To: D. Muirhead
Subject: RE: comments Water Capacity Fee Analysis Study Hello Doug,
Please see responses to your questions below:

Thanks,
Dat Nguyen, CPA, CGFM
Finance Director
City of Morgan Hill
Finance
17575 Peak Avenue, Morgan Hill, CA 95037
P 408.776.7379
[email protected]
morgan-hill.ca.gov | facebook | twitter
From: D. Muirhead
Sent: Wednesday, February 8, 2023 8:48 AM
To: Dat Nguyen <[email protected]>
Subject: comments Water Capacity Fee Analysis Study
Hello Dat,
My comments and questions on Water Capacity Fee Analysis Study.

Thanks, DougM
Water Capacity Fee Analysis
City of Morgan Hill   January 2022
Community Meeting  Thu  Feb 09, 2PM‐3PM @ ID: 893 6814 0878 comments [email protected]
‐‐‐‐‐
[Study] Background and Purpose
To ensure that the fees are updated to comply with legal requirements and industry standards,
[Comment] Please identify those legal requirements and industry standards.

Legal Requirements. The Mitigation Fee Act (California Government Code sections 66010‐66025) authorizes an agency to establish, increase, or impose fees as a condition for approval of a development project.  The fees need to have a reasonable relationship between the amount of the fee and the cost of the public facilities attributable to the new development.
 The fees can only be used for the purpose for which the fee was collected.

2  These fees may be imposed by a majority vote of the governing legislative body.

California Government Code Section 66013 defines a capacity fee as a one‐time “charge for public facilities in existence at the time a charge is imposed or charges for new public facilities to be acquired or constructed in the future that are of proportional benefit to the person or property being charged, including supply or capacity contracts for rights or entitlements, real property interests, and entitlements and other rights of the local agency involving capital expense relating to its use of existing or new public facilities.”  It authorizes public agencies to impose capacity fees, which are also referred to as  system capacity charges, connection fees, or capital impact fees, on customers connecting to or upsizing their connection to the system, to ensure that they pay their fair share of utility assets, plus the costs of new facilities needed to serve them.  In its simplest form, capacity fees are the result of dividing the cost (or value) of the Utility’s current system assets plus planned capital improvements, by the expected number of future customers.  As a result, future customers connecting to the City’s utility would enter as equal participants, along with current customers, regarding their financial commitment and obligations to the City.

Industry Standards.  In working with water agencies and their attorneys across California, NBS has found that the defensibility of the fee calculations is improved if the methodology follows an industry standard and that is used by many other agencies.
‐‐‐‐‐
[Study] Overview of Capacity Fee Program Methodology
Consultants cite the most common methodologies from the American Water Works Association's Principles of Water Rates, Fees, and Charges, Seventh Edition, 2017.
[Comment] What legal or other authority specifies using this particular Association's definitions? A collection of water agencies are not a neutral party.

There are no legal requirements to use the AWWA standards.  However, as mentioned above, using industry standards helps defensibility.  AWWA is a professional society for water industry practitioners, whose members include water agencies, regulatory bodies, academics, as well professionals working with water.  The society has many committees, one which focuses on water charges and fees, and publishes the referenced source.  AWWA M1 Manual is a nationwide standard manual in calculating water related fees and charges. It has been a standard across America since the 1950’s.

We acknowledge it is not a neutral party, but that could be said for almost all professional societies, associations, etc.  For example, people give credibility to the American Medical Association and their  publications and research, even though that association is comprised of medical professionals. ‐‐‐‐‐
[Study] Existing and Planned Assets
The replacement‐cost‐new‐less‐depreciation (RCNLD) is calculated by escalating the book value of existing assets to current‐day values using inflation factors from the Handy‐Whitman Index of Public Utility Construction Costs for Water Utility Construction.
[Comment] There is no citation for the Handy‐Whitman Index.

What legal or other authority specifies using this particular publication's inflation factors?

3 There are no legal or regulatory requirements to use the Handy Whitman Index.  There are several ways to escalate construction costs, but the Engineering News Record’s Construction Cost Index and the Handy Whitman Index are two of the more popular sources used by cost estimators.  NBS prefers the Handy Whitman Index as their indices are prepared by equipment/structure type.
‐‐‐‐‐
[Study] Existing Connections and Projected Future Growth The City has now implemented 1‐inch meters as the standard (or base) meter size installed, but there are over 13,000 5/8‐ and 3/4‐inch meters connected to the system. For the purpose of this study, 5/8‐ and 3/4‐inch meters are treated the same as 1‐inch meters, which is a common industry practice when setting rates and fees for smaller meter sizes.
[Comment] What is the basis for the Consultant's claim that this is "common industry practice"?
The 5/8 inch, ¾ inch, and 1 inch meters are sizes used by single‐family residences.  Many agencies are moving from the 5/8 and ¾ inch meters to 1 inch meters for single‐family residences.  The rate study assumption to treat them the same is based on their representation of a single‐family residence. [Comment] Since 5/8‐ and 3/4‐inch meters support lower peak flows, it appears that you do this up‐sizing solely to simplify the arithmetic.

New homes are being asked to install a 1 inch meter for fire protection. The 5/8 inch, ¾ inch, and 1 inch meters were combined to reflect residential users of the existing system. ‐‐‐‐‐
[Study] Existing Connections and Projected Future Growth The anticipated future connections are based on the City's planned customer growth rate of 2.1% annually for the next 16 years (per historical population growth). [Comment] The historical population growth was influenced by the housing growth control limits of the RDCS. State housing law removed those limits and have higher numbers of housing units going forward. Please justify your projected future connections growth rate given that the past is a poor predictor of the future in this case.

The City uses three (3) years average data from 2019‐2022 to project future growth. SB 330, which suspended the City’s RDCS, went into effect January 1, 2020, so the Projected Future Growth took into account the impact of the suspension of the City’s RDCS.
‐‐‐‐‐
[Study] Consultant Recommendations and Next Steps
Implement New Water Capacity Fees: Based on the analysis presented in this report, the City Council should implement the new water capacity fee of $11,692 per 1‐inch equivalent water meter unit,
[Comment] Does this study protect you from claims that the new Housing Element does not encourage affordable housing by removing barriers,

4 in this case a building cost of $11,692 per 1‐inch equivalent water meter unit?
This study represents the maximum amount the City can charge for a capacity fee.  It is the City Council’s prerogative to adopt any fee that does not exceed this calculation.  Adopting a fee lower than recommended means the City will need to find another funding source for the new development.  The only feasible alternative funding source would likely be user rates. The City is not recommending supporting new development with user rates.  Without appropriate fundings the City will not be able to construct the necessary improvements such as wells and reservoirs to support reliable water service to the City as development occurs.
‐‐‐‐‐
[Study] Water Capacity Fee Findings Statements
* The purpose of the City's water capacity fees is to ensure that new and upsized connections reimburse and/or mitigate a reasonable portion of the City's planned capital investment projects.
* These capacity fees ensure that, over time, ongoing service rates are not disproportionately burdened by the accommodation of system growth. [Study] Background and Purpose
* To ensure that these fees reflect the cost of capital infrastructure needed to serve new connections or any person requesting additional capacity * This authorizes public agencies to impose capacity fees on customers connecting to, or upsizing their connection to the water system, to ensure that they pay their fair share of existing utility asset costs plus the costs of new facilities needed to serve them. ... Future customers connecting to the City's water utility would enter as equal participants with current customers regarding their financial commitment and obligations to the Utility.
[Comment] I can understand a new customer paying for expansion of the existing system if it cannot accommodate that need. And I assume that debt service on the existing system in factored into the monthly billing for all.

But I do not understand this "backdating" where the new customer is charged for some part of the existing system even when no change is needed to that system to serve the new connection.

Since current customers have previously invested in the current system, capacity fees for new customers are to equitably buy‐in the existing ratepayers’ investment in oversizing the infrastructure to accommodate future customers.

This puts the future customers on a ‘level playing field’ as current customers in regard to their investment in the current capacity of the system.
‐‐‐‐‐

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RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF MORGAN HILL UPDATING THE WATER CAPACITY
(IMPACT) FEES
WHEREAS, new development within the City of Morgan Hill ("City") will continue to result in additional population and business growth, and such growth will continue to place additional burdens on various City facilities, infrastructure and services, requiring construction of expanded and/or new City facilities and services; and
WHEREAS, all development within the City should bear a proportionate financial burden in the construction and improvement of public facilities and services necessary to service the growth engendered by such development; and
WHEREAS, the imposition of development impact fees is the preferred method of ensuring that new development bears its proportionate share of the cost of public facilities and service improvements; and
WHEREAS, imposition of impact fees to finance public facilities and service improvements required by new development is necessary in order to avoid adversely impacting existing facilities and services; and
WHEREAS, consistent with these principles, Chapter 3.56 of the City's Municipal Code establishes Development Impact Mitigation Fees; and
WHEREAS, Municipal Code Section 3.56.060 provides for revision of established fees, including increases, by resolution; and
WHEREAS, the City Council has received and duly considered the report authored by NBS Government Finance Group ("NBS") entitled “Water Capacity Fee Analysis” dated January 2023 (the "NBS Report"), and presented to the City Council on March 15, 2023; and WHEREAS, the NBS Report analyzed the City's development activity based on data available from the 2021 Water System Master Plan; and
WHEREAS, as the NBS Report determined the public facilities and system improvements engendered by anticipated development in light of those various plans and existing and projected land use patterns and zoning; and
WHEREAS, as the NBS Report demonstrate, the water capacity (impact) fees adjusted by this resolution is based upon estimated costs for new public facilities and service improvements that will be required, incrementally, by new development within the City's sphere of influence; and WHEREAS, as the NBS Report demonstrate, the water capacity (impact) fees adjusted by this resolution do not exceed the reasonable cost of providing public facilities and service improvements occasioned by development projects within the City; and

WHEREAS, the fees recommended by the NBS Report rationally relate to the reasonable cost of providing public facilities occasioned by the development projects and service improvements within the City's sphere of influence; and
WHEREAS, the NBS Report and all background data referenced in the report were available for public inspection and review at the City Clerk's office of the City of Morgan Hill; and WHEREAS, City staff emailed information regarding the proposed adoption of and public hearing on the fees and a copy of the NBS Report to all known regular real estate and development firms and individuals who have done business in the City in the recent past; and WHEREAS, on February 9, 2023, NBS and City staff hosted virtual community meeting on the NBS Report for those firms and individuals to provide them an opportunity to query the consultant and staff on how the water capacity (impact) fees were calculated; and WHEREAS, a public hearing on adoption of this resolution and the updated fees shown in Exhibit A was noticed pursuant to and in compliance with Government Code section 6062(a), and set as part of a regular City Council meeting held on March 15, 2023, in the Council Chamber located at City Hall, 17555 Peak Avenue; and
WHEREAS, the City Council has received and duly considered all written and oral comments provided to it by staff and the public, which comments are hereby incorporated into the record on this matter; and
WHEREAS, the City Council deems it necessary that the water capacity (impact) fees be adjusted to ensure that new development in the City continues to pay its proportionate share of public facilities and service improvements necessary to accommodate such development in order to promote the public health, safety and welfare; and
WHEREAS, the City Council hereby incorporates the findings made in Municipal Code Section 3.56.010 and applies them in support of the adoption of this Resolution; and WHEREAS, the Projects approved pursuant hereto are exempt from the California Environmental Quality Act (CEQA) under Section 15273 of Guidelines for CEQA and Public Resources Code Section 21080(b)(8) because they establish, modify and approve rates and charges for the purposes of obtaining funds for capital projects; and

WHEREAS, further reasons supporting the adjustment of the water capacity (impact) fees described in, and that is the subject of, this Resolution are set forth in detail in that certain City Council Staff Report entitled "Updating Water Capacity (Impact) Fees" submitted for City Council consideration at its meeting of March 15, 2023, submitted to the City Council by the City Manager (the “Staff Report”), the contents of which Staff Report are incorporated herein by this reference.

THEREFORE, BE IT RESOLVED by the City Council of the City of Morgan Hill that:

Section l. The recitals, findings and determinations set forth above are true and correct and are incorporated by reference herein.

Section 2. The City Council hereby further finds as follows, with respect to the requirements of California Government Code sections 66000 through 66025:

A. Purpose of Fee. The purpose of the water capacity (impact) fees is to ensure that new and upsized connections reimburse and/or mitigate a reasonable portion of the City’s planned capital investment projects. These investments benefit and/or are necessary to accommodate the increased demand for water services.

B. Use of Fee Revenues. The updated fees would be used to fund capital investments in the water system, which include the future design and construction of planned facilities.

C. Benefit Relationship. The City has made investments in water infrastructure and plans to invest further in expanded and upgraded facilities. These investments make possible the availability and continued reliable service of high-quality water sufficient to meet the demands of growth within the City’s service area. Without capital investment in existing facilities, the water system capacity available to serve the needs of future connections would be uncertain. Without planned investments in future facilities, water service would not be sustainable at the level of service received by current users.

D. Burden Relationship. Facilities need is based on a combination of “system buy-in” and “system development” methodologies which requires new customers to pay both their fair share of existing system assets as well as their share of the planned future capital improvements needed to provide them with capacity in the City’s water system.

E. Proportionality. Capacity (impact) fees for new water customers vary depending on the size of the water meter serving the connection. Meter size is generally proportionate to the demands that a parcel places on the water utility system, specifically the peaking requirements related to the meter size.

Section 3. The City Council hereby adjusts the water capacity (impact) fees as stated in Exhibit A, which is attached hereto and incorporated by this reference. Except as modified herein, Resolution No 5592 and its attached fee schedule, along with the corresponding automatic annual adjustments pursuant to Municipal Code Section 3.56.050, shall remain in full force and effect.

Section 4. The City Council hereby orders that all adjustments in the water capacity (impact) fees be effective 60 days following adoption of this ordinance.

Section 5.The City Council hereby finds the approval of the adjustments in the water capacity (impact) fees of the City of Morgan Hill to be exempt from CEQA.

Section 6. If any section, subsection, subdivision, sentence, clause, phrase, word, or portion of this resolution is, for any reason, held to be invalid by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this resolution and each section, subsection, subdivision, sentence, clause, phrase, word or portion thereof, irrespective of the fact that any one or more sections, subsections, subdivision, sentences, clauses, phrases, words, or portions thereof be declared invalid.

