Morgan Hill City Council
October 23, 2024

City of Morgan Hill
Resolution No. 24-XXX

4. The proposed Planning, Land Development Engineering, and Building Fees are initially based upon the information contained in a document prepared by City staff entitled "City of Morgan Hill Development Services Fund 206 Analysis", dated August 16, 2024; and

5. Based upon the analysis and the provided information, the City (i) identifies the purpose of the proposed fees, (ii) identifies the use to which the fees will be put, (iii) demonstrates a reasonable relationship between the fees’ use and the types of services on which the fees are imposed, and (iv) demonstrates a reasonable relationship between the amount of the fees and the cost of the City's services attributable to the applications on which the fees are imposed; and

6. The City Council finds and determines the fees calculations utilized to establish new and updated Planning, Land Development Engineering and Building fees will not cause fee revenues to exceed the estimated cost reasonably borne of providing the services which the fees are levied; and

7. The City Council hereby adopts and approves the establishment of new and updated Planning, Land Development Engineering and Building fees as set forth in attached Exhibit A and incorporated by this reference; and

8. The City Council finds and determines that it is reasonable to continue to annually adjust the fees set forth in Schedule by the Consumer Price Index for Urban Wage Earners and Clerical Workers for the San Francisco, Oakland and San Jose Area, and hereby instructs, authorizes and directs the City Manager or his/her designee to so annually adjust the applicable fees as set forth Resolution 6503 adopted January 18, 2012; and

9. The City Manager or his/her designee is hereby authorized and directed to amend the City Fee Schedule to reflect the fees as set forth in Exhibit A.

10. Effective Date. This Resolution shall take effect upon its adoption; provided, however, that the New and Updated Planning, Land Development Engineering and Building Fees established hereunder shall first be imposed and collected sixty (60) days from the date of adoption of this Resolution.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Morgan Hill at a regular meeting held on the 23rd day of October, 2024.

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

City of Morgan Hill
Resolution No. 24-XXX

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 October 23, 2024.

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

DATE: _____________________ ___________________________________ Michelle Bigelow, City Clerk

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Program - Building Permits
Permit Type Proposed Fee
(FBHR) 256.00
Building Permit (Not Combination) Valuation Based Fees
$1 - $500
Any Valuation $ 192
$501 to $2,000
first $500 $ 256
each additional $100 (round up) $ 8
$2,001 - $25,000
first $2,000 $ 384
each additional $1000 (round-up) $ 15
$25,001 to $50,000
first $25,000 $ 768
each additional $1000 (round-up) $ 18
$50,001 to $100,000
first $50,000 $ 1,216
each additional $1000 (round-up) $ 15
$100,001 to $500,000
first $100,000 $ 2,048
each additional $1000 (round-up) $ 5
$500,001 to $1,000,000
first $500,000 $ 4,864
each additional $1000 (round-up) $ 3
$1,000,000 and up
first $1,000,000 $ 7,168
each additional $1000 (round-up) $ 8
Combination Builiding Permits Valuation Based Fees
$1 - $500
Any Valuation $ 256
$ -
$501 to $2,000
first $500 320 $
each additional $100 (round up) $ 8
$2,001 - $25,000
first $2,000 $ 448
each additional $1000 (round-up) $ 23

EXHIBIT A

$25,001 to $50,000
first $25,000 1,024$
each additional $1000 (round-up) 20$
$50,001 to $100,000
first $50,000 1,536$
each additional $1000 (round-up) 31$
$100,001 to $500,000
first $100,000 3,072$
each additional $1000 (round-up) 8$
$500,001 to $1,000,000
first $500,000 6,656$
each additional $1000 (round-up) 10$
$1,000,000 and up
first $1,000,000 12,288$
each additional $1000 (round-up) 13$
Grading - Permit Fees
50 cubic yards or less
Any Amount up to and including 50 cubic yards 384$
51 to 100 cubic yards
first 50 cubic yards 384$
each additional cubic yard 5$
101 to 1,000 cubic yards
first 100 cubic yards 640$
each additional 100 cubic yards 33$
1,001 to 10,000 cubic yards
First 1,000 cubic yards 960$
each additional hundred cubic yards 10$
10,001 to 100,000 cubic yards
1st 10,000 cubic yards 2,048$
each additional 10,000 cubic yards or fraction thereof 84$ 100,001 to 200,000 cubic yards
1st 100,000 cubic yards 2,816$
each additional 10,000 cubic yards or fraction thereof 26$ Roofs
Re-Roofs: Comp/Tile/Shake (Includes new roof sheath)
1 - 15 SQUARES 256$
16-30 SQUARES 384$
31 and more SQUARES 448$
Steel Roof System
Any Size 512$

Overlay
Residential Composition Overlay - Lifetime 320$
Miscellaneous Roof
Single-ply Roof System 1-30 SQUARES 512$
Single-ply Roof System 31 and more SQUARES 640$
Tar & Gravel (Built-Up/BUR) 512$

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Permit Program - Plan Check Fee Calculation
Permit Type Base
Buildig Fee
Land Dev
Surcharge
Planning
Surcharge
Fire
Inspection
Surcharge
Total (Max)
$ 256 $ 370 $ 387 $ 204
Multi-Department Plan Check Valuation Based Fees
$1 - $500
Any Valuation 256$ 93$ 97$ 51$ 496$
-$ -$ -$ -$ -$
$501 - $2,000
first $500 384$ 185$ 194$ 102$ 865$
each additional $100 (round-up) 8$ 11$ -$ -$ 19$
$2,001 - $25,000
first $2,000 512$ 370$ 194$ 102$ 1,178$
each additional $1,000 (round-up) 13$ 15 $ 4$ 2$ 34$
$25,001 - $50,000
first $25,000 832$ 740$ 290$ 153$ 2,015$
each additional $1,000 (round-up) 5$ 15$ 4$ 2$ 26$
$50,001 - $100,000
first $50,000 960$ 1,110$ 387$ 204$ 2,661$
each additional $1,000 (round-up) 20$ 7$ -$ -$ 28$
$100,001 - $500,000
first $100,000.00 2,048$ 1,480$ 484$ 255$ 4,267$
each additional $1,000 (round-up) 5$ - $ -$ -$ 5$
$500,001 - $1,000,000
first $500,000.00 4,096$ 1,850$ 1,161$ 612$ 7,719$
each additional $1,000 (round-up) 5$ - $ -$ -$ 5$
$1,000,001 and up
first $1,000,000.00 6,656$ 2,220$ 1,935$ 1,020$ 11,831$ each additional $1,000 (round-up) 8$ 4 $ 4$ 2$ 17$
Grading - Plan Review Fees
50 cubic yards or less
Any Amount up to and including 50 cubic yards 320$ 185$ 194$ -$ 699$ 51 to 100 cubic yards
first 50 cubic yards 320$ 185$ 194 $ -$ 699$
each additional cubic yard 5$ -$ -$ -$ 5$
101 to 1,000 cubic yards
first 100 cubic yards 576$ 185$ 194$ -$ 955$
each additional 100 cubic yards 13$ - $ -$ -$ 13$
1,001 to 10,000 cubic yards
First 1,000 cubic yards 704$ 185$ 194$ -$ 1,083$
each additional hundred cubic yards 8$ -$ -$ -$ 8$
10,001 to 100,000 cubic yards
1st 10,000 cubic yards 1,536$ 185$ 194$ -$ 1,915$
each additional 10,000 cubic yards or fraction thereof 64$ -$ -$ -$ 64$

100,001 to 200,000 cubic yards
1st 100,000 cubic yards 2,112$ 185$ 194$ -$ 2,491$
each additional 10,000 cubic yards or fraction thereof 108$ -$ -$ -$ 108$ 200,001 cubic yards or more
1st 200,000 cubic yards 3,200$ 185$ 194$ -$ 3,579$
each additional 10,000 cubic yards or fraction thereof 26$ -$ -$ -$ 26$ Standard Plan Check (Not Routed) Valuation Based Fees
$1 - $500
Any Valuation 192$ 192$
$501 - $2,000
first $500 256$ 256$
each additional $100 (round-up) 8$ 8$
$2,001 - $25,000
first $2000.00 384$ 384$
each additional $1,000 (round-up) 15$ 15 $
$25,001 - $50,000
first $25,000.00 768$ 768$
each additional $1,000 (round-up) 8$ 8 $
$50,001 - $100,000
first $50,000.00 960$ 960$
each additional $1,000 (round-up) 20$ 20 $
$100,001 - $500,000
first $100,000.00 2,048$ 2,048$
each additional $1,000 (round-up) 5$ 5 $
$500,001 - $1,000,000
first $500,000.00 4,352$ 4,352$
each additional $1,000 (round-up) 5$ 5 $
$1,000,001 and up
first $1,000,000.00 7,168$ 7,168$
each additional $1,000 (round-up) 8$ 8 $

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Fire Permit Program
Permit Type Proposed Fee
(FBHR) $ 256
Fire Alarm
1-15 Devices 768$
16-50 Devices 1,024$
51-100 Devices 1,280$
101-500 Devices 1,536$
Each additional 50 devices over 500 devices 10$
Fire Sprinklers
Residential Single Family/Townhouse 13D System 768 $
Apartment/Condo 1,024$
Additional time per unit 192$
Master Plan Review $ -
Commercial - New Construction
1-20 Appliances 896$
21-100 Appliances 1,152$
101-200 Appliances 1,344$
201-350 Appliances 1,600$
351-500 Appliances 1,920$
Each additional 100 appliances over 500 appliances 192$ Commercial - Tenant Improvements
1-20 Appliances 832$
21-100 Appliances 960$
101-200 Appliances 1,088$
201-350 Appliances 1,216$
351-500 Appliances 1,344$
Each additional 100 appliances over 500 appliances 192$ High Piled Storage $ 768
Suppression System $ 704
Underground Piping / Hydrant System / Backflow $ 1,024
Each Additional Hydrant or Backflow $ 192
Medical Gas Systems $ 768

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Permit Program - Mechanical
Permit Type Proposed Fee
Permit Issuance $ 115
Furnaces Installation
Residential: Installation or relocation of forced air or gravity-type furnace or burner, each 128$ Commercial: Installation or relocation of forced air or gravity-type furnace or burner, each 256$ Installation or relocation of suspended heater, recessed wall heater, floor furnace, or floor mounted unit heater including flue vent, each 192$
Appliance Vents and Ducts
Installation, relocation or replacement of appliance vent, ducts, per system $ 192 Condensing units (AC), each $ 128
Boilers, Compressors & Absorption Systems
Installation or relocation of each boiler, compressors 1-15 horsepower, or absorption system 0 - 500,000 Btu/h, each 192$
Installation or relocation of each boiler, compressors 16-50 horsepower, or absorption system 500,001 - 1,750,000 Btu/h, each 256$
Installation or relocation of each boiler, compressors 51 and over horsepower, or absorption system 500,001 - 1,750,001 and over Btu/h, each 320$
Air Handlers
Installation or relocation of air-handling unit, each 192$ Evaporative Coolers
Each non-residential evaporative cooler other than portable type, each $ 256 Ventilation & Exhaust
Residential: Ventilation fan or hoods connected to a single duct, exhaust fan for bathrooms, kitchens, or laundry rooms, each 192$
Commercial: Installation of kitchen hood each which is served by mechanical exhaust, including the ducts for such hood, each 512$
Ventilation system which is not a portion of any heating or air-conditioning, each 256$ Repairs or Additions
The repair, alteration, or addition to each heating appliance, refrigeration unit, cooling unit, absorption unit, or evaporative cooling system, including installation of controls, each 192$ Incinerators
Installation or relocation of commercial or industrial-type incinerator, each $ 768 Miscellaneous
Each appliance or piece of equipment regulated by this code but not classed in other appliance categories, or for which no other fee is listed, each 256$

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Permit Program - Electrical
Permit Type Proposed Fee
(FBHR) $ 256
Permit Issuance $ 115
Unit Fee Schedule
Receptacle, switch, lighting outlets, lighting fixtures, sockets or other lamp holding devices, per system 128$
Pole or platform-mounted lighting fixtures (up to 5), each 256$ Theatrical-type lighting fixtures or assemblies, per system 640$ Kitchen circuits - remodels 192$
Bathroom circuits - remodels $ 128
Non-Residential Appliances, and Receptacle Outlets $ 320 Power Apparatus
1 to 100 - HP or KW, each 256$
101 and over - HP or KW, each 384$
Services
Services of 600 volts or less and not over 200 amperes in rating, each 256$ Services of 600 volts or less and over 200 amperes and over, each 384$ Photovoltaic
Residential 307$
Commercial <10kW 371$
Commercial greater than or equal to 10kW - 49kW 499$
Commercial >49kW 691$
Solar Structure (0-50kW) 768$
Each kW over 50kW 5$
Residential: Repair of photovoltaic electrical systems, each 256$ Commercial and Industrial: Repair of photovoltaic electrical systems, each $ 320 Miscellaneous Apparatus, Conduits, and Conductors
Electrical apparatus, conduits and conductors for which a permit is required but for which $ 192 Busways $ 512
Temporary Power Service
Temporary metered service power pole or pedestal including pole or pedestal-mounted receptacle outlets, each 256$
Temporary distribution system (up to 5) poles including temporary lighting and receptacle outlets for construction sites, decorative light, Christmas tree sales lots, firework stands, each
256$
Each additional distribution system 256$
Private Swimming Pools - Repairs/Replacement
For private, residential in-ground, swimming pools for single-family occupancies including a complete system of necessary branch circuit wiring, bonding, grounding, underwater lighting, water pumping and other similar electrical equipment directly related to the operation of a swimming pool, each pool
$ 256

Carnivals and Circuses
For electric generators, electrically driven rides, mechanically driven rides and walk through attractions or displays having electric lighting $ 512 Carnivals and circuses booth and pathway lighting $ 512 Signs, Outline Lighting, Marquees
Signs, outline lighting systems or marquees supplies from one branch circuit 320$ Additional branch circuits (up to 5) within the same sign, outline lighting system or marquee
256$

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Permit Program - Plumbing
Permit Type Proposed Fee
(FBHR) $ 256
Permit Issuance 115$
$ -
Fixtures and Vents
Installation or repair plumbing fixture, trap or set of fixtures on one trap, backflow device, including condensate lines 128$
For repairs or alterations of drainage or vents piping, each 192$ Sewers, Disposal Systems and Interceptors
Building Sewer Lateral, each 256$
Private sewage or disposal system, each 256$
Industrial water pretreatment interceptor, each 512$
Non-residential rainwater systems, up to 5 per drain 384$ Water Piping and Water Heaters
Installation, alteration or repair of water piping and/or water treating equipment, including pressure regulator, per system 256$
For installation and replacement of water heater including vent, each 115$ Gas Piping Systems
Gas piping system, 1-10 outlets 115$
Gas piping system, over 10 outlets 384$
Lawn Sprinklers, Vacuum Breakers, Backflow Protections Devices Installation of lawn sprinkler systems including backflow protection device, and atmospheric-type vacuum breakers, per system 256$
Swimming Pools and Spas - Plumbing Repair / Replacement Public pool including anti-entrapment device 320$
Private pool including anti-entrapment device 256$
Public spa including anti-entrapment device 320$
Private spa including anti-entrapment device 256$
Installation or replacement of anti-entrapment device 320$ Thermal Solar Water Heating 256$
Miscellaneous
Each additional or piece of equipment regulated by the Plumbing Code but not classed in other appliance categories, or for which no other fee is listed in this code 192$

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Land Development Program
Fee Description Proposed Fee
Public Improvement - Plan Check
$1 - $100,000 24,826$
Any Valuation
$100,001 to $200,000
first $100,000 24,826$
each additional $1,000 (round-up) 97$
$200,001 to $500,000
first $200,000 34,538$
each additional $1,000 (round-up) 32$
$500,001 to $1,000,000
first $500,000 44,009$
each additional $1,000 (round-up) 17$
$1,000,001 to $5,000,000
first $1,000,000 52,704$
each additional $1,000 (round-up) 5$
$5,000,000 and up
first $5,000,000 71,481$
each additional $1,000 (round-up) 14$
Public Improvement - Inspection
$1 - $100,000
Any Valuation 32,375$
$100,001 to $200,000
first $100,000 32,375$
each additional $1,000 (round-up) 200$
$200,001 to $500,000
first $200,000 52,355$
each additional $1,000 (round-up) 191$
$500,001 to $1,000,000
first $500,000 109,705$
each additional $1,000 (round-up) 169$
$1,000,001 to $5,000,000
first $1,000,000 194,435$
each additional $1,000 (round-up) 27$
$5,000,000 and up
first $5,000,000 302,845$
each additional $1,000 (round-up) 61$

Plan Revision (after approval of Public Improvement Plans) 1,110$ Map Check
Parcel Map 15,511$
Tract Map/Subdivision Map (Service #149) 18,357$
Certificate of Compliance - Lot Line Adjustment / Lot Merger 11,743$ Parcel Map - Lot Line Adjustment / Lot Merger 12,685$
Streets/Easements
Public Easement Review 4,995$
Street Vacation 16,095$
Easement Abandonment 14,430$
Reimbursement Agreement 7,955$
FEMA Compliance
Base Fee
New Structure 1,701$
New Accessory Structure and New ADU 1,331$
Improvement of Existing Structure:

Non-Substantial Improvement w/o Detailed Review 1,181$
Non-Substantial Improvement with Detailed Review 1,551$ Substantial Improvement (not Accessory Structure) 2,163$ Substantial Improvement of Accessory Structure/ADU 1,516$ Additional Review Fees
Elevation Certificate Review 1,018$
Flood Field Inspection 925$
Flood Study Review with Valley Water Coordination 2,405$ Review of CLOMR/CLOMR-F/LOMR/LOMR-F 1,480$
Public Outreach for LOMR/LOMR-F 2,220$
Review of BFE Determination for Zone A w/o a BFE or Zone D 740$ Stormwater Runoff Management Plan Review
Tier 1 Project 4,255$
Tier 2 Project 12,580$
Tier 3 Project 17,760$
Tier 4 Project 19,980$
Erosion & Sediment Control/Stormwater Pollution Prevention Plan (SWPPP) Review & Compliance
Type 1 & Type 2 Projects:
< 1 Acre in Soil Disturbance 833$
1+ Acre in Soil Disturbance 1,388$
Type 3 Projects 648$
Type 4 Projects 463$
Stormwater BMP Operations & Maintenance Agreement 3,330$

Private Sanitary Sewer Agreement 4,255$
Assessment District Reapportionment
City Staff Only (Contractor Costs Additional) 6,660$
Preliminary Review on Projects / Engineering Services 3,700$ Additional Plan Review (after 3rd submittal) 370$
Re-Inspection Fee 370$
Complexity Fee 4,440$
Agreement Extensions / Improvement Agreement
Amendments
With City Manager Approval 4,625$
With City Council Approval 7,030$
Preliminary Fee Estimate 555$
GIS / Technology Fee
5% of Public
Improvement Fee

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Planning Permit Program
Permit Type Proposed Fee
Agreements
Development Agreement, Non-Residential 23,220$
Development Agreement, Residential 23,220$
CC&Rs (Plus City Attorney Fees) 2,658$
Other Agreements / Documents Review (Plus City Attorney Fees) 1,548$ Appeals
Commision/Board Decision - Applicant Appeal 17,330$
Commission/Board Decision - Public Appeal 600$
Staff Decision - Applicant Appeal 16,220$
Staff Decision - Public Appeal 600$
Approval Amendments
Minor Amendment (per Code Section 17.20.190) 13,699$
Major Approval Amendment (Non Admin - s/b Major) 29,737$ Boundary Adjustments
Annexation City Process Actual Cost
Annexation LAFCO Process 85,140$
Out of Agency Contract for Services 26,316$
Urban Service Area Amendment City Process Actual Cost
Urban Service Area Amendment LAFCO Process 85,140$
(Plus additional fees collected by LAFCO/Other agencies) Design Permits
Landscape Plan Review Only 3,870$
Non-Residential Design Permit (Major, >10,000 SF in floor area) 50,563$ Non-Residential Design Permit (Minor) 26,024$
Plan Detail Review (misc. site details, e.g., lighting, trash encl.) 3,096$ Residential Design Permit - 6 units or less 25,160$
Residential Design Permit - 7 units to 15 units 28,222$ Residential Design Permit - 16 -50 52,910$
Projects with horizontal subdivision: Each Additional 10 units 20,121$ Single-lot/condo projects: Each Additional 10 units 6,661$ Site Plan Only (no new square footage) 13,358$

Design Review (Preliminary Review)
(Includes one Planning Commission hearing)
Conceptual Plan Review (Staff) $ 14,737
Non-Residential (Major >10,000 SF) Preliminary Plan Review to PC $ 23,813 Non-Residential (Minor) Preliminary Plan Review to PC $ 16,898 Residential SB330 Preliminary Application Review (limited review) $ 1,161 Residential SB330 Preliminary Application Review (full review) $ 26,666 Residential - 6 units or less Preliminary Plan Review to PC $ 17,816 Residential - 7 units or more Preliminary Plan Review to PC $ 25,101 Projects with horizontal subdivision: Each Additional 10 units $ 12,836 Single-lot/condo projects: Each Additional 10 units $ 4,373 Environmental Review (CEQA)
Expanded Initial Study (Internal Prep) $ 66,360
Historic Assessments - Historical Consultant (Deposit)
Historic Assessments - Staff-level $ 16,084
Initial Environmental Assessment (Plus outside agency fees) $ 3,836 Mitigation Monitoring and Reporting Program (Long-term Mitigation Annual Monitoring) $ 1,935
SC County Habitat Plan Review $ 774
Exceptions
Minor Exception $ 6,377
Variance $ 24,894
Administrative Extension of Time for Approvals $ 6,579
Non Administrative Extension of Time for Approvals $ 12,384 General Plan Amendment
Land Use Diagram Amendment $ 49,400
Text Amendment $ 33,920
Historic/Cultural Resources
Alteration-Minor - per 18.60.070B2a under $10,000 valuation (plus additional fees if Planning Commission hearing is required) $ 1,161 Alteration-Major - per Section 18.60.070B2b $10,000+ valuation (plus additional fees if Planning Commission hearing is required) $ 13,545 Demolition or Relocation (Formerly Alteration) $ 14,655 Designation $ 12,384
Miscellaneous
Residential Private Livestock Permit $ 1,045
Reversion to Acreage Processing $ 4,838
Transfer of Development Credit (Per Hillside Combining District -

18.44 MHMC) $ 16,254
Williamson Act Cancelation $ 30,960
Williamson Act New Contract $ 17,415
Williamson Act Non-Renewal $ 7,740

Sign Review
Alteration to Existing Sign (Limited Scope) 290$
Sign Review Over the Counter - Copy Change 387$
New Sign Permit - First Sign 581$
Each additional Sign 194$
New Sign within a Master Sign Program 290$
Subdivision/Real Estate Tract Signs (on and/or off-site) 1,161$ Temporary/Promotional Signs 290$
Uniform Sign Program 10,836$
Subdivision
Tentative Parcel Map Review - 4 lots or less 11,878$
Tentative Subdivision Map Review (5-15 lots) 15,646$
Tentative Subdivision Map Review (16-25 lots) 19,482$
Tentative Subdivision Map Review (26+ Lots per each 25 lots) 24,058$ Each Additional 10 Lots 3,608$
Tree Removals
Tree Removal Permit 124$
Use Permits
Administrative Use Permit 8,449$
Conditional Use Permit - New Construction 26,666$
Conditional Use Permit - No New Construction 25,926$
Temporary Use Permit 13,644$
Temporary Use Permit (Non-Profit) 101$
Temporary Use Permit Amendment 3,399$
Zoning Requests (Includes one PC and one CC Hearing)
Planned Development 52,871$
Residential Planned Development Review 52,220$
Residential Planned Development (concurrent with subdivision) 45,615$ Zoning Map Amendment Review 47,920$
Zoning Map Amendment Review (concurrent with GPA or ANX) 23,960$ Zoning Text Amendment Review 31,700$
Zoning Confirmation Letter (designation only, additional info: T&M) 774$ Fees for Additional Services
City Council Meeting / Additional Meeting 3,062$
LAFCO Meeting / Additional Meeting 2,322$
Planning Commission Meeting / Additional Meeting 3,062$ Planning Consultation (Hourly) 387$

August 16, 2024
City of Morgan Hill
Development Services
Fund 206 Analysis

Page | 2
City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Table of Contents
Executive Summary 3
Background 5
Land Use Permitting / Development Services
Cost Recovery Model
Best Practices
Objectives 8
Methodology 9
Prior Fee Studies
Budget Alignment
Key Elements 10
Staff Team Composition
Fully Burdened Hourly Rate
Hours per Service
Conclusions 20
Cost Recovery Revenue Projections
Stakeholder Input
City Comparisons
Policy Considerations

Page | 3
City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Executive Summary
Based on the analysis summarized in this report, the City of Morgan Hill is proposing to update the City’s fees for land development permits issued by Planning, Engineering Land Development (a part of the Public Services Department), and Building programs. Fees for service are determined based upon two primary variables:
• Fully Burdened Hourly Rate (FBHR)
• Number of hours to perform the service (Hours per Service) This analysis indicates that both the FBHR and the Hours per Service should be increased to implement a 100% cost recovery fee program. The FBHR is proposed to be adjusted based on changes to the current staffing composition, employee pay rates, program administrative costs, and Citywide overhead rates. The Hours per Service for each permit have been reviewed by staff and adjusted in this study to align with the amount of time currently spent by staff in the review and issuance of these permits.