PASSED AND ADOPTED by the City Council of the City of Morgan Hill at its meeting held on this 15th day of March, 2023 by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

APPROVED: ATTEST:

MARK TURNER, 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 a regular meeting held on March 15, 2023.

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

DATE: __________________
Michelle Bigelow, CITY CLERK

Exhibit A

UPDATED WATER CAPACITY (IMPACT) FEES
Meter Size
Capacity Fee
Per Meter Size
5/8-1 inch meter $11,692

1.5-inch meter $23,385
2-inch meter $37,415
3-inch meter $74,830
4-inch meter $116,923
6-inch meter $233,845
8-inch meter $374,152

19 CITY COUNCIL STAFF REPORT
MEETING DATE: March 15, 2023
PREPARED BY:

Chris Ghione, Public Services Director
APPROVED BY: City Manager

APPROVE DESIGN CONSULTANT AGREEMENT WITH VERDE

DESIGN FOR BUTTERFIELD PARK

RECOMMENDATION(S)

1. Authorize the City Manager to execute and administer a design consultant agreement for $296,454 with Verde Design for the design of the Butterfield Park Site; and

2. Adopt a resolution to amend the City’s Fiscal Year 2022-23 adopted budget to appropriate $180,000 from the Park Impact Fund.

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Supporting our Youth, Seniors, and Entire Community
2022-2023 Strategic Priorities
Economic Development
Guiding Documents
Bikeways, Trails, and Recreation Master Plan
REPORT NARRATIVE:

City staff has been working for the past few years to develop the Butterfield Park site in partnership with two potential operators. The potential site plans and approval to negotiate with partners were approved by the Council on August 3 and December 7, 2022. The City has completed negotiations with one of the potential partners and that proposed agreement is on the agenda for approval under another agenda item. The purpose of this agenda item is to enter into an agreement for the design of the City portions of the facility as well as the shared components.

The City is requesting approval for Verde Design to complete a design that can be bid for construction this summer. The agreement is for $296,454. Verde Design has done the initial preliminary design work for the proposed site and the previous design for the original park site. Staff is recommending that Verde Design be awarded this project to reduce delays and for cost savings associated with providing the previous design work

19 on the project. The design work is expected to take 16 weeks. It is anticipated the partner agreements will reimburse the City for a percentage of the design and construction costs associated with the project.

COMMUNITY ENGAGEMENT:

Involve/Collaborate
Through the prior grant process, significant outreach to the community was performed on the design of the site. It is the intent of staff to utilize the existing design as the basis for any future partnership development. The proposed collaboration with the community partners is critical for the financial feasibility of the project. The invitation for letters of interest was posted on the City website and sent directly to local sports organizations.

ALTERNATIVE ACTIONS:

The City Council could choose to provide alternate direction to City staff.This alternate direction could include not moving forward with the project, delaying the project, directing staff to conduct a request for proposals on the design, and/or other actions.

Should the alternate direction delay the design work, this could result in delays in moving forward with the partnership agreements.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

Developing new park and recreation facilities is a central tenet of the Bikeways, Trails, Parks and Recreation Master Plan that the Council adopted in July 2017. The City Council authorized a grant application for development of this park site in July 2019 and again in October 2020. The City Council received an update on the partnership opportunities on August 3, 2022. The Parks and Recreation Commission reviewed this item and recommended moving forward with partnership agreement negotiation on November 15, 2022. On December 7, 2022, the City Council approved moving forward with negotiation of potential partners for the design of the facility.

FISCAL AND RESOURCE IMPACT:

To fund the design work an additional appropriation of $180,000 is necessary from Park Impact Fee Fund (Fund 301). Additionally, should construction of the site be approved by the Council this summer, an appropriation of approximately $1.5 - $2 million would be required to construct the City/shared portion of the site. Currently, the City's Capital Improvement Budget has funding of $3.5 million for the park in FY 2025-26. City staff believe that higher than expected revenues in Quimby Fee Fund (Fund 375) and the lower cost of allowing partners to build-out the adjacent site, will allow for construction to begin this summer. The first of the two partner agreements is designed to allow the City to recover approximately 1/3 of the cost of design and construction of the shared improvements as part of the partner agreement.

CEQA (California Environmental Quality Act):

Mitigated Negative Declaration
An environmental assessment, including an Initial Study and Mitigated Negative Declaration, has been prepared for the project by David J. Powers & Associates, Inc. in

19 conformance with CEQA for the initial site plan and uses. Should the Council move forward with the design work, the City shall move forward with a consultant providing an updated analysis on the changes to the original design, which would likely result in an amendment to the initial Mitigated Negative Declaration.

RESOLUTION NO. 22-_____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY

OF MORGAN HILL APPROVING AN AMENDMENT TO
THE CITY’S FISCAL YEAR 2022-2023 BUDGET IN THE
PARK IMPACT FUND (FUND NO. 301) TO APPROPRIATE
$180,000, THEREFOR
WHEREAS, the City of Morgan Hill, a municipal corporation and general law city duly organized and existing under and pursuant to the Constitution and laws of the State of California (“City”), is authorized to enter into contracts and agreements for the benefit of the City; and WHEREAS, the reasons supporting this Resolution are set forth in detail in that certain City Council Staff Report entitled “Approve Design Consultant Agreement with Verde Design for Butterfield Park” submitted for City Council consideration at its meeting of March 15, 2023, submitted to the City Council by the City Manager (the “Staff Report”), the contents of which Staff Report are incorporated herein by this reference; and WHEREAS, recommended amendments are needed and proposed to the City’s previously adopted Annual Budget for Fiscal Year 2022-2023 as set forth on Exhibit A to this Resolution, to appropriate the requisite funds to implement the actions authorized by this Resolution; and WHEREAS, the consideration by City Council of the adoption of this Resolution has been duly noticed pursuant to applicable laws and has been placed upon the City Council Meeting Agenda on the date set forth in the Staff Report, or to such date that the City Council may have continued or deferred consideration of this Resolution, and on such date the City Council conducted a duly noticed public meeting at which the City Council provided members of the public an opportunity to comment and be heard and considered any and all testimony and other evidence provided in connection with the adoption of this Resolution; and WHEREAS, the City Council determines that adoption of this Resolution is in the public interest.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES HEREBY FIND, DETERMINE, RESOLVE AND ORDER AS FOLLOWS:

Section 1. Recitals. The City Council does hereby find, determine and resolve that all of the foregoing recitals are true and correct.

Section 2. Approval and Authorization. The City Council does further resolve, order and/or direct as follows:
a. That the City’s previously adopted Fiscal Year 2022-2023 Budget, as the same has been amended to date, is hereby further amended in accordance with and as reflected on Exhibit A attached hereto and incorporated herein by this reference; and

City of Morgan Hill
Resolution No. 22-_____

b. That the City Clerk is hereby authorized and directed to forward a copy of this Resolution to the City’s Finance Director, who is hereby authorized and directed to take all actions necessary to implement the terms of this Resolution pertaining to the Fiscal Year 2022-2023 Budget of City.

Section 3. This Resolution shall take effect immediately upon adoption.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of Morgan Hill at its meeting held on this 15th day of March 2023 by the following vote:

AYES: COUNCIL MEMBERS: None
NOES: COUNCIL MEMBERS: None
ABSTAIN: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: None
APPROVED: ATTEST:
___________________________________ _______________________________ MARK TURNER, Mayor MICHELLE BIGELOW, City Clerk
 CERTIFICATION 
I, Michelle Bigelow, City Clerk of the City of Morgan Hill, California, do hereby certify that the foregoing is a true and correct copy of Resolution No. 22-_____ adopted by the City Council at the meeting held on the 15th day of March 2023.

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

DATE: _____________________ ___________________________________ MICHELLE BIGELOW, City Clerk

AGENDA BUDGET SCORECARD
FISCAL YEAR 2022‐2023
ADJUSTMENT # 005
FUND: 301 Park Impact Fund
DEPARTMENT: 8051 Park Development
OBJECT: 86360 CONSTRUCTION
AGENDA DATE: 03/15/23
AGENDA ITEM TITLE:
07/01/22 06/30/23

AUDITED PROJECTED

BEGINNING AMENDED ENDING
FUND ESTIMATED APPROPRI‐ FUND

BALANCE REVENUES ATIONS BALANCE
ORIGINAL BUDGET             831,183          1,369,271         1,278,096            922,358 CUMULATIVE REVISIONS PRIOR                       ‐ ‐                                  244,063           (244,063)

TO RECOMMENDED ACTION
RECOMMENDED ACTION                     ‐            180,000          (180,000) RESULT OF RECOMMENDED ACTION             831,183          1,369,271          1,702,159            498,295 Approve Design Consultant Agreement with Verde Design for Butterfield Park

20 CITY COUNCIL STAFF REPORT
MEETING DATE: March 15, 2023
PREPARED BY:

Chris Ghione, Public Services Director
APPROVED BY: City Manager

APPROVE PARTNER AGREEMENT FOR BUTTERFIELD PARK

DEVELOPMENT WITH FOUNDATION FOR A BETTER RIDE IN

COLLABORATION WITH USA BMX

RECOMMENDATION(S)
Authorize the City Manager to execute and administer an operator agreement with Foundation for a Better Ride for the construction, operations, and maintenance of a BMX facility at the Butterfield Park site.

COUNCIL PRIORITIES, GOALS & STRATEGIES
City Council Ongoing Priorities
Supporting our Youth, Seniors, and Entire Community
Enhancing Diversity and Inclusiveness
2022-2023 Strategic Priorities
Economic Development
Guiding Documents
Bikeways, Trails, and Recreation Master Plan
Economic Blueprint
REPORT NARRATIVE:

On December 7, 2022, the City Council authorized staff to pursue partnership agreements with Dub Baseball and USA BMX for development of portions of the Butterfield Park site. This authorization occurred after a long review period by staff and previous direction and recommendations by the City Council and the Parks and Recreation Commission. The City property at Butterfield Boulevard and Monterey Road has been identified as a potential new park space containing both ball fields, a BMX pump track, and other amenities. The property is approximately 8 acres and has been designated for future park use. This property has been environmentally cleared for park development with the designated amenities through a CEQA process. Additionally, the City has recently purchased approximately 20 additional acres of adjacent property.

However, this recently purchased property is outside the City limits and within the County, and development of this property is planned for further down the road.

The initial development process for this park site was completed for an application to

20 the State of California Department of Park and Recreation for its Statewide Parks Program. Unfortunately, due to the competitive nature of the grant program and the City's demographic makeup, the City's grant applications for the program were not successful. However, during the grant application process, the City engaged potential partners who were willing to take on significant portions of the park maintenance, as the City does not have the funding available to increase park maintenance services on a Citywide basis. Over the past two years, the City has continued to see interest from prospective partners in the development of this property for both the benefit of the community and the partner organizations. Based on this interest, the City released an "Invitation to Partner" to allow the City to more formally explore potential partners in the development and operation of the park and recreation space. Without partners, the full development of even the first 8 acres will be at least a decade into the future. In submitting proposals, potential partners were asked to use the criteria outlined in developing their letters of interest. The required criteria in the RFP included:
• Provides a direct benefit to the public and an opportunity for direct use by the public.
• Aligns with the environmental documents prepared for the site. • Safe use of the site from a public safety perspective. • Compatible with the future development of park space on the site and adjacent site.

Additionally, desired criteria were also included in the RFP:
• Contribution of capital funding for the development of park amenities. • Contribution of operational funding to support overall site maintenance beyond maintenance of the direct amenities used by the partner organization.

Following the update on August 3, 2022, City staff began moving forward with a design consultant and the two organizations to space plan for a build out with both organizations and City park facilities on the 8 acres. Additionally, the City would work to develop a general partnership framework with both partners on site development.

Following this work, the next step was to return to the Council with a site development plan, which is the purpose of this item. An initial site development/space planning plan has been created and is included as Exhibit B of the Attached Agreement. As can be viewed in the site plan, the site can be segmented into three areas. The first on the west side of the site includes the BMX area. The second, on the east side of the site, includes the baseball field area. The third in the center would include public park space and shared parking space. The additional undeveloped 20 acres is planned for use for overflow parking and also could include walking trails in the near term, until it is formally developed down the road.

The existing site plan (Attachment 1), previously reviewed by the Council, demonstrated that there will be adequate space for both partners on the site. The proposed park space would be developed in a public non-profit partnership with two partners. The site would include the following amenities:

20 1. City non-leased property for public park space and shared amenities. City to lead operations and maintenance, with identified payment from groups for shared costs.

2. Baseball leased property to be developed privately for the organization's use and required public access use of the facilities.

3. BMX leased property to be developed privately for the organization's use and required public access use for the facilities.

The purpose of the partner agreements was to allow development of the site with funding from the non-profit partners while ensuring a benefit to the Morgan Hill community. The major benefits discussed by the Council and Parks and Recreation Commission were ensuring the facilities are available for the community and specifically supporting the underrepresented portions of the community.

The first of the two partner agreements has been negotiated between City staff and Foundation for a Better Ride. Foundation for a Better Ride is a local non-profit organization that is working as a member non-profit under USA BMX. The proposed agreement is included as Attachment 2. The key provisions of the agreement are outlined below:
• Operator agreement that allows construction and operations of a BMX track on the west side of the park property
• 10 Year Agreement Term
• Ability for the City to terminate the agreement early with repayment of costs spent by the Operator on development of the site
• Requires the Operator to provide the minimum Community Benefits outlined below:
o Discounted fees shall be provided to all Morgan Hill residents. o To encourage participation from females in Morgan Hill, the Operator shall provide a 25% discount on all fees to female participants residing within Morgan Hill.
o To encourage participation from low-income areas, youth participants residing in Morgan Hill shall be eligible for up to a 50% discount based upon income level. Income levels shall be determined by the City of Morgan Hill Recreation Division’s current Financial Assistance levels. o The Operator shall provide free use to Morgan Hill residents following all Sunday races for a minimum of 2 hours, unless earlier closure is required due to sunset occurring prior to 2 hours following completion of the races. • Requires the operator to pay the City back for 1/3 of the improvements made to the shared section of the facility.
• Provide the City with Quarterly Financial Statements
It is envisioned that the BMX track will host regular track practices and local/regional races and will provide some sports tourism benefits to the community. The track would

20 not bring larger scale events within its first several years, as organizers must provide a previous track record of being able to host events. The track's primary benefit shall be local in nature to Morgan Hill and Santa Clara County. While not required under CEQA requirements, the City would review congestion management numbers in relation to its CEQA work. City staff believe that the increased traffic will be based on the following use estimates.
• Local Traffic - 2-3 Afternoons and Evenings per week 4pm to 9pm - Approximately 75 cars
• Regional Traffic - 1 Weekend day per week 7am to 5pm - Approximately 120 cars
• National/Statewide Events - 1-2 weekends per year - 750 cars (will not have national events in first 3-5 years of operation)
After receiving an anonymous letter providing some negative comments regarding Foundation for a Better Ride organization, City staff have spent additional time reviewing the organization and the claims outlined in the letter. Prior to recommending moving forward with this partnership, City staff have found that Foundation is in good standing with USA BMX and that USA BMX will be the oversight sanctioning entity for the track, providing insurance, track design and other services on the Project.

Furthermore, City staff has structured a strong agreement to protect the interests of the City.

One additional benefit from a development perspective of the current design concept is that development of the site can occur in numerous phases as funding for specific elements becomes available. This could come from both the City and the partners. It is the intent of the operator to construct a basic track first and other amenities such as lights further down the road.

COMMUNITY ENGAGEMENT:

Involve/Collaborate
Through the prior grant process, significant outreach to the community was performed on the design of the site. It is the intent of staff to utilize the existing design as the basis for any future partnership development. The proposed collaboration with the community partners is critical for the financial feasibility of the project. The invitation for letters of interest was posted on the City website and sent directly to local sports organizations.

ALTERNATIVE ACTIONS:

The City Council could choose to provide alternate direction to City staff. This alternate direction could include not moving forward with the agreement or directing staff to further negotiate specific points of the agreement.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

On December 7, 2022, the City Council authorized staff to pursue partnership agreements with Dub Baseball and USA BMX for development of portions of the Butterfield Park site.

20 FISCAL AND RESOURCE IMPACT:

Should the City Council move forward with the partnership as outlined in the agreement, the City is recommending funding the design work at a cost of approximately $300,000.

This appropriation is included in a separate item on this agenda. Additionally, should construction of the site be approved by the Council this summer, an appropriation of approximately $1.5 - $2.0 million would be required to construct the City/shared portion of the site. Currently, the City's Capital Improvement Budget has funding of $3.5 million for the park in FY 2025-26. City staff believe that higher than expected revenues in the Quimby Fee Fund (375) and the lower cost of allowing partners to build-out the adjacent site, will allow for construction to begin this summer. The first of the two partner agreements is designed to allow the City to recover approximately 1/3 of the cost of design and construction of the shared improvements as part of the partner agreement.

CEQA (California Environmental Quality Act):

Mitigated Negative Declaration
An environmental assessment, including an Initial Study and Mitigated Negative Declaration, has been prepared for the project by David J. Powers & Associates, Inc. in conformance with CEQA for the initial site plan and uses. Should the Council move forward with the design work, the City shall move forward with a consultant providing an updated analysis on the changes to the original design, which would likely result in an amendment to the initial Mitigated Negative Declaration.

1 AGREEMENT FOR THE CONSTRUCTION, OPERATION AND MAINTENANCE OF

BUTTERFIELD PARK BMX FACILITY
Between

THE CITY OF MORGAN HILL
And

FOUNDATION FOR A BETTER RIDE
Dated: ___________ __, 2023

2 AGREEMENT FOR THE CONSTRUCTION, OPERATION AND MAINTENANCE OF THE

BUTTEFIELD PARK BMX FACILITY

TABLE OF CONTENTS
Contents
SECTION 1. DEFINITIONS........................................................................................................................5 SECTION 2. PERMISSION GRANTED.....................................................................................................6 SECTION 3. BUTTERFIELD PARK AND PREMISES ............................................................................7 SECTION 4. TERM OF AGREEMENT......................................................................................................7 SECTION 5. OPERATOR PAYMENT AND COMMUNITY BENEFIT ..................................................8 SECTION 6. LATE PAYMENT..................................................................................................................9 SECTION 7. FACILITY USAGE, FEES AND CHARGES........................................................................9 SECTION 8. OPERATOR RESPONSIBILITIES .....................................................................................12 SECTION 9. MAINTENANCE AND REPAIR ........................................................................................15 SECTION 10. INFRASTRUCTURE IMPROVEMENT RESPONSIBILITY ..........................................16 SECTION 11. LIABILITY.........................................................................................................................18 SECTION 12. PROHIBITED ACTS..........................................................................................................18 SECTION 13. PERFORMANCE, DEPOSIT, AND ASSURANCES .......................................................19 SECTION 14. INDEPENDENT CONTRACTORS/CONSULTANTS.....................................................20 SECTION 15. PERMITS, TAXES, AND LICENSES...............................................................................20 SECTION 16. ASSIGNMENT, SUBLEASE, BANKRUPTCY................................................................20 SECTION 17. BUSINESS RECORDS ......................................................................................................21 SECTION 18. REGULATIONS AND INSPECTIONS.............................................................................21 SECTION 19. TERMINATION.................................................................................................................22 SECTION 20. SURRENDER OF POSSESSION ......................................................................................25

3 SECTION 21. WAIVER ............................................................................................................................26 SECTION 22. FORCE MAJEURE ............................................................................................................26 SECTION 23. REMEDIES ARE NON-EXCLUSIVE AND MEDIATION REQUIREMENT ................26 SECTION 24. LAW OF CALIFORNIA APPLIES....................................................................................26 SECTION 25. VENUE...............................................................................................................................26 SECTION 26. SEVERABILITY................................................................................................................26 SECTION 27. ATTORNEY’S FEES .........................................................................................................27 SECTION 28. NOTICES ...........................................................................................................................27 SECTION 29. INTERPRETATION...........................................................................................................28 SECTION 30. AGREEMENT CONTAINS ENTIRE AGREEMENT ......................................................28 SECTION 31. TIME OF THE ESSENCE..................................................................................................28 SECTION 32. INCORPORATION OF DOCUMENTS ............................................................................29

4 AGREEMENT FOR THE CONSTRUCTION, OPERATION AND MAINTENANCE OF

BUTTERFIELD BMX FACILITY
Between

THE CITY OF MORGAN HILL
And

FOUNDATION FOR A BETTER RIDE
This agreement is made and entered into on this day of __________ __, 2023, by and between the CITY OF MORGAN HILL, a municipal corporation (“CITY”), and FOUNDATION FOR A BETTER RIDE (“OPERATOR”), non-profit 501(c)(3) corporation. Collectively CITY and OPERATOR may be referred to as “PARTIES.”
Recitals
The following recitals are a substantive portion of this Agreement:

1. The CITY issued an Invitation for Letters of Interest (“ILOI”) for the development, operation and maintenance of recreation facilities at the Butterfield Park Site in February of 2022.

2. FOUNDATION FOR A BETTER RIDE submitted a Letter of Interest in partnership with USA BMX in May 2022.

2. The Parks and Recreation Commission reviewed the responses to the ILOI and recommended that the City move forward with partnering with FOUNDATION FOR A BETTER RIDE in development and operation of a BMX Facility at the City’s Butterfield Park site.

3. The City Council determined that FOUNDATION FOR A BETTER RIDE was responsive to the ILOI and selected this proposer to construct and operate the BMX Facility on a portion of the Butterfield Park site in accordance with the terms and conditions of this Construction, Operations and Maintenance Agreement ("AGREEMENT").

4. FOUNDATION FOR A BETTER RIDE is a 501(c)(3) LLC with the following purpose:
“FOUNDATION FOR A BETTER RIDE programs are beginner and family inclusive programs, allowing racers of all ages to compete together and share experiences through thoughtfully designed weekly coaching, practice and competitive cycling events.”

4. OPERATOR desires to enter into an agreement in accordance with the foregoing and undertakes to provide services of the type and character required by CITY for the benefit of the residents of the CITY and other users at the Butterfield Park site.

5 5. The principal motivation for CITY to enter into this AGREEMENT is to serve the public by providing a well-maintained and operated BMX Facility as well as related facilities and services.

6. CITY and OPERATOR intend to work together in good faith to ensure that the BMX Facility to be located at the Butterfield Park site is constructed and becomes a first-class sports facility which is operated in a professional manner.

NOW THEREFORE, in consideration of the premises and of the terms, covenants, and conditions to be kept and performed by the PARTIES, the PARTIES agree as follows:

SECTION 1. DEFINITIONS
For the purpose of this AGREEMENT, the following capitalized words and phrases not defined elsewhere in this AGREEMENT are defined and shall be construed as set forth:

AGREEMENT: This “AGREEMENT FOR THE CONSTRUCTION, OPERATION AND MAINTENANCE OF THE BMX FACILITY” and Exhibits (A-H) attached hereto and incorporated herein.

BALL FIELD PREMISES: The geographical area, as defined in Exhibit A, attached hereto and incorporated herein which is the subject of a potential AGREEMENT which has not been entered into at this time in which the OPERATOR will construct, operate and maintain its improvements.

BMX PREMISES: The geographical area, as defined in Exhibit A, attached hereto and incorporated herein which is the subject of this AGREEMENT and in which the OPERATOR will construct, operate and maintain its IMPROVEMENTS as defined below.

BUSINESS MANAGER: OPERATOR’S representative appointed by OPERATOR to be the primary point of contact for City with respect to operations at the Facility. OPERATOR will notify CITY promptly upon any change of the appointed BUSINESS MANAGER.

CITY/SHARED PREMISES: The geographical area, as defined in Exhibit A, which shall be constructed, operated and maintained by the CITY. The area will contain public park amenities and shared facilities for use in conjunction with the BMX PREMISES and proposed BALL FIELD PREMISES. The CITY Improvement Plan and CITY construction plan is attached hereto and incorporated herein as Exhibit E.

CODE: Morgan Hill Municipal Code.

COMMUNITY BENEFIT: As described further below, the OPERATOR shall provide a community benefit to CITY in return for use of the portion of Butterfield Park site for its FACILITY.

DIRECTOR: The City representative appointed by the City Manager to oversee the Butterfield Park. The City initially appoints the Public Services Director or his or her designee.

6 FACILITY: The IMPROVEMENTS constructed by the OPERATOR on the BMX PREMISES and shown on Exhibit “B” attached hereto and incorporated herein.

FISCAL YEAR: The period from July 1 of one calendar year to June 30 of the next calendar year.

IMPROVEMENTS: All buildings and appurtenances recessed into or attached by any method to the ground or to another object which is recessed or attached to the ground or to other CITY owned facilities (including, but not limited to track components, turf, fences, posts, signs, electrical hookups, irrigation systems, plumbing, tracks, tanks, etc.).

LIMITED USE AREA: Parking or other areas designated on Exhibit "A” that are unimproved, typically used for parking and not designed for day-to-day use and which may only be used following prior written permission by CITY.

SECTION 2. PERMISSION GRANTED
A. Permission for Entry BMX PREMISES: For and in consideration of the receipt of the community benefit or community benefit in lieu fee as described below and subject to all of the terms and conditions of this AGREEMENT, CITY hereby grants to the OPERATOR the exclusive right and obligation to: make improvements to the BMX PREMISES, schedule the use of the FACILITY; and to operate and maintain the FACILITY for the purpose of hosting, organizing, or scheduling the FACILITY for sporting events and sports training activities along with uses ancillary to the sporting events appropriate for the FACILITY; and not for any other purpose without the prior written consent of DIRECTOR. OPERATOR may also schedule the use of the FACILITY for non-sporting events as described herein. The rights granted by this AGREEMENT shall be carried on solely within the limits and confines of the areas designated as BMX PREMISES.

B. Permission for Entry CITY/SHARED PREMISES: For and in consideration of the receipt the SHARED USE PAYMENT (as described in section 5B), the CITY hereby authorizes access to the CITY/SHARED PREMISES for the non-exclusive use of visitors to the FACILITY. CITY may allow operator to make improvements to the CITY/SHARED USE PREMISES.

Improvements must be approved in writing and in advance by the DIRECTOR.

C. Permission for Entry LIMITED USE AREA: For and in consideration of the receipt of the SHARED USE PAYMENT (as described in section 5B), the CITY shall authorize limited uses of the CITY/SHARED PREMISES. All uses must be scheduled and approved in advance in writing and in advance by the DIRECTOR. DIRECTOR shall not unreasonably withhold approval of use of the LIMITED USE AREA.

SECTION 3. BUTTERFIELD PARK AND PREMISES
A. The BMX PREMISES (Exhibit “A”) subject to this AGREEMENT is located at 16000 Butterfield Boulevard, Morgan Hill, CA. This Butterfield Park site is a shared facility and includes the following areas as further described in Exhibit “A”: CITY/SHARED PREMISES, proposed BALL FIELD PREMISES, BMX PREMISES AND LIMITED USE AREA.

7 B. The FACILITY:

The FACILITY includes, includes the unimproved land located within the BMX PREMISES and any future IMPROVEMENTS constructed by the OPERATOR.

C. No Violation of Law: OPERATOR shall not use or allow the FACILITY or the BMX PREMISES to be used, in whole or in part, for any use in violation of any present or future laws, ordinances, rules, and regulations of any public or governmental authority or agencies, departments or officers thereof, including CITY. These ordinances, rules, and regulations include, but are not limited to those which relate to sanitation, public health, and safety.

SECTION 4. TERM OF AGREEMENT
A. Term: The term of the AGREEMENT shall be ten (10) years from July 1, 2023 subject, to early termination as set forth below. The AGREEMENT shall commence when formally executed by CITY.

B. Term Extension: The term may be extended on the same terms and conditions by up to two (2) additional five (5) year terms at the discretion of the CITY. The CITY shall not unreasonably withhold approval of either extension if OPERATOR has not breached AGREEMENT.

OPERATOR shall provide eighteen (18) months’ notice prior to any extension period should it wish to utilize the additional five (5) year terms. CITY shall notify OPERATOR of CITY’S approval or disapproval of the extension within ninety (90) days of OPERATOR’S notice unless this time is extended based upon mutual agreement of the PARTIES.