In summary:
• Proposed FBHR increases are 53% for Planning, 49% for Engineering Land Development and 9% for the Building programs. (The Building Program includes Fire code permits.) • Average permit fees increase by various amounts, ranging from 8% for Electrical permits issued by the Building Department up to 119% for Planning permits. • Based upon projected activity levels by permit type, fees collected are expected to increase on average by program from between 9% for Mechanical, Electrical and Plumbing permits to 131% for Planning permits.
• The proposed increases to the FBHR and permit fees correspond to a 100% cost recovery model as established in the following analysis.

Proposed Change to FBHR 2024
Current
2024
Proposed % Increase
Planning $253 $387 53%
Engineering Land Development $248 $370 49%
Building / Fire $234 $256 9%
Average Permit Fee Increase Unweighted Weighted by
Volume
Planning 119% 131%
Engineering Land Development 62% 51%
Building Permits 27% 33%
Building Plan Check 110% 92%
Building - Mechanical 9% 9%
Building - Electrical 8% 9%
Building - Plumbing 9% 9%
Fire 40% 14%

Page | 4
City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Planning permit fees increase by the greatest margin due to the increased Planning program FBHR and a significant increase in Hours per Service for most planning permits. Planning staff carefully reviewed the Hours per Service used in the two prior Fee Studies and determined that they significantly underrepresented the actual amount of time spent by staff to process each permit.

Engineering Land Development fees also increase significantly, due in large part to the increased Engineering Land Development FBHR, along with more modest increases in the standard Hours per Service.

Building Permit fees have a less significant increase, correlating mostly with the modest increase in the Building program FBHR. However, plan check fees have increased more significantly, particularly for projects that include review by Engineering Land Development and Planning, due to increased FBHR for both programs and increased Hours per Service for Engineering Land Development. Fire reviews have also increased more significantly, due to increased Hours per Service.

In mid-August, the City conducted outreach to development stakeholders to gather input on the proposed fee increases. Five members of the public attended a virtual meeting and three spoke expressing opposition to fee increases as they would cause a barrier to development.

The City also compared the proposed fees with the fees for comparable permit processes in Gilroy, San Jose, Campbell, and Sunnyvale.

Based upon the input received from stakeholders, and the comparison with other cities, the proposed fee structure was modified to create a reduced fee for an SB 330 Preliminary Application and to reduce the rate of escalation in fees for multi-family residential projects based on the number of units.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Background
Land Use Permitting / Development Services
The City of Morgan Hill exercises regulative authority over land use activities within the City, including new construction, alterations to existing structures, and new land uses. This authority is implemented through the issuance of land use permits that ensure construction and land use activities conform to local, regional, and state policies and regulations. Permits are issued by different departments or discipline areas within the City, focused on planning (land use policy and zoning requirements), building (Building Code) and engineering (interface with public infrastructure). These three programs are referred to as Planning, Building and Engineering Land Development respectively. Collectively, they may be referred to as Development Services.

Per the City’s website, these three programs have the following purposes:
• The Planning Division performs a variety of services intended to protect, maintain and develop an attractive, safe, and healthy environment. The Planning Division is responsible for review/approval of Design Permits, Use Permits, Zoning changes, etc., including fulfilment of environmental review as required under the California Environmental Quality Act (CEQA). Many of these approvals are discretionary in nature and may require action to be taken by the City Council or Planning Commission.
• The Building Division serves the residents and developers within the City by answering general questions, providing plan review services, issuing grading and building permits, and much more.

The Building Division is responsible for the issuance of Building Permits and Fire Permits and inspection of construction activities.
• Engineering Land Development provides development review/inspection services. It oversees all construction activities that pertain to the infrastructure constructed by developers within the City.

Engineering Land Development is responsible for review/approval of Improvement Plans, Street Vacations, Final Subdivision Maps, etc. Engineering Land Development further reviews and inspects all onsite privately owned storm water treatment and detention/retention facilities in compliance with State mandates.

Cost Recovery Model
According to State law, local municipalities like the City of Morgan Hill, are allowed to establish fees for services such as the issuance of land use permits. The fee charged to an individual applicant should correspond to the general cost of delivering the corresponding service. For example, a Building Permit fee can be charged to pay for the work required to review and issue a Building Permit, including administrative activities for the permit, review of the proposed construction for consistency with the Building Code (plan check) and subsequent inspections by a Building Inspector to verify that construction is taking place consistent with the plans approved for the Permit.

Best Practices
In general, the City may choose to pass 100% of the costs for permitting services on to the applicants who are required to obtain a permit for a proposed land use. The costs for these services include front line staff costs (a proportional share of the salary and benefit costs for staff working directly on the issuance of permits), supplies and equipment (e.g., computers, stationary, vehicles, etc.), administrative staff costs (proportional share of management or support staff who enable the productivity of the front-line staff), and citywide overhead (e.g., building maintenance, IT, etc.). The City may elect to bear some of the costs of permitting through the use of other revenue sources, such as the City’s General Fund, which may consist of

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
monies collected from property, sales and hotel taxes. Attempting to fully fund permitting program costs through permit fees is referred to as a 100% cost recovery fee model.

To operate a 100% cost recovery fee program, the City must conduct periodic studies to quantify the exact cost of service delivery. These studies include an analysis of the Fully Burdened Hourly Rate (FBHR) as well as the typical number of hours (Hours per Service) required to process a permit. For the Hours per Service, it is permissible to utilize averages based on typical procedures in terms of hours spent in review, number of meetings or public hearings, number of inspections, etc. The FBHR is determined by calculating the true cost for an employee’s hour of work. The Hours per Service are based on the experiences of City staff in processing recent permits. The product of the FBHR and Hours per Service is the standard fee for a particular permit. The permit fees are listed by type on a Fee Schedule so that applicants may know anticipated fees to process an application for a land use permit.

Like many cities, Morgan Hill typically increases fees annually using a generic inflationary rate. However, actual employee costs can change significantly independent of the general economy due to changes in staff team composition, salary rates, and other factors. Periodic review allows the fee levels to be set more accurately at the actual service cost.

Permit fees should not exceed the typical cost for the corresponding type of permit, or else they may be considered a form of taxation. On the other hand, if fees are less than 100% cost recovery, the cost of the permitting activity is being born (or subsidized) by some other funding source. A municipality may elect to charge a fee less than the amount required to fully cover the cost of the service (e.g., a cost recovery rate less than 100%), but should do so through a decision-making process that accounts for an alternative funding source to replace any fees not collected. If some fees are disproportionately high while others are low, the permittees paying the higher fees are subsidizing those paying the lower fees.

A 100% cost recovery program should generate a positive revenue balance for fee revenue when considered on an annual basis. In particular, the review and inspection of Building permit projects can take place over multiple fiscal years while fees are collected only at the beginning of either the plan check or building permit process. It is thus necessary for the City to maintain a positive balance across multiple fiscal years to cover the costs of work performed in a fiscal year subsequent to the fiscal year in which the corresponding revenue was collected. Planning and Engineering Land Development reviews may also cover multiple fiscal years, but to a lesser degree. Further, there may be fluctuations in the fund balance that are a result of the unpredictable increases and decreases in the demand for land use permits.

Maintaining this slight buffer allows the City to retain experienced staff and overall productivity levels when construction activity and associated permit revenue drop.

While a time and materials fee could be the most precise means of tracking and collecting fees for full cost recovery, this approach creates significant administrative overhead. As a result, municipalities typically set fees based on the average cost of processing a type of permit, with time and materials fees only used for more unusual circumstances.

A 100% cost recovery approach may include limited exceptions for either legal or practical reasons. For example, if the City provides an appeal process for community members to challenge land use decisions, a substantial fee to file the appeal could be considered an undue burden on due process. As another example, the City may elect to subsidize a particular permit where a fee set at 100% cost recovery would discourage compliance with City regulations or unfavorably discourage land use activity. Typical examples

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
of Planning permits subsidized by cities include use permits for non-profit entities conducting a community event or a tree removal permit for a single-family homeowner.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Objectives
The City of Morgan Hill undertook this analysis to specifically review and propose updates to the permit fees for the City’s Development Services activities and to align with the requirements for a 100% cost recovery fee program. Previously the City contracted with a consulting firm to conduct fee studies in 2021 (Planning and Engineering Land Development) and 2017 (Planning, Building and Engineering Land Development).

Since 2021, Planning and Engineering Land Development fees were increased annually based on a standardized inflationary adjustment. While Building Permit fees were not adjusted in the same manner, this was offset by the use of project valuation as an input to the Building Permit Fee. Project valuation, an estimated cost of construction for the project, increases periodically based on data collected by the construction industry on actual construction costs. Because Building Permit fees are calculated as a percentage of the expected construction costs (referred to as project valuation), they automatically increase as construction prices increase.

In addition to a desire to follow the best practice of periodic permit fee updates, the City was motivated by a desire to improve the fiscal stability of the Development Services Fund programs by better aligning revenues with actual costs. Fund 206 is used in the City’s budget to track revenues and costs for Development Services, including Planning, Engineering Land Development and Building programs. Through the City’s 2024-2025 budget process, it was noted that Fund 206 was continuing to operate in a deficit situation such that the City was forced to use General Fund money to cover some portion of the cost of Development Services.

Furthermore, as a best practice, the City has the objective of addressing changes in staffing composition, overhead costs, and permit procedures that had been implemented since the most recent fee studies and which could affect the cost of the Development Services permit program. Changes to staffing and overhead costs occur through the biennial adoption of the City’s operating budget. Changes to permit procedures result from changes in State law as well as local land use regulations, and include the suspension of Morgan Hill’s Residential Development Control System (RDCS) and a new preliminary review process brought on by the adoption of SB 330.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Methodology
Prior Fee Studies
Cities routinely conduct Fee Studies to support cost recovery fee programs, often with the assistance of an outside consultant. The nature of these studies is fairly routine, although their structure can vary significantly in terms of approach and detail. This particular analysis directly relies upon the methodology established in the City’s two most recent Development Services Fee Studies, both of which were prepared by the same consultant and used the same methodology to determine an aggregate Fully Burdened Hourly Rate (FBHR) for each of the three main programs (Planning, Engineering Land Development and Building) and then to apply that rate to an aggregate of the number of hours for each enumerated permit included on the City’s Fee Schedule. The following report provides a more detailed description of each step in this process.

Budget Alignment
As noted above, the City is using an aggregate FBHR for each program within Fund 206. This approach aligns well with the structure of the City’s budget, which assigns staff on a proportionate basis to each program. For example, a portion of the funding for several positions (e.g., City Manager, Development Services Director, Assistant City Attorney, Management Analyst, etc.) are assigned within the City’s budget to each of these programs. These positions or portions of these positions then become an administrative cost within the overall staffing cost for each program, rather than a specifically enumerated cost that is considered when determining the Hours per Service. An alternative approach would be to separate out one or more of these positions, calculate a separate FBHR specific to the position, and then allocate time specifically to that position at the specific FBHR. This approach would add both complexity and specificity, and may be desirable for the latter reason, but would not align well with the structure of the City’s budget which allocates costs for materials, supplies, overhead, etc., as well as staffing, as an aggregate for each program.

Materials and supplies are included in the City’s budget as a line item specific for each program. The Citywide overhead may also include materials and supplies, but in a generalized fashion where each program pays a proportionate share of the City’s total costs. Some of the increase in Citywide overhead and corresponding decrease in materials and supplies costs for each program between 2021 and 2024 is attributed to a shift of materials and supplies cost from individual programs to the Citywide overhead.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Key Elements
Staff Team Composition
The following analysis begins with a quantification of the staff resources for each of the three programs.

The following tables present the City’s staffing for each of the three Fund 206 programs as set forth in the City’s budget.

The key pieces of information for the fee analysis are the total number of hours spent on each activity and the percentage of those hours spent on each activity for each program. The first table summarizes the distribution between administrative, public information and permit processing for each program.

Administrative activities include staff meetings, training, and administrative work such as contract management and supervision. Public information includes time spent in communication with the general public and/or applicants and other stakeholders, either in person, by phone, email or other means. Permit processing time is time available to work directly on the review and issuance of a land use permit. Notably, the Planning program has the greatest share of public information activity, while Engineering Land Development and Building have more hours dedicated to permit processing.

The allocation of hours to these different activities are further broken down in the following table. The table identifies staffing by position title and the percentage of that position assigned in the budget to the referenced Fund 206 program (% FTE or % Full Time Equivalent). The percentage of FTE assigned to the program determines how many productive hours are available for the work of the program by the indicated individual. The productive hours for each position, (productive hours being the total number of work hours in a year after subtraction of vacation, sick leave and break time), have been distributed between administrative, public information (counter) and permit processing activities as an indication of how much time is spent by each individual on each.

Distribution of Hours
Planning 3,978 39% 2,261 22% 4,026 39%
Land Development 3,023 37% 525 6% 4,703 57%
Building 3,514 22% 564 3% 12,176 75%
Administrative Public Information Permit Processing

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
City of Morgan Hill: Fund 206 Fee Study
FY 2024-2025
Fund 206 Employee Time Resources
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.04 100% - - - 64 -
Asst City Manager Development Services 0.30 64% 21% 15% 314 105 73 Development Services Director 0.30 54% 7% 39% 266 35 191 Senior Planner 1.00 22% 7% 71% 353 120 1,167
Associate Planner 0.80 25% 29% 46% 352 400 643
Assistant Planner 0.80 25% 28% 47% 354 400 673
Development Services Technician 0.05 6% 94% - 5 81 -
Development Services Technician 0.90 13% 70% 17% 206 1,080 255 Part-Time / Temp 0.50 12% 3% 85% 123 25 852
Economic Development Coordinator 0.10 100% - - 168 - -
Assistant City Attorney 0.17 33% 5% 62% 92 15 172
Business Assistant 0.10 100% - - 174 - -
Municipal Service Assistant 0.80 100% - - 1,382 - -
Management Analyst 0.07 100% - - 125 - -
Total 5.93 39% 22% 39% 3,978 2,261 4,026
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.02 100% - - - 32 -
Public Services Director 0.03 33% - 67% 16 - 33
Development Services Director 0.10 87% - 13% 143 - 21
Deputy Director for Engineering 0.15 33% - 67% 80 - 166 Senior Civil Engineer 0.75 43% 2% 55% 527 30 673
Supervising Civil Engineer 1.00 31% 7% 62% 503 120 1,017 Assistant Engineer 0.50 23% 17% 60% 206 150 540
Junior Engineer 0.75 23% 17% 60% 309 225 810
Senior Public Works Inspector 0.35 16% - 84% 97 - 502
Senior Public Works Inspector 0.35 16% - 84% 98 - 510
Environmental Programs Coordinator 0.45 56% - 44% 453 - 353 Assistant City Attorney 0.07 32% - 68% 37 - 78
Business Assistant 0.25 100% - - 436 - -
Municipal Service Assistant 0.05 100% - - - 86 -
Management Analyst - - - - - - -
Total 4.82 37% 6% 57% 3,023 525 4,703
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.02 100% - - - 32 -
Asst City Manager Development Services 0.05 100% - - - 82 - Development Services Director 0.20 100% - - 328 - -
Building Official 1.00 40% 2% 58% 663 25 952
Building Division Manager 1.00 24% - 76% 393 - 1,247
Development Services Technician 0.75 13% 11% 76% 172 140 972 Development Services Technician 0.10 12% 40% 47% 21 69 81 Development Services Technician 1.00 12% 9% 79% 217 165 1,410 Development Services Technician 1.00 12% 10% 78% 212 165 1,335 Biulding Inspector II 1.00 12% - 88% 214 - 1,522
Biulding Inspector II 1.00 12% - 88% 214 - 1,530
Biulding Inspector II 1.00 12% - 88% 217 - 1,575
Plan Check Engineer 1.00 12% - 88% 216 - 1,552
Assistant City Attorney 0.16 100% - - 262 - -
Business Assistant 0.10 100% - - 174 - -
Municipal Service Assistant 0.05 100% - - - 86 -
Management Analyst 0.07 100% - - 125 - -
Total 9.50 22% 3% 75% 3,514 564 12,176
Notes
DPW Admin hours include floodplain and special projects Fund 206 - Planning
Fund 206 - Building
Fund 206 - Land Development
Distribution of Work (%)
Distribution of Work (%)
Distribution of Work (%)
Distribution of Work (Hours)
Distribution of Work (Hours)
Distribution of Work (Hours)

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Fully Burdened Hourly Rate
The next step in the analysis process was to calculate a FBHR for each of the three programs based on staff team composition and the associated budget. The FBHR reflects the full cost, including all forms of overhead, for one hour of staff work on a permit. The FBHR is calculated by adding up all of the costs required to conduct the permit program, including salary, benefits, administration, public information, equipment and supplies and dividing the total costs by the total number of hours available. Based on this calculation, the analysis supports significant increases to the current FBHR for the Planning and Engineering Land Development programs, and a modest increase for the Building program as shown.

Proposed Change to FBHR 2024
Current
2024
Proposed Increase % Increase
Planning $253 $387 $134 53%
Engineering Land Development $248 $370 $122 49%
Building $234 $256 $22 9%
The calculation of the FBHR is the most complex part of this analysis and was carefully reviewed prior to making this recommendation as it will have a significant impact on the fees the City will be charging for new land use permits, and thus make new construction and land use activities more expensive.

The proposed increases reflect changes to:
• Cost of salary and benefits
• Proportion of staff time dedicated to administrative activities • Availability of productive hours
• Equipment and supplies
• Citywide overhead
• Incorporation of public information costs within the permit program The relative effect of each of these factors varies by program as discussed below.

Planning Program
The Planning Program FBHR is proposed to increase substantially from $253 to $387 per hour for the following reasons.
1) Public Information – the biggest factor increasing the FBHR for Planning is the allocation of 50% of the staff time spent on public information activities to the permit fee program. While it is not uncommon for a city to assume that the majority of public information time spent by Development Services staff (e.g., answering questions from potential applicants and/or community members during the workday at the counter, by email or by phone) is directly related to the issuance of permits, the previous two Studies assumed only 10% of this time would be allocated to the permit program based upon a rough estimation made by City staff. For this analysis, the City monitored public information over a two-week period and determined that 52% of the time spent on public information was in direct support of the conduct of the City’s land use permit program. To align with common practice, and with the support of the collected data, the City is proposing to increase the percentage of public information activities covered by permit fees from 10% to 50%. This adds administrative costs to the Planning fee program and thus increases the Planning FBHR.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
2) Productive Hours – the second largest factor increasing the Planning FBHR is the loss of productive hours from the most recent Fee Study. Administrative costs and overhead are distributed over the total number of productive hours, so that when the number of productive hours is reduced, the FBHR is increased. The drop in productive hours is most notably the result of a reduction in staffing at the Senior Planner level. In the 2021 study the Planning program included two Senior Planner positions with a total of 3,288 productive hours. One position was removed and work duties reassigned so that in the current analysis, the remaining Senior Planner provides only 1,167 hours of productive time for permit processing. This reduction reflects increasing demand upon the Senior Planner to perform administrative tasks related to State Housing and Community Development requirements, the growing complexity of legal and procedural requirements placed upon local land use permitting, and other factors contributing to greater administrative workload. 3) Citywide Overhead – The third contributing factor to the increased Planning FBHR is an increase in Citywide overhead assigned to the Planning program. Increased administrative activity contributes as well. The potential increase in the Planning FBHR is somewhat offset by a decrease in the budget for supplies and equipment, but this decrease is also related to a shift in some of these expenses from a direct program specific line item in the budget to incorporation into the Citywide overhead.

Engineering Land Development
The Engineering Land Development Program FBHR is proposed to increase substantially from $248 to $370 per hour for the following reasons.
1) Citywide Overhead – The most significant factor increasing the Engineering Land Development FBHR is an increase in Citywide overhead for this program, due to a change in methodology for overhead allocation.
2) Productive Hours – The second factor for Engineering Land Development is a loss of productive hours.

Due to changes in workload and revenue, Engineering Land Development staff were reassigned from Engineering Land Development to the City’s Capital Improvement Program, reducing the productive hours available within the Engineering Land Development program. As with Planning, this results in administrative and overhead costs being borne by a reduced number of productive hours, thereby resulting in a higher FBHR.
3) Public Information – The Engineering Land Development FBHR is also increased by a shift in public information hours to the fee program from 30% to 100%. Under current work assignments, all of the public information activities conducted by Engineering Land Development program staff are related to the permit program. This shift in public information has a lesser impact on Engineering Land Development than on the Planning program as the total number of hours for public information is considerably less (525 hours compared to 2,261 hours).
4) Labor Costs – The increase in the Engineering Land Development FBHR would be larger except that it is offset by reductions in the overall cost of labor and a reduction in administrative hours.

Building
By comparison to Planning and Engineering Land Development, the Building program has a modest proposed increase in FBHR from $234 to $256. While the Planning and Engineering Land Development programs were addressed in the 2021 Fee Study, the Building program was excluded and thus this analysis uses the 2017 Fee Study as a point of refence. This increase is a result of the following factors.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
1) Labor Costs – The total labor cost for the Building program has increased substantially from the 2017 Study with the addition of new positions in the program. 2) Citywide Overhead – Citywide overhead has increased for the Building program and is the second largest factor increasing the Building FBHR.
3) Productive Hours – Factors causing increases to the FBHR are significantly offset by an increase in productive hours. The positions added within the program are focused on productive hours rather than administrative activities and thus have a much lesser effect on increasing the FBHR. 4) Public Information – Counter hour cost recovery is proposed to increase from 10% to 100% but this has a very minor impact on the FBHR as it is a small part of the Building program workload.

Calculation of FBHR
The following three tables present the calculation of the FBHR for each of the three programs. The FBHR is calculated by distributing program costs (salary, benefits, materials and supplies, and Citywide overhead) proportionately between work hours for administrative, public information, and permit processing activities.

The first category, Employee Services, includes the total cost of salary and benefits budgeted for each program. Overtime costs are subtracted from this total as any time spent as overtime should not be a factor in determining the FBHR for a regular work hour.

Non-Labor / Overhead includes the costs for supplies and materials and the general citywide overhead costs for each program as set in the budget.

The Total for Labor and Non-Labor is a calculation of the proportional cost for each of the three work activities including labor, supplies and materials and citywide overhead.

The fully burdened cost for administrative work hours is then distributed between the public information and permit processing time, so that each bears a proportional cost of the administrative activity. 50% of the public information hourly cost is added to 100% of the permit processing hourly cost to establish the Fully Burdened Hourly Rate (FBHR) for the Planning program. For Engineering Land Development and Building programs 100% of the public information costs are added to the FBHR.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Fund 206 - Planning
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 39% 22% 39% 100%
Labor Hours 3,978 2,261 4,026 10,265
Employee Services
Salaries-General $ 805,205 - $ 805,205 312,041$ 177,357$ $ 315,807 Salaries-Part-Time Temp $ 97,000 - $ 97,000 37,590$ 21,366$ $ 38,044 Salaries-Earned leave $ 25,758 - $ 25,758 9,982$ 5,674$ $ 10,102 Overtime-General $ 2,500 (2,500) $ - $ - $ - $ -
Benefits (sum) $ 377,596 - $ 377,596 146,330$ 83,170$ $ 148,095 Total Labor Cost $ 1,308,059 $ (2,500) $ 1,305,559 505,944$ 287,566$ 512,049$ $ 1,305,559 Non-Labor / Overhead
Supplies & Services Total $ 131,440 (8,600) $ 122,840 47,604$ 27,057$ $ 48,179 Capital Outlay Total $ - - $ - $ - $ - $ -
Internal Services Total $ 469,490 - $ 469,490 181,942$ 103,411$ $ 184,137 Total Non-Labor / Overhead Cost $ 600,930 $ (8,600) $ 592,330 229,546$ 130,468$ $ 232,316 $ 592,330 Total Labor and Non-Labor $ 1,908,988 $ (11,100) $ 1,897,888 735,490$ 418,035$ $ 744,364 $ 1,897,888 Allocation of Administrative Costs
Administrative 735,490$ 735,490$
Productive 418,035$ 744,364$ $ 1,162,399
Productive (%) 36% 64%
Proportional Admin 264,505$ $ 470,985 735,490$
Productive + Proportional Admin 682,539$ $ 1,215,349 $ 1,897,888 Calculation of Billing Rate
Cost Recovery Target 50% 100%
Targeted Fee Revenue 341,270$ $ 1,215,349 $ 1,556,619
Funding from Alternative Source 341,270$ $ - 341,270$
Productive Hours Available 4,026
Productive Hour Cost (Billing Rate) 85$ 302$ 387$
Budgeted Program Cost Allocation to Activity

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Fund 206 - Land Development
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 37% 6% 57% 100%
Labor Hours 3,023 525 4,703 8,251
Employee Services
Salaries-General $ 761,819 $ (11,819) $ 750,000 274,785$ 47,721$ $ 427,493 Salaries-Part-Time Temp $ 15,300 - $ 15,300 5,606$ 974$ $ 8,721 Salaries-Earned leave $ 44,265 - $ 44,265 16,218$ 2,817$ $ 25,231 Overtime-General $ 2,500 (2,500) $ - $ - $ - $ -
Benefits (sum) $ 344,090 - $ 344,090 126,067$ 21,894$ $ 196,128 Total Labor Cost $ 1,167,974 $ (14,319) $ 1,153,654 422,676$ 73,405$ $ 657,573 $ 1,153,654 Non-Labor / Overhead
Supplies & Services Total $ 253,295 (1,250) $ 252,045 92,344$ 16,037$ $ 143,664 Capital Outlay Total $ - - $ - $ - $ - $ -
Internal Services Total $ 336,235 - $ 336,235 123,190$ 21,394$ $ 191,651 Total Non-Labor / Overhead Cost $ 589,530 $ (1,250) $ 588,280 215,534$ 37,431$ $ 335,315 $ 588,280 Total Labor and Non-Labor $ 1,757,504 $ (15,569) $ 1,741,934 638,210$ 110,837$ $ 992,888 $ 1,741,934 Allocation of Administrative Costs
Administrative 638,210$ $ 638,210
Productive 110,837$ $ 992,888 $ 1,103,725
Productive (%) 10% 90%
Proportional Admin 64,090$ $ 574,120 $ 638,210
Productive + Proportional Admin 174,926$ $ 1,567,008 $ 1,741,934 Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 174,926$ $ 1,567,008 $ 1,741,934
Funding from Alternative Source $ - $ - $ -
Productive Hours Available 4,703
Productive Hour Cost (Billing Rate) 37$ $ 333 $ 370
Budgeted Program Cost Allocation to Activity

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Fund 206 - Building
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 22% 3% 75% 100%
Labor Hours 3,514 564 12,176 16,254
Employee Services
Salaries-General $ 1,471,302 - $ 1,471,302 318,085$ 51,053$ $ 1,102,164 Salaries-Part-Time Temp $ 15,300 - $ 15,300 3,308$ 531$ $ 11,461 Salaries-Earned leave $ 58,569 - $ 58,569 12,662$ 2,032$ $ 43,875 Overtime-General $ 5,000 (5,000) $ - $ - $ - $ -
Benefits (sum) $ 728,805 - $ 728,805 157,562$ 25,289$ $ 545,953 Total Labor Cost $ 2,278,976 $ (5,000) $ 2,273,976 491,618$ 78,905$ $ 1,703,453 $ 2,273,976 Non-Labor / Overhead
Supplies & Services Total $ 334,440 (45,500) $ 288,940 62,467$ 10,026$ $ 216,447 Capital Outlay Total $ - - $ - $ - $ - $ -
Internal Services Total $ 552,546 - $ 552,546 119,457$ 19,173$ $ 413,917 Total Non-Labor / Overhead Cost $ 886,986 $ (45,500) $ 841,486 181,923$ 29,199$ $ 630,364 $ 841,486 Total Labor and Non-Labor $ 3,165,962 $ (50,500) $ 3,115,462 673,541$ 108,104$ $ 2,333,817 $ 3,115,462 Allocation of Administrative Costs
Administrative 673,541$ $ 673,541
Productive 108,104$ $ 2,333,817 $ 2,441,921
Productive (%) 4% 96%
Proportional Admin 29,818$ $ 643,723 $ 673,541
Productive + Proportional Admin 137,922$ $ 2,977,540 $ 3,115,462 Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 137,922$ $ 2,977,540 $ 3,115,462
Funding from Alternative Source $ - $ - $ -
Productive Hours Available 12,176
Productive Hour Cost (Billing Rate) 11$ $ 245 $ 256
Budgeted Program Cost Allocation to Activity

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Hours per Service
The second step in calculating individual permit fees is to determine the number of work hours needed for staff to process the permit. This number of work hours (referred to as Hours per Service) includes activities such as application intake, creation of permit records, review of application materials for consistency with applicable policies and regulations, communications between staff and applicants, conduct of public hearings, writing staff reports and creation of permit documents. This calculation is performed for each permit type the City issues. The Hours per Service for a particular permit is the average number of hours required for these activities to complete the City’s processing and issuance of that permit type.