C. Transition Plan: At least 6 months prior to the conclusion of this Agreement, by its own terms, if not extended by the PARTIES, OPERATOR shall meet and confer with CITY in good faith.

D. Termination: The CITY may terminate this AGREEMENT upon an event of default as set forth herein.

E. Termination Provision: The CITY may terminate this AGREEMENT pursuant to Section 19.A.

F. Following termination of this AGREEMENT and payback by the CITY of any funds due to OPERATOR, as described below, all right, title and interest in the IMPROVEMENTS shall be conveyed to CITY.

SECTION 5. OPERATOR PAYMENT AND COMMUNITY BENEFIT
A. OPERATOR Provided COMMUNITY BENEFIT in Lieu Payment: The OPERATOR shall provide the following benefits (“COMMUNITY BENEFIT”):

1. Discounted fees shall be provided to all Morgan Hill residents. These fees shall be referred to as “COMMUNITY BENEFIT FEES” and are outlined in Exhibit “F”.

8 2. To encourage participation from females in Morgan Hill the OPERATOR shall provide a 25% discount on all fees to female participants within Morgan Hill.

3. To encourage participation from low-income youth participants residing in Morgan Hill shall be eligible for up to a 50% discount based upon income level. Income levels shall be determined by the City of Morgan Hill Recreation Division’s current Financial Assistance levels.

4. The OPERATOR shall provide free use to Morgan Hill residents following all Sunday races for a minimum of 2 hours, unless earlier closure is required due to sunset occurring prior to 2 hours following completion of the races.

Reporting of the Community Benefit to CITY shall occur on a quarterly basis as outlined in Section

5.C.2. If the OPERATOR does not provide the required COMMUNITY BENEFIT as described in this section; the operator shall make a payment of $100,000 annually for any year that the Community Benefit has not been provided (“COMMUNITY BENEFIT IN LIEU FEE"). The payment amount shall increase or decrease in subsequent years based upon the CPI increase or decrease of the prior year for the San Francisco/Oakland/San Jose CPI for Urban Consumers.

Payment shall be made within 3 months of the end of each FISCAL YEAR. OPERATOR shall not be subject to this in lieu payment until completion of the construction of IMPROVEMENTS and opening of the BMX Facility as necessary to allow use of the IMPROVEMENTS.

B. OPERATOR Payment for Shared Use: In exchange for visitors’ use of the CITY/SHARED USE PREMISES operator shall pay 33% of the costs associated with the shared use of the facility (“SHARED USE PAYMENT”). Shared use costs shall include all costs associated with maintaining and repairing the CITY/SHARED USE PREMISES by the CITY, excluding recreational facilities, such as playgrounds, fitness equipment, meeting rooms, and/or other areas designated by the CITY. SHARED USE PAYMENTS shall be made quarterly within 30 days of billing by CITY.

C. Annual and Quarterly Reports:

1. OPERATOR shall transmit a Statement of Revenue and Expense in the form of a Profit and Loss Statement (Exhibit “H”), for every Fiscal Year during the Term. Reports shall be due by September 30 of each year.

2. OPERATOR shall maintain and submit to the CITY monthly statistical information and reports quarterly (July-September, October-December, January-March, and April-June) on the following:
ongoing programs, hours of track use, participant levels, use age and gender type, local vs. regional use levels, hours of use, GROSS RECEIPTS and net profits, expenses and revenues. OPERATOR shall provide detailed statistics as outlined above specifically on the COMMUNITY BENEFIT.

OPERATOR shall provide statistics for all hosted major events, including estimated attendance, estimated percentage of overnight stays, average travel distance to reach the facility. MAJOR EVENTS are defined as those events where it is anticipated that there will be more than 500 attendees. Reports shall be due 30 days after the end of each quarter. At the request of CITY, OPERATOR shall provide an hour by hour booking schedule for the use of the FACILITY.

9 SECTION 6. LATE PAYMENT
A. Late Payment: The failure of OPERATOR to pay any payments required by this AGREEMENT on or before the payment due date is a breach of the AGREEMENT. The CITY may terminate the AGREEMENT and take other legal action for such a breach as set forth herein.

B. Late Fees: Without waiving any rights available at law, in equity, or under the AGREEMENT, in the event of late or delinquent payments, OPERATOR recognizes that CITY will incur certain expenses as a result thereof, the amount of which is difficult to ascertain. Therefore, in addition to monies owing, OPERATOR agrees to pay the CITY a late fee set forth below to compensate CITY for all expenses and or damages and loss resulting from the late or delinquent payments.

1. The charge for each late payment shall be $200.00, for each month after the due date. In addition, OPERATOR shall pay interest calculated at the rate of eighteen percent (18%) per annum or one and one-half percent (1.5%) for each month, after the due date, assessed daily, on the balance of the unpaid amount, unless otherwise prohibited by law. Payments are past due if postmarked or electronically transferred after the fifth (5th) day on which payment was due.

SECTION 7. FACILITY USAGE, FEES AND CHARGES
A. Usage: Subject to the conditions set forth below, CITY agrees that OPERATOR, upon providing the COMMUNITY BENEFIT or paying the COMMUNITY BENEFIT IN LIEU PAYMENT, and all other charges and payments due from OPERATOR under the terms of this AGREEMENT, and upon observing and keeping the required terms, conditions and covenants of this AGREEMENT, and provided that OPERATOR is not in breach or default of this AGREEMENT, shall lawfully and quietly hold, use, and enjoy the FACILITY during the term of and for purposes specified in this AGREEMENT. In the case of disputes, during the term of the AGREEMENT, about any conditions which may impede the OPERATOR'S quiet enjoyment of the FACILITY, the DIRECTOR and OPERATOR shall meet and confer to determine the resolution to the dispute.

B. Usage Fees: OPERATOR has the right to determine facility usage fees and other charges with the following limitations:

1. Fees associated with local community use outlined in 5A as a COMMUNITY BENEFIT shall be established by this AGREEMENT as the rates or charges are shown in Exhibit “F” attached hereto and incorporated herein by this reference. Exhibit “F” shall include standard fees as well as COMMUNITY BENEFIT FEES. Fee increases in subsequent years shall not exceed the CPI increase of the prior year for the San Francisco/Oakland/San Jose CPI for Urban Consumers.

4. There are no rate caps or increase caps on regional uses such as races.

5. All fees shall not be excessively high, low, unreasonable, or discriminatory based upon the circumstances.

10 C. Charges and Pricing: OPERATOR shall have the right to charge and establish prices for the entrance, advertising, and any other usage of the BMX FIELD PREMISES permitted under this AGREEMENT. OPERATOR shall provide the DIRECTOR with a list of prices for all services and goods offered. OPERATOR shall update the list and provide a copy to the DIRECTOR whenever any prices are changed.

D. Maximization of Use: OPERATOR shall make available the FACILITY in a manner that maximizes the safe use of the FACILITY, while maintaining the FACILITY at the maintenance standards specified in this AGREEMENT. Nothing in this AGREEMENT shall require OPERATOR to make the FACILITY available on a fee basis below those charges specified in Exhibit “G,” attached hereto and incorporated herein in order to maximize use.

E. City Use: CITY shall have the right to forty (40) hours of scheduled use at the FACILITY at no charge to the CITY. CITY may use this free time for CITY sponsored or CITY partner programs. The total free time shall not exceed 40 hours during a calendar year. The CITY’S use shall not exceed one weekend day per year. OPERATOR shall use reasonable efforts to schedule the CITY’S request. If the CITY uses the FACILITY for hours over the free 40 hours, CITY shall pay the standard rental rate established by the OPERATOR.

F. Parking Use: The parking lots located within the CITY/SHARED PREMISES under this AGREEMENT shall be regularly available for use by the general public and visitors to the proposed BMX PREMISES and proposed BALL FIELD PREMISES. Upon consultation all parking may be closed to the General Public for a limited number of special events to be hosted annually. Closure of the parking lot for special event use by the OPERATOR shall require a City Special Event permit.

OPERATOR, the City, and the Business Manager of the BMX PREMISES shall provide each other with monthly calendars to ensure clear communication of when events are occurring at the BUTTERFIELD PARK SITE. During regular shared use, a parking fee cannot be charged.

OPERATOR shall work in good faith with CITY to develop event parking plans to manage the Parking in an integrated fashion. Parking fees for portions or all of the parking areas, may be allowed by the OPERATOR, CITY, or Business Manager of the BALL FIELD PREMISES with advance written approval and a Special Event Permit from the CITY. The special event parking fees shall be the property of whichever OPERATOR is hosting the event. The OPERATOR, City and Business Manager of the potential BALL FIELD PREMISES shall meet monthly to establish and plan for parking operations. All three organizations shall have equal right to host special events. Should proposed special events create a conflicting use the City shall determine which event shall be permitted.

1. When a special event permit is required, OPERATOR must apply for the permit no less than 60 days prior to the special event. Major special events that require public safety review shall require 6 months advance notice. OPERATOR shall be responsible for management and clean-up of any special event use of parking facilities during and at the conclusion of OPERATOR’S use.

11 2. Use of the LIMITED USE AREA for parking or other uses shall be allowed following advance written approval from the City.

G. Advertising: OPERATOR shall have the right to pursue advertising and sponsorship agreements and offer space and locations within the BMX PREMISES for advertising that are consistent with the CITY’S approved policy. OPERATOR may have temporary advertising for alcohol products during “ADULT ONLY” tournaments occurring at the BMX PREMISES, upon prior written pre-approval by DIRECTOR. ADULT ONLY tournaments are those tournaments or events where the participants are exclusively adults, 21 years of age or older.

H. Naming Rights: OPERATOR shall have the right to pursue and have the authority to enter into agreements for advertising naming rights for the amenities within the BMX PREMISES, provided that the term of any such agreement shall not continue beyond the term of this AGREEMENT.

I. Food and Beverage Concession Stand: OPERATOR shall have the right to establish or permit food and beverage sales within the BMX PREMISES; provided that OPERATOR shall not sell any alcohol or tobacco products without prior written consent from DIRECTOR. All food and beverage sales shall comply with local, state, and federal laws and regulations, including, but not limited to all County Health Department regulations or requirements. No products containing CBD, marijuana or marijuana extracts shall be sold on the BMX PREMISES.

J. Vending Machines: OPERATOR shall not install, or allow to be installed, any vending machines, electronic games, or other coin-operated machines without prior written approval of DIRECTOR. DIRECTOR shall have the right to order the immediate removal of any unauthorized machines. DIRECTOR shall not unreasonably withhold permission for the installation of vending machines.

K. Non-Sporting Events: OPERATOR shall not schedule any non-sporting, recreational or BMX related events, without the prior written permission of DIRECTOR. DIRECTOR shall not unreasonably withhold permission for events to be hosted.

L. Event Schedule: OPERATOR shall maintain an online schedule of events that is available to the CITY and the public. The schedule will show all MAJOR EVENTS.

M. Signage. OPERATOR may design and construct a permanent sign on the BMX PREMISES to advertise the location of the FACILITY, subject to the approval of DIRECTOR. OPERATOR may design and install temporary signage concerning events at the FACILITY if the signage is professional in appearance and permitted under local and state laws.

N. Proposed BALL FIELD. The BALL FIELD is proposed, and no agreement has been reached with the provider. This Agreement is not contingent upon the approval, development or construction of the BALL FIELD. Should CITY in its sole discretion choose not to enter into an Agreement concerning the construction of the BALL FIELD such an occurrence shall not constitute default under this Agreement.

12 SECTION 8. OPERATOR RESPONSIBILITIES
OPERATOR shall, at all times during the term of the AGREEMENT, comply with the following conditions:

A. Conduct: OPERATOR shall at all times conduct its business in a professional, and orderly manner to the reasonable satisfaction of DIRECTOR. OPERATOR shall use its best efforts to exclude intoxicated person(s), profane or indecent language, or boisterous or loud conduct in or about the BMX PREMISES and shall not knowingly allow the use or possession of illegal drugs, narcotics, or controlled substances on the BMX PREMISES. OPERATOR shall ensure that all activities at the BMX PREMISES do not constitute a public nuisance due to spillover effects upon adjacent properties or public safety response requirements.

B. Non-Discrimination: OPERATOR, in its operations at the FACILITY, for itself, its personal representatives, successors in interest and assigns, as part of the consideration hereof, does hereby covenant and agree that: (1) no person shall be excluded from the BMX PREMISES or FACILITY or activities thereon or be denied the benefits of or subjected to discrimination on the grounds of race, color, national origin, religion, ancestry, sex, age, physical disability, or sexual orientation; (2) in the construction of any improvements on, over or under the BMX PREMISES authorized to be improved herein and the furnishing of services thereon, no person shall be excluded from participation in, denied the benefits of or otherwise be subjected to discrimination on the basis of race, color, national origin, religion, ancestry, sex, age, physical disability, or sexual orientation.

In addition, OPERATOR, during the term of the AGREEMENT, agrees not to unjustly discriminate in its employment practices against any employee or applicant for employment because of the employee's or applicant's race, color, religion, national origin, ancestry, sex, age, physical disability, or sexual orientation. All contracts entered into by OPERATOR shall contain a similar provision.

C. Qualified Personnel: OPERATOR will, in the operation of the FACILITY, employ or permit the employment of only personnel who will provide a high standard of service to the public and cooperation with CITY. All personnel, while on or about the BMX PREMISES, shall be neat in appearance and courteous at all times and shall be appropriately attired, with badges or other suitable means of identification. OPERATOR shall make all reasonable efforts to ensure no person employed by OPERATOR, while on or about the BMX PREMISES, shall be under the influence of illegal drugs, narcotics, other controlled substances or alcohol, or use inappropriate language, or engage in otherwise inappropriate conduct for a work environment. In the event an employee’s conduct is not satisfactory, the DIRECTOR may, but is not required to, direct OPERATOR to remove that person from the BMX PREMISES and OPERATOR shall do so.

D. Employees of Operator: OPERATOR shall appoint a Business Manager, upon commencement of operation of the FACILITY for the management and operation of the FACILITY. If OPERATOR elects to subcontract the management of any of the portions of the operations, subject to approval by CITY, to a managing entity or entities, the provisions of this section shall also apply to that entity. The BUSINESS MANAGER will be responsible for the appearance, conduct, and demeanor of OPERATOR'S agents, contractors, and employees. The BUSINESS MANAGER shall be available during regular business hours and, at all times during that person's absence, a

13 responsible designee shall be in charge and available. The BUSINESS MANAGER shall have the authority to: hire, fire, and schedule personnel; order repairs, maintenance work, merchandise and materials; oversee inventory control and tracking; oversee field maintenance; implement a marketing plan; maintain accounting records; book parties and events; oversee operations; train employees (to include such areas as customer service) and have ultimate on-site decision-making responsibility.

E. BUSINESS MANAGER: The BUSINESS MANAGER shall be the single point of contact for the DIRECTOR. The BUSINESS MANAGER shall be available at all normal business hours and any hours in which the FACILITY is in use to be contacted by the DIRECTOR or his or her designee should that be necessary. If the BUSINESS MANAGER is unavailable, then an alternative employee shall be available for contact by the DIRECTOR. If, for reasons of ill health, incapacitation, or death, the BUSINESS MANAGER becomes incapable of performing all terms and provisions of the AGREEMENT and no substitute is immediately forthcoming from OPERATOR, DIRECTOR may, following seven days written notice in his or her sole discretion, terminate the AGREEMENT.

G. Utilities: OPERATOR shall be responsible for all utility charges related to the BMX PREMISES and its fair share of all utility charges for the CITY/SHARED PREMISES. Charges may include, but are not limited to, deposits, installation costs, meter deposits, and all service charges for gas, electricity, water, heat, air-conditioning, and other utility services to PREMISES, and shall be paid in a timely fashion by OPERATOR regardless of whether utility services are furnished by CITY or by other utility service providers. Any utility service shared between the proposed BALL FIELD PREMISES, BMX PREMISES, AND CITY/SHARED PREMISES shall be paid by the CITY and fair share reimbursed by the appropriate OPERATOR as part of payment under section 5.B. The percentage of the bill paid by the OPERATOR will be based on the estimated percentage of use of that specific utility for the BMX PREMISES.

1. CITY will incur the cost of all refuse collection from the main dumpster to be located within the CITY/SHARED PREMISES during the term of this AGREEMENT. Notwithstanding the foregoing, OPERATOR agrees to pay a fair share of the cost of refuse collection for the PREMISES if the CITY’S agreement with its current refuse hauler terminates.

2. OPERATOR hereby expressly waives all claims for compensation against CITY, for any loss or damage sustained by OPERATOR resulting from any defect, deficiency, or impairment of the water, heating, or air conditioning systems, electrical apparatus, or wires furnished to the PREMISES from any cause, or from any loss resulting from water, earthquake, wind, civil commotion, or riot. OPERATOR hereby expressly releases and discharges CITY and its officers, employees, and agents from any and all demands, claims, actions, and causes of action arising from any of these causes. In addition to the foregoing waivers, any damage to any utility service line if caused by OPERATOR, its employees, contractors, sub-contractors, suppliers, agents, or invitees, OPERATOR shall be responsible for the cost of repairs and all damages incurred.

H. Safety: OPERATOR shall correct safety deficiencies and violations of safety practices as soon as reasonably possible after the condition becomes known, or DIRECTOR notifies OPERATOR of the condition if OPERATOR is unaware of the condition. OPERATOR shall cooperate fully

14 with CITY in the investigation of accidents occurring on the BMX PREMISES. In the event of injury to a patron or customer requiring emergency medical response, OPERATOR shall reasonably ensure that the injured person receives prompt and qualified medical attention. Notice to CITY within 48 hours or sooner if practicable shall be provided. Email is acceptable form of Notice under this provision. OPERATOR shall notify the CITY in writing describing the names of the person(s) injured, and the time, place, and nature of the injury. If OPERATOR fails to correct hazardous conditions specified by the DIRECTOR in a written notice, which have led, or in the opinion of CITY could lead, to injury, the DIRECTOR may, but is not required to, in addition to all other remedies which may be available to CITY, repair, replace, rebuild, redecorate, or paint the BMX PREMISES to correct the specified hazardous conditions, with the cost thereof, plus fifteen percent (15%) for administrative overhead, to be paid by OPERATOR to CITY on demand.

OPERATOR is solely responsible for safety at the FACILITY.

I. Security: OPERATOR shall be responsible for the security of the BMX PREMISES.

OPERATOR may install equipment approved by the CITY, which will assist in protecting the PREMISES from theft, burglary, or vandalism. Any security equipment must be purchased, installed, and maintained by OPERATOR. OPERATOR is solely responsible for the security of the FACILITY except for live security provided by the CITY during events which are solely run by the CITY or the CITY and its partner(s).

J. Environmental Sensitivity: The OPERATOR must operate the FACILITY in an environmentally sensitive manner and all operations must comply with CITY policies and ordinances regarding protection of the environment. OPERATOR shall not use or allow the use on the PREMISES of environmentally unsafe products. OPERATOR shall develop and submit a water conservation plan to the DIRECTOR.

K. Fund-Raising Activities: OPERATOR shall cooperate with CITY personnel on all matters relative to the conduct of fundraising and/or special events on the BMX PREMISES.

L. Community Outreach: OPERATOR shall coordinate and cooperate with CITY to develop strategies to contact all members of the community, particularly those living in low-to-moderate income areas, fixed-income households, youth, the disabled, etc., to provide its services to these members of the community who may not otherwise have the opportunity to utilize the opportunities provided by OPERATOR.

SECTION 9. MAINTENANCE AND REPAIR
A. “As Is”: OPERATOR acknowledges that it is taking control of the BMX Premises in an “as is”, unimproved condition.

B. Maintenance and Operating Standards: During all periods that the BMX PREMISES are used or are under the control of the OPERATOR for the uses, purposes, and occupancy set forth in this AGREEMENT, OPERATOR shall maintain and operate the BMX PREMISES and the FACILITY at its own expense, in compliance with law and, unless otherwise more specifically set

15 forth, to a standard equal or better than standards in place as of the effective date of the AGREEMENT.

C. OPERATOR shall maintain the BMX PREMISES at standards to a level equal to or better than other City of Morgan Hill Park Facilities.

F. Improvements: OPERATOR shall, at its own expense, keep and maintain IMPROVEMENTS.

The CITY shall have no responsibility for maintenance of the BMX PREMISES, FACILITY, OR IMPROVEMENTS. OPERATOR'S maintenance duties shall include all sweeping, washing, servicing, repairing, replacing, cleaning, and interior and exterior painting that may be required to properly maintain the premises in a safe, clean, operable, and attractive condition.

G. Pest Control: OPERATOR shall be responsible for pest control in and around the BMX PREMISES, including but not limited to, abatement of insects, roaches, ants, spiders, rodents, vermin, and other nuisance pests.

I. Property Damage and Theft Reporting: OPERATOR shall notify the CITY in writing of any damage or destruction to the BMX PREMISES and/or CITY-owned property within 48 hours of OPERATOR’S discovery thereof, or sooner if practicable. Notice by email under this provision shall be sufficient.

J. Damage or Destruction to Premises:

1. Partial Damage: If all or a portion of the IMPROVEMENTS are partially damaged by fire, explosion, flooding inundation, floods, the elements, public enemy, or other casualty, but not rendered uninhabitable, the same will be repaired with due diligence by OPERATOR at its own cost and expense, subject to the limitations as hereinafter provided. If any damage to the CITY/SHARED PREMISES or the LIMITED USE Area is caused by the negligent acts or omissions of OPERATOR, its agents, officers, or employees, OPERATOR shall be responsible for reimbursing CITY for the cost and expense incurred in making the repairs.

If the damages as described above in "Partial Damage" are so extensive as to render the IMPROVEMENTS or a portion thereof uninhabitable or unusable for its primary purpose, but are capable of being repaired within a reasonable time not to exceed sixty (60) days, OPERATOR shall endeavor to repair the damage with due diligence by OPERATOR at its own cost and expense, subject to the following limitations: the damage must be a covered claim under the OPERATOR’s insurance and the damage must not be from a Federal, State or locally declared disaster. Should OPERATOR not have the financial ability to reconstruct until the insurance claim payment is made, additional time shall be provided to OPERATOR to complete the repairs.

2. Complete Destruction: In the event all or a substantial portion of the BMX PREMISES are completely destroyed by fire, explosion, the elements, public enemy, or other casualty, or are so damaged that they are uninhabitable or unusable for its primary purpose and cannot be replaced except after more than sixty (60) days, OPERATOR shall be under no obligation to repair, replace or reconstruct the BMX PREMISES. This provision only applies to Complete Destruction or destruction of a substantial portion of the BMX PREMISES. If the damage or destruction to the

16 PREMISES has not been repaired or reconstructed within 4 months, OPERATOR may terminate this AGREEMENT in its entirety as of the date of the damage or destruction. Notwithstanding the foregoing, if the BMX PREMISES, or a substantial portion thereof, are completely destroyed as a result of the negligent acts or omissions of OPERATOR, its agents, officers, or employees, OPERATOR shall pay to CITY the insurance proceeds or the value of the depreciated IMPROVEMENTS prior to the destruction whichever is greater, if OPERATOR does not rebuild the IMPROVEMENTS.

3. Limits of CITY'S Obligation Defined: In the application of the foregoing provisions, OPERATOR may, but shall not be obligated to, repair or reconstruct the IMPROVEMENTS. If OPERATOR chooses to do so, OPERATOR’S obligation shall also be limited to repair or reconstruction of the IMPROVEMENTS to the same extent and of equal quality as originally constructed by OPERATOR, less ordinary wear and tear, at the commencement of its operations.

SECTION 10. INFRASTRUCTURE IMPROVEMENT RESPONSIBILITY
A. OPERATOR Infrastructure Improvements to BMX PREMISES: OPERATOR shall improve the BMX PREMISES by constructing IMPROVEMENTS in the concept design (Exhibit “B”) on the BMX PREMISES.

1. OPERATOR shall submit plans for approval to DIRECTOR prior to commencing construction of any improvements. Director shall not unreasonably withhold approval if plans are aligned with the concept design (Exhibit “B”).

2. OPERATOR shall follow all required laws and permitting requirements for construction of the IMPROVEMENTS. This includes the City development/building permitting process, with all expenses the responsibility of the OPERATOR.

3. CITY recognizes that construction of improvements within the BMX PREMISES shall be phased with some improvements constructed before others. OPERATOR agrees that the track facility shall be the first IMPROVEMENT constructed on the BMX PREMISES. OPERATOR agrees to complete the construction of the BMX track and ancillary required improvements for its use within 5 years of the effective date of this AGREEMENT.

4. OPERATOR and the CITY agree that the building identified in the concept design (Exhibit “B”) shall not be included in the initial phase of IMPROVEMENTS and shall require additional environmental review to meet any requirements of the California Environmental Qualities Act.

5. OPERATOR shall submit to CITY bills, invoices and other documentation to show the actual cost of IMPROVEMENTS paid for by OPERATOR.

6. CITY intends to construct the basic improvements within the CITY/SHARED PREMISES to support access and development of the BMX PREMISES. A tentative list of the specific improvements and target construction dates are included in Exhibit “F” attached hereto and incorporated herein. CITY does not commit to meet the target dates specified in the Exhibit "F”.

17 7. The OPERATOR, CITY and the operator manager of the BMX PREMISES shall be responsible for the costs associated with the basic amenities constructed by CITY at the CITY/SHARED PREMISES. The OPERATOR shall be responsible for reimbursing the CITY for 33% of all costs associated with the costs of construction of the basic amenities in Exhibit “E”.

OPERATOR shall pay CITY 1/20 of the capital costs of construction of the basic amenities each year, starting the first year after the completion of the basic amenities, but not before the construction of the IMPROVEMENTS on the BMX PREMISES and the opening of the BMX Facility. The payment shall last for a period of 20 years, should the Agreement be renewed for additional terms. Should OPERATOR terminate the Agreement with cause this sum shall not be an outstanding obligation of OPERATOR. Should OPERATOR choose not to renew the Agreement after the first ten-year period or the first subsequent five-year extension term, then any remaining payment shall not be an outstanding obligation of OPERATOR. Should CITY terminate this Agreement for any reason, other than default by OPERATOR, OPERATOR shall not have an outstanding obligation to reimburse CITY for these expenses.

8. The CITY and OPERATOR recognize there is significant uncertainty within the construction industry as it relates to material availability and cost escalation. Should the construction of improvements by the CITY, within the CITY/SHARED PREMISES be significantly delayed the CITY and OPERATOR shall meet in good faith to develop alternative options for development of the basic amenities within the CITY/SHARED PREMISES necessary for use and access of the BMX PREMISES. The CITY, at its sole discretion, may approve the construction of basic amenities by the OPERATOR.

9. Should OPERATOR not complete construction of the IMPROVEMENTS, by the end of the fifth year of this Agreement, this Agreement shall terminate, and CITY shall have ownership of any IMPROVEMENTS constructed to date. This provision may be extended upon mutual written agreement of the PARTIES.

10. OPERATOR shall submit a proposed construction schedule delineating the approximate number of years for the IMPROVEMENTS to be constructed. CITY shall grant extension of these deadlines, but no further than five years from the date of execution of this Agreement. The proposed construction schedule shall be provided prior to commencement of this Agreement and be attached hereto and incorporated herein as Exhibit “C”.

11. All construction performed on the BMX PREMISES of the IMPROVEMENTS shall be subject to prevailing wage requirements. All maintenance of the IMPROVEMENTS, if required by law, shall be subject to prevailing wage requirements. It shall be the responsibility of OPERATOR to ensure that all contractors, subcontractors or any entities retained by OPERATOR to construct the PREMISES pay prevailing wage and provide all documentation necessary or required by law in order to comply with State prevailing wage requirements. To the extent permitted by law, uncompensated volunteers participating in or coordinating construction or maintenance shall not be subject to prevailing wage requirements.

18 SECTION 11. LIABILITY
A. Indemnification:

1. Except for the active negligence or willful misconduct of CITY, OPERATOR undertakes and agrees to defend, indemnify, and hold harmless CITY and its officers, agents, and employees from and against all suits and causes of action, claims, losses, demands and expenses, including, but not limited to, attorney's fees and costs of litigation, damage or liability of any nature whatsoever, for death or injury to any person, including OPERATOR'S employees and agents, or damage or destruction of any property of either party hereto or of third parties, arising in any manner by reason of, or incident to, the performance of this AGREEMENT on the part of OPERATOR, its officers, agents, employees, or subcontractor of any tier.