While some Fee Studies calculate the Hours per Service based on time spent for individual positions to process a permit (e.g., hours spent by a Permit Technician, Associate Planner, etc.), the City of Morgan Hill, in prior Fee Studies and this analysis, uses an aggregate approach where hours are grouped or aggregated for multiple positions within each program (Planning, Engineering Land Development and Building) as applicable. This total number of hours for each program is then multiplied by the FBHR for that program to determine the 100% cost recover amount for each program. The resulting numbers for each program are added together to determine the full cost for the City to process and issue the permit.

The City may elect to charge a fee equivalent to the full cost (100% cost recovery) or to charge less than the full cost consistent with other City goals. For any permit where the City decides to set a fee at less than 100% cost recovery, the City should budget alternative funding for the cost of work not being recovered by permit fees.

Hours per Service Tables
The attached tables present the calculations to determine the current full cost for issuance of permits within Planning, Engineering Land Development and Building programs. Building program permits are presented in multiple tables including Building Permits, Building Plan Check, Mechanical, Electrical, Plumbing and Fire. These tables indicate the updated Hours per Service for each permit, using the same methodology as used in the previous Fee Studies, with an updated FBHR and adjustments to the particular hours per service based on current staff experience. The Tables also indicate the proposed permit fee for each permit, in most cases based on 100% cost recovery.

Multi-Department Plan Check
One notable change was made to the Building program Plan Check fee for multi-department review.

Previously, Building Plan Check was broken into two categories, Building-only review and multi-department review. In this approach, any permit that required referral to another department was charged the same fee regardless of whether it was referred to one, two or three other departments. For the current analysis, the multi-departmental referral fees have been calculated to provide separate cost-recovery fees for Planning, Engineering Land Development and Building-Fire Marshall. By identifying separate cost-recovery fees for each of these disciplines, the City will be able to assess fees more precisely, where an applicant will only pay for the cost of referrals relevant to their permit.

Summary
Other changes made to the Fee per Service analysis are minor in nature, reflecting changes in permit processes (e.g., the suspension of the Residential Development Control System or RDCS) or other procedural changes. In a few cases the fee has been dropped as no longer needed or replaced with an actual time and services fee given the unpredictability of the Hours per Service for that particular activity.

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
The resulting FBHR will then be applied for each permit activity (shown in the Fees per Service tables).

In summary, the increased FBHR and an average increase in the Hours per Service for each permit type result in significant increases to the proposed 100% cost-recovery fee for each permit type. The average increase for permit type by program is summarized in the following table. The “Unweighted” increase represents the average increase in the permit fee for all permits in the corresponding program. The “Weighted” increase is a calculation of the average increase in fees weighted according to the projected volume of permits by permit type. An increase in the fee for a commonly used permit type will thus have a greater impact on the weighted average than a permit type that is seldom used.

Average Permit Fee Increase Unweighted Weighted
Planning 119% 131%
Engineering Land Development 62% 51%
Building Permits 27% 33%
Building Plan Check 110% 92%
Building - Mechanical 9% 9%
Building - Electrical 8% 9%
Building - Plumbing 9% 9%
Fire 40% 14%
*Revised based on FY24-25 Fees, effective July 1, 2024
Planning permit fees increase by the greatest margin due to the increased Planning program FBHR and a significant increase in Hours per Service for most planning permits. Planning staff carefully reviewed the Hours per Service used in the two prior Fee Studies and determined that they significantly underrepresented the actual amount of time spent by staff to process each permit.

Engineering Land Development fees also increase significantly, due in large part to the increased Engineering Land Development FBHR, along with more modest increases in the standard Hours per Service.

Building Permit fees have a less significant increase, correlating mostly with the modest increase in the Building program FBHR. However, plan check fees have increased more significantly, particularly for projects that include review by Engineering Land Development and Planning, due to increased FBHR for both programs and increased Hours per Service for Engineering Land Development. Fire reviews have also increased more significantly, due to increased Hours per Service. (Hours per Service tables attached as a separate document.)

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Conclusions
Cost Recovery Revenue Projections
A key objective for this analysis is to provide an opportunity for the City of Morgan Hill to improve the performance of Fund 206 in alignment with a 100% cost recovery model. The City has consistently needed to use General Fund money to cover the costs of operating and is not meeting the best practice objective of carrying a positive balance from fiscal year to fiscal year. This analysis determined that the City is undercharging for land use permits and thus the current fees are not at a 100% cost recovery level.

As shown in the following table, the City’s fees are currently set at a range between 47% of cost-recovery for Planning up to 92% cost recovery for Building-Mechanical and Building-Plumbing. When projected permit activity levels by permit type are taken into consideration, using the City’s current fees, the Planning program would only collect 42% of the full cost of reviewing and issuing permits. Data for other programs is shown in the table below.

Current Cost Recovery Unweighted Weighted
Planning 47% 43%
Engineering Land Development 62% 66%
Building Permits 83% 75%
Building Plan Check 53% 52%
Building - Mechanical 92% 92%
Building - Electrical 82% 91%
Building - Plumbing 92% 92%
Fire 75% 86%
*Revised based on FY24-25 Fees, effective July 1, 2024
With the proposed update to 100% cost recovery (with limited exceptions in the Planning program), the projected revenue for Fund 206 more closely aligns with the City’s budget projections as shown in the following table. Forecast revenue depends on the level of permit activity. With the proposed fee increases and anticipated number of permits for each type, Fund 206 would slightly exceed the Fund 206 revenue forecast ($ 5.9M) included within the City’s adopted Operating Budget for FY 2024-25. Actual revenues could be more or less depending upon actual activity levels. Without the proposed fee change, revenues are projected to fall significantly short of the Budget forecast.

Revenue Projections Current Fee Proposed Fee
Planning $ 823,180 $ 1,899,989
Engineering Land Development 846,681 1,281,824
Building Permits 1,455,674 1,940,175
Building Plan Check 447,495 858,628
Building - Mechanical 41,543 45,210
Building - Electrical 218,147 238,502
Building - Plumbing 49,156 53,517
Fire 199,338 232,768
Fund 206 Total $ 4,081,214 $ 6,550,614
*Revised based on FY24-25 Fees, effective July 1, 2024

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Implementing the proposed fee increases will thus improve the condition of Fund 206 to reduce the need for General Fund subsidy and allow the Fund to carry a positive balance from fiscal year to fiscal year, in keeping with 100% cost recovery model best practices.

Stakeholder Input
City staff conducted outreach to development industry stakeholders through an in-person meeting on Tuesday, August 13, 2024 and an on-line meeting on Wednesday, August 14, 2024. There were no attendees at the in-person meeting, but five members of the public attended the August 14 meeting. The City invited an established contact list of development industry representatives (developers, architects, engineers, consultants, etc.) that the City typically uses to invite stakeholders to this type of meeting. This list includes representatives of the Building Industry Association (BIA) and trade unions, as well as local developers and builders. Information for the meetings was also posted on the City’s website and both meetings were open to the general public.

Three of the attendees at the August 14 meeting provided feedback to the City on the proposed fee increases. Two other community members attended the meeting but did not make any comments.

Dennis Martin of the Building Industry Association (BIA) provided a significant number of comments objecting to the proposed fee increases and the process for adoption of the new fees. He requested that Council consideration of the fees be delayed for several months so that the BIA could prepare an analysis of the proposed fees. He questioned the need for a fee update when fees were studied in 2021 and are adjusted annually based on price indices. He objected to the timing (outreach in August and consideration right after Labor Day) as inconvenient for stakeholder participation, and the lack of early outreach in the process. He noted the benefits of new development to the community and suggested that General Fund subsidy is warranted, if necessary to avoid fee increases or reduce fees so that desirable development may move forward. He questioned that premise that growing complexity of State regulations adds to administrative costs for the City, noting that State laws are intended to streamline the development process and reduce the amount of staff work required. He said that fee increases if adopted should be phased in over a longer time-period than 18 months.

Rogg Collins, of Evergreen DevCo, also emphatically opposed a proposed fee increase, stating that current fees are already too high. He gave a specific example that they were unable to bring a grocery store into one of their retail spaces because of the City’s impact fees. He added that high construction costs and interest rates, along with high fees, are making development infeasible. He stated that if the government wants development to occur, fees will need to be lowered.

A third speaker, Alejandra, echoed the concerns from the BIA that developer stakeholders had not been included earlier in the fee analysis process.

City Comparisons
To provide context for this analysis, a survey was conducted of five neighboring cities (Gilroy, San Jose, Santa Clara, Sunnyvale, and Palo Alto) to compare the proposed permit fees with those charged by other cities. Such comparisons are complicated by the varying approaches taken by different jurisdictions in how to regulate land development, organize City departments and conduct permitting activities. The comparison was limited to the types of permits included in the analysis (Planning, Engineering Land Development and Building) and did not take into account impact fees or other costs of development that

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
could affect future development activity. Results from the survey will be provided, along with stakeholder input, when these fees are brought forward for potential adoption.

Policy Considerations
This analysis is being provided as the basis for the City to implement a 100% cost recovery model for services provided through the City’s Fund 206 land use permitting programs (Planning, Engineering Land Development and Building). The City may elect to adopt new fees in accordance with the 100% cost recovery fees identified in this analysis.

Alternatives to 100% Cost Recovery
Alternatively, the City may elect to set some fees at less than 100% cost recovery fee levels. In this case the City should identify an alternative source of funding for the staff time required to process the subject permit.

The analysis assumes that the fee for four permits will not be at 100% cost recovery. The first two are appeals:
• Commission/Board Decision - Public Appeal
• Staff Decision - Public Appeal
Setting the fee for an appeal by a member of the public at 100% cost-recovery would contradict City objectives in that It could create an undue burden upon the intended due process. Other appeals, made by an applicant, can be set at 100% cost recovery and accounted for as a cost of development.

In addition, the following two permits were also considered at less than 100% cost recovery, based on well-established practice in Morgan Hill:
• Tree Removal Permit
• Temporary Use Permit (Non-Profit)
In the case of a Tree Removal Permit, a full cost recovery fee would discourage compliance as these permits are for homeowners who would find a full cost recovery fee too expensive. The Temporary Use Permit for Non-Profits are typically issued for special events hosted by community groups, typically funded through donations or community fund raising and a full cost recovery fee would exceed the practical ability of these types of organizations to pay for services.

Based on projected permit volumes, collectively, to subsidize these four permit types will require approximately $47,000 annually of alternative revenue.

Public Information
If the City implements the proposed FBHR and resulting fees as identified in this analysis, a greater percentage of public information activities will be funded through the permit program. The analysis is based on 50% cost-recovery for Planning public information activity and 100% for Engineering Land Development and Building. Because of the significantly greater amount of time spent by Planning on public information, this increase most significantly affects the Planning FBHR. The City could alternatively utilize the General Fund to pay for a greater share of the public information work and thereby reduce the Planning FBHR and planning permit fees.

Phased Implementation

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City of Morgan Hill –Development Services: Fund 206 Analysis August 16, 2024
Because the proposed permit fee increases are substantial, the City may consider implementing them in a delayed manner with a portion of the increase effective in the near-term and additional increases scheduled over a period of time until they reach 100% cost recovery. For example, 50% of the proposed fee increase could take effect upon adoption, with an additional 25% increase at the end of the next two fiscal years.

City of Morgan Hill: Fund 206 Fee Study
FY 2024-2025
Calculation of Fully Burdened Hourly Rate (FBHR)
Fund 206 - Planning
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 39% 22% 39% 100%
Labor Hours 3,978 2,261 4,026 10,265
Employee Services
Salaries-General $ 805,205.00 - $ 805,205 312,041$ 177,357$ $ 315,807 Salaries-Part-Time Temp $ 97,000.00 - $ 97,000 37,590$ 21,366$ $ 38,044 Salaries-Earned leave $ 25,758.00 - $ 25,758 9,982$ 5,674$ $ 10,102 Overtime-General $ 2,500.00 (2,500) $ - -$ -$ -$
Benefits (sum) $ 377,595.69 - $ 377,596 146,330$ 83,170$ $ 148,095 Total Labor Cost $ 1,308,059 $ (2,500) $ 1,305,559 505,944$ 287,566$ $ 512,049 $ 1,305,559 Non-Labor / Overhead
Supplies & Services Total $ 131,440 (8,600) $ 122,840 47,604$ 27,057$ $ 48,179 Capital Outlay Total $ - - $ - -$ -$ -$
Internal Services Total $ 469,490 - $ 469,490 181,942$ 103,411$ $ 184,137 Total Non-Labor / Overhead Cost $ 600,930 $ (8,600) $ 592,330 229,546$ 130,468$ $ 232,316 $ 592,330 Total Labor and Non-Labor $ 1,908,988 $ (11,100) $ 1,897,888 735,490$ 418,035$ $ 744,364 $ 1,897,888 Allocation of Administrative Costs
Administrative 735,490$ $ 735,490
Productive 418,035$ $ 744,364 $ 1,162,399
Productive (%) 36% 64%
Proportional Admin 264,505$ $ 470,985 $ 735,490
Productive + Proportional Admin 682,539$ $ 1,215,349 $ 1,897,888 Calculation of Billing Rate
Cost Recovery Target 50% 100%
Targeted Fee Revenue 341,270$ $ 1,215,349 $ 1,556,619
Funding from Alternative Source 341,270$ -$ 341,270 $
Productive Hours Available 4,026
Productive Hour Cost (Billing Rate) 85$ $ 302 $ 387
Fund 206 - Land Development
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 37% 6% 57% 100%
Labor Hours 3,023 525 4,703 8,251
Employee Services
Salaries-General $ 761,819 $ (11,819.34) $ 750,000 274,785$ 47,721$ $ 427,493 Salaries-Part-Time Temp $ 15,300 - $ 15,300 5,606$ 974$ $ 8,721 Salaries-Earned leave $ 44,265 - $ 44,265 16,218$ 2,817$ $ 25,231 Overtime-General $ 2,500 (2,500) $ - -$ -$ -$
Benefits (sum) $ 344,089.61 - $ 344,090 126,067$ 21,894$ $ 196,128 Total Labor Cost $ 1,167,974 $ (14,319) $ 1,153,654 422,676$ 73,405$ $ 657,573 $ 1,153,654 Non-Labor / Overhead
Supplies & Services Total $ 253,295 (1,250) $ 252,045 92,344$ 16,037$ $ 143,664 Capital Outlay Total $ - - $ - -$ -$ -$
Internal Services Total $ 336,235 - $ 336,235 123,190$ 21,394$ $ 191,651 Total Non-Labor / Overhead Cost $ 589,530 $ (1,250) $ 588,280 215,534$ 37,431$ $ 335,315 $ 588,280 Total Labor and Non-Labor $ 1,757,504 $ (15,569) $ 1,741,934 638,210$ 110,837$ $ 992,888 $ 1,741,934 Allocation of Administrative Costs
Administrative 638,210$ $ 638,210
Productive 110,837$ $ 992,888 $ 1,103,725
Productive (%) 10% 90%
Budgeted Program Cost
Allocation to Activity
Allocation to Activity
Budgeted Program Cost

Proportional Admin 64,090$ 574,120$ 638,210$
Productive + Proportional Admin 174,926$ 1,567,008$ 1,741,934$ Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 174,926$ 1,567,008$ 1,741,934$
Funding from Alternative Source -$ -$ -$
Productive Hours Available 4,703
Productive Hour Cost (Billing Rate) 37$ 333$ 370$
Fund 206 - Building
FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 22% 3% 75% 100%
Labor Hours 3,514 564 12,176 16,254
Employee Services
Salaries-General 1,471,302.00$ - 1,471,302$ 318,085$ 51,053$ 1,102,164$ Salaries-Part-Time Temp 15,300.00$ - 15,300$ 3,308$ 531$ 11,461$ Salaries-Earned leave 58,569.00$ - 58,569$ 12,662$ 2,032$ 43,875$ Overtime-General 5,000.00$ (5,000) - $ -$ -$ -$
Benefits (sum) 728,804.79$ - 728,805$ 157,562$ 25,289$ 545,953$ Total Labor Cost 2,278,976$ (5,000)$ 2,273,976$ 491,618$ 78,905$ 1,703,453$ 2,273,976$ Non-Labor / Overhead
Supplies & Services Total 334,440$ (45,500) 288,940$ 62,467$ 10,026$ 216,447$ Capital Outlay Total -$ - -$ -$ -$ -$
Internal Services Total 552,546$ - 552,546$ 119,457$ 19,173$ 413,917$ Total Non-Labor / Overhead Cost 886,986$ (45,500)$ 841,486$ 181,923$ 29,199$ 630,364$ 841,486$ Total Labor and Non-Labor 3,165,962$ (50,500)$ 3,115,462$ 673,541$ 108,104$ 2,333,817$ 3,115,462$ Allocation of Administrative Costs
Administrative 673,541$ 673,541$
Productive 108,104$ 2,333,817$ 2,441,921$
Productive (%) 4% 96%
Proportional Admin 29,818$ 643,723$ 673,541$
Productive + Proportional Admin 137,922$ 2,977,540$ 3,115,462$ Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 137,922$ 2,977,540$ 3,115,462$
Funding from Alternative Source -$ -$ -$
Productive Hours Available 12,176
Productive Hour Cost (Billing Rate) 11$ 245$ 256$
Budgeted Program Cost Allocation to Activity

City of Morgan Hill: Fund 206 Fee Study
FY 2024-2025
Fund 206 Employee Time Resources
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.04 100% 0% 0% 64 - -
Asst City Mgr. For Comm Dev 0.30 64% 21% 15% 314 105 73 Comm Development Director 0.30 54% 7% 39% 266 35 191
Senior Planner 1.00 22% 7% 71% 353 120 1,167
Associate Planner 0.80 25% 29% 46% 352 400 643
Assistant Planner 0.80 25% 28% 47% 354 400 673
Development Services Technician 0.05 6% 94% 0% 5 81 -
Development Services Technician 0.90 13% 70% 17% 206 1,080 255 Part-Time / Temp 0.50 12% 3% 85% 123 25 852
Economic Development Coordinator 0.10 100% 0% 0% 168 - - Assistant City Attorney 0.17 33% 5% 62% 92 15 172
Business Assistant 0.10 100% 0% 0% 174 - -
Municipal Service Assistant 0.80 100% 0% 0% 1,382 - -
Management Analyst 0.07 100% 0% 0% 125 - -
Total 5.93 39% 22% 39% 3,978 2,261 4,026
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.02 100% 0% 0% 32 - -
Public Services Director 0.03 33% 0% 67% 16 - 33
Comm Development Director 0.10 87% 0% 13% 143 - 21
Deputy Director for Engineering 0.15 33% 0% 67% 80 - 166 Senior Civil Engineer 0.75 43% 2% 55% 527 30 673
Supervising Civil Engineer 1.00 31% 7% 62% 503 120 1,017 Assistant Engineer 0.50 23% 17% 60% 206 150 540
Junior Engineer 0.75 23% 17% 60% 309 225 810
Senior Public Works Inspector 0.70 16% 0% 84% 97 - 502
Senior Public Works Inspector 0.70 16% 0% 84% 98 - 510
Environmental Programs Coordinator 0.45 56% 0% 44% 453 - 353 Assistant City Attorney 0.07 32% 0% 68% 37 - 78
Business Assistant 0.25 100% 0% 0% 436 - -
Municipal Service Assistant 0.05 100% 0% 0% 86 - -
Management Analyst 0.00 0% 0% 0% - - -
Total 5.52 37% 6% 57% 3,023 525 4,703
Position FTE Admin Public Info Permits Admin Public Info Permits City Manager 0.02 100% 0% 0% 32 - -
Asst City Mgr. For Comm Dev 0.05 100% 0% 0% 82 - -
Comm Development Director 0.20 100% 0% 0% 328 - -
Building Official 1.00 40% 2% 58% 663 25 952
Building Division Manager 1.00 24% 0% 76% 393 - 1,247
Development Services Technician 0.75 13% 11% 76% 172 140 972 Development Services Technician 0.10 12% 40% 47% 21 69 81 Development Services Technician 1.00 12% 9% 79% 217 165 1,410 Development Services Technician 1.00 12% 10% 78% 212 165 1,335 Biulding Inspector II 1.00 12% 0% 88% 214 - 1,522
Biulding Inspector II 1.00 12% 0% 88% 214 - 1,530
Biulding Inspector II 1.00 12% 0% 88% 217 - 1,575
Plan Check Engineer 1.00 12% 0% 88% 216 - 1,552
Assistant City Attorney 0.16 100% 0% 0% 262 - -
Business Assistant 0.10 100% 0% 0% 174 - -
Municipal Service Assistant 0.05 100% 0% 0% 86 - -
Management Analyst 0.07 100% 0% 0% 125 - -
Total 9.50 22% 3% 75% 3,514 564 12,176
Notes
DPW Admin hours include floodplain and special projects Fund 206 - Planning
Fund 206 - Building
Fund 206 - Land Development
Distribution of Work (%)
Distribution of Work (%)
Distribution of Work (%)
Distribution of Work (Hours)
Distribution of Work (Hours)
Distribution of Work (Hours)

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Permit Cost of Service
Building Program - Building Permits Hours per Service Detail Permit Type
Hours
per
Service
Proposed
Fee
Proposed
% Cost
Recovery
Current Fee
Current %
Cost
Recovery
Proposed %
Increase
Permit
Tech
Plan
Check
Fire Plan
Check
Building
Inspector
Building
Total
(FBHR) 256.00
Building Permit (Not Combination) Valuation Based Fees
$1 - $500
Any Valuation 0.75 192$ 100% 141$ 73% 36% 0.25 0.00 0.00 0.50 0.75 $501 to $2,000
first $500 1.00 256$ 100% 188$ 73% 36% 0.50 0.00 0.00 0.50 1.00 each additional $100 (round up) 0.03 8$ 100% 11$ -30% 0.03 $2,001 - $25,000
first $2,000 1.50 384$ 100% 376$ 98% 2% 0.75 0.00 0.00 0.75 1.50 each additional $1000 (round-up) 0.06 15$ 100% 9$ 71% 0.06 $25,001 to $50,000
first $25,000 3.00 768$ 100% 611$ 80% 26% 1.50 0.00 0.00 1.50 3.00 each additional $1000 (round-up) 0.07 18$ 100% 11$ 63% 0.07 $50,001 to $100,000
first $50,000 4.75 1,216$ 100% 893$ 73% 36% 2.00 0.00 0.00 2.75 4.75 each additional $1000 (round-up) 0.06 15$ 100% 11$ 40% 0.06 $100,001 to $500,000
first $100,000 8.00 2,048$ 100% 1,504$ 73% 36% 3.00 0.00 0.00 5.00 8.00 each additional $1000 (round-up) 0.02 5$ 100% 6$ -15% 0.02 $500,001 to $1,000,000
first $500,000 19.00 4,864$ 100% 3,760$ 77% 29% 5.00 0.00 0.00 14.00 19.00 each additional $1000 (round-up) 0.01 3$ 100% 4$ -36% 0.01 $1,000,000 and up
first $1,000,000 28.00 7,168$ 100% 5,640$ 79% 27% 6.00 0.00 0.00 22.00 28.00 each additional $1000 (round-up) 0.03 8$ 100% 6$ 28% 0.03 Cost Recovery Analysis