2. Except for the active negligence or willful misconduct of CITY, the OPERATOR, in consideration of the granting of this AGREEMENT, agrees to hold the CITY harmless for any and all claims or rights of action for damages which may or might arise or accrue to the OPERATOR or, its officers, agents, servants, employees, or others who may be at the FACILITY as part of an BMX PREMISES event or for any other reason by reason of injury to the property, or the persons of any of them resulting from the entry upon or the use of the BMX PREMISES, by the CITY at any time, for any purpose necessary or convenient in connection with the FACILITY.

3. No member, official or employee of CITY shall be personally liable to OPERATOR, or any successor in interest, in the event of any default or breach by CITY or for any amount which may become due to OPERATOR, or on any obligations under the terms of this Agreement.

OPERATOR hereby waives and releases any claim it may have against the members, officials, or employees of CITY with respect to any Default or breach by CITY or for any amount which may become due to OPERATOR under the terms of this Agreement.

B. Insurance Required: OPERATOR shall, at its own cost and expense, purchase and maintain throughout the term of this AGREEMENT the insurance listed in Exhibit “D”:

SECTION 12. PROHIBITED ACTS
OPERATOR shall not:

A. Rent, sell, lease, or offer any space for storing of any articles whatsoever within or on the BMX PREMISES other than as specified herein, without the prior written approval of DIRECTOR; B. Do or permit to be done any act or thing upon the FACILITY which will invalidate, suspend or increase the cost of any insurance policy required under the AGREEMENT, or carried by CITY.;
C. Use, create, store, or allow any hazardous materials as defined in Title 26, Section 13-1160.3(d) of the California Code of Regulations, or those which meet the criteria of the above Code, as well as any other substance which poses a hazard to health and environment. No products containing

19 glyphosate may be used on the BMX PREMISES. Nothing contained herein shall preclude OPERATOR from bringing, keeping, or using on or about the BMX PREMISES, materials, supplies, equipment, and machinery as are appropriate or customary in carrying on its business, except that all hazardous materials must be stored and used in compliance with all city, state and federal rules, regulations, ordinances, and laws; or
D. Use the BMX PREMISES in any manner that will constitute waste.

SECTION 13. PERFORMANCE, DEPOSIT, AND ASSURANCES
A. Performance Deposit: OPERATOR shall pay to the CITY $10,000 to guarantee payment of fees and as a damage deposit to be used in accordance with the default provisions of this AGREEMENT. This deposit shall be returned to OPERATOR after the expiration or earlier termination of the AGREEMENT and any exit audit(s) performed in conjunction with the AGREEMENT. The CITY reserves the right to deduct from the deposit, any amounts up to and including the full amount of the deposit owed to the CITY by OPERATOR as shown by any exit audit(s) performed by CITY, or as compensation to CITY for failure to adhere to the terms and conditions of the AGREEMENT.

B. Construction Deposit: All ordinary and usual bond requirements for public improvements will be required for the IMPROVEMENTS to be constructed by OPERATOR. OPERATOR shall be solely responsible for the costs of the ordinary and usual bond requirements. CITY standard bond forms are attached hereto and incorporated herein as Exhibit “G.” B. Financial Assurances: OPERATOR represents to the CITY that it has sufficient capital, credit, and investment available to it for the purposes of meeting its obligations set forth in this AGREEMENT. In order to demonstrate the OPERATOR’S financial capacity to perform under this AGREEMENT, OPERATOR shall provide to the CITY evidence of its source of capital and operational funding upon execution of this Agreement and annually, in the future, upon the CITY’S request.

SECTION 14. INDEPENDENT CONTRACTORS/CONSULTANTS
The OPERATOR is acting as an independent contractor and not as an agent or employee of the CITY. The OPERATOR shall not represent or otherwise hold itself or any of its directors, officers, partners, employees, or agents to be an agent or employee of the CITY.

SECTION 15. PERMITS, TAXES, AND LICENSES
A. Permits: OPERATOR shall obtain and maintain at its sole expense any approvals, permits, or licenses that may be required in connection with the operation of the BMX PREMISES including, but not limited to, tax permits, business licenses, health permits, building permits, police and fire permits, etc.

20 B. Taxes: OPERATOR shall pay all taxes of whatever character that may be levied or charged upon the rights of OPERATOR to use the BMX PREMISES, or upon OPERATOR'S improvements, fixtures, equipment, or other property thereon or upon OPERATOR'S operations hereunder. In addition, by executing the AGREEMENT and accepting the benefits thereof, a property interest may be created known as "Possessory Interest" and such property interest may be subject to property taxation. OPERATOR, as the party to whom the Possessory Interest is vested, may be liable for the payment of the property taxes levied by the state and county upon such interest. If OPERATOR becomes subject to any tax including, but not limited to a Possessory Interest Tax due to its entry into this Agreement, OPERATOR shall be solely liable for the payment of these taxes.

C. Business License: During the entire term of the AGREEMENT, OPERATOR must hold a current Morgan Hill Business License as required by the CODE Section 5.04.110 and pay applicable fees and taxes pursuant to Chapter 5.04 of the CODE.

D. City’s Increase in Taxes Due: If OPERATOR’S operation of the BMX PREMISES results in any additional property, income, or other taxes to CITY, those obligations shall be those of the OPERATOR’S.

SECTION 16. ASSIGNMENT, SUBLEASE, BANKRUPTCY
Prohibition of Sublease: OPERATOR shall not under-let or sub-let the subject BMX PREMISES or any part thereof or allow the same to be used or occupied by any other person or for other use than that herein specified, nor assign the AGREEMENT nor transfer, assign or in any manner convey any of the rights or privileges herein granted without the prior written consent of CITY.

Neither the AGREEMENT nor the rights herein granted shall be assignable or transferable by any process or proceedings in any court, or by attachment, execution, proceeding in insolvency or bankruptcy either voluntary or involuntary, or receivership proceedings. Any attempted assignment, mortgaging, hypothecation, or encumbering of the rights and obligations under this AGREEMENT or other violation of the provisions of this Section shall be void and shall confer no right, title or interest in or to the AGREEMENT or right of use of the whole or any portion of the FACILITY upon any such purported assignee, mortgagee, encumbrancer, pledgee or other lien holder, successor, or purchaser. CITY entered into this AGREEMENT with OPERATOR based upon the unique qualifications of the OPERATOR, including but not limited to 501(c)(3) status, reputation, experience and financial capabilities. These are individual characteristics of the OPERATOR and organization involved. These characteristics require that this AGREEMENT, or any portion of it, cannot be assigned to another entity without the prior written approval of CITY, which CITY may withhold in its sole discretion.

SECTION 17. BUSINESS RECORDS
A. Record Retention: During the term of the AGREEMENT and for 3 years thereafter, OPERATOR shall maintain all of its books, ledgers, journals, and accounts in which are kept all entries reflecting the GROSS RECEIPTS received or billed by it, and expenses recorded from the

21 business transacted pursuant to the AGREEMENT. These books, ledgers, journals, accounts, and records shall be available for inspection and examination by DIRECTOR, or a duly authorized representative of the CITY, during ordinary business hours at any time during the term of this AGREEMENT and for at least three (3) years thereafter.

D. Termination for Failure to Meet Performance Goals: Based on the annual and quarterly progress reports, OPERATOR shall demonstrate that it has met the performance goals by spending no less than two hundred fifty thousand dollars ($250,000) for infrastructure IMPROVEMENTS to the BMX PREMISES over the first five years of this AGREEMENT.

SECTION 18. REGULATIONS AND INSPECTIONS
A. Regulations: The operations conducted by OPERATOR pursuant to the AGREEMENT shall be subject to:

1. Any applicable rules, regulations, orders, and restrictions which are now in force, or which may be hereafter adopted by CITY with respect to the operation of the FACILITY;

2. Any orders, directions or conditions issued, given, or imposed by DIRECTOR with respect to the use of the roadways, driveways, curbs, sidewalks, parking areas, or CITY/SHARED PREMISES and other public areas adjacent to the BMX PREMISES;

3. Any applicable laws, ordinances, statutes, rules, regulations or orders, including the CODE, and of any governmental authority, federal, state or municipality, lawfully exercising authority over the OPERATOR'S operations;

4. Any applicable local, state and federal laws and regulations relative to the design and installation of facilities to accommodate disabled persons, including the Americans with Disabilities Act; and

5. OPERATOR acknowledges that the BMX PREMISES shall be operated smoke-free and smoking or vaping shall be prohibited.

B. Permissions:

Any permission required by the AGREEMENT shall be secured in writing by OPERATOR from CITY or the DIRECTOR and any errors or omissions therefrom shall not relieve OPERATOR of its obligations to faithfully perform the conditions. OPERATOR shall immediately comply with any written request or order submitted to it by CITY or DIRECTOR provided the request or order is consistent with the terms of this AGREEMENT.

C. Right of Inspection:

22 CITY and the DIRECTOR, their authorized representatives, agents and employees shall have the right to enter upon the PREMISES at any and all reasonable times for the purpose of inspection, evaluation, and observation of OPERATOR'S operation.

SECTION 19. TERMINATION
A. Termination By CITY:

CITY may not terminate this Agreement without cause within the first five years of the Agreement.

CITY may terminate without cause starting at the end of the fifth year of the Agreement or thereafter without cause, following a one year written notice of termination.

For any event of default under this Agreement, with the exception of those listed below, CITY may, by 90-day written notice, terminate the AGREEMENT in its entirety and all rights ensuing therefrom as provided by applicable law. However, no such notice, default or event of default shall occur until OPERATOR is provided with written notice of the event of default and fails to cure within ten (10) days after the date of the written notice from CITY. If the default cannot reasonably be cured within ten (10) days or fulfillment of OPERATOR’S obligation requires activities over a period of time, OPERATOR shall timely commence performance and such performance shall be diligently pursued without interruption.

The following listed events of default shall include the written notice and time period to cure (if any) described within each event of default:

1. OPERATOR fails to pay any payment obligation due under this AGREEMENT and OPERATOR fails to pay within twenty-one (21) days after the date of a written notice of default from the CITY;

2. OPERATOR fails to keep, perform, and observe any promise, covenant, and condition set forth in the AGREEMENT and OPERATOR fails to perform following thirty (30) days written notice of the event of default and then OPERATOR fails to cure within ten (10) days after the date of the written notice from CITY. If the default cannot reasonably be cured within ten (10) days or fulfillment of OPERATOR’S obligation requires activities over a period of time, OPERATOR shall timely commence performance and such performance shall be diligently pursued without interruption.;

3. OPERATOR’S interest in the AGREEMENT is assigned, transferred, passed to or devolved upon, by operation of law or otherwise, any other person, firm or corporation without the written consent of DIRECTOR;

4. OPERATOR becomes, without the prior written approval of DIRECTOR, a successor or merged corporation in a merger, a constituent corporation in a consolidation or a corporation in dissolution;

23 5. The levy of any attachment or execution, or the appointment of any receiver, or the execution of any other process of any court of competent jurisdiction which is not vacated, dismissed or set aside within a period of ten (10) days, and which does, or as a direct consequence of such process will, interfere with OPERATOR'S use of the FACILITY or with its operations under the AGREEMENT;

6. OPERATOR becomes insolvent, or takes the benefit of any present or future insolvency statute, or makes a general assignment for the benefit of creditors, or files a voluntary petition in bankruptcy, or a petition or answer seeking an arrangement for its reorganization, or the readjustment of its indebtedness under the federal bankruptcy laws or under any other law or statute of the United States, or of any state law, or consents to the appointment of a receiver, trustee or liquidator of all or substantially all of its property or its property located within the BMX PREMISES;

7. By order or decree of court, OPERATOR is adjudged bankrupt, or an order is made approving a petition filed by any of the creditors or stockholders of OPERATOR seeking its reorganization or the readjustment of its indebtedness under the federal bankruptcy laws, or under any law or statute of the United States, or any state thereof;

8. A petition under any part of the federal bankruptcy laws, or an action under any present or future insolvency law or statute is filed against OPERATOR and is not dismissed within one hundred twenty (120) days;

9. By or pursuant to, or under authority of, any legislative act, resolution or rule, order or decree of any court, governmental board, agency or officer having jurisdiction, a receiver, trustee or liquidator takes possession or control of all or substantially all of the property of OPERATOR;

10. Cessation or deterioration of service for any period which, in the reasonable opinion of DIRECTOR, materially and adversely affects the operation or service required to be performed by OPERATOR under the AGREEMENT following thirty (30) days written notice of the event of default and then OPERATOR fails to cure within ten (10) days after the date of the written notice from CITY. If the default cannot reasonably be cured within ten (10) days or fulfillment of OPERATOR’S obligation requires activities over a period of time, OPERATOR shall timely commence performance and such performance shall be diligently pursued without interruption.

11. Any lien is filed against the BMX PREMISES because of any act or omission of OPERATOR and the lien is not removed, enjoined or a bond for satisfaction of such lien is not posted within thirty (30) days written notice; or

12. OPERATOR voluntarily abandons, deserts, vacates, or discontinues its operation of the business herein authorized.

No acceptance by CITY of payments specified herein, in whole or in part, and for any period, after a default of any of the terms, covenants and conditions to be performed, kept or observed by OPERATOR, other than the default in the payment thereof, shall be deemed a waiver of any right on the part of CITY including the right to terminate the AGREEMENT on account of such default.

24 B. Payment to OPERATOR following Termination by CITY.

If CITY terminates this AGREEMENT without cause, after the fifth year of this Agreement, OPERATOR shall be entitled to a reimbursement of the actual expense paid for any IMPROVEMENTS at the FACILITY less 5% for each full year that has elapsed since the IMPROVEMENTS have been constructed. Should OPERATOR construct additional improvements over the life of this Agreement, or extensively retrofit or remodel any existing IMPROVEMENTS each significant addition shall be calculated as of the date of completion of construction with the 5% annual reduction not utilized until at least one year has passed since the completion. If CITY terminates this AGREEMENT without cause prior to the end of the fifth year of the Agreement, OPERATOR is entitled to the actual expense incurred. CITY shall be entitled to all rights, title and possessory interest in the improvements should any of these payments be made by CITY. At the conclusion of 20 years under the AGREEMENT CITY shall not be liable for any payment, except if there has been subsequent construction or extensive remodeling or reconstruction after the fifth year of the AGREEMENT and then the actual cost less 5% per year shall be paid to OPERATOR, should OPERATOR’s Term not be extended by actions of the CITY.

C. CITY'S Right of Reentry:

CITY shall, as an additional remedy, upon an event of default as provided above, have the right to reenter the BMX PREMISES and every part thereof on the effective date of termination without further notice of any kind, remove any persons present and may regain and resume possession either with or without the institution of summary or legal proceedings or otherwise. Such reentry, however, shall not in any manner affect, alter or diminish any of the obligations of OPERATOR under the AGREEMENT.

D. Additional Rights of CITY:

CITY, upon termination of the AGREEMENT, or upon reentry, regaining, or resumption of possession of the BMX PREMISES, may occupy the BMX PREMISES and shall have the right to permit any person, firm, or corporation to enter upon the BMX PREMISES and use it. This occupation by others may be of only a part of the BMX PREMISES, or the whole or a part of together with other space, and for a period of time the same as or different from the balance of the term remaining in this AGREEMENT, and on terms and conditions the same as or different from those set forth in the AGREEMENT.

E. Survival of OPERATOR'S Obligations:

In the event the AGREEMENT is terminated by CITY for cause, or in the event CITY reenters, regains, or resumes possession of the PREMISES upon default, all of the obligations of OPERATOR shall survive and shall remain in full force and effect for the full term of the AGREEMENT.

F. Termination By OPERATOR:

25 The AGREEMENT may be terminated by OPERATOR, by a 30-day written notice, upon the happening of one or more of the following events of default:

1. The complete destruction of all or a substantial portion of the PREMISES from a cause other than the negligence or omission of OPERATOR, its agents, officers, or employees.;

3. The default by CITY in the performance of any material covenant or agreement herein required to be performed by CITY and the failure of CITY to remedy such default for a period of thirty (30) days after receipt from OPERATOR of written notice to do so and then CITY fails to cure within ten (10) days after the date of the written notice from OPERATOR. If the default cannot reasonably be cured within ten (10) days or fulfillment of CITY’S obligation requires activities over a period of time, CITY shall timely commence performance and such performance shall be diligently pursued without interruption.

4. If OPERATOR terminates for cause, OPERATOR is entitled to have its investment returned to it at 100% for the first five years, declining by 5% each year thereafter and reaching 25% in the 20th year.

SECTION 20. SURRENDER OF POSSESSION
OPERATOR agrees to yield and deliver possession of the BMX PREMISES to CITY on the date of the expiration or earlier termination of the AGREEMENT promptly, peaceably, quietly, and in as good order and condition as the same now are or may be hereafter improved by OPERATOR or CITY, normal use and wear and tear thereof excepted. No agreement of surrender or to accept a surrender shall be valid unless and until the same is in writing and signed by the duly authorized representatives of CITY and OPERATOR. Neither the doing nor omission of any act or thing by any of the officers, agents or employees of CITY shall be deemed an acceptance of a surrender of the BMX PREMISES utilized by OPERATOR under the AGREEMENT.

OPERATOR shall have the right to remove its equipment, supplies, furnishings, inventories, removable fixtures and personal property from the BMX PREMISES within thirty (30) days before the expiration or earlier termination of the AGREEMENT. If OPERATOR fails to remove the property within the last thirty (30) days of the AGREEMENT, the property shall be considered abandoned, and CITY may dispose of the property as it sees fit.

SECTION 21. WAIVER
A waiver of a default of any part, term, or provision of the AGREEMENT shall not be construed as a waiver of any succeeding default or as a waiver of the part, term, or provision itself. A party's performance after the other party's default shall not be construed as a waiver of that default.

26 SECTION 22. FORCE MAJEURE
Neither party hereto shall be liable to the other for any failure, delay, or interruption in the performance of any of the terms, covenants or conditions of the AGREEMENT due to causes beyond the control of that party including, without limitation, strikes, boycotts, labor disputes, embargoes, shortage of material, acts of nature, landslides, earthquakes, acts of the public enemy, acts of superior governmental authority, floods, riots, rebellion or sabotage.

SECTION 23. REMEDIES ARE NON-EXCLUSIVE AND MEDIATION REQUIREMENT No right, power, remedy, or privilege of CITY shall be construed as being exhausted or discharged by the exercise thereof in one or more instances. It is agreed that each and all of these rights, powers, remedies, or privileges shall be deemed cumulative and additional and not in lieu or exclusive of each other or of any other remedy available to CITY at law or in equity. No litigation may be filed concerning this Agreement unless both parties have participated in non-binding mediation prior to the filing of a lawsuit. The only exception to this clause is if either party reasonably believes that an emergency exists, and a Temporary Restraining Order may be sought prior to engaging in mediation.

SECTION 24. LAW OF CALIFORNIA APPLIES
The laws of the State of California shall govern the performance and enforcement of this AGREEMENT.

SECTION 25. VENUE
Venue of any action brought in connection with the AGREEMENT shall lie in Santa Clara County Superior Court.

SECTION 26. SEVERABILITY
If any term, provision, condition or covenant of this Agreement or its application to any Party or circumstances shall be held, to any extent, invalid or unenforceable, the remainder of this Agreement, or the application of the term, provision, condition or covenant to persons or circumstances other than those as to whom or which it is held invalid or unenforceable, shall not be affected, and shall be valid and enforceable to the fullest extent permitted by law.

SECTION 27. ATTORNEY’S FEES

27 Should any legal action be brought by a party for breach of this Agreement or to enforce any provision herein, the prevailing party of the action shall be entitled to reasonable attorneys’ fees, court costs, and other such costs as may be fixed by the court. Reasonable attorneys’ fees of the City Attorney’s Office if private counsel is not used, shall be based on comparable fees of private attorneys practicing in Santa Clara County.

SECTION 28. NOTICES
A. To CITY:

Unless otherwise stated in the AGREEMENT, written notices to CITY shall be addressed to the Department of Public Services, Attn: Department Director, 17555 Peak Avenue Morgan Hill, CA 95037, with a copy to City Attorney, City of Morgan Hill, 17575 Peak Avenue, Morgan Hill, CA 95037-4128.

All notices may either be delivered personally or may be deposited in the United States mail, properly addressed with postage fully prepaid for delivery by registered or certified mail. Service in such manner by registered or certified mail shall be effective upon receipt. This address may be used for service of process.

CITY shall provide OPERATOR with written notice of any address change within thirty (30) days of the occurrence of said address change.

B. To OPERATOR:

All notices may either be delivered personally to the OPERATOR or to any officer or responsible employee of OPERATOR or may be deposited in the United States mail, properly addressed as aforesaid with postage fully prepaid for delivery by registered or certified mail. Service in such manner by registered or certified mail shall be effective upon receipt. This address may be used for service of process.

Written notices to OPERATOR shall be addressed to OPERATOR as follows:

FOUNDATION FOR A BETTER RIDE
c/o Nick Valencia
17513 Woodridge Court
Salinas, CA 93908
OPERATOR shall provide CITY with written notice of any address change within thirty (30) days of the occurrence of said address change.

28 SECTION 29. INTERPRETATION
OPERATOR and CITY agree that the AGREEMENT shall be deemed to have been jointly drafted and shall be construed according to its fair meaning and not strictly for or against either CITY or OPERATOR. The section headings are for the convenience of CITY and OPERATOR, and shall not be deemed to govern, limit, modify or in any manner affect the scope, meaning or intent of the provisions of the AGREEMENT. If any provision of the AGREEMENT is determined to be void by any court of competent jurisdiction, then this determination shall not affect any other provision of the AGREEMENT, and all such other provisions shall remain in full force and effect; and it is the intention of the PARTIES that if any provision of the AGREEMENT is capable of two constructions, one of which render the provision void and the other of which would render the provision valid, then the provision shall have the meaning which renders it valid. The use of any gender shall include all genders and the use of any number shall be construed as the singular or the plural, all as the context may require.

SECTION 30. AGREEMENT CONTAINS ENTIRE AGREEMENT
The provisions of the AGREEMENT contain the entire agreement between the PARTIES and said AGREEMENT may not be changed or modified in any manner except by formal, written amendment fully executed by both CITY and OPERATOR.

SECTION 31. TIME OF THE ESSENCE
Time is of the essence for all provisions of the AGREEMENT SECTION 32. INCORPORATION OF DOCUMENTS
This AGREEMENT and incorporated documents represent the entire integrated agreement of the PARTIES and supersedes all prior written or oral representations, discussions, and agreements.

IN WITNESS WHEREOF, THE CITY OF MORGAN HILL has caused this AGREEMENT to be executed on its behalf by its duly authorized representative and OPERATOR has executed the as of the date first written above.

29 CITY:

CITY OF MORGAN HILL, a California municipal corporation By:

Christina Turner, City Manager
APPROVED AS TO FORM:

By:

Donald A. Larkin, City Attorney
ATTEST:

By:

Michelle Bigelow, City Clerk
OPERATOR:

FOUNDATION FOR A BETTER RIDE
a California non-profit 501(c)(3) corporation
By: _______________________________
Name:

Its:

By: _______________________________
Name:

Its:

Exhibits:
“A”: Map of PREMISES
“B”: CONCEPT MAP and LIST of all IMPROVEMENTS
“C”: Proposed Construction Schedule of OPERATOR for IMPROVEMENTS “D”: Insurance Requirements

30 “E”: CITY Improvement Plan and CITY Construction Plan for CITY/SHARED Use AREA “F”: Standard Fees and COMMUNITY BENEFIT FEES List
“G” CITY Bond Forms
“H” Form Example of Profit and Loss Statement for BMX PREMISES

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NOVEMBER ?2, 2022

EXHIBIT A - PREMISES

EXHIBIT B

Exhibit C -
Proposed Construction Schedule of Operator for Improvements Construction within first two years of agreement:
• Construction of BMX race course and fencing to secure the course.
• Installation of landscaping to beautify the space to include mulch, drought tolerant plants, etc.
• Storage unit(s) to secure loaner bikes and equipment.

Construction within first 5 years of agreement:
• Temporary style office building on premises will also be planned for race day office programming and computer
storage.
• Lighting system to facilitate the possibility of evening programming and race events. This will be looked to be
executed in year 1 as funds become available for this
project.
• Concrete walkways/bike paths inside the track area to keep dust minimal and improve aesthetics.

EXHIBIT “D”
PART 1 of 2: Insurance required for construction of FACILITY:

No later than ten (10) days following issuance of the notice to proceed, OPERATOR is required to procure and provide proof of the insurance coverage required by this section in the form of certificates and endorsements. The required insurance must cover the activities of OPERATOR and its Subcontractors relating to or arising from the performance of work associated with the construction of the FACILITY, and must remain in full force and effect at all times during the period covered by the Agreement, including any extensions of time as may be granted, and until such time as the FACILITY has been accepted for maintenance and operation by the City. The coverages may be arranged under a single policy for the full limits required or by a combination of underlying policies with the balance provided by excess or “umbrella” policies, provided each such policy complies with the requirements set forth herein. Any self-insured retentions must be declared to and approved by City.

Coverages may be provided by OPERATOR's General Contractor if OPERATOR is not directly insuring such exposures under an “Owners and Contractors Protective Liability Policy (OCP)” on which CITY would be an additional insured. If OPERATOR will utilize the services of a General Contractor to perform all of the work associated with the construction of the FACILITY, then OPERATOR may opt to have all coverages provided by OPERATOR’s General Contractor, provided that a written contract is executed between OPERATOR and the General Contractor whereby the written contract specifically required General Contractor to fulfill all of the City insurance requirements as outlined in this Agreement, including all endorsements in favor of the City. Verification of the written contract must be provided to City upon request.

If OPERATOR fails to provide any of the required coverage in full compliance with the requirements of the Agreement, City may, at its sole discretion, purchase such coverage at OPERATOR’s expense and invoice OPERATOR for the costs incurred, or terminate the Agreement for default. OPERATOR further understands that City reserves the right to modify the insurance requirements set forth herein, with thirty (30) days’ notice provided to OPERATOR, at any time as deemed necessary to protect the interests of City. (a) Policies and Limits. The following insurance policies and limits are required for this Contract unless otherwise specified in the Special Conditions:
(1) Commercial General Liability Insurance (“CGL”). OPERATOR shall maintain CGL and shall include coverage for liability arising from OPERATOR’s or its Subcontractor’s acts or omissions in the performance of the construction of the FACILITY against claims and liabilities for personal injury, death, or property damage providing protection in the minimum amount of: (i) five million dollars ($5,000,000.00) combined single limit each occurrence and either a general aggregate limit of ten million dollars ($10,000,000.00) or a general aggregate limit of five million dollars ($5,000,000.00) as applied on a “per project” or “per location” basis, or (ii) the maximum amount of such insurance available to