Combination Builiding Permits Valuation Based Fees
$1 - $500
Any Valuation 1.00 256$ 100% 141$ 55% 82% 0.50 0.00 0.00 0.50 1.00 -$
$501 to $2,000
first $500 1.25 320$ 100% 188$ 59% 70% 0.50 0.00 0.00 0.75 1.25 each additional $100 (round up) 0.03 8$ 100% 9$ -15% 0.03 $2,001 - $25,000
first $2,000 1.75 448$ 100% 329$ 73% 36% 0.75 0.00 0.00 1.00 1.75 each additional $1000 (round-up) 0.09 23$ 100% 13$ 77% 0.09 $25,001 to $50,000
first $25,000 4.00 1,024$ 100% 658$ 64% 56% 1.50 0.00 0.00 2.50 4.00 each additional $1000 (round-up) 0.08 20$ 100% 19$ 8% 0.08 $50,001 to $100,000
first $50,000 6.00 1,536$ 100% 1,128$ 73% 36% 2.00 0.00 0.00 4.00 6.00 each additional $1000 (round-up) 0.12 31$ 100% 23$ 34% 0.12 $100,001 to $500,000
first $100,000 12.00 3,072$ 100% 2,256$ 73% 36% 4.00 0.00 0.00 8.00 12.00 each additional $1000 (round-up) 0.03 8$ 100% 6$ 28% 0.03 $500,001 to $1,000,000
first $500,000 26.00 6,656$ 100% 4,700$ 71% 42% 6.00 0.00 0.00 20.00 26.00 each additional $1000 (round-up) 0.04 10$ 100% 8$ 28% 0.04 $1,000,000 and up
first $1,000,000 48.00 12,288$ 100% 8,460$ 69% 45% 10.00 0.00 0.00 38.00 48.00 each additional $1000 (round-up) 0.05 13$ 100% 8$ 60% 0.05 Grading - Permit Fees
50 cubic yards or less
Any Amount up to and including 50 cubic yards 1.50 384$ 100% 225$ 59% 71% 0.50 0.00 0.00 1.00 1.50 51 to 100 cubic yards
first 50 cubic yards 1.50 384$ 100% 282$ 73% 36% 0.50 0.00 0.00 1.00 1.50 each additional cubic yard 0.02 5$ 100% 5$ 2% 0.02
101 to 1,000 cubic yards
first 100 cubic yards 2.50 640$ 100% 451$ 70% 42% 1.00 0.00 0.00 1.50 2.50 each additional 100 cubic yards 0.13 33$ 100% 25$ 33% 0.13 1,001 to 10,000 cubic yards
First 1,000 cubic yards 3.75 960$ 100% 676$ 70% 42% 1.75 0.00 0.00 2.00 3.75

each additional hundred cubic yards 0.04 10$ 100% 7$ 46% 0.04 10,001 to 100,000 cubic yards
1st 10,000 cubic yards 8.00 2,048$ 100% 1,353$ 66% 51% 3.00 0.00 0.00 5.00 8.00 each additional 10,000 cubic yards or fraction thereof 0.33 84$ 100% 88$ -4% 0.33 100,001 to 200,000 cubic yards
1st 100,000 cubic yards 11.00 2,816$ 100% 2,142$ 76% 31% 4.00 0.00 0.00 7.00 11.00 each additional 10,000 cubic yards or fraction thereof 0.10 26$ 100% 23$ 11% 0.10 Roofs
Re-Roofs: Comp/Tile/Shake (Includes new roof sheath)
1 - 15 SQUARES 1.00 256$ 100% 297$ 116% -14% 0.50 0.00 0.00 0.50 1.00 16-30 SQUARES 1.50 384$ 100% 469$ 122% -18% 0.75 0.00 0.00 0.75 1.50 31 and more SQUARES 1.75 448$ 100% 587$ 131% -24% 0.75 0.00 0.00 1.00 1.75 Steel Roof System
Any Size 2.00 512$ 100% 587$ 115% -13% 1.00 0.00 0.00 1.00 2.00 100% Overlay
Residential Composition Overlay - Lifetime 1.25 320 $ 100% 469$ 147% -32% 0.50 0.00 0.00 0.75 1.25 Miscellaneous Roof
Single-ply Roof System 1-30 SQUARES 2.00 512$ 100% 469$ 92% 9% 1.00 0.00 0.00 1.00 2.00 Single-ply Roof System 31 and more SQUARES 2.50 640 $ 100% 587$ 92% 9% 1.00 0.00 0.00 1.50 2.50 Tar & Gravel (Built-Up/BUR) 2.00 512$ 100% 469$ 92% 9% 1.00 0.00 0.00 1.00 2.00

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building Plan Check Fee Cost of Service
Building Permit Program - Plan Check
Permit Type Permit
Tech
Plan
Check
Fire Plan
Check
Building
Inspector
Building
Total Land Dev Planning Fire Plan Check
Base
Buildig Fee
Land Dev
Surcharge
Planning
Surcharge
Fire
Inspection
Surcharge
Total (Max)
$ 256 $ 370 $ 387 $ 204
Multi-Department Plan Check Valuation Based Fees
$1 - $500
Any Valuation 0.75 0.25 0.00 0.00 1.00 0.25 0.25 0.25 256$ 93$ 97$ 51$ 496$ -$ -$ -$ -$ -$
$501 - $2,000
first $500 1.25 0.25 0.00 0.00 1.50 0.50 0.50 0.50 384$ 185$ 194$ 102$ 865$ each additional $100 (round-up) 0.03 0.03 0.00 0.00 8$ 11$ -$ -$ 19$ $2,001 - $25,000
first $2,000 1.50 0.50 0.00 0.00 2.00 1.00 0.50 0.50 512$ 370$ 194$ 102$ 1,178$ each additional $1,000 (round-up) 0.05 0.04 0.01 0.01 13$ 15$ 4$ 2$ 34$ $25,001 - $50,000
first $25,000 1.75 1.50 0.00 0.00 3.25 2.00 0.75 0.75 832$ 740$ 290$ 153$ 2,015$ each additional $1,000 (round-up) 0.02 0.04 0.01 0.01 5$ 15$ 4$ 2$ 26$ $50,001 - $100,000
first $50,000 2.25 1.50 0.00 0.00 3.75 3.00 1.00 1.00 960$ 1,110$ 387$ 204$ 2,661$ each additional $1,000 (round-up) 0.08 0.02 0.00 0.00 20$ 7$ -$ -$ 28$ $100,001 - $500,000
first $100,000.00 3.00 5.00 0.00 0.00 8.00 4.00 1.25 1.25 2,048$ 1,480$ 484$ 255$ 4,267$ each additional $1,000 (round-up) 0.02 0.00 0.00 0.00 5$ -$ -$ -$ 5$ $500,001 - $1,000,000
first $500,000.00 5.00 11.00 0.00 0.00 16.00 5.00 3.00 3.00 4,096$ 1,850$ 1,161$ 612$ 7,719$ each additional $1,000 (round-up) 0.02 0.00 0.00 0.00 5$ -$ -$ -$ 5$ $1,000,001 and up
first $1,000,000.00 8.00 18.00 0.00 0.00 26.00 6.00 5.00 5.00 6,656$ 2,220$ 1,935$ 1,020$ 11,831$ each additional $1,000 (round-up) 0.03 0.01 0.01 0.01 8$ 4$ 4$ 2$ 17$ Grading - Plan Review Fees
50 cubic yards or less
Building Avg. Review/Inspection Time Fee Calculation Referral Review Time

Any Amount up to and including 50 cubic yards 0.50 0.75 0.00 0.00 1.25 0.50 0.50 0.00 320$ 185$ 194$ -$ 699$ 51 to 100 cubic yards
first 50 cubic yards 0.50 0.75 0.00 0.00 1.25 0.50 0.50 0.00 320$ 185$ 194$ -$ 699$ each additional cubic yard 0.02 5$ -$ -$ -$ 5$
101 to 1,000 cubic yards
first 100 cubic yards 1.00 1.25 0.00 0.00 2.25 0.50 0.50 0.00 576$ 185$ 194$ -$ 955$ each additional 100 cubic yards 0.05 13$ -$ -$ -$ 13$
1,001 to 10,000 cubic yards
First 1,000 cubic yards 1.25 1.50 0.00 0.00 2.75 0.50 0.50 0.00 704$ 185$ 194$ -$ 1,083$ each additional hundred cubic yards 0.03 8$ -$ -$ -$ 8$ 10,001 to 100,000 cubic yards
1st 10,000 cubic yards 2.50 3.50 0.00 0.00 6.00 0.50 0.50 0.00 1,536$ 185$ 194$ -$ 1,915$ each additional 10,000 cubic yards or fraction thereof 0.25 64$ -$ -$ - $ 64$ 100,001 to 200,000 cubic yards
1st 100,000 cubic yards 3.25 5.00 0.00 0.00 8.25 0.50 0.50 0.00 2,112$ 185$ 194$ -$ 2,491$ each additional 10,000 cubic yards or fraction thereof 0.42 108$ -$ -$ -$ 108$ 200,001 cubic yards or more
1st 200,000 cubic yards 4.50 8.00 0.00 0.00 12.50 0.50 0.50 0.00 3,200$ 185$ 194$ -$ 3,579$ each additional 10,000 cubic yards or fraction thereof 0.10 26$ -$ -$ - $ 26$ Standard Plan Check (Not Routed) Valuation Based Fees
$1 - $500
Any Valuation 0.50 0.25 0.00 0.00 0.75 192$ 192$
$501 - $2,000
first $500 0.75 0.25 0.00 0.00 1.00 256$ 256$
each additional $100 (round-up) 0.03 8$ 8$
$2,001 - $25,000
first $2000.00 1.00 0.50 0.00 0.00 1.50 384$ 384$
each additional $1,000 (round-up) 0.06 15$ 15$
$25,001 - $50,000
first $25,000.00 1.50 1.50 0.00 0.00 3.00 768$ 768$
each additional $1,000 (round-up) 0.03 8$ 8$
$50,001 - $100,000
first $50,000.00 2.25 1.50 0.00 0.00 3.75 960$ 960$
each additional $1,000 (round-up) 0.08 20$ 20$
$100,001 - $500,000
first $100,000.00 3.00 5.00 0.00 0.00 8.00 2,048$ 2,048$

each additional $1,000 (round-up) 0.02 5$ 5$
$500,001 - $1,000,000
first $500,000.00 5.00 11.00 1.00 0.00 17.00 4,352$ 4,352$ each additional $1,000 (round-up) 0.02 5$ 5$
$1,000,001 and up
first $1,000,000.00 8.00 18.00 2.00 0.00 28.00 7,168$ 7,168$ each additional $1,000 (round-up) 0.03 8$ 8$

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building - Mechanical Permit Cost of Service
Building Permit Program - Mechanical Cost Recovery Analysis Permit Type Estimated
Time
Proposed
Fee Current Fee
Current
Cost
Recovery %
Proposed %
Increase
(FBHR) $ 256
Permit Issuance 0.45 $ 115 106$ 92% 9%
Furnaces Installation
Residential: Installation or relocation of forced air or gravity-type furnace or burner, each 0.50 128$ 118$ 92% 8%
Commercial: Installation or relocation of forced air or gravity-type furnace or burner, each 1.00 256$ 234$ 91% 9%
Installation or relocation of suspended heater, recessed wall heater, floor furnace, or floor mounted unit heater including flue vent, each 0.75 192$ 176$ 92% 9% Appliance Vents and Ducts
Installation, relocation or replacement of appliance vent, ducts, per system 0.75 $ 192 176$ 92% 9% Condensing units (AC), each 0.50 $ 128 118$ 92% 8%
Boilers, Compressors & Absorption Systems
Installation or relocation of each boiler, compressors 1-15 horsepower, or absorption system 0 - 500,000 Btu/h, each 0.75 192$ 176$ 92% 9% Installation or relocation of each boiler, compressors 16-50 horsepower, or absorption system 500,001 - 1,750,000 Btu/h, each 1.00 256$ 234$ 91% 9% Installation or relocation of each boiler, compressors 51 and over horsepower, or absorption system 500,001 - 1,750,001 and over Btu/h, each 1.25 320$ 293$ 92% 9% Air Handlers
Installation or relocation of air-handling unit, each 0.75 192$ 176$ 92% 9% Evaporative Coolers
Each non-residential evaporative cooler other than portable type, each 1.00 $ 256 234$ 91% 9% Ventilation & Exhaust
Residential: Ventilation fan or hoods connected to a single duct, exhaust fan for bathrooms, kitchens, or laundry rooms, each 0.75 192$ 176$ 92% 9% Commercial: Installation of kitchen hood each which is served by mechanical exhaust, including the ducts for such hood, each 2.00 512$ 469$ 92% 9% Ventilation system which is not a portion of any heating or air-conditioning, each 1.00 256$ 233$ 91% 10%
Repairs or Additions
The repair, alteration, or addition to each heating appliance, refrigeration unit, cooling unit, absorption unit, or evaporative cooling system, including installation of controls, each

0.75 192$ 176$ 92% 9%
Incinerators
Installation or relocation of commercial or industrial-type incinerator, each 3.00 $ 768 703$ 92% 9% Miscellaneous
Each appliance or piece of equipment regulated by this code but not classed in other appliance categories, or for which no other fee is listed, each 1.00 256$ 234$ 91% 9% Fee Calculation

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building - Electrical Permit Cost of Service
Building Permit Program - Electrical
Permit Type Estimated
Time
Proposed
Fee Current Fee
Current
Cost
Recovery %
Proposed %
Increase
(FBHR) $ 256
Permit Issuance 0.45 $ 115 106$ 92% 9%
Unit Fee Schedule
Receptacle, switch, lighting outlets, lighting fixtures, sockets or other lamp holding devices, per system 0.50 128$ 118$ 92% 8%
Pole or platform-mounted lighting fixtures (up to 5), each 1.00 256$ 234$ 91% 9% Theatrical-type lighting fixtures or assemblies, per system 2.50 640$ 587$ 92% 9% Kitchen circuits - remodels 0.75 192$ 176$ 92% 9%
Bathroom circuits - remodels 0.50 $ 128 118$ 92% 8%
Non-Residential Appliances, and Receptacle Outlets 1.25 $ 320 293$ 92% 9% Power Apparatus
1 to 100 - HP or KW, each 1.00 256$ 234$ 91% 9%
101 and over - HP or KW, each 1.50 384$ 352$ 92% 9%
Services
Services of 600 volts or less and not over 200 amperes in rating, each 1.00 256$ 234$ 91% 9% Services of 600 volts or less and over 200 amperes and over, each 1.50 384$ 352$ 92% 9% Photovoltaic
Residential 1.20 307$ 280$ 91% 10%
Commercial <10kW 1.45 371$ 338$ 91% 10%
Commercial greater than or equal to 10kW - 49kW 1.95 499$ 454$ 91% 10% Commercial >49kW 2.70 691$ 629$ 91% 10%
Solar Structure (0-50kW) 3.00 768$ -$ 0% 0%
Each kW over 50kW 0.02 5$ -$ 0% 0%
Residential: Repair of photovoltaic electrical systems, each 1.00 256$ 234$ 91% 9% Commercial and Industrial: Repair of photovoltaic electrical systems, each 1.25 $ 320 293$ 92% 9% Miscellaneous Apparatus, Conduits, and Conductors
Electrical apparatus, conduits and conductors for which a permit is required 0.75 $ 192 176$ 92% 9% Busways 2.00 $ 512 469$ 92% 9%
Temporary Power Service
Temporary metered service power pole or pedestal including pole or pedestal-mounted receptacle outlets, each 1.00 256$ 234$ 91% 9% Temporary distribution system (up to 5) poles including temporary lighting and receptacle outlets for construction sites, decorative light, Christmas tree sales lots, firework stands, each

1.00 256$ 234$ 91% 9%
Each additional distribution system 1.00 256$ 234$ 91% 9% Private Swimming Pools - Repairs/Replacement
For private, residential in-ground, swimming pools for single-family occupancies including a complete system of necessary branch circuit wiring, bonding, grounding, underwater lighting, water pumping and other similar electrical equipment directly related to the operation of a swimming pool, each pool

1.00 $ 256 234$ 91% 9%
Carnivals and Circuses
For electric generators, electrically driven rides, mechanically driven rides and walk through attractions or displays having electric lighting 2.00 $ 512 469$ 92% 9% Carnivals and circuses booth and pathway lighting 2.00 $ 512 469$ 92% 9% Signs, Outline Lighting, Marquees
Signs, outline lighting systems or marquees supplies from one branch circuit 1.25 320$ 293$ 92% 9%
Additional branch circuits (up to 5) within the same sign, outline lighting system or marquee 1.00 256$ 234$ 91% 9%
Fee Calculation Cost Recovery Analysis

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Building - Plumbing Permit Cost of Service
Building Permit Program - Plumbing
Permit Type Estimated
Time
Proposed
Fee Current Fee
Current
Cost
Recovery %
Proposed %
Increase
(FBHR) $ 256
Permit Issuance 0.45 115$ 106$ 92% 9%
-$
Fixtures and Vents
Installation or repair plumbing fixture, trap or set of fixtures on one trap, backflow device, including condensate lines 0.50 128$ 118$ 92% 8% For repairs or alterations of drainage or vents piping, each 0.75 192$ 176$ 92% 9% Sewers, Disposal Systems and Interceptors
Building Sewer Lateral, each 1.00 256$ 234 $ 91% 9%
Private sewage or disposal system, each 1.00 256$ 234$ 91% 9% Industrial water pretreatment interceptor, each 2.00 512$ 469$ 92% 9% Non-residential rainwater systems, up to 5 per drain 1.50 384$ 352$ 92% 9% Water Piping and Water Heaters
Installation, alteration or repair of water piping and/or water treating equipment, including pressure regulator, per system 1.00 256$ 234$ 91% 9% For installation and replacement of water heater including vent, each 0.45 115$ 106$ 92% 9% Gas Piping Systems
Gas piping system, 1-10 outlets 0.45 115$ 106$ 92% 9%
Gas piping system, over 10 outlets 1.50 384$ 352$ 92% 9% Lawn Sprinklers, Vacuum Breakers, Backflow Protections Devices Installation of lawn sprinkler systems including backflow protection device, and atmospheric-type vacuum breakers, per system 1.00 256$ 234$ 91% 9% Swimming Pools and Spas - Plumbing Repair / Replacement Public pool including anti-entrapment device 1.25 320$ 293$ 92% 9% Private pool including anti-entrapment device 1.00 256$ 234$ 91% 9% Public spa including anti-entrapment device 1.25 320$ 293$ 92% 9% Private spa including anti-entrapment device 1.00 256$ 234$ 91% 9% Installation or replacement of anti-entrapment device 1.25 320$ 293$ 92% 9% Thermal Solar Water Heating 1.00 256$ 234$ 91% 9%
Miscellaneous
Each additional or piece of equipment regulated by the Plumbing Code but not classed in other appliance categories, or for which no other fee is listed in this code

0.75 192$ 176$ 92% 9%
Fee Calculation Cost Recovery Analysis

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Fire Permit Fee Cost of Service
Fire Permit Program Cost Recovery Analysis
Permit Type Estimated
Time
Proposed
Fee Current Fee
Current
Cost
Recovery %
Proposed %
Increase
(FBHR) $ 256
Fire Alarm
1-15 Devices 3.00 768$ 704$ 92% 9%
16-50 Devices 4.00 1,024$ 937$ 92% 9%
51-100 Devices 5.00 1,280$ 1,171$ 91% 9%
101-500 Devices 6.00 1,536$ 1,407$ 92% 9%
Each additional 50 devices over 500 devices 0.04 10$ 9$ 88% 14% Fire Sprinklers
Residential Single Family/Townhouse 13D System 3.00 768$ 704$ 92% 9% Apartment/Condo 4.00 1,024$ 704$ 69% 45%
Additional time per unit 0.75 192$ 118$ 61% 63%
Master Plan Review $ - 677$ Actual Time
Commercial - New Construction
1-20 Appliances 3.50 896$ 704$ 79% 27%
21-100 Appliances 4.50 1,152$ 937$ 81% 23%
101-200 Appliances 5.25 1,344$ 1,113$ 83% 21%
201-350 Appliances 6.25 1,600$ 1,348$ 84% 19%
351-500 Appliances 7.50 1,920$ 1,642$ 86% 17%
Each additional 100 appliances over 500 appliances 0.75 192$ 34$ 18% 465% Commercial - Tenant Improvements
1-20 Appliances 3.25 832$ 646$ 78% 29%
21-100 Appliances 3.75 960$ 761$ 79% 26%
101-200 Appliances 4.25 1,088$ 879$ 81% 24%
201-350 Appliances 4.75 1,216$ 996$ 82% 22%
351-500 Appliances 5.25 1,344$ 1,113$ 83% 21%
Each additional 100 appliances over 500 appliances 0.75 192$ -$ 0% High Piled Storage 3.00 $ 768 704$ 92% 9%
Suppression System 2.75 $ 704 704$ 100% 0%
Underground Piping / Hydrant System / Backflow 4.00 $ 1,024 761$ 74% 35% Each Additional Hydrant or Backflow 0.75 $ 192 -$ 0%
Medical Gas Systems 3.00 $ 768 704$ 92% 9%
Fee Calculation

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Land Development Program Cost of Service
Land Development Program
Fee Description Hours per
Service
Proposed
Fee
Proposed
% Cost
Recovery
Current
Fee
Proposed
% Increase Eng Plng Bldg Eng Plng Bldg
Cost of
Service for
Activity
$ 370 $ 387 $ 256 FBHR
Public Improvement - Plan Check
$1 - $100,000 67.25 24,826$ 100% 16,335$ 52% 66.75 0.00 0.50 $ 24,698 $ - $ 128 $ 24,826 Any Valuation
$100,001 to $200,000
first $100,000 67.25 24,826$ 100% 16,335$ 52% 66.75 0.00 0.50 $ 24,698 $ - $ 128 $ 24,826 each additional $1,000 (round-up) 0.26 97$ 100% 62$ 57% 0.263 0.000 0.000 $ 97 $ - $ - $ 97.13 $200,001 to $500,000
first $200,000 93.50 34,538$ 100% 22,520$ 53% 93.00 0.00 0.50 $ 34,410 $ - $ 128 $ 34,538 each additional $1,000 (round-up) 0.09 32$ 100% 20$ 58% 0.084 0.000 0.002 $ 31 $ - $ 0 $ 31.57 $500,001 to $1,000,000
first $500,000 119.25 44,009$ 100% 28,508$ 54% 118.25 0.00 1.00 $ 43,753 $ - $ 256 $ 44,009 each additional $1,000 (round-up) 0.05 17$ 100% 11$ 58% 0.047 0.000 0.000 $ 17 $ - $ - $ 17.39 $1,000,001 to $5,000,000
first $1,000,000 142.75 52,704$ 100% 34,013$ 55% 141.75 0.00 1.00 $ 52,448 $ - $ 256 $ 52,704 each additional $1,000 (round-up) 0.013 5$ 100% 3$ 50% 0.013 0.000 0.000 $ 5 $ - $ - $ 4.69 $5,000,000 and up
first $5,000,000 193.50 71,481$ 100% 46,529$ 54% 192.50 0.00 1.00 $ 71,225 $ - $ 256 $ 71,481 each additional $1,000 (round-up) 0.04 14$ 100% 9$ 54% 0.04 0.00 0.00 $ 14 $ - $ 0 $ 14.30 Public Improvement - Inspection
$1 - $100,000
Any Valuation 87.50 32,375$ 100% 21,688$ 49% 87.50 $ 32,375 $ 32,375 $100,001 to $200,000
first $100,000 87.50 32,375$ 100% 21,688$ 49% 87.50 $ 32,375 $ 32,375 each additional $1,000 (round-up) 0.54 200$ 100% 134$ 49% 0.540 $ 200 $ 199.80 $200,001 to $500,000
first $200,000 141.50 52,355$ 100% 35,072$ 49% 141.50 $ 52,355 $ 52,355 each additional $1,000 (round-up) 0.52 191$ 100% 128$ 49% 0.517 $ 191 $ 191.17 Cost Recovery Analysis Hours per Service Detail Activity/Service Cost Analysis