Contractor under Contractor’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater.
a. CGL policy may not exclude explosion, collapse, underground excavation hazard, or removal of lateral support.
b. CGL policy must include contractor’s protected coverage, blanket contractual, and completed operations.
(2) Workers’ Compensation Insurance and Employer’s Liability: OPERATOR shall maintain Workers Compensation coverage, as required by law. The policy must comply with the requirements of the California Workers’ Compensation Insurance and Safety Act and provide protection in the minimum amount of: (i) one million dollars ($1,000,000.00) for any one accident or occurrence, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. If OPERATOR is self-insured, OPERATOR must provide its Certificate of Permission to Self-Insure, duly authorized by the State of California Department of Industrial Relations.
(3) Automobile Liability: OPERATOR shall maintain Automobile Liability covering all owned, non-owned and hired automobiles (if OPERATOR does not own automobiles, then OPERATOR shall maintain Hired/Non-owned Automobile Liability) against claims and liabilities for personal injury, death, or property damage providing protection in the minimum amount of: (i) five million dollars ($5,000,000.00) combined single limit, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. (4) Pollution (Environmental) Liability: If the performance of OPERATOR’s work or service under this Agreement involves hazardous materials, contaminated soil disposal, and/or a risk of accidental release of fuel oil, chemicals or other toxic gases or hazardous materials, OPERATOR shall procure and maintain Pollution Liability covering OPERATOR’s liability for bodily injury, property damage and environmental damage resulting from pollution and related cleanup costs arising out of the work or services to be performed under this Agreement. Coverage shall be provided for both work performed on site, as well as during the transport of hazardous materials. Such coverage shall be in the minimum amount of: (i) One Million Dollars ($1,000,000.00) for any one accident or occurrence, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater.
(5) Professional Liability: Because the performance of OPERATOR’s work or service under this Agreement involves professional and/or technical services (examples include, but are not limited to, architects, engineers, land surveyors, legal

services, and appraisers), OPERATOR shall procure and maintain either a claims made or occurrence Errors and Omission liability insurance in the minimum amount of: (i) One Million Dollars ($1,000,000.00) each claim, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. Further, if OPERATOR maintains a claims-made policy, OPERATOR shall provide written evidence of such insurance to City for at least five (5) years after the completion of work performed under this Agreement. (b) Required Endorsements. OPERATOR shall provide proof of the following endorsements, listed for each policy for which endorsements are required, as outlined below.
(1) All Policies except Professional Liability:
“Waiver of Subrogation” - Each required policy must include an endorsement providing that the carrier agrees to waive any right of subrogation it may have against the City of Morgan Hill and the City’s elected or appointed officials, boards, agencies, officers, agents, employees, and volunteers.
(2) General Liability, Automobile, and if required, Pollution Liability:
a. “Additionally Insured” - The City of Morgan Hill, its elected or appointed officials, boards, agencies, officers, agents, employees, and volunteers are named as additional insureds on a form at least as broad as ISO Form CG 20 10 for ongoing operations and at least as broad as ISO Form CG 20 37 for completed operations.

b. “Primary and Non-Contributing” - Insurance shall be endorsed to be primary and non-contributory and will not seek contribution from the City’s insurance or selfinsurance and shall be at least as broad as ISO Form CG 20 01; (3) General Liability:
a. “Separation of Insureds” endorsements stating that the inclusion of more than one insured will not operate to impair the rights of one insured against another, and the coverages afforded will apply as though separate policies have been issued to each insured.
(c) Subcontractors. OPERATOR must ensure that each Subcontractor is required to maintain the same insurance coverage required under this EXHIBIT “D,” as appropriate based on each subcontractor’s scope of work associated with the construction of the FACILITY, including all required endorsements.
(d) Qualification of Insurers. All insurance required pursuant to this Agreement must be issued by a company licensed and admitted, or otherwise legally authorized to carry out insurance business in the State of California, and each insurer must have a current A.M.

Best's financial strength rating of “A” or better and a financial size rating of “VIII” or better.
(e) Certificates. OPERATOR shall furnish CITY with copies of all certificates as outlined herein, whether new or modified, promptly upon receipt. In the event of a claim or legal action, OPERATOR shall promptly furnish CITY with copies of all policies outlined herein. No policy subject to this Agreement shall be canceled or materially changed except after thirty (30) days' notice by the insurer to CITY. A "material change" is a change that results in non-compliance with any insurance requirements in this EXHIBIT “D”. Certificates, including renewal certificates, may be mailed electronically to [email protected] or delivered to the Certificate Holder address provided herein.

Certificate Holder address:

City of Morgan Hill
Attn: Risk Management
17575 Peak Avenue
Morgan Hill, CA 95037
Part 2 of 2: Insurance required for the maintenance and operations of facility:

OPERATOR shall procure and provide proof of the insurance coverage required by this section in the form of certificates and endorsements. The required insurance must cover the activities of OPERATOR, including its subcontractors and invitees, for liability arising out of or relating to OPERATOR’s use or occupancy of the FACILITY or the conduct of its operations under this Agreement, and must remain in full force and effect at all times during the period covered by this Agreement, including any extensions of time as may be granted. The coverages may be arranged under a single policy for the full limits required or by a combination of underlying policies with the balance provided by excess or “umbrella” policies, provided each such policy complies with the requirements set forth herein. Any self-insured retentions must be declared to and approved by CITY. OPERATOR further understands that CITY reserves the right to modify the insurance requirements set forth herein, with thirty (30) days’ notice provided to OPERATOR, at any time as deemed necessary to protect the interests of CITY.
(a) Policies and Limits. The following insurance policies and limits are required for this Agreement:
(1) Commercial General Liability Insurance (“CGL”): OPERATOR shall maintain CGL against claims and liabilities for personal injury, death, or property damage providing protection in the minimum amount of: (i) two million dollars ($2,000,000.00) combined single limit each occurrence and either a general aggregate limit of four million dollars ($4,000,000.00) or a general aggregate limit of two million dollars ($2,000,000.00) as applied on a “per location” basis, or (ii) the maximum amount of such insurance available to OPERATOR under

OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater.
(2) Workers’ Compensation Insurance and Employer’s Liability:

OPERATOR shall maintain Workers Compensation coverage, as required by law.

The policy must comply with the requirements of the California Workers’ Compensation Insurance and Safety Act and provide protection in the minimum amount of: (i) one million dollars ($1,000,000.00) for any one accident or occurrence, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. If OPERATOR is self-insured, OPERATOR must provide its Certificate of Permission to Self-Insure, duly authorized by the State of California Department of Industrial Relations. (3) Automobile Liability: OPERATOR shall maintain Automobile Liability covering all owned, non-owned and hired automobiles (if OPERATOR does not own automobiles, then OPERATOR shall maintain Hired/Non-owned Automobile Liability) against claims and liabilities for personal injury, death, or property damage providing protection in the minimum amount of: (i) one million dollars ($1,000,000.00) combined single limit, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. (4) Other Liability Insurance: Because the OPERATOR’s activity outlined in this Agreement involves contact with minors, OPERATOR shall procure and maintain Sexual Abuse and Molestation insurance in the minimum amount of (i) two million dollars ($2,000,000.00) each claim, or (ii) the maximum amount of such insurance available to OPERATOR under OPERATOR’s combined insurance policies (including any excess or “umbrella” policies), whichever is greater. (5) Property: OPERATOR shall maintain Property Insurance to cover OPERATOR’s personal property, including furniture and fixtures, at an amount equal to the full replacement cost of such property. Such coverage shall include protection against fire, theft, vandalism, sprinkler leakage, malicious activity, and all other forms of loss (“all-risk” coverage). OPERATOR may elect to self-insure OPERATOR’s personal property by written notice given to CITY. (b) Required Endorsements. OPERATOR shall provide proof of the following endorsements, listed for each policy for which endorsements are required, as outlined below.
(1) ALL Policies:
“Waiver of Subrogation” - Each required policy must include an endorsement providing that the carrier agrees to waive any right of subrogation it may have

against the City of Morgan Hill and the City’s elected or appointed officials, boards, agencies, officers, agents, employees, and volunteers.
(2) ALL Policies except Workers Compensation:
a. “Additionally Insured” - The City of Morgan Hill, its elected or appointed officials, boards, agencies, officers, agents, employees, and volunteers are named as additional insureds. Further, for the CGL policy, the additionally insured endorsement will be provided on a form at least as broad as ISO Form CG 20 10 for ongoing operations.
(3) General Liability:
a. “Primary and Non-Contributing” - Insurance shall be primary noncontributing on a form at least as broad as ISO Form CG 20 10 for ongoing operations;
b. “Separation of Insureds” - The inclusion of more than one insured will not operate to impair the rights of one insured against another, and the coverages afforded will apply as though separate policies have been issued to each insured.
(c) Subcontractors. OPERATOR must ensure that each Subcontractor is required to maintain the same insurance coverage required under this EXHIBIT “D” as appropriate based on each subcontractor’s scope of work, with respect to the management or operations of the PROPERTY, including all required endorsements.
(d) Qualification of Insurers. All insurance required pursuant to this Agreement must be issued by a company licensed and admitted, or otherwise legally authorized to carry out insurance business in the State of California, and each insurer must have a current A.M.

Best's financial strength rating of “A” or better and a financial size rating of “VIII” or better.
(e) Certificates. OPERATOR shall furnish CITY with copies of all certificates as outlined herein, whether new or modified, promptly upon receipt. In the event of a claim or legal action, OPERATOR shall promptly furnish CITY with copies of all policies outlined herein. No policy subject to this Agreement shall be canceled or materially changed except after thirty (30) days' notice by the insurer to CITY. A "material change" is a change that results in non-compliance with any insurance requirements in this EXHIBIT “D”. Certificates, including renewal certificates, may be mailed electronically to [email protected] or delivered to the Certificate Holder address provided herein.

Certificate Holder address:

City of Morgan Hill

Attn: Risk Management
17575 Peak Avenue
Morgan Hill, CA 95037

Exhibit E -
CITY Improvement Plan and CITY Construction Plan for

CITY/SHARED PREMISES
Initial Construction Phase (All Components are included as basic amenities) • Driveway into Park
• 40 stall or greater parking improved parking lot
• 145 stall or greater dirt parking lot
• Wet utilities within the Shared Premises area (storm drainage and filtration systems, sanitary sewer, and water)
• Electricity within the Shared Premises
• Internal travel paths and sidewalk
Potential Future Phase:
• Restroom Building (basic amenity)
• Playground (City only amenity)
• Picnic Area (City only amenity)
• Trail Connection to South Property (City only amenity • Outdoor exercise equipment (City only amenity)

Exhibit F
Standard Fees and COMMUNITY BENEFIT FEE List
Standard Race day entry $12 Community (Morgan Hill Resident) race day entry $10
Standard Sunday post race track practice $5 Community (Morgan Hill Resident) track time Free No Charge
Standard Skills clinic practice session $25 Community (Morgan Hill Resident) price $20
Standard Bike/Equipment rental $5 Community (Morgan Hill Resident) price $4 Financial assistance shall be provide to Female Morgan Hill Residents at 25% of standard fees listed above.

Financial assistance shall be provided to low income Morgan Hill Residents at up to 50% based upon income level. Income levels shall be determined by the City of Morgan Hill Recreation Division’s current Financial Assistance levels.

Special one off events will strive to keep a discount consistent with favor given to community members whenever possible. Additional scenarios will exist in the future where discount can be overridden by fee waivers through Foundation For A Better Ride or USABMX Foundation non profit entities.

EXHIBIT G - PERFORMANCE BOND
The City of Morgan Hill (“City”) and Foundation for a Better Ride a 501(c)(3) nonprofit corporation (“OPERATOR”) have entered into an AGREEMENT for work on the Butterfield Park BMX Facility (“Project”). The Agreement between the City and OPERATOR is incorporated by reference into this Performance Bond (“Bond”).

1. General. Under this Bond, OPERATOR as Principal and
________________________________________, its surety (“Surety”), are bound to City as obligee for an amount not less than
_________________________________ Dollars ($__________________) (the “Bond Sum”). By executing this Bond, OPERATOR and Surety bind themselves and their respective heirs, executors, administrators, successors and assigns, jointly and severally, to the provisions of this Bond.

2. Surety’s Obligations. Surety’s obligations are co-extensive with OPERATOR’s obligations under the AGREEMENT. If OPERATOR fully performs its obligations under the AGREEMENT, including its warranty obligations under the AGREEMENT, Surety’s obligations under this Bond will become null and void. Otherwise, Surety’s obligations under this bond will remain in full force and effect.

3. Waiver. Surety waives any requirement to be notified of and further consents to any alterations to the AGREEMENT made under the applicable provisions of the AGREEMENT Documents, including changes to the scope of Work or extensions of time for performance of Work under the AGREEMENT. Surety waives the provisions of Civil Code Sections 2819 and 2845.

4. Limitation upon Surety Liability for Project. Upon making a demand on this Bond for completion of the Work prior to acceptance of the Project, the Surety is only liable for the total amount of construction costs to complete the Project based upon the AGREEMENT’s requirements.

5. OPERATOR Default. Upon written notification from City that OPERATOR is in default under Article 19 of the AGREEMENT, time being of the essence, Surety must act within the time specified in Article 19 to remedy the default through one of the following courses of action:

5.1 Arrange for completion of the Work under the AGREEMENT by OPERATOR, with City’s consent, but only if OPERATOR is in default solely due to its financial inability to complete the Work;

5.2 Arrange for completion of the Work under the AGREEMENT by a qualified contractor acceptable to City, and secured by performance and payment bonds issued by an admitted surety, at Surety’s expense, or

5.3 Waive its right to complete the Work under the AGREEMENT and reimburse City the amount of City’s costs to have the remaining Work completed.

6. Surety Default. If Surety defaults on its obligations under the Bond, City will be entitled to recover all costs it incurs due to Surety’s default, including legal, design professional, or delay costs.

7. Notice. Any notice to Surety may be given in the manner specified in the AGREEMENT and delivered or transmitted to Surety as follows:

Attn: _______________________________
Address: ____________________________
City/State/Zip: ________________________
Phone: _____________________________
Fax: _______________________________
Email: ______________________________

8. Law and Venue. This Bond will be governed by California law, and venue for any dispute pursuant to this Bond will be in the Superior Court of Santa Clara County, and no other place. Surety will be responsible for City’s attorneys’ fees and costs in any action to enforce the provisions of this Bond.

9. Effective Date; Execution. This Bond is entered into and effective on ____________________, 20___.
[Signatures are on the following page.]

SURETY: OPERATOR:
s/ _________________________ s/ _________________________ Name: _____________________ Name: _____________________ Title: ______________________ Title: ______________________ (Attach Acknowledgment with Notary
Seal and Power of Attorney)
APPROVED AS TO FORM:

By:______________________________
Donald A. Larkin, City Attorney
Date:__________________________

END OF PERFORMANCE BOND

Exhibit H - Profit and Loss Statement Format
Sales
Food and Drink
Race Fees
Practice Session Fees
Special Event Fees
Rental Fees
Merchandise
Total SALES
Cost of Goods Sold (COGS)
Total COGS
Gross Profit
Labor Cost
Operating Costs
Rent
Utilities
Property Tax
Waste Removal
Insurance
Equipment Repairs
Total Operating Cost
Net Profit/Loss
Food and Drink
Race Fees
Practice Session Fees
Special Event Fees
Rental Fees
Merchandise