$500,001 to $1,000,000
first $500,000 296.50 109,705$ 100% 73,488$ 49% 296.50 $ 109,705 $ 109,705 each additional $1,000 (round-up) 0.46 169$ 100% 114$ 49% 0.458 $ 169 $ 169.46 $1,000,001 to $5,000,000
first $1,000,000 525.50 194,435$ 100% 130,248$ 49% 525.50 $ 194,435 $ 194,435 each additional $1,000 (round-up) 0.07 27$ 100% 18$ 49% 0.073 $ 27 $ 27.10 $5,000,000 and up
first $5,000,000 818.50 302,845$ 100% 202,869$ 49% 818.50 $ 302,845 $ 302,845 each additional $1,000 (round-up) 0.16 61$ 100% 41$ 49% 0.16 $ 61 $ 60.57 Plan Revision (after approval of Public Improvement
Plans) 3.00 1,110$ 100% 248$ 348% 3.00 $ 1,110 $ 1,110.00 Map Check
Parcel Map 42.00 15,511$ 100% 9,401$ 65% 36.00 5.00 1.00 $ 13,320 $ 1,935 $ 256 $ 15,511 Tract Map/Subdivision Map (Service #149) 50.00 18,357$ 100% 11,107$ 65% 43.00 5.00 2.00 $ 15,910 $ 1,935 $ 512 $ 18,357 Certificate of Compliance - Lot Line Adjustment / Lot
Merger 32.00 11,743$ 100% 7,408$ 59% 30.00 1.00 1.00 $ 11,100 $ 387 $ 256 $ 11,743 Parcel Map - Lot Line Adjustment / Lot Merger 34.50 12,685$ 100% 7,968$ 59% 31.50 2.00 1.00 $ 11,655 $ 774 $ 256 $ 12,685.00 Streets/Easements
Public Easement Review 13.50 4,995$ 100% 3,347$ 49% 13.50 $ 4,995 $ 4,995.00 Street Vacation 43.50 16,095$ 100% 9,667$ 66% 43.50 $ 16,095 $ 16,095.00 Easement Abandonment 39.00 14,430$ 100% 9,667$ 49% 39.00 $ 14,430 $ 14,430.00 Reimbursement Agreement 21.50 7,955$ 100% 5,329$ 49% 21.50 $ 7,955 $ 7,955.00 FEMA Compliance
Base Fee
New Structure 4.75 1,701$ 100% 1,040$ 64% 4.25 0.00 0.50 $ 1,573 $ - $ 128 $ 1,700.50 New Accessory Structure and New ADU 3.75 1,331$ 100% 791$ 68% 3.25 0.00 0.50 $ 1,203 $ - $ 128 $ 1,330.50 Improvement of Existing Structure:

Non-Substantial Improvement w/o Detailed Review 3.50 1,181$ 100% 592$ 99% 2.50 0.00 1.00 $ 925 $ - $ 256 $ 1,181.00 Non-Substantial Improvement with Detailed Review 4.50 1,551$ 100% 839$ 85% 3.50 0.00 1.00 $ 1,295 $ - $ 256 $ 1,551.00 Substantial Improvement (not Accessory Structure) 6.00 2,163$ 100% 1,349$ 60% 5.50 0.00 0.50 $ 2,035 $ - $ 128 $ 2,163.00 Substantial Improvement of Accessory Structure/ADU 4.25 1,516$ 100% 916$ 65% 3.75 0.00 0.50 $ 1,388 $ - $ 128 $ 1,515.50 Additional Review Fees
Elevation Certificate Review 2.75 1,018$ 100% 682$ 49% 2.75 $ 1,018 $ 1,017.50 Flood Field Inspection 2.50 925$ 100% 620$ 49% 2.50 $ 925 $ 925.00 Flood Study Review with Valley Water Coordination 6.50 2,405$ 100% 1,611$ 49% 6.50 $ 2,405 $ 2,405.00 Review of CLOMR/CLOMR-F/LOMR/LOMR-F 4.00 1,480$ 100% 991$ 49% 4.00 $ 1,480 $ 1,480.00 Public Outreach for LOMR/LOMR-F 6.00 2,220$ 100% 1,487$ 49% 6.00 $ 2,220 $ 2,220.00 Review of BFE Determination for Zone A w/o a BFE or
Zone D 2.00 740$ 100% 496$ 49% 2.00 $ 740 $ 740.00
Stormwater Runoff Management Plan Review
Tier 1 Project 11.50 4,255$ 100% 2,850$ 49% 11.50 $ 4,255 $ 4,255.00

Tier 2 Project 34.00 12,580$ 100% 7,435$ 69% 34.00 $ 12,580 $ 12,580.00 Tier 3 Project 48.00 17,760$ 100% 10,658$ 67% 48.00 $ 17,760 $ 17,760.00 Tier 4 Project 54.00 19,980$ 100% 12,889$ 55% 54.00 $ 19,980 $ 19,980.00 Erosion & Sediment Control/Stormwater Pollution
Prevention Plan (SWPPP) Review & Compliance
Type 1 & Type 2 Projects:
< 1 Acre in Soil Disturbance 2.25 833$ 100% 558$ 49% 2.25 $ 833 $ 832.50 1+ Acre in Soil Disturbance 3.75 1,388$ 100% 930$ 49% 3.75 $ 1,388 $ 1,387.50 Type 3 Projects 1.75 648$ 100% 435$ 49% 1.75 $ 648 $ 647.50 Type 4 Projects 1.25 463$ 100% 310$ 49% 1.25 $ 463 $ 462.50 Stormwater BMP Operations & Maintenance
Agreement 9.00 3,330$ 100% 2,231$ 49% 9.00 $ 3,330 $ 3,330.00 Private Sanitary Sewer Agreement 11.50 4,255$ 100% 2,850$ 49% 11.50 $ 4,255 $ 4,255.00 Assessment District Reapportionment
City Staff Only (Contractor Costs Additional) 18.00 6,660$ 100% 2,973$ 124% 18.00 $ 6,660 $ 6,660.00 Preliminary Review on Projects / Engineering
Services 10.00 3,700$ 100% 2,478$ 49% 10.00 $ 3,700 $ 3,700.00 Additional Plan Review (after 3rd submittal) 1.00 370$ 100% 248$ 49% 1.00 $ 370 $ 370.00 Re-Inspection Fee 1.00 370$ 100% 248$ 49% 1.00 $ 370 $ 370.00 Complexity Fee 12.00 4,440$ 100% 2,973$ 49% 12.00 $ 4,440 $ 4,440.00 Agreement Extensions / Improvement Agreement
Amendments
With City Manager Approval 12.50 4,625$ 100% 3,099$ 49% 12.50 $ 4,625 $ 4,625.00 With City Council Approval 19.00 7,030$ 100% 4,709$ 49% 19.00 $ 7,030 $ 7,030.00 Preliminary Fee Estimate 1.50 555$ 100% 371$ 50% 1.50 $ 555 $ 555.00 GIS / Technology Fee
5% of Public
Improvement
Fee 100%
5% of Public
Improvement
Fee
Notes
[1] Activity related to Public Improvement Plan Check & Inspection is based on the number of valuation increments, rather than number of projects.

City of Morgan Hill: Fund 206 Fee Analysis
FY 2024-2025
Planning Program Cost of Service
Planning Permit Program
Permit Type
Hours
per
Service
Proposed
Fee
Proposed
% Cost
Recovery
Current
Fee
Proposed
% Increase Plng Eng Bldg Fire Housing Police (Captain) Plng Eng Bldg Fire Housing Police
(Captain)
Total
$ 387 $ 370 $ 256 $ 225 $ 178 $ 282 FBHR
Agreements
Development Agreement, Non-Residential 60.00 23,220$ 100% 14,415$ 61% 60.00 0.00 0.00 0.00 0.00 0.00 23,220$ -$ - $ -$ -$ -$ 23,220$ Development Agreement, Residential 60.00 23,220$ 100% 14,415$ 61% 60.00 0.00 0.00 0.00 0.00 0.00 23,220$ -$ - $ -$ -$ -$ 23,220$ CC&Rs (Plus City Attorney Fees) 7.00 2,658$ 100% 1,250$ 113% 4.00 3.00 0.00 0.00 0.00 0.00 1,548$ 1,110$ - $ -$ -$ -$ 2,658$ Other Agreements / Documents Review (Plus City Attorney Fees) 4.00 1,548$ 100% 505$ 207% 4.00 0.00 0.00 0.00 0.00 0.00 1,548$ -$ - $ -$ -$ -$ 1,548$ Appeals
Commision/Board Decision - Applicant Appeal 45.00 17,330$ 100% 8,960$ 93% 40.00 5.00 0.00 0.00 0.00 0.00 15,480$ 1,850$ - $ -$ -$ -$ 17,330$ Commission/Board Decision - Public Appeal 45.00 600$ 3% 624$ -4% 40.00 5.00 0.00 0.00 0.00 0.00 15,480$ 1,850$ - $ -$ -$ -$ 17,330$ Staff Decision - Applicant Appeal 42.00 16,220$ 100% 7,329$ 121% 40.00 2.00 0.00 0.00 0.00 0.00 15,480$ 740$ -$ -$ -$ -$ 16,220$ Staff Decision - Public Appeal 42.00 600$ 4% 624$ -4% 40.00 2.00 0.00 0.00 0.00 0.00 15,480$ 740$ -$ -$ -$ -$ 16,220$ Approval Amendments
Minor Amendment (per Code Section 17.20.190) 37.00 13,699$ 100% 7,651$ 79% 24.00 10.00 1.00 1.00 0.50 0.50 9,288$ 3,700$ 256$ 225$ 89$ 141$ 13,699$ Major Approval Amendment (Non Admin - s/b Major) 80.00 29,737$ 100% 13,665$ 118% 55.00 19.00 2.00 2.00 1.00 1.00 21,285$ 7,030$ 512$ 450$ 178$ 282$ 29,737$ Boundary Adjustments
Annexation City Process 334 Actual Cost 100% 26,491$ 320.00 8.00 2.00 2.00 1.00 1.00 123,840$ 2,960$ 512$ 450$ 178$ 282$ 128,222$ Annexation LAFCO Process 220 85,140$ 100% 30,348$ 181% 220.00 0.00 0.00 0.00 0.00 0.00 85,140$ -$ -$ -$ -$ -$ 85,140$ Out of Agency Contract for Services 68.00 26,316$ 100% 10,559$ 149% 68.00 0.00 0.00 0.00 0.00 0.00 26,316$ -$ - $ -$ -$ -$ 26,316$ Urban Service Area Amendment City Process 328.00 Actual Cost 100% 16,399$ 320.00 8.00 0.00 0.00 0.00 0.00 123,840$ 2,960$ -$ -$ -$ -$ 126,800$ Urban Service Area Amendment LAFCO Process 220.00 85,140$ 100% 30,348$ 181% 220.00 0.00 0.00 0.00 0.00 0.00 85,140$ -$ -$ -$ -$ -$ 85,140$ (Plus additional fees collected by LAFCO/Other agencies) Design Permits
Landscape Plan Review Only 10.00 3,870$ 100% 2,528$ 53% 10.00 0.00 0.00 0.00 0.00 0.00 3,870$ -$ -$ -$ -$ -$ 3,870$ Non-Residential Design Permit (Major, >10,000 SF in floor area) 134.50 50,563$ 100% 18,767$ 169% 80.00 50.00 2.00 2.00 0.00 0.50 30,960$ 18,500$ 512$ 450$ -$ 141$ 50,563$ Non-Residential Design Permit (Minor) 69.50 26,024$ 100% 10,316$ 152% 36.00 31.00 1.00 1.00 0.00 0.50 13,932$ 11,470$ 256$ 225$ -$ 141$ 26,024$ Plan Detail Review (misc. site details, e.g., lighting, trash encl.) 8.00 3,096$ 100% 2,129$ 45% 8.00 0.00 0.00 0.00 0.00 0.00 3,096$ -$ - $ -$ -$ -$ 3,096$ Residential Design Permit - 6 units or less 67.50 25,160$ 100% 12,524$ 101% 40.00 24.00 1.00 1.00 1.00 0.50 15,480$ 8,880$ 256$ 225$ 178$ 141$ 25,160$ Residential Design Permit - 7 units to 15 units 75.50 28,222$ 100% 15,528$ 82% 46.00 26.00 1.00 1.00 1.00 0.50 17,802$ 9,620$ 256$ 225$ 178$ 141$ 28,222$ Residential Design Permit - 16 -50 142.00 52,910$ 100% 19,509$ 171% 80.00 55.00 2.00 2.00 2.00 1.00 30,960$ 20,350$ 512$ 450$ 356$ 282$ 52,910$ Projects with horizontal subdivision: Each Additional 10 units 54.00 20,121$ 100% 40.00 10.00 1.00 1.00 1.00 1.00 15,480$ 3,700$ 256$ 225$ 178$ 282$ 20,121$ Single-lot/condo projects: Each Additional 10 units 19.00 6,661$ 100% 10.00 5.00 1.00 1.00 1.00 1.00 3,870$ 1,850$ 256 $ 225$ 178$ 282$ 6,661$ Site Plan Only (no new square footage) 35.00 13,358$ 6,772$ 97% 24.00 11.00 0.00 0.00 0.00 0.00 9,288$ 4,070$ -$ -$ -$ -$ 13,358$ Design Review (Preliminary Review)
(Includes one Planning Commission hearing)
Conceptual Plan Review (Staff) Non-Residential (Major >10,000 SF) Preliminary Plan 40.00 14,737$ 100% 6,714$ 120% 28.00 8.00 1.00 1.00 1.00 1.00 10,836$ 2,960$ 256$ 225$ 178$ 282$ 14,737$ Review to PC 63.00 23,813$ 100% 10,682$ 123% 50.00 10.00 1.00 1.00 0.00 1.00 19,350$ 3,700$ 256$ 225$ -$ 282$ 23,813$ Non-Residential (Minor) Preliminary Plan Review to PC 45.00 16,898$ 100% 7,410$ 128% 35.00 7.00 1.00 1.00 0.00 1.00 13,545$ 2,590$ 256$ 225$ -$ 282$ 16,898$ Residential SB330 Preliminary Application Review (staff) 71.00 26,666$ 100% 13,654$ 95% 55.00 12.00 1.00 1.00 1.00 1.00 21,285$ 4,440$ 256$ 225$ 178$ 282$ 26,666$ Residential - 6 units or less Preliminary Plan Review to PC 48.00 17,816$ 100% 8,090$ 120% 35.00 9.00 1.00 1.00 1.00 1.00 13,545$ 3,330$ 256$ 225$ 178$ 282$ 17,816$ Residential - 7 units or more Preliminary Plan Review to PC 67.00 25,101$ 100% 11,611$ 116% 50.00 13.00 1.00 1.00 1.00 1.00 19,350$ 4,810$ 256$ 225$ 178$ 282$ 25,101$ Projects with horizontal subdivision: Each Additional 10 units 35.00 12,836$ 100% 25.00 6.00 1.00 1.00 1.00 1.00 9,675$ 2,220$ 256 $ 225$ 178$ 282$ 12,836$ Single-lot/condo projects: Each Additional 10 units 13.00 4,373$ 100% 6.00 3.00 1.00 1.00 1.00 1.00 2,322$ 1,110$ 256$ 225$ 178$ 282$ 4,373$ Environmental Review (CEQA)
Expanded Initial Study (Internal Prep) 172.00 66,360$ 100% 16,125$ 312% 160.00 12.00 0.00 0.00 0.00 0.00 61,920$ 4,440$ -$ -$ -$ -$ 66,360$ Historic Assessments - Historical Consultant (Deposit)
Cost Recovery Analysis Hours per Service Detail Activity/Service Cost Analysis

Historic Assessments - Staff-level 42.00 16,084$ 100% 5,008$ 221% 32.00 10.00 0.00 0.00 0.00 0.00 12,384$ 3,700$ -$ -$ -$ -$ 16,084$ Initial Environmental Assessment (Plus outside agency fees) 10.00 3,836$ 100% 2,271$ 69% 8.00 2.00 0.00 0.00 0.00 0.00 3,096$ 740$ -$ -$ -$ -$ 3,836$ Mitigation Monitoring and Reporting Program (Long-term Mitigation Annual Monitoring) 5.00 1,935$ 100% 1,265$ 53% 5.00 0.00 0.00 0.00 0.00 0.00 1,935$ -$ - $ -$ -$ -$ 1,935$ SC County Habitat Plan Review 2.00 774$ 100% 505$ 53% 2.00 0.00 0.00 0.00 0.00 0.00 774$ -$ -$ -$ -$ -$ 774$ Exceptions
Minor Exception 16.50 6,377$ 100% 3,222$ 98% 16.00 0.50 0.00 0.00 0.00 0.00 6,192$ 185$ -$ -$ -$ -$ 6,377$ Variance 65.25 24,894$ 100% 10,831$ 130% 62.00 0.75 1.00 1.00 0.00 0.50 23,994$ 278$ 256$ 225$ -$ 141$ 24,894$ Administrative Extension of Time for Approvals 17.00 6,579$ 100% 2,150$ 206% 17.00 0.00 0.00 0.00 0.00 0.00 6,579$ -$ -$ -$ -$ -$ 6,579$ Non Administrative Extension of Time for Approvals 32.00 12,384$ 100% 3,857$ 221% 32.00 0.00 0.00 0.00 0.00 0.00 12,384$ -$ - $ -$ -$ -$ 12,384$ General Plan Amendment
Land Use Diagram Amendment 128.00 49,400$ 100% 17,789$ 178% 120.00 8.00 0.00 0.00 0.00 0.00 46,440$ 2,960$ -$ -$ -$ -$ 49,400$ Text Amendment 88.00 33,920$ 100% 10,077$ 237% 80.00 8.00 0.00 0.00 0.00 0.00 30,960$ 2,960$ - $ -$ -$ -$ 33,920$ Historic/Cultural Resources
Alteration-Minor - per 18.60.070B2a under $10,000 valuation (plus additional fees if Planning Commission hearing is required) 3.00 1,161$ 100% 380$ 206% 3.00 0.00 0.00 0.00 0.00 0.00 1,161$ -$ - $ -$ -$ -$ 1,161$ Alteration-Major - per Section 18.60.070B2b $10,000+ valuation (plus additional fees if Planning Commission hearing is required) 35.00 13,545$ 100% $ 5,438 149% 35.00 0.00 0.00 0.00 0.00 0.00 13,545$ -$ - $ -$ -$ -$ 13,545$ Demolition or Relocation (Formerly Alteration) 38.00 14,655$ 100% 6,182$ 137% 35.00 3.00 0.00 0.00 0.00 0.00 13,545$ 1,110$ - $ -$ -$ -$ 14,655$ Designation 32.00 12,384$ 100% $ 8,092 53% 32.00 0.00 0.00 0.00 0.00 0.00 12,384$ -$ - $ -$ -$ -$ 12,384$ Miscellaneous
Residential Private Livestock Permit 9.00 1,045$ 100% 873$ 20% 9.00 0.00 0.00 0.00 0.00 0.00 3,483$ -$ - $ -$ -$ -$ 3,483$ Reversion to Acreage Processing 12.50 4,838$ 100% 3,162$ 53% 12.50 0.00 0.00 0.00 0.00 0.00 4,838$ -$ -$ -$ -$ -$ 4,838$ Transfer of Development Credit (Per Hillside Combining District -

18.44 MHMC) 42.00 16,254$ 100% 8,978$ 81% 42.00 0.00 0.00 0.00 0.00 0.00 16,254$ -$ - $ -$ -$ -$ 16,254$ Williamson Act Cancelation 80.00 30,960$ 100% 12,140$ 155% 80.00 0.00 0.00 0.00 0.00 0.00 30,960$ -$ - $ -$ -$ -$ 30,960$ Williamson Act New Contract 45.00 17,415$ 100% 6,576$ 165% 45.00 0.00 0.00 0.00 0.00 0.00 17,415$ -$ - $ -$ -$ -$ 17,415$ Williamson Act Non-Renewal 20.00 7,740$ 100% 1,012$ 665% 20.00 0.00 0.00 0.00 0.00 0.00 7,740$ -$ -$ -$ -$ -$ 7,740$ Sign Review
Alteration to Existing Sign (Limited Scope) 0.75 290$ 100% 189$ 54% 0.75 0.00 0.00 0.00 0.00 0.00 290$ -$ -$ -$ -$ -$ 290$ Sign Review Over the Counter - Copy Change 1.00 387$ 100% 253$ 53% 1.00 0.00 0.00 0.00 0.00 0.00 387$ -$ -$ -$ -$ -$ 387$ New Sign Permit - First Sign 1.50 581$ 100% 380$ 53% 1.50 0.00 0.00 0.00 0.00 0.00 581$ -$ -$ -$ -$ -$ 581$ Each additional Sign 0.50 194$ 100% 126$ 54% 0.50 0.00 0.00 0.00 0.00 0.00 194$ -$ -$ -$ -$ -$ 194$ New Sign within a Master Sign Program 0.75 290$ 100% 189$ 54% 0.75 0.00 0.00 0.00 0.00 0.00 290$ -$ -$ -$ -$ -$ 290$ Subdivision/Real Estate Tract Signs (on and/or off-site) 3.00 1,161$ 100% 758$ 53% 3.00 0.00 0.00 0.00 0.00 0.00 1,161$ -$ - $ -$ -$ -$ 1,161$ Temporary/Promotional Signs 0.75 290$ 100% 63$ 361% 0.75 0.00 0.00 0.00 0.00 0.00 290$ -$ -$ -$ -$ -$ 290$ Uniform Sign Program 28.00 10,836$ 100% 3,668$ 195% 28.00 0.00 0.00 0.00 0.00 0.00 10,836$ -$ - $ -$ -$ -$ 10,836$ Subdivision
Tentative Parcel Map Review - 4 lots or less 31.00 11,878$ 100% 7,299$ 63% 24.00 7.00 0.00 0.00 0.00 0.00 9,288$ 2,590$ -$ -$ -$ -$ 11,878$ Tentative Subdivision Map Review (5-15 lots) 41.00 15,646$ 100% 9,797$ 60% 28.00 13.00 0.00 0.00 0.00 0.00 10,836$ 4,810$ -$ -$ -$ -$ 15,646$ Tentative Subdivision Map Review (16-25 lots) 51.00 19,482$ 100% 12,317$ 58% 36.00 15.00 0.00 0.00 0.00 0.00 13,932$ 5,550$ -$ -$ -$ -$ 19,482$ Tentative Subdivision Map Review (26+ Lots per each 25 lots) 63.00 24,058$ 100% 15,331$ 57% 44.00 19.00 0.00 0.00 0.00 0.00 17,028$ 7,030$ -$ -$ -$ -$ 24,058$ Tree Removals
Tree Removal Permit 8.00 124$ 4% 125$ -1% 8.00 0.00 0.00 0.00 0.00 0.00 3,096$ -$ - $ -$ -$ -$ 3,096$ Use Permits
Administrative Use Permit 45.00 8,449$ 50% 7,682$ 10% 38.00 4.00 1.00 1.00 0.50 0.50 14,706$ 1,480$ 256$ 225$ 89$ 141$ 16,897$ Conditional Use Permit - New Construction 71.00 26,666$ 100% 12,168$ 119% 62.00 4.00 2.00 2.00 0.50 0.50 23,994$ 1,480$ 512$ 450$ 89$ 141$ 26,666$ Conditional Use Permit - No New Construction 69.00 25,926$ 100% 11,672$ 122% 62.00 2.00 2.00 2.00 0.50 0.50 23,994$ 740$ 512$ 450$ 89$ 141$ 25,926$ Temporary Use Permit 36.50 13,644$ 100% 6,178$ 121% 26.00 8.00 1.00 1.00 0.00 0.50 10,062$ 2,960$ 256$ 225$ -$ 141$ 13,644$ Temporary Use Permit (Non-Profit) 29.50 101$ 1% 100$ 1% 26.00 1.00 1.00 1.00 0.00 0.50 10,062$ 370$ 256$ 225$ -$ 141$ 11,054$ Temporary Use Permit Amendment 18.50 3,399$ 50% 3,304$ 3% 15.00 1.00 1.00 1.00 0.00 0.50 5,805$ 370$ 256$ 225$ -$ 141$ 6,797$ Zoning Requests (Includes one PC and one CC Hearing)

Planned Development 138.00 52,871$ 100% 18,046$ 193% 130.00 5.00 1.00 1.00 0.50 0.50 50,310$ 1,850$ 256$ 225$ 89$ 141$ 52,871$ Residential Planned Development Review 136.50 52,220$ 100% 17,644$ 196% 130.00 3.00 1.00 1.00 1.00 0.50 50,310$ 1,110$ 256$ 225$ 178$ 141$ 52,220$ Residential Planned Development (concurrent with subdivision) 118.00 45,615$ 100% 11,112$ 311% 115.00 3.00 0.00 0.00 0.00 0.00 44,505$ 1,110$ -$ -$ -$ -$ 45,615$ Zoning Map Amendment Review 124.00 47,920$ 100% 11,877$ 303% 120.00 4.00 0.00 0.00 0.00 0.00 46,440$ 1,480$ -$ -$ -$ -$ 47,920$ Zoning Map Amendment Review (concurrent with GPA or ANX) 62.00 23,960$ 100% 9,600$ 150% 60.00 2.00 0.00 0.00 0.00 0.00 23,220$ 740$ -$ -$ -$ -$ 23,960$ Zoning Text Amendment Review 82.00 31,700$ 100% 12,635$ 151% 80.00 2.00 0.00 0.00 0.00 0.00 30,960$ 740$ -$ -$ -$ -$ 31,700$ Zoning Confirmation Letter (designation only, additional info: T&M) 2.00 774$ 100% 1,644$ -53% 2.00 0.00 0.00 0.00 0.00 0.00 774$ -$ -$ -$ -$ -$ 774$ Fees for Additional Services
City Council Meeting / Additional Meeting 8.00 3,062$ 100% 2,266$ 35% 6.00 2.00 0.00 0.00 0.00 0.00 2,322$ 740$ -$ -$ -$ -$ 3,062$ LAFCO Meeting / Additional Meeting 6.00 2,322$ 100% 1,770$ 31% 6.00 0.00 0.00 0.00 0.00 0.00 2,322$ -$ - $ -$ -$ -$ 2,322$ Planning Commission Meeting / Additional Meeting 8.00 3,062$ 100% 2,393$ 28% 6.00 2.00 0.00 0.00 0.00 0.00 2,322$ 740$ -$ -$ -$ -$ 3,062$ Planning Consultation (Hourly) 1.00 387$ 100% 253$ 53% 1.00 0.00 0.00 0.00 0.00 0.00 387$ -$ -$ -$ -$ -$ 387$

From: Christina Turner
To: Michelle Bigelow
Subject: Wednesday, September 4, 2024 City Council Meeting Questions Supplement for Item 8 - ADOPT RESOLUTION TO ESTABLISH NEW AND UPDATED FEES FOR

PLANNING, BUILDING, AND LAND DEVELOPMENT ENGINEERING
Date: Tuesday, September 3, 2024
Staff Report:

Proposed Change to FBHR 2024
Current
2024
Proposed
%
Increase
Planning $253 $387 53%
Engineering Land Development $248 $370 49%
Building / Fire $234 $256 9%
Question: Can you give a quick example of why the 53% increase, in numbers please.

Response: The largest factor causing the increase in Planning FBHR is the decision to move more of the cost of public information into the permit program. Other factors, such as increased administrative overhead, loss of frontline staff, and increased employee and overhead costs also contributed to the increase in FBHR. The full calculation for all divisions is on Page 24 of Exhibit A.

September 3, 2024
Mayor Mark Turner and City Councilmembers
City of Morgan Hill

TRANSMITTED VIA EMAIL
RE: Council Meeting 9.4.24 Agenda Item 8. ADOPT RESOLUTION TO ESTABLISH NEW AND UPDATED

FEES FOR PLANNING, BUILDING, AND LAND DEVELOPMENT ENGINEERING Dear Mayor Turner and Councilmembers,
BIA Bay Area, representing hundreds of home builders and related industry throughout the Bay Area, respectfully objects to the Staff recommendation to raise Development Services Fees by 53% in adherence with the August 16, 2024 Development Services Fund 206 Analysis Report (Report).

Because BIA Bay Area has timely filed a “Request for Fee Notification” with the Morgan Hill City Clerk, the City therefore has not complied with State Law with regard to written notification of the September 4, 2024 hearing. Consequently, the City Council should postpone hearing or action on this issue until proper notification in writing has taken place. BIA has also advised the City Clerk, the City Attorney, and the City Manager of this discrepancy.

BIA expects the City Council to adopt higher planning and building fees from time to time to support the development services enterprise fund. However, BIA and our members are seeking a fair fee structure, a longer-term predictable phasing plan and a timeline that would allow fee increases to become seamlessly incorporated into residual land values. Annual inflationary fee adjustments are anticipated, but repetitive fee studies over 7 years with huge fee increases plus annual inflationary increases is excessive and should be cause for concern and challenge from the building industry.

At the very least, the City Council should justify these massive fee increases by demanding more efficient, faster, and accountable development services. The City has a well-earned reputation for slow development service and building processes. Instead, the City proposes to significantly raise the cost of doing business while offering no improvements in service delivery.

Before enacting fees increases, BIA strongly encourages the City Council to direct that Staff return with concrete proposals to improve service with measurable goals and results. Higher fees should come with a promise from the City of more efficient and accountable city services and processes.

High fees are recognized in the City’s Housing Element as a constraint on the development of housing of all types and levels and a major concern that must be analyzed and mitigated. Many of the potential fee increases identified in the Study are hefty increases on a percentage basis. Fee increases of up to 120% to reach full cost recovery are extremely concerning.

BIA did participate in a virtual stakeholder meeting on August 14, 2024. At BIA’s insistence, this meeting was recorded so that the City and the public would have a record of comments. We ask that the recording of that meeting be preserved.

Since the August 14th meeting, Staff has made no effort to answer or respond to any of the points that BIA raised. Moreover, the Staff memo brushes over the urgency of BIA concerns, burying a synopsis of these remarks on page 21 of the Report. For the edification of the City Council, here are concerns, comments, and questions that BIA raised at that August 14Th meeting:
• Inadequate outreach to Stakeholders – BIA builder members developing in Morgan Hill report that no outreach occurred to them. They learned of this fee increase through BIA’s weekly association newsletter published Monday August 12. We ask that you check your stakeholder outreach rolls and update to include all home builders working in Morgan Hill. • Inflated Fully Burdened Hourly Rate – The Report proposes FBHR increases of 53% for Planning and 49% for Engineering Land Development, two fees that affect our member home builders directly. These FBHR increases lead to very significant service fee increases of 120% average increase in planning fees, 57% increase in engineering and 92% in plan check. • Multiple fee increases over short time period – This is the third development services study and commensurate increase in fees in the last seven years, not including annual inflationary adjustments, i.e., 2017, 2021, 2024. Most Cities do these major adjustments once every five to 10 years, not every 3 years. It defies logic that the costs of providing development services should increase up to 140% in 3 years.
• Massive increase in Development Services budget with no service improvement - Planning revenue more than doubles and other development services like engineering land development also propose significant revenue increases. The City proposes a total Fund 206 fee revenue increase of 64% with no corresponding improvement in delivery of service. • More analysis needed - The Report points to the prior two Fee Studies in 2017 and 2021. We recommend an analysis of major components of the FBHR compared with the results of the last two studies so that the home building and construction industry, the City Council and the public can better understand why the costs of providing basic services to business and development is escalating at an outrageous rate.
• Annual inflationary rate not included - The report states that the City enacted annual fee increases based on a “generic inflationary rate”. What has that rate increase been annually and cumulatively since the development services fee increases in 2017? How will the annual inflationary rate affect fee increases over the next 3 years? • Significant adjustment in public information labor hours – The report proposes that the allocation of time to provide information to applicants and the public has increased 500%. Some of the cost of time providing additional information to permit applicants is justified but the counter service is also a public benefit and must be subsidized by the General Fund. • Additional time to comply with State Law - The assertion that the City should charge home builders for spending more time to comply with State Laws like SB 330 and requirements from the Department of Housing and Community Development is inexplicable. A $26,660 SB 330 fee seems extremely high.
• The Housing Accountability Act and other recent housing laws streamline many processes in City planning approvals, objective design standards and alleviating long approval timelines. Limits are now in place on the number of community meetings, hearings, and other time-consuming steps

that the City used to enforce through the RDCS. If anything, SB 330 and other recent State housing law should have imposed time savings for the City and for applicants. • Inadequate Sampling of Labor Hours – A two-week study of time devoted to responding to the public or applicants is wholly inadequate. Between the last report in 2021 and this Report, the City had ample time to develop a more accurate method for measuring labor hours rather than relying on a two week period
• Productive hours – Please explain how the reduction in staff has led to higher fees? The explanation in the Report seems to be saying “we had two people we were paying to do this job, but now we only have one, so we’re going to double your fee”. • Productive hours - The Report indicates that a loss of productive hours has occurred due to the reassignment of staff hours to the City’s Capital Improvement Program leading to a higher FBHR.

It seems unfair that development should be shouldering the labor reassignment to CIP and the FBHR should be adjusted accordingly.
• Citywide overhead – please explain the detailed makeup of this component and why has it increased so much?
• General Fund responsibilities - The cost of producing the General Plan, Housing Element or other regulatory interactions required by HCD of the City should not be born solely by development but by the City’s General Fund as this is a function and requirement of the City and not of development projects per se.
• Phased implementation unclear - Near the end of the study is a perfunctory mention of a “Phased Implementation”, but the language is confusing. Please clarify, because if the City plans to produce another study in three years to attempt to justify another major fee increase then it would seem that a phased implementation would run up against that timeline. • Housing Element “Constraints” amendment - The City’s Housing Element was certified in December 2023 with the current fee structure in place. Should this fee increase be adopted, BIA would expect the City to amend the Housing Element to reflect the greater constraint to the production of housing that these fees would impose.
• Requested delay to further analyze - BIA asks for flexibility in this schedule to have the time and opportunity to potentially commission a peer review of the study and the proposed fees.

BIA supports phasing fee increases into at least 4 steps with no more than 25% of the increase effective on January 1, 2025, 25% should then go into effect no earlier than July 1, 2025. The remaining 50% should be divided over the next two fiscal years. This would provide a workable timeline for land deals to amortize the fee increases. All phased increases should hinge on delivery of improved development service plans.

BIA Bay Area looks forward to working with the City of Morgan Hill on development issues. Thank you for your attention to these concerns.

Yours truly,
Dennis Martin
BIA Bay Area

From: Christina Turner
To: CityClerk
Cc: Donald Larkin
Subject: Fwd: [EXTERNAL] Failure to Properly Notify BIA Bay Area; City Council 9.4.24 Item 8. ADOPT RESOLUTION TO

ESTABLISH NEW AND UPDATED FEES FOR PLANNING, BUILDING, AND LAND DEVELOPMENT ENGINEERING Date: Wednesday, September 4, 2024 1:13:04 PM
Please supplement.

Begin forwarded message:

From: Donald Larkin <[email protected]>
Date: September 4, 2024 at 11:44:52 AM PDT
To: [email protected]
Cc: Jennifer Carman <[email protected]>, Edith Ramirez <[email protected]>, Christina Turner
<[email protected]>, CityClerk <[email protected]> Subject: Re: [EXTERNAL] Failure to Properly Notify BIA Bay Area; City Council 9.4.24 Item 8. ADOPT RESOLUTION TO ESTABLISH NEW AND

UPDATED FEES FOR PLANNING, BUILDING, AND LAND

DEVELOPMENT ENGINEERING
Dear Mr. Martin,
The City Clerk's Office has no record of receiving a request for notice from the you (or anyone at the BIA). However, regardless of whether there was a request, the BIA was provided with notice. On August 6, 2024 we provided notice of the September 4 meeting date as well as the invitation to the outreach meetings (one of which you attended). The materials were included as part of that notice.

I would note that your e-mail below suggests that your request was under section 66013, which applies to notices of proposed increases to water and sewer rates.

Water and sewer are not under consideration at the meeting tonight.

Regards,
Donald A. Larkin
City Attorney
City of Morgan Hill
Tel: (408) 778-3490
Email: [email protected]
This e-mail may contain confidential and/or attorney-client privileged material. If you have received this message in error, please immediately notify the sender and

delete this e-mail message from your computer.

From: Dennis Martin <[email protected]>
Sent: Friday, August 30, 2024 3:45 PM
To: CityClerk <[email protected]>; City Manager
<[email protected]>
Cc: Jennifer Carman <[email protected]>; Edith Ramirez <[email protected]>
Subject: [EXTERNAL] Failure to Properly Notify BIA Bay Area; City Council 9.4.24 Item 8.

ADOPT RESOLUTION TO ESTABLISH NEW AND UPDATED FEES FOR PLANNING,

BUILDING, AND LAND DEVELOPMENT ENGINEERING
Greetings City Clerk;
This message is to notify you that the City of Morgan Hill (City) has not properly notified BIA Bay Area of this fee increase as required under State Law. BIA respectfully requests that the City postpone any hearing or action on this matter until such time as proper notification is distributed by the City and received by BIA Bay Area.

On January 10, 2024, BIA Bay Area filed a Request for Notification of Fee Increase with the Morgan Hill City Clerk. Under State law, this request requires the City to notify BIA Bay Area in writing 14 days prior to the meeting during which levying a new or modified fee or service charge is being considered.

Here is the content of the message that BIA sent to the City Clerk:

The Building Industry Association of the Bay Area (BIA) hereby requests notice of any action to adopt or increase a fee or charge as described in Gov't Code 66013.

Please send all notices via email to: [email protected] 66016 (a) Prior to levying a new fee or service charge, or prior to approving an increase in an existing fee or service charge, a local agency shall hold at least one open and public meeting, at which oral or written presentations can be made, as part of a regularly scheduled meeting. Notice of the time and place of the meeting, including a general explanation of the matter to be considered, and a statement that the data required by this section is available, shall be mailed at least 14 days prior to the meeting to any interested party who files a written request with the local agency for mailed notice of the meeting on new or increased fees or service charges. Any written request for mailed notices shall be valid for one year from the date on which it is filed unless a renewal request is filed.

Renewal requests for mailed notices shall be filed on or before April 1 of each year. The legislative body may establish a reasonable annual charge for sending notices based on the estimated cost of providing the service.

At least 10 days prior to the meeting, the local agency shall make available to the public data indicating the amount of cost, or estimated cost, required to provide the service for which the fee or service charge is levied and the revenue sources anticipated to provide the service, including General Fund revenues...
66019(b) If a city, county, or city and county receives a request for mailed notice pursuant to this section, or a local agency receives a request for mailed notice pursuant to Section 66016, the city, county, or city and county or other local agency may provide the notice via electronic mail for those who specifically request electronic mail notification. A city, county, city or county, or other local agency that provides electronic mail notification pursuant to this subdivision shall send the electronic mail notification to the electronic mail address indicated in the request. The electronic mail notification authorized by this subdivision shall operate as an alternative to the mailed notice required by this section.

Thank you for your attention to this matter.
--
Dennis Martin
BIA | Bay Area
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Development Services Fees
October 23, 2024 Item

10 Development Services Fund 206
• Building
• Land Development Engineering
• Planning
100% Cost Recovery Fee Model
• Based upon cost of service delivery
• Reasonable and equitable
• Uphold statutory requirements
• Align with industry standards
• City Council goal to limit General Fund impacts
Introduction
1

Most Recent Fee Studies
• Planning and Engineering Land Development – 2021
• Building – 2017
Changes since prior studies
• Team staffing
• What and how services are provided
(e.g., suspension of RDCS)
• Increased administrative burdens
(State law compliance)
• Personnel cost
Background
2

• Cost Recovery Target %
• Fully Burdened Hourly Rate (FBHR)
• Hours per Service
Cost to issue permit =
FBHR x Hours per Service x Cost Recovery Target %
Considerations
3

Updated 100% Cost Recovery Fees
• Reduce impact to City’s General Fund
• Promote long-term sustainability for Development
Services
• More accurately reflect the actual cost of services
• Allow improved service delivery
• Limited exceptions (tree removals, appeals, etc.)
ConsiderationsCost Recovery Target %
4

Cost Recovery Targets for Public Information
(Counter and other customer services)
5 Division Current
Percentage
Proposed
Percentage
Planning 10% 50%
Land Development
Engineering 30% 100%
Building 10% 100%
ConsiderationsCost Recovery Target %

Fully Burdened Hourly Rate (FBHR)
Full cost for one hour of productive work available
for review and issuance of a permit
Considerations- FBHR
6 Changes Affecting
FBHR
• Team composition
• Productive vs.
administrative hours
• Recovery of public
information costs
• Citywide overhead
Includes Proportional
Allocation of:
• Salary
• Benefits
• Administrative time
• Materials and supplies
• Overhead
• Public information

Calculation of Fully Burdened Hourly Rate (FBHR)
Considerations – FBHR
7 Division 2024
Current
2024
Proposed Increase
Planning $253 $387 53%
Engineering
Land
Development
$248 $370 49%
Building $234 $256 9%

• Reviewed and updated hours per service
• Based on prior experience
• Accounts for all aspects of permit processing, including permit review, public hearings, and interactions related to permit
• Adjusted to reflect current permit procedures as
consistent with new state law
ConsiderationsHours per Service
8

Average proposed fee increase by program
Results
9 Permit Type Unweighted Weighted
Planning 119% 131%
Engineering Land Development 62% 51%
Building Permits 27% 33%
Building Plan Check 110% 92%
Building – Mechanical 9% 9%
Building – Electrical 8% 9%
Building – Plumbing 9% 9%
Fire 40% 14%

• Modified multiplier on “Design
Review 25 units or more” permits
• Limited time SB330 Preliminary
Application
• Modified multiplier on “Subdivision
25 lots or more”
New or Modified Tiered Fees
10

• Two outreach meetings
o In person – August 13, 2024
o Via Zoom – August 14, 2024
• Received letters and email
communications
• Concerns expressed over “impact fees”
Outreach
11

Recommendation
Recommend adoption of
proposed fee schedule
(Exhibit A)
12

Questions and Discussion
Development Services Fees
13

From: No Reply
To: CC Public Comment
Subject: Public Comment Submission
Date: Wednesday, September 4, 2024 8:07:11 PM
Submitted by: Dennis Martin
Email Address: [email protected]
Commented on event: https://morganhillca.portal.civicclerk.com/event/886/overview If you are having trouble viewing the URL above, cut and paste the string into your browser window.

User comment: Comments to Morgan Hill City Council 9.4.24 Item 8 Development Services Fees Good evening Mayor Turner and City Councilmembers, Dennis Martin, speaking on behalf of BIA Bay Area. I call your attention to the BIA comment letter submitted yesterday.

In it BIA raises several objections to the Fund 206 Analysis, including the methodology for calculating the Fully Burdened Hourly Rate, the City’s alarming escalation of Development Services Fees, and the inadequate noticing and outreach to BIA and the development community working in Morgan Hill. The City is proposing yet another major Development Services fee increase, the third in six years, on top of annual fee increases. Yet the City proposes no corresponding plan on improving service, or even on how to be held accountable and measurable. Admittedly, developers often complain about slow service and other obstacles in home building, but they particularly single out Morgan Hill for having some of the slowest and most complicated processes in the Bay Area. BIA has submitted a significant number of questions, concerns and comments to which we have received virtually no response. Our association members builders working in Morgan Hill deserve better respect and engagement. We respectfully request a delay in any action on this issue to allow time for BIA to complete a peer review and submit it to the City. Thank you.

17575 Peak Avenue
Morgan Hill, CA 95037-4128
TEL: (408) 779-7271
FAX: (408) 779-3117
www.morganhill.ca.gov
October 14, 2024
Mr. Martin,
The City of Morgan Hill reviewed your detailed list of questions submitted prior to the September 4 City Council meeting. Point by point responses are included below:

Inadequate outreach to Stakeholders – BIA builder members developing in Morgan Hill report that no outreach occurred to them. They learned of this fee increase through BIA’s weekly association newsletter published Monday August 12. We ask that you check your stakeholder outreach rolls and update to include all home builders working in Morgan Hill.

Response: City sent an email communication to every developer currently working in Morgan Hill as well as past housing developers and other companies that have inquired. We appreciate BIA’s engagement and your efforts to communicate with the building/development industry. We are continuously looking to update our builder/developer list, please provide us with any companies you want us to include in future mailings.

Inflated Fully Burdened Hourly Rate – The Report proposes FBHR increases of 53% for Planning and 49% for Engineering Land Development, two fees that affect our member home builders directly. These FBHR increases lead to very significant service fee increases of 120% average increase in planning fees, 57% increase in engineering and 92% in plan check.

Response: The FBHR is not inflated but was calculated using standard methodology and reflects the City’s intent of a 100% cost recovery approach to the permit program. The calculations for the FBHR are provided and explained in the Fee Analysis.

Multiple fee increases over short time period – This is the third development services study and commensurate increase in fees in the last seven years, not including annual inflationary adjustments, i.e., 2017, 2021, 2024. Most Cities do these major adjustments once every five to 10 years, not every 3 years.

It defies logic that the costs of providing development services should increase up to 140% in 3 years.

Response: There is no set time period for fee studies and some cities conduct them on an annual basis.

More frequent analysis will result in a more accurate alignment of fees and actual costs. Factors that affect the cost of service delivery can change in any given year. In this case, the City experienced changes in staffing, permit procedures, overhead costs, salary costs and administrative obligations during the interval since the last fee study, all of which warranted a new analysis. 2017 – based on RDCS
2021 – first review under new housing laws and end of RDCS 2024 – refined based on 3 years of processing under new housing laws

Responses to BIA letter
Massive increase in Development Services budget with no service improvement - Planning revenue more than doubles and other development services like engineering land development also propose significant revenue increases. The City proposes a total Fund 206 fee revenue increase of 64% with no corresponding improvement in delivery of service.

Response: This review accounts for ALL the time spent on application, from the initial contact to the certificate of occupancy. Every point of contact is included in the processing time calculation. This was not done in the past and combined with a higher FBHR and an increased permit intake based on public counter communication, results in increased fees.

The fee analysis does not alter the Development Services budget, but will reduce the need for General Fund subsidy. The budget is set each year through the City’s Operating Budget and is separate from this analysis.

More analysis needed - The Report points to the prior two Fee Studies in 2017 and 2021. We recommend an analysis of major components of the FBHR compared with the results of the last two studies so that the home building and construction industry, the City Council and the public can better understand why the costs of providing basic services to business and development is escalating at an outrageous rate.

Response: The full calculation for the FBHR is provided in Analysis so that it is possible to identify the contributing factors. Staff compared with the prior studies to better understand which factors had changed the most since the prior fee studies and the results of this were provided in the Analysis. As discussed, for Planning, the decision to assign 50% of public information/counter activity to the fee program was the most significant factor in the increase to the FBHR. However, changes in increased administrative work, a decrease in front-line staffing, and general increases to salary and overhead costs all contribute to the increase to the FBHR.

Annual inflationary rate not included - The report states that the City enacted annual fee increases based on a “generic inflationary rate”. What has that rate increase been annually and cumulatively since the development services fee increases in 2017? How will the annual inflationary rate affect fee increases over the next 3 years?
Response: As set forth in the Resolution 6503, adopted January 18, 2012, the City applies Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers for the San Francisco, Oakland and San Jose Area annually, except those fees that have been recently increased by Council action within 12 months. Below is the annual CPI for Urban Wage Earners and Clerical Workers for the San Francisco, Oakland and San Jose Area since 2017.

Year CPI
2017 3.70% Note 1
2018 3.40% Note 1
2019 3.70%
2020 0.70%
2021 4.10%
2022 6.50% Note 2
2023 3.60%
2024 4.00%
Note 1 - 2017 Fee Study was phased in over two years. CPI was not applied.

Responses to BIA letter
Note 2 - 2021 Fee Study implemented. CPI
was not applied.

Significant adjustment in public information labor hours – The report proposes that the allocation of time to provide information to applicants and the public has increased 500%. Some of the cost of time providing additional information to permit applicants is justified but the counter service is also a public benefit and must be subsidized by the General Fund.

If counter services results in an application that needs to be accounted for as part of the fee. Under Land Development and Building, there is virtually no interaction at the counter that is not connected to an actual permit. That time needs to be accounted for in order to be 100% cost recovery.

Response: The number of hours allocated for public service are based on actual staffing time. Staff recorded counter activity for two weeks and found that greater than 50% of the public information activity was permit related, but not currently accounted for in permit fees. The proposed fee increases account for this time.

Additional time to comply with State Law - The assertion that the City should charge home builders for spending more time to comply with State Laws like SB 330 and requirements from the Department of Housing and Community Development is inexplicable. A $26,660 SB 330 fee seems extremely high.

Response: Based on feedback from HCD and confirmed by your statement, staff has proposed tiering the SB330 fee. The new fee will be based on a three (3) hour review that meets State requirements rather than the typical preliminary review process with extensive feedback provided to the applicant. The existing fees account for a multi-department review of a preliminary application and a meeting with the entire city team that has input into the project. Staff has found that the opportunities to point out red flags for applicants not only result in better and safer projects but also prevent the applicant from hitting the 20% change that would result in losing the vesting right proposed by an SB330 Preliminary Application.

The Housing Accountability Act and other recent housing laws streamline many processes in City planning approvals, objective design standards and alleviating long approval timelines. Limits are now in place on the number of community meetings, hearings, and other time-consuming steps through the RDCS. If anything, SB 330 and other recent State housing law should have imposed time savings for the City and for applicants.

Response: With the exception of the RDCS, Morgan Hill permitting processes were generally already streamlined and thus not affected in this manner. At the same time the State law creates new procedures that add to the complexity of the permitting process and additional reporting requirements, particularly related to the Housing Element, which must be borne by the permitting program.

The City complies with all new California housing laws. All applications processed since SB330 have followed the prescribed timelines except in cases where an applicant requested an extension. The SB330 process actually provides for up to 11 months for an applicant to move through the process should they file a Preliminary Application – this is without the additional CEQA timeline.

Inadequate Sampling of Labor Hours – A two-week study of time devoted to responding to the public or applicants is wholly inadequate. Between the last report in 2021 and this Report, the City had ample time to develop a more accurate method for measuring labor hours rather than relying on a two week period

Responses to BIA letter
Prior fee studies did not involve any data collection but rather just assumed a 10% cost recovery for public information. Staff who work in this role are confident that at least 50% of their work is permit related, as was supported by the data. Other jurisdictions use between 50% and 100% cost recovery for public information.

Productive hours – Please explain how the reduction in staff has led to higher fees? The explanation in the Report seems to be saying “we had two people we were paying to do this job, but now we only have one, so we’re going to double your fee”.

Response: The number and type of positions affect the fee schedule. Previously the City had more staff who were dedicated to working on permits, so that overhead costs could be distributed over a greater number of productive hours. With the reduction of frontline staff, administrative activity and overhead costs are increased for the remaining staff. At the same time, administrative activities have increased.

Productive hours - The Report indicates that a loss of productive hours has occurred due to the reassignment of staff hours to the City’s Capital Improvement Program leading to a higher FBHR. It seems unfair that development should be shouldering the labor reassignment to CIP and the FBHR should be adjusted accordingly.

Response: The permit program does not support CIP work. As discussed above, a reduction in frontline staff hours results in a concentration of administrative and overhead costs on fewer productive hours.

Land Engineering shifts staff from permitting to CIP work due to a drop in permit activity and revenue.

Another way to understand this is in terms of loss of economy of scale. Larger organizations can be more efficient from a cost recovery perspective.

Citywide overhead – please explain the detailed makeup of this component and why has it increased so much?
Response: The overhead includes the costs for required supplies and materials for each program/division, as well as each division/program share of the general citywide allocated costs or internal services cost (e.g., building maintenance, IT, etc.).

Some of the increase in overhead and corresponding decrease in materials and supplies costs for each program between 2021 and 2024 is attributed to a shift of materials and supplies cost from individual programs to the overhead.

General Fund responsibilities - The cost of producing the General Plan, Housing Element or other regulatory interactions required by HCD of the City should not be born solely by development but by the City’s General Fund as this is a function and requirement of the City and not of development projects per se.

Response: All development in the City has an impact on long range planning and as such, pays a minor surcharge on application fees to support the planning work that will in turn support proposed development.

Phased implementation unclear - Near the end of the study is a perfunctory mention of a “Phased Implementation”, but the language is confusing. Please clarify, because if the City plans to produce another study in three years to attempt to justify another major fee increase then it would seem that a phased implementation would run up against that timeline.

Responses to BIA letter
Response: The City Council has the ability to adopt the fees in full or choose a phased implementation approach similar to the 2017 Study.

Housing Element “Constraints” amendment - The City’s Housing Element was certified in December 2023 with the current fee structure in place. Should this fee increase be adopted, BIA would expect the City to amend the Housing Element to reflect the greater constraint to the production of housing that these fees would impose.

Response: A new constraints analysis will be produced for the seventh cycle as will an analysis of the events that occurred during the sixth cycle. Housing Elements do not currently have to be amended when application procedures or fees change. Should new law be proposed and go into effect in the future, those types of amendments will be made.

Comparison of fees in neighboring jurisdictions that we were told was supposed to be presented at the

9.4.24 hearing
Response: Staff stated an intent to include a comparison of other cities in the presentation on September 4th, however, this comparison was not completed due to the complexity of comparing fee schedules designed to be 100% cost recovery to fee schedules that are based on “time and materials” or are not 100% cost recovery. These comparisons are not apples to apples per se.

A list of personnel, including Staff and Consultants, that contributed to the Development Fund 206 Analysis Report.

Andrew Crabtree, Consultant
Jennifer Carman, Development Services Director
Adam Paszkowski, Principal Planner
Dat Nguyen, Finance Director
Eric Blomquist, Building Official
Chris Ghione, Public Services Director
Maria Angeles, Senior Civil Engineer
Edith Ramirez, Assistant City Manager for Development Services Donald Larkin, City Attorney
Christina Turner, City Manager
Thank you,
Jennifer Carman
Development Services Director

Building Industry Association of the Bay Area
1000 Burnett Ave Suite 340
Concord, CA 94520
October 7, 2024
Mayor Mark Turner and City Councilmembers
City of Morgan Hill

TRANSMITTED VIA EMAIL
RE: Development Services Fund 206 Analysis, New and Updated Fees for Planning, Building, and Land Development Engineering
Dear Mayor Turner and Councilmembers,
BIA Bay Area, representing hundreds of home builders and related industries throughout the Bay Area, respectfully objects to the Staff recommendation to raise Development Services Fees based on the August 7, 2024 Development Services Fund 206 Analysis (Fee Study). BIA asserts that these substantial fee increases pose potentially significant constraints to the cost of housing production.

BIA has raised objections and provided comment to the Fee Study and associated fee increases on two separate occasions. On August 13, 2024 BIA participated in a stakeholder outreach meeting providing Staff with extensive comments. A summary of these comments is included in the September 4, 2024 Staff Report to City Council. Then on September 4, 2024, BIA submitted a comment letter spelling out several concerns with the Fee Study and proposed fee increases.

To this date and despite several requests, no response from the City has been received.

Following up on our September 4, 2024 letter to City Council, BIA now submits additional comments for the record on this issue. These comments are reflected in a third-party Peer Review of the City of Morgan Hill Development Services Fund 206 Analysis (Fee Study) conducted by Development & Financial Advisory (DFA). The Peer Review examined City Budgets, past Development Services Fee Studies, and of course the August 7, 2024 Fee Study.

Based on the DFA Peer Review, BIA disagrees with the methodology employed in the City’s Fee Study and recommends that the Fully Burdened Hourly Rate reflected in the City’s Fee Study should be revised to accurately reflect the true cost of providing planning service for equitable cost recovery. DFA identifies significant concerns with the Fee Study:

• Inadequate measurements: The Fee Study relies on a two-week monitoring period for certain activities, far too short of a data collection period to be accurate; • Questionable labor hour adjustments: The Fee Study describes how the City has shifted personnel to other departments resulting in significant increases across all programs; • Deviations for the City-approved budget: The Fee Study uses higher internal service costs that those approved in the City budget resulting in higher fully burdened hourly rates than approved in the budget.

The Peer Review also examines the City’s proposed comparison with other jurisdiction’s development services fees and makes recommendations that the City compare fee levels with cities that are equivalent with Morgan Hill in size, growth projections, and development patterns. The proposed cities of San Jose, Santa Clara and Sunnyvale are not equitable with Morgan Hill in terms of a development services bench marking study.

BIA urges the City Council to thoroughly examine the DFA Peer Review and consider the analysis, findings, and significant concerns contained therein. Please take these concerns into your deliberations on the proposed fee increases.

BIA Bay Area looks forward to working with the City of Morgan Hill on development issues.

Thank you for your attention to these concerns.

Yours truly,
Dennis Martin
BIA Bay Area
Encl: BIA/DFA Peer Review of Fund 206 Analysis

Sacramento • Orange County devfa.com
October 7, 2024
Mr. Dennis Martin
Government Affairs
Building Industry Association of the Bay Area
150 Almaden Blvd., Suite 1100
San Jose, CA 95113
Mr. Martin:

On behalf of the Building Industry Association of the Bay Area (“BIA”), Development & Financial Advisory (“DFA”) reviewed the City of Morgan Hill’s (“City”) Development Services Fund 206 Analysis (“Fee Study”) dated August 7, 2024 (and later revised) to evaluate the adequacy of calculations of the City’s Fully Burdened Hourly Rates (“FBHR”) for land development permits issued by the Planning, Engineering Land Development and Building programs. We further reviewed the following additional source documents to determine their impact on our review of the Fee Study:
• The City of Morgan Hill Citywide User Fee Study prepared by NBS dated October 20, 2017. • The City of Morgan Hill Comprehensive Fee Study of Planning and Land Development Engineering dated December 13, 2021.
• The City’s Council-Adopted Budgets from FY 2014-15 to FY 2024-26. • The fee schedules of various surrounding jurisdictions. • The Association of Bay Area Governments Regional Housing Needs Assessment (RHNA) Housing Allocation for 2023-2030.

Our review of the Fee Study focused on the reasonableness of factors used in the calculation of the FBHRs for Planning, Engineering Land Development, and Building programs. This report examines the service components used to calculate the FBHRs.

OUTCOMES
Based on our review of the Fee Study and examination of source documents, we disagree with the methodology employed in the Fee Study. Our findings conclude that the FBHRs should be revised to accurately reflect the true cost of providing planning services for equitable cost recovery. Reliance solely on budgeted amounts, which may not be reliable in this instance, does not ensure accurate cost allocation.

DFA recommends that the BIA work with the City to expeditiously resolve concerns outlined in this review and to ensure the timely implementation of our recommendations to reduce the impact of the proposed FBHRs and fees on new development.

SIGNIFICANT CONCERNS
Inadequate measurements. The Fee Study's reliance on a two-week monitoring period for public information activities is insufficient; a longer data collection period is needed to account for seasonal

Review of the City of Morgan Hill’s Development Services Fund 206 Analysis

Development & Financial Advisory October 2024
fluctuations and provide a more accurate measure of labor hours. Despite consistently budgeting approximately 19.8 full-time equivalents (FTEs) for FY 2024-26, the two-week estimation deviates significantly from expected labor hours, even when accounting for staff time off, indicating inaccuracies in the Fee Study. Further, the reassignment of staff to the Capital Improvement Program has reduced productive hours in Planning and Engineering Land Development programs, leading to higher FBHRs. To address this, the City should consider reallocating or recruiting staff to prioritize Development Services appropriately. Additionally, the Fee Study overlooked best practices, such as using shared resources, and did not consider budgeted FTEs and workload hours required for permit activities.

Questionable labor hour adjustments. The Study indicates that productive hours in Planning and Engineering Land Development were reduced without considering labor-sharing between departments.

In Planning, one position was removed, leaving only 1,167 productive hours for permit processing by the remaining Senior Planner. In Engineering, staff were reassigned to the Capital Improvement Program, reducing productive hours and increasing the FBHR, effectively causing the public to pay more for reduced services. Despite a slight increase in FTEs, labor hours have historically remained consistent. The Fee Study claims that public information tasks now represent 50% of Planning's workload, up from 10%, but provides no supporting data, making this figure seem arbitrary; the same issue exists for Engineering Land Development and Building programs. As a result, public information costs within the FBHRs have significantly increased across all programs compared to previous fee studies, with Planning experiencing a fourfold increase since the 2021 Fee Study.

Deviations from the City-approved budget and lack of due diligence. By using higher internal service costs than those approved in the City budget, the Fee Study increased FBHRs for all three programs; when the City-adopted budget for internal services is applied, the FBHRs are lower. Calculations using the Fee Study's methodology for previous years yield results that significantly differ from expected outcomes, raising concerns about its validity and inconsistency with prior analysis. Although this review acknowledges procedural changes and the elimination of the Residential Development Control System (RDCS) component and other components in the calculation of the FBHRs, the substantial variance undermines the consistency critical in rate-setting. Although the Fee Study mentions that it prepared a comparison of fees of various jurisdictions, the findings were never provided. In addition, fee comparisons with neighboring cities are problematic due to unavailable methodologies and differences in population size and development landscape, making sole reliance on fee comparisons insufficient for benchmarking.

It is important to also review and improve the entire permitting process to refine the budget for more accurate cost recovery.

We thank you for your attention to this matter. Should you have any questions, please call our office at (916) 297-7655.

Sincerely,
Michael Whipple
Michael Whipple
Vice President

Review of the City of Morgan Hill’s Development Services Fund 206 Analysis

Development & Financial Advisory October 2024
I. Review of the Fund 206 Analysis
A. Proposed Fully Burdened Hourly Rates (FBHR)
The Fee Study employed a cost recovery model comprising two key components: calculating the Fully Burdened Hourly Rate (FBHR) and determining the Hours per Service (HPS) for each permit type. The product of the FBHR and HPS gives the fee amount. Because the City aims to charge fees that cover the full cost of service delivery, it is the intent of the City to avoid the need to subsidize permitting activities with other City funds, such as the General Fund.

The City is proposing to increase the FBHRs for land development permits issued by the Planning, Engineering Land Development, and Building programs by 53%, 49% and 9%, respectively. Below are the progressive increases starting from the 2017 Fee Study.

Table 1. Historical Fully Burdened Hourly Rate (FBHR)
Since 2021, Planning and Engineering Land Development fees have increased annually based on a standardized inflationary adjustment. In contrast, Building Permit fees were not adjusted in the same manner but were instead tied to project valuation, which reflected the estimated cost of construction. As construction costs rose, Building Permit fees automatically increased because they were calculated as a percentage of the project's expected costs.

B. Methodology Used in the Fee Study
The Hours per Service (HPS) for a specific permit represents the average time needed to complete the City's processing and issuance of permit type.

Table 2. Hours per Service (HPS)
[a] The Study has an arithmetical error in the number of HPS for Administrative-Building. The 3,514 shown in this table is incorrect and should be 3,628. A revision to the correct number does not result in a noticeable difference in the FBHR for the Building program.

Actual Actual Current Proposed
Program / Division 2017 2021 2024 2024
Planning $240 $235 $253 $387
Engineering Land Development $195 $230 $248 $370
Building $188 $204 $234 $256
Average Annual Increase 2017-2021 2021-24
Current -
Proposed
Planning -0.5% 2.6% 53.0%
Engineering Land Development 4.5% 2.6% 49.2%
Building 2.1% 4.9% 9.4%
Distribution of Hours Administrative Public Information Permit Processing Total Planning 3,978 39% 2,261 22% 4,026 39% 10,265 100%
Engineering Land Development 3,023 37% 525 6% 4,703 57% 8,251 100% Building [a] 3,514 22% 564 3% 12,176 75% 16,254 100%
Total Hours 10,515 3,350 20,905 34,770 Page 246 of 554
Review of the City of Morgan Hill’s Development Services Fund 206 Analysis

Development & Financial Advisory October 2024
The percentages in Table 2 and assumptions of cost allocations to each activity were used to calculate the FBHR for each program. Administrative costs were allocated to each activity. The calculation of the FBHR for the Planning program is shown below to illustrate how FBHRs were calculated. The Fee Study shows the calculation of the FBHRs for all three programs in detail.

Table 3. Calculation of the FBHR for Planning[1]
________
[1] Calculations of the FBHRs for Engineering Land Development and Building are shown in the Fee Study.

One of the noticeable adjustments in this study was the increase in public information hours from significantly lower levels in previous studies to 100% in the current study. The public information component has been consistently included in the current and all previous fee studies, making it a suitable area for further analysis. The table below shows the historical assumptions for cost recovery targets related to public information hours.

Table 4. Cost Recovery Targets for General Public / Information

FUND 206 - PLANNING Budgeted Program Cost Allocation to Activity 24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 39% 22% 39% 100%
Labor Hours 3,978 2,261 4,026 10,265
Labor Cost 1,305,559 $ 505,944 $ 287,566 $ 512,049 $ 1,305,559 Non-Labor / Overhead 592,330 $ 229,546 $ 130,468 $ 232,316 $ 592,330 Total 1,897,889 $ 735,490 $ 418,035 $ 744,364 $ 1,897,889 Allocation of Administrative Costs
Admin $ 735,490 $ 735,490
Productive $ 418,035 $ 744,364 $ 1,162,399
Productive % 36% 64% 100%
Proportional Admin $ 264,505 $ 470,985 $ 735,490
Productive + Proportional Admin $ 682,540 $ 1,215,349 $ 1,897,889 Calculation of Billing Rate
Cost Recovery Target 50% 100%
Targeted Fee Revenue $ 341,270 $ 1,215,349 $ 1,556,619
Funding from Alternative Source $ 341,270 $ 341,270
Productive Hours Available 4,026
Productive Hour Cost (Billing Rate) $ 85 $ 302 $ 387
Program 2017 2021 2024
Planning 10% 10% 50%
Engineering Land Development 10% 30% 100%
Building 10% 10% 100% Page 247 of 554
Review of the City of Morgan Hill’s Development Services Fund 206 Analysis

Development & Financial Advisory October 2024
II. Findings and Recommendations
Our findings below are followed by recommendations based on our review of source documents and analysis of the Fee Study’s methodology.

A. Inadequate Measurements

1. Inadequate sampling of labor hours. While the study monitored the activity for two weeks to determine the amount of time spent in public information, two weeks may not provide a comprehensive measure. It would be more effective to keep records of time over a longer period to account for fluctuations due to seasonal activities that may occur throughout the year. This approach would offer a more accurate and representative understanding of the time required for the activity. Between 2021 and 2024, the City had ample time to develop a more accurate method for measuring labor hours, rather than relying solely on a two-week period.

According to the FY 2024-26 Adopted Budget, about 19.8 full time equivalents (FTE) have been budgeted for FY 2024-26 (Table 5). This FTE figure has not significantly changed in the past few years. The two-week estimation in the Fee Study significantly deviates from the expected number of hours worked across the three programs, even when accounting for personal time off by City staff is considered.

Table 5. Historical and Budgeted Full Time Equivalents (FTEs) and Work Hours[a] [a] Assumes a 40-hour week and 52 weeks in a year.

2. Inadequate planning and allocation of labor resources. Productive hours are a significant factor in calculating the FBHR. The Fee Study indicates that a loss of productive hours in the Planning and Engineering Land Development program areas has occurred due to the reassignment of staff hours to the City’s Capital Improvement Program, leading to a higher FBHR. The reduction in staff hours at Development Services indicates that the City's Development Services are not given the same priority as other City services.

The use of shared resources either does not appear to be a management practice or was not recognized as a fundamental best practice in the Fee Study. Diversion of staff resources to related services that overlap reduced the number of hours allocated to Development Services activities, resulting in a higher FBHR. It is unclear why the Fee Study did not consider budgeted FTEs and increasing workload hours required to service permit activities, despite permit processing returning to pre-pandemic levels (Figure 1).

Program FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 Planning 6.86 6.54 6.54 6.54 5.96 5.96 5.43 5.43
Building 7.23 8.22 8.22 8.22 8.43 8.43 9.50 9.50
Land Development Engineering 4.80 4.12 4.12 4.12 5.39 5.39 4.89 4.89 Total 18.89 18.88 18.88 18.88 19.78 19.78 19.82 19.82
Total Hours Annually per Budget 39,291 39,270 39,270 39,270 41,142 41,142 41,226 41,226 Total Hours Annually per Fee Study 34,770 34,770 34,770 Difference 6,372 6,456 6,456 Page 248 of 554
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Figure 1. Number of Permits Issued[a]
[a] As of August 2024, a total of 1,409 permits have been issued for the year, averaging 176 permits per month. The projected total of 2,114 permits shown in the chart is based on this monthly average.

Recommendation:

When calculating the FBHRs, the City should consider allocating more staff hours to the programs. To enhance the precision of productive hour estimates, the Fee Study should re-examine workloads at a longer time period, especially at a time when permit reviews and approvals appear be returning to pre-pandemic levels, as shown in the chart above.

B. Questionable Labor Hour Adjustments

1. Reduction of labor hours in the cost-of-service formula increases the FBHR. According to the Study, both the Planning and Engineering Land Development productive hours were reduced, without accounting for labor-sharing between departments. • Planning Program Productive Hours: “One position was removed, and work duties reassigned so that in the current analysis, the remaining Senior Planner provides only 1,167 hours of productive time for permit processing.”
• Engineering Land Development: “The second factor for Engineering Land Development is a loss of productive hours. Due to changes in workload and revenue, Engineering Land Development staff were reassigned from Engineering Land Development to the City’s Capital Improvement Program, reducing the productive hours, thereby resulting in a higher FBHR.”
In summary, the above is analogous to stating that the public “will pay more for reduced services.” As indicated in Table 5 above, while the number of labor hours has historically remained consistent, it has recently increased slightly due to a modest rise in FTEs.

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2. The substantial increase in public information labor hours seems inconsistent with the reduction in productive hours in Planning and Engineering Land Development. As the Fee Study claims, there was a significant increase in labor hours dedicated to public information.

The Study noted that public information for Planning now represents 50% of the workload, up from 10%. However, the 50% figure seems arbitrary, as the Study did not provide any data to support this number. The same is true for the Engineering Land Development and Building programs.

The public information component of the FBHR appears disproportional to actual costs (Figure 2) and the public information cost component of the FBHRs for all divisions have significantly increased from the previous fee studies (Figures 2 and 3). Public information activities nearly make up one-quarter of the FBHR for Planning, a four-fold increase from the FY 2021 Fee Study (Table 6).

Figure 2. Comparison of General Public Costs[a]
Figure 3. General Public Cost Component of the FBHR
[a] The public information component of the FBHR for Building is not available for FY 21-22

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Table 6. General Public Cost as % of FBHR

3. Inefficiencies in the budget process. The Fee Study indicated that Fund 206 continues to operate at a deficit, such that the General Fund covered some portion of the cost of Development Services. Application of the City-approved budget in the cost-recovery approach appears unreliable, especially when the Fee Study already demonstrates deviation from the adopted budget, as shown in Table 7 below.

Recommendation:

Adjust workloads through collaboration with other departments and examine budget and permit process inefficiencies alongside fee increases.

C. Deviations from the City-approved Budget and Lack of Due Diligence

1. Deviations from the City-approved budget. The Fee Study deviated from the City-approved budget for internal services by using a higher amount, resulting in higher FBHRs for all three programs (see Exhibit A for the calculations in Table 8 below).

Table 7. Deviation from the Cost of Internal Services
Program FY 24-25 Adopted Budget FY 24-25 Fee Study Difference Planning $254,615 $469,490 $214,875
Engr. Land Dev. $196,922 $336,235 $139,313
Building $388,494 $552,546 $164,052
Applying the City-approved internal services budget lowers the FBHRs for all three programs.

Table 8. FBHRs Using the City-Adopted Budget for
Internal Services vs. The Study

2. The Fee Study’s methodology produces inconsistencies in rate-setting. When the FBHRs are calculated for previous fiscal years using the Fee Study’s methodology and assumptions, the results differ significantly from expected outcomes. Significant fluctuations in the FBHRs shown below when the Fee Study’s methodology is used raise concerns about the validity of the Fee Study’s approach and its departure from prior studies. This review acknowledges the suspension of the Residential Development Control System or RDCS and other procedural changes that may affect the calculation of FBHRs. However, the virtue of consistency is critical Fully Burdened Hourly Rate (FBHR) Study
City
Adopted
Program 2024 FY 24-25
Planning $ 387 $ 343
Engr. Land Dev. $ 370 $ 341
Building $ 256 $ 242
Division
FY 17-18
Study
FY 21-22
Study
FY 24-25
Proposed
Planning 3.3% 5.5% 22.0%
Land Dev. Engr 1.1% 1.3% 10.0%
Building 0.5% 0.0% 4.3% Page 251 of 554
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in rate-setting and the variance between expected outcomes to prior studies is too material to ignore. Note the FBHRs established in the fee studies in 2017 and 2021 significantly differ from FBHRs calculated in between these years using the approach and assumptions in the 2024 Fee Study.

Figure 4. Comparison of FBHRs in the 2017 Fee Study with the FBHRs Using the Approach and Assumptions in the 2024 Fee Study

3. Lack of due diligence and transparency. Research comparing fees from various agencies is not included in the Fee Study and was withheld at its planned adoption at the previous City Council meeting. According to the Fee Study, a survey of five neighboring cities (Gilroy, San Jose, Santa Clara, Sunnyvale and Palo Alto) was conducted. The Fee Study points out that, “such comparisons are complicated by the varying approaches taken by different jurisdictions in how to regulate land development, organize City departments and conduct permitting activities.” We acknowledge and agree with this statement. The methodologies or fee studies for these five cities in which FBHRs are calculated are not published publicly and are not readily available.

In addition, it is impractical to compare FBHRs on a one-to-one basis, making it unclear why the City would make such a statement without providing the corresponding results. Table 9 below presents our review’s attempt to shed light on labor rates for similar activities in the planning departments of neighboring jurisdictions. Although the FBHRs in the table below may not be directly comparable across agencies, they may still provide insights into true costs.

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Table 9. FBHRs of Comparable Cities[a]
[a] While hourly rates may not be directly comparable across agencies due to variations in calculation methodologies and services, they may still provide insights into true costs. [b] Planning rate shown is the standard hourly rate for planning services; building rate shown is the general building plan check hourly rate; engineering rate shown is public works engineering personnel hourly rate. All rates shown are FY 2023-24.
[c] Planning rate range shown are for assistant, associate and senior planners and permit technicians; building rate range shown are for building inspector and building official; engineering rate range shown are for assistant engineers, associate civil engineers and engineering services managers. [d] Planning rate shown is for plan check.
[e] Determining an exact equivalency of FBHRs is difficult.

In addition, except for the City of Gilroy, the cities of San Jose, Santa Clara, Sunnyvale and Palo Alto are not comparable in population size and to the development landscape of the City of Morgan Hill. Lastly, it is important not to focus solely on fee comparisons, but also on the entire permitting process in order to improve it and refine the budget process for Fund 206 for more accurate cost recovery.

Table 10. Cities Compared in the 2024 Fee Study[a]
Jurisdiction Population 2024
RHNA Baseline 2050
Households
Square
Miles
Gilroy 57,785 1,285 16.5
Palo Alto 65,057 6,086 26.0
Santa Clara 131,886 11,739 18.2
Sunnyvale 150,872 11,966 22.1
San Jose 956,433 62,761 179.9
Table 11. Recommended Cities for Comparing Fees
Jurisdiction Population 2024
RHNA Baseline 2050
Households
Square
Miles
Morgan Hill 44,075 1,047 12.9
Campbell 41,005 3,005 6.3
Los Gatos 31,816 1,998 11.4
Gilroy 57,785 1,285 16.5
Saratoga 29,171 1,712 12.78
Watsonville 50,328 2,053 6.8
[a] Findings of the permit fees was not provided by the City.

Recommendation:

Compare the fees of the following neighboring cities that have the same population size and development landscape as the City of Morgan Hill.

Jurisdiction Planning Building Engineering
Morgan Hill (2024 Proposed) $387 $256 $370
Morgan Hill (Current) $253 $234 $248
Campbell[b] $237 $218 $267
Saratoga[c] $103 - $157 $132 - $197 $135 - $211
Watsonville[d] $207 [e] [e] Page 253 of 554
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D. Full Cost-Recovery Not Applicable to All Cost Categories It is important to note that the Development Services Fund (206) is a Special Revenue Fund that can be supported by the General Fund as opposed to an Enterprise Fund, which is designed to be selfsustaining through user charges and operate similarly to a private business, with the goal of recovering all costs through fees.

The Fee Study calculated the fees based on 100% cost recovery in all aspects, treating Fund 206 as if it were an Enterprise Fund, which it is not, especially when calculating the cost associated with providing information to the general public. Property owners, including landowners applying for permits, are already paying these costs through property taxes. The Fee Study states that the City was “forced to use General Fund money to cover some portion of the cost of Development Services.” The Fee Study also states that the City "may elect to set some fees at less than 100% cost recovery," suggesting that this is an option. However, Fund 206 is not an enterprise fund, and should not be treated as such, and a portion of its costs should be paid by the General Fund, as is typically the case with other basic functions of the City. The 2021 fee study (and the 2017 fee study) also recognized this, especially when considering the approach to calculating the general public information component of the FBHR, stating that public counter/general information are:
“Activities associated with responding to phone calls and general information requests that support the development review process. Typically, some portion of costs for the provision of general public information and assistance do not apply toward recovery from fees and are considered a basic function of governmental services to the public.

Planning staff estimated that approximately 10% of these costs support land use application review activities, while the remaining costs should not be considered in the calculation of fees for services.”
Furthermore, the City’s FY 2024-26 Adopted Budget states that for planning, “fees are applied according to a City-adopted fee schedule that aims to be full-cost recovery with the exception of some selected fees, such as counter service and permits that support the Community, pre-development work, appeals and public information, and non-projected-related activities.” Lack of or inefficiencies in funding from the General Fund is not due to the cost of providing services to the development community. To ensure fairness, the development community should not be burdened with inefficiencies associated with the management of the General Fund.

Recommendation:

Apply cost-recovery targets that account for costs associated with the normal operating activities of the City.

III. Summary of Findings
Our analysis of the Fee Study warrants its re-examination to evaluate the reasonableness of the FBHRs and ensure alignment with the previous Fee Studies. Our findings are summarized below.

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• The Fee Study inadequately sampled labor hours due to an insufficient data collection period.

Relying on a two-week monitoring period fails to capture seasonal fluctuations and does not provide a comprehensive measure of time spent on public information activities. A longer data collection period would offer a more accurate understanding of workloads, especially since approximately 19.8 full-time equivalents (FTEs) have been consistently budgeted for FY 2024-26, and the two-week estimation deviates significantly from expected hours. • Labor resources were inefficiently allocated. The reassignment of staff to the Capital Improvement Program reduced productive hours in Planning and Engineering Land Development, leading to higher Fully Burdened Hourly Rates (FBHRs) and suggesting that Development Services are not given equal priority. The Fee Study failed to consider budgeted FTEs and necessary workload hours for permit activities and did not employ shared resource management practices, further increasing the FBHR.
• The Fee Study reduced productive labor hours in its cost-of-service formula for Planning and Engineering Land Development without accounting for labor-sharing between departments. This reduction—due to staff reassignments—led to higher FBHRs, effectively making the public pay more for reduced services despite a slight increase in full-time equivalents (FTEs). • Discrepancies in labor hours cast doubt on the assumptions made in the Fee Study. The claimed substantial increase in public information labor hours, asserting that it now represents 50% of Planning’s workload (up from 10%), appears arbitrary and unsupported by data, and conflicts with the reduction in productive hours elsewhere. This inconsistency resulted in significant increases in the public information cost component of the FBHRs across all programs. • Inefficiencies in the budget process are evident as Fund 206 operates at a deficit, requiring the General Fund to cover some Development Services costs. The Fee Study’s own deviation from the adopted budget raises concerns about the reliability of its cost-recovery approach, indicating that budget and permit process inefficiencies should be addressed alongside any fee increases. The Fee Study deviated from the City-approved budget by using higher internal service amounts than those approved, resulting in increased FBHRs for all three programs. When the City-adopted budget is applied, the FBHRs decrease accordingly.
• Methodological inconsistencies in rate-setting emerged. Calculating FBHRs for previous fiscal years using the Fee Study’s methodology yields results that significantly differ from expected outcomes and prior studies from 2017 and 2021, raising concerns about the validity of the Fee Study’s approach and its departure from prior analysis. • Information was withheld during its planned adoption at the previous City Council meeting.

Although it references a survey of five neighboring cities—Gilroy, San Jose, Santa Clara, Sunnyvale, and Palo Alto—these cities (except Gilroy) are not comparable to Morgan Hill in population size or development landscape, and their methodologies are not accessible in the public domain. • The Development Services Fund (206) should also be supported by the General Fund and not require full cost recovery for all its activities through fees. The Fee Study’s 100% cost recovery

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approach unfairly burdens landowners who already pay for basic government functions through property taxes.

Exhibit A - Internal Services Budget Amounts Using the City-Approved Budget FUND 206 - PLANNING Budgeted Program Cost Allocation to Activity FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 39% 22% 39% 100%
Labor Hours 3,978 2,261 4,026 10,265
Employee Services:

Salaries - General $ 805,205 $ - $ 805,205 $ 312,041 $ 177,357 $ 315,807 Salaries - Part-Time Temp 97,000 - 97,000 37,590 21,366 38,044 Salaries - Earned Leave 25,758 - 25,758 9,982 5,674 10,102 Overtime - General 2,500 (2,500) - - - -
Benefits (sum) 377,596 - 377,596 146,330 83,170 148,096 Total Labor Cost 1,308,059 (2,500) 1,305,559 505,944 287,566 512,049 1,305,559 Non-Labor / Overhead:

Supplies & Services Total 131,440 (8,600) 122,840 47,604 27,057 48,179 Capacity Outlay Total - - - - - -
Internal Services Total 254,615 - 254,615 98,671 56,082 99,862 Total Non-Labor / Overhead 386,055 (8,600) 377,455 146,275 83,139 148,040 377,455 Total Labor and Non-Labor $ 1,694,114 $ (11,100) $ 1,683,014 $ 652,219 $ 370,706 $ 660,089 $ 1,683,014 Allocation of Administrative Costs
Admin 652,219 652,219
Productive 370,706 660,089 1,030,795
Productive % 36% 64% 100%
Proportional Admin 234,558 417,661 652,219
Productive + Proportional Admin 605,264 1,077,750 1,683,014 Calculation of Billing Rate
Cost Recovery Target 50% 100%
Targeted Fee Revenue 302,632 1,077,750 1,380,382
Funding from Alternative Source 302,632 302,632
Productive Hours Available 4,026
Productive Hour Cost (Billing Rate) $ 75 $ 268 $ 343

Exhibit A - Internal Services Budget Amounts Using City-Approved Budget FUND 206 - ENGR LAND DEVELOPMENT Budgeted Program Cost Allocation to Activity FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 37% 6% 57% 100%
Labor Hours 3,023 525 4,703 8,251
Employee Services:

Salaries - General $ 761,819 $ (11,819) $ 750,000 $ 274,785 $ 47,721 $ 427,494 Salaries - Part-Time Temp 15,300 - 15,300 5,606 974 8,721 Salaries - Earned Leave 44,265 - 44,265 16,218 2,817 25,231 Overtime - General 2,500 (2,500) - - - -
Benefits (sum) 344,090 - 344,090 126,068 21,894 196,128 Total Labor Cost 1,167,974 (14,319) 1,153,655 422,676 73,406 657,574 1,153,655 Non-Labor / Overhead:

Supplies & Services Total 253,295 (1,250) 252,045 92,344 16,037 143,664 Capacity Outlay Total - - - - - -
Internal Services Total 196,922 - 196,922 72,148 12,530 112,244 Total -Labor / Overhead 450,217 (1,250) 448,967 164,492 28,567 255,907 448,967 Total Labor and Non-Labor $ 1,618,191 $ (15,569) $ 1,602,622 $ 587,168 $ 101,973 $ 913,481 $ 1,602,622 Allocation of Administrative Costs
Admin 587,168 587,168
Productive 101,973 913,481 1,015,454
Productive % 10% 90% 100%
Proportional Admin 58,964 528,204 587,168
Productive + Proportional Admin 160,937 1,441,685 1,602,622 Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 160,937 1,441,685 1,602,622
Funding from Alternative Source - -
Productive Hours Available 4,703
Productive Hour Cost (Billing Rate) $ 34 $ 307 $ 341

Exhibit A - Internal Services Budget Amounts Using City-Approved Budget FUND 206 - BUILDING Budgeted Program Cost Allocation to Activity FY 24-25 Adjustment
24-25 Net
Expenditures Admin
General
Public Permits Total
Allocation of Labor Factor 22% 3% 75% 100%
Labor Hours 3,514 564 12,176 16,254
Employee Services:

Salaries - General $ 1,471,302 $ - $ 1,471,302 $ 318,085 $ 51,053 $ 1,102,164 Salaries - Part-Time Temp 15,300 - 15,300 3,308 531 11,461 Salaries - Earned Leave 58,569 - 58,569 12,662 2,032 43,875 Overtime - General 5,000 (5,000) - - - -
Benefits (sum) 728,805 728,805 157,562 25,289 545,954
Total Labor Cost 2,278,976 (5,000) 2,273,976 491,618 78,905 1,703,453 2,273,976 Non-Labor / Overhead:

Supplies & Services Total 334,440 (45,500) 288,940 62,467 10,026 216,447 Capacity Outlay Total - - - - - -
Internal Services Total 388,494 - 388,494 83,990 13,480 291,024 Total -Labor / Overhead 722,934 (45,500) 677,434 146,456 23,506 507,471 677,434 Total Labor and Non-Labor $ 3,001,910 $ (50,500) $ 2,951,410 $ 638,074 $ 102,411 $ 2,210,925 $ 2,951,410 Allocation of Administrative Costs
Admin 638,074 638,074
Productive 102,411 2,210,925 2,313,336
Productive % 4% 96% 100%
Proportional Admin 28,248 609,826 638,074
Productive + Proportional Admin 130,659 2,820,751 2,951,410 Calculation of Billing Rate
Cost Recovery Target 100% 100%
Targeted Fee Revenue 130,659 2,820,751 2,951,410
Funding from Alternative Source - -
Productive Hours Available 12,176
Productive Hour Cost (Billing Rate) $ 11 $ 232 $ 242

11 CITY COUNCIL STAFF REPORT
MEETING DATE: October 23, 2024
PREPARED BY:

Cynthia Hasson, Assistant City Attorney
APPROVED BY: City Manager

INTRODUCE ORDINANCE TO AMEND THE CITY OF MORGAN HILL

DOWNTOWN SPECIFIC PLAN DELETING THE CONDITIONAL USE

PERMIT REQUIREMENT FOR BARS ASSOCIATED WITH A

RESTAURANT

RECOMMENDATION(S)

1. Waive first and second reading of the Ordinance; and

2. Introduce an Ordinance deleting from the Morgan Hill Downtown Specific Plan the conditional use permit requirement for bars associated with a restaurant.

COUNCIL PRIORITIES, GOALS & STRATEGIES
2024-2025 Strategic Priorities
Economic Development and Tourism
Guiding Documents
Economic Blueprint
Morgan Hill 2035 General Plan
Morgan Hill Downtown Specific Plan
REPORT NARRATIVE:

POLICY CONSIDERATION:

Should the Downtown Specific Plan be amended to be consistent with the Morgan Hill 2035 General Plan to allow restaurant bars to operate without a Conditional Use Permit, similarly to restaurants outside of downtown?
REPORT NARRATIVE:

The Downtown Specific Plan (DTSP) was adopted by the City Council on November 4, 2009. One of the goals of the DTSP is to create an active Downtown village through intensifying residential, retail, restaurant and entertainment uses, with a diversity of restaurant and entertainment uses that will draw office workers to Downtown during the day, and provide a destination for individuals and families at night and on the weekend.

The plan lists restaurants with a full-service bar as a conditionally permitted use. Any new restaurant desiring to open in the downtown area of Morgan Hill with a full service bar is required to obtain a conditional use permit at a public hearing before the Planning

11 Commission. The proposal is to amend the Morgan Hill Downtown Specific Plan to allow restaurants to have bars selling alcohol allowed by right, subject to a license issued by the ABC.

The Morgan Hill zoning code was substantially revised in 2018. The requirement for a Conditional Use Permit (CUP) for restaurants with a full-service bar located outside of downtown was eliminated with the adoption of the zoning code update in 2018, causing downtown restaurants to be treated differently than restaurants outside of downtown.

A Type 47 license is typical for restaurants where both food and beverages will be served during the same hours of operation. Alcohol licenses are issued under the authority of the State’s Department of Alcoholic Beverage Control (ABC). Each census tract has a limited number of licenses that can be issued based on the population within the census tract and crime rates, but additional licenses may be issued if findings for “public convenience or necessity” (PCN) are made by the ABC. While this PCN finding is determined by the ABC alone for Type 47 licenses, the allowance for alcohol sales is consistent with the City’s General Plan goals of providing thriving restaurants and bars that meet local residents' needs and attract tourists. Such a concentration is typical and considered appropriate for a downtown area that contains multiple dining and drinking establishments.

The proposed amendment is consistent with the Morgan Hill 2035 General Plan, adopted by the City Council on July 27, 2016, because the allowance for alcohol sales is typical of most restaurants in Downtown that operate with a Type 47 license and will be consistent with the City’s General Plan Goals, including Goal ED-7, by providing thriving restaurants that meet local residents' needs and attracting tourists.

The Vision Statement of the Downtown Specific Plan is: "Strengthening Downtown as the gathering place, a connecting force, the social and activity heart of Morgan Hill, is the overriding aspiration of the Plan - a place where residents from all segments of the community can live, work, meet, shop, dine and participate in public celebrations, and share in the richness of Morgan Hill's community life..." Downtown is the priority district for dining and entertainment. Allowing for a variety of restaurants contributes to the variety of available dining options and provides a unique experience. Applying for a CUP is a significant expense and causes delays for new restaurants. Because restaurants outside of downtown are not required to obtain a CUP, restaurants in the downtown are placed at a disadvantage, contrary to the intent of the General Plan and the Specific Plan. Economically, restaurants need to have the ability to offer a range of beverages to compete in today's dining market.

COMMUNITY ENGAGEMENT:

A 10-day public hearing notice was published in the Friday, October 11, 2024 edition of the Morgan Hill Times pursuant to Government Code sections 65090-65096.

11 ALTERNATIVE ACTIONS:

Council could choose not to introduce the ordinance. Applicants for restaurants in the downtown specific plan area would continue to be required to apply for and obtain a conditional use permit (CUP) to include a bar in the restaurant.

PRIOR CITY COUNCIL AND COMMISSION ACTIONS:

This ordinance was heard by the Planning Commission on September 24, 2024. The Planning Commission voted to recommend adoption of the ordinance by a vote of 6 to

0. FISCAL AND RESOURCE IMPACT:

The impact of this ordinance is fiscally neutral. The City will no longer collect the application fee which paid for staff time for a Planning Commission Public Hearing.

CEQA (California Environmental Quality Act):

This ordinance is exempt from environmental review pursuant to Section 15061(b)(3) of the California Environmental Quality Act (CEQA) Guidelines, as the proposed text amendment to the Morgan Hill Downtown Specific Plan is not a project with potential for causing a significant effect on the environment requiring California Environmental Quality Act (CEQA) analysis.

ORDINANCE NO. , NEW SERIES

AN ORDINANCE OF THE CITY OF MORGAN HILL
AMENDING THE 2009 DOWNTOWN SPECIFIC PLAN OF

THE CITY OF MORGAN HILL DELETING THE

CONDITIONAL USE PERMIT REQUIREMENT FOR BARS

ASSOCIATED WITH A RESTAURANT

THE CITY COUNCIL OF THE CITY OF MORGAN HILL DOES ORDAIN AS FOLLOWS:

Section 1. Figure 8 of the Morgan Hill Downtown Specific Plan is hereby amended to read as follows (additions in underline, deletions in strikeout):

Permitted Uses
Figure 8 below lists uses that are permitted (P), conditionally permitted (C), conditionally permitted with a Downtown Administrative Use Permit (A), and not permitted (N).

Figure 8
Permitted Uses (within the Specific Plan Boundary)
Use
(Block 16 is subject to special use
restrictions. Uses with an N in the column
after the CBD column means that retail or
commercial use is prohibited on Block 16)
CBD
CB
D
Bloc
k
16 GF
O
D-PF
R2
D-R3
D-R4
RE
Commercial/Service/Retail Uses
Antique shop, vintage clothing and collectibles P N P N N N Arts and crafts gallery P N P N N N
Bed and Breakfast Lodging C N N N C C
Commercial recreation (3,000 sq. ft. or less) P C C N N Commercial recreation (greater than 3,000 sq.
ft.)

C C C N N
Commercial service P A N N N
Convenience market/store C N C N N N
Dry cleaner, shoe repair P N C N N N
Family day care, small C N N P P
Financial services, bank P C N N N
Food service, takeout P N P N N N
Hotel C N C N N N
Nightclub and bar (ancillary to a restaurant) C N C N N N Nightclub, bar, theater (not ancillary to a
restaurant)

C N C N N N
Nursery school/large family day care facility C N C C C Personal services P A N N N
Public/quasi-public building (education, cultural,
or public- service)

C A P C C

City of Morgan Hill
Ordinance No. xxxx, New Series

Public Parking Lots or Structures P C P C N
Restaurant (bars and beer & wine permitted, bars
conditionally permitted)

P N P N N N
Retail store P N P N N N
School, general educational C N N C N N
Social hall, lodge, fraternal organization,
community club, religious facilities C N N C C C
Specialty food market P N P N N N
Theater C N C N N N
Residential Uses
Duplex, triplex C N N P N
Congregate care for the elderly/assisted living
facility (>6)

N N C C N
Home occupations (in accordance with Chapter

18.04.225: Home Occupations, of the Zoning
Ordinance)

P C N P P
Live/work unit P C N N N
Mixed use residential (residential use above
some other use)

P P N N N
Multi-family dwelling C C N P N
Nursing/convalescent hospital N N C C N
Residential congregate care facility - large (>6) N N C C N Residential congregate care facility - small (<6) N N N P P Single-family attached dwelling C N N P P
Single-family detached dwelling C N N P P
Office/Professional Uses
Business, trade or tutoring school P A C N N
Business support services P A N N N
Hospital P N N N N
Medical office P N N N N
Office, administrative P A C N N
Professional office P A C N N
Other Uses
Drive-in establishments C N N N N
Public Parking Lots or Structures P C P C N
Other uses similar to permitted or conditionally
permitted uses as determined by the Planning
Commission to be permitted

C C C C C
Section 2. Severability. Should any provision of this ordinance be deemed unconstitutional or unenforceable by a court of competent jurisdiction, such provision shall be severed from the ordinance, and such severance shall not affect the remainder of the ordinance.

Section 3. Effective Date; Posting. This Ordinance shall take effect on the 31st day after adoption. The City Clerk is hereby directed to publish this Ordinance or a summary thereof

City of Morgan Hill
Ordinance No. xxxx, New Series

pursuant to Government Code Section 36933.

This ordinance was introduced at a meeting of the City Council held on the 23rd day of October, 2024, and adopted at a meeting held on the _____ day of November, 2024, and said ordinance was duly passed and adopted in accordance with law by the following vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSTAIN: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

APPROVED: ATTEST:

MARK TURNER, Mayor MICHELLE BIGELOW, City Clerk

CERTIFICATE OF THE CITY CLERK

I, MICHELLE BIGELOW, CITY CLERK OF THE CITY OF MORGAN HILL, CALIFORNIA, do hereby certify that the foregoing is a true and correct copy of Ordinance No.

XXXX, New Series, adopted by the City Council of the City of Morgan Hill, California at their regular meeting held on the ___ day of November, 2024.

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

DATE:

MICHELLE BIGELOW, City Clerk

Morgan Hill Downtown Specific Plan
November 2009

ACKNOWLEDGEMENTS
City Council
Mayor Steve Tate
Councilmember Larry Carr
Councilmember Mark Grzan (to November 2008)
Councilmember Marby Lee
Councilmember Marilyn Librers
Councilmember Greg Sellers
Planning Commission
Geno Acevedo (to June 2009)
Mike Davenport (to November 2008)
Robert Escobar
Nancy Hart
Susan Koepp-Baker
John Liegl
Ralph Lyle (to June 2009)
John Moniz
Joseph Mueller
Wayne Tanda
ADOPTED NOVEMBER 4, 2009

November 2009

TABLE OF CONTENTS
i
Chapter 4: Parking Resources
Management Strategy
Overview 4-1
Survey Methodology 4-2
Existing Conditions 4-2
Future Projections 4-12
Recommendations 4-14
References 4-23
Chapter 5: Design Guidelines
Overview 5-1
Site Review Permit Permit Process
Requirements 5-2
Basic Design Principles 5-2
A: All Building Facades 5-4
B: Mixed-Use Building Facades 5-7
C: Residential Building Facades 5-13
D: Block 4 Special Guidelines (Including
Sunsweet Site) 5-15
E: Roofs 5-16
F: Awnings and Marquees 5-18
G: Balconies 5-19
H: Bay Windows 5-20
I: Front Porches and Stoops 5-21
J: Outdoor Open Space 5-22
K: Service Areas 5-23
L: Mechanical and Electrical Equipment 5-23
M: Landscaping 5-24
N: Fences, Walls, and Gates 5-27
O: Site Lighting 5-28
P: Plazas, Walkways, and Courtyards 5-29
Q: Outdoor Dining in the Public
Right-of-Way 5-31
R: Streetscape Furniture and Amenities 5-32
Table of Contents
Chapter 1: Vision
Overview 1-1
Urban Design Goals 1-5
Vision Statement 1-5
Chapter 2: Land Uses and
Development Standards
Overview 2-1
Goals, Policies, and Actions 2-5
Land Use Targets 2-7
Retail Real Estate Overview 2-9
2015 and 2030 Development Projections 2-10
Ground Floor Overlay District and
Downtown Administrative Use Permit 2-20
Affordable Housing 2-21
Residential Development Control System
(RDCS) 2-21
Zoning Districts 2-21
Central Business District (CBD) 2-24
Ground Floor Overlay (GFO) 2-27
Downtown Administrative Use Permits
(DAUPs) 2-27
Residential Estate 2-30
Downtown Medium Density Residential
(D-R2) 2-31
Downtown Medium Density Residential
(D-R3) 2-32
Downtown High-Density Residential
(D-R4) 2-34
Downtown Public Facilities (D-PF) 2-35
Planned Development (PD) 2-36
Chapter 3: Multi-Modal Circulation
and Streetscapes
Overview 3-1
Monterey Road 3-2
Third Street 3-6
Depot Street 3-6
Pedestrian-Friendly, Multi-Modal
Circulation 3-7
Downtown Streetscape Design 3-11

Morgan Hill Downtown Specifi c Plan
ii November 2009
Chapter 6: Signage Guidelines
Overview 6-1
A: General Sign Guidelines 6-1
B: Wall Signs 6-5
C: Awning Signs 6-6
D: Window Signs 6-6
E: Projecting Signs 6-7
F: Hanging Signs 6-9
G: Freestanding Signs 6-10
H: Plaque Signs 6-11
I: Directional Signs and Entry Features 6-12
J: Monument Signs 6-13
K: Governmental Signs 6-13
Permit Requirements 6-14
Chapter 7: Infrastructure
Overview 7-1
Transportation 7-2
Water Service 7-4
Sanitary Sewer System 7-5
Storm Drainage System 7-5
Floodplain Regulations 7-6
Solid Waste 7-7
Energy 7-7
Fire Service 7-9
Chapter 8: Implementation and
Plan for Investment
Overview 8-1
Implementation Goals 8-3
Implementation Programs and Plan for
Investment 8-3
Phasing Plan 8-7
Subsequent Development Entitlements
and Permits 8-11
Key Opportunities for Public/Private
Redevelopment and Improvements 8-12
Relationship to the General Plan 8-15
CEQA Compliance 8-16
Subsequent Projects 8-16
Relationship with Other City Policies
and Programs 8-17
Administration of the Specifi c Plan 8-17
Summary of Impacts and Mitigation &
Avoidance Measures from Master
Environmental Impact Report (MEIR) 8-18
Appendices
A. Background A-1
B. Workshop Results B-1
C. Development Projections by Block C-1

November 2009

LIST OF FIGURES
List of Figures
1: Local Vicinity 1-2
2: Project Boundary 1-3
3: Existing and Approved Land Uses 2-2
4: Proposed General Plan Land Use Designations 2-3
5: Proposed Zoning Designations 2-4
6: Ground Floor Retail Overlay 2-13
7: Retail Building Depth Recommendations 2-14
8: Permitted Uses (within the Specifi c Plan Boundary) 2-22 9: CBD Development Standards 2-25
10: Bike Map 3-5
11: County Courthouse and Plaza 3-9
12: Redevelopment Agency Parcel 3-10
13: Existing Depot Street Layout 3-12
14: East Third Street Design 3-13
15: Possible Side Street Layout 3-14
16: Project Study Area 4-3
17: Parking Survey Sites 4-4
18: On-Street Parking Locations 4-5
19: Off-Street Parking Facilities Locations 4-6
20: Existing Parking Supply and Demand 4-8
21: On-Street Parking Turnover 4-9
22: Off-Street Parking Facilities Turnover 4-10
23: Short-Term Parking Generation Rates and Demand Estimates 4-13 24: Long-Term Parking Generation Rates and Demand Estimates 4-13 25: Commercial Parking Supply and Demand Comparison 4-13 26: Downtown Parking Requirement Rates 4-19
27: Existing Downtown Sanitary Sewer and Water System 7-6 28: Downtown Floodplain 7-8
29: Redevelopment Agency Boundary 8-2
30: Key Opportunities for Public / Private Redevelopment & Improvements 8-13 iii

Morgan Hill Downtown Specifi c Plan
November 2009
This page intentionally left blank.
iv

November 2009 1-1
CHAPTER 1: VISION
Chapter 1: Vision
Overview
The City of Morgan Hill is located approximately 12 miles south of San Jose, 10 miles north of Gilroy and 15 miles inland from the Pacifi c Coast. The City is centered on U.S. Highway 101, which is the major north-south transportation corridor in the region. The City is located approximately 25 miles south of the San Jose International Airport. The Morgan Hill Downtown Specifi c Plan boundary covers 18 blocks and approximately 110 acres. Downtown Morgan Hill is centered on Monterey Road and is bound by Main Avenue, Butterfi eld Boulevard, Dunne Avenue, and Del Monte Avenue (see Figures 1 and 2). The Downtown Core is generally defi ned by Main Avenue, the railroad tracks, Dunne Avenue, and Del Monte Avenue. This area has smaller lots and is closer to a traditional Main Street downtown atmosphere than the area east of the railroad, which is more downtown serving in nature.

This 2009 Downtown Specifi c Plan has its roots in a downtown plan created almost thirty years ago. In 1980, the community held a series of public workshops to address issues of Downtown revitalization, which was necessary due to changes stemming from completion of Highway 101, and subsequent shift of traffi c from Monterey Road through the Downtown area over to the freeway. From these workshops, a bold 1981 Downtown Plan emerged that has created a unique Downtown image for Morgan Hill along with the modest attraction of new uses and the construction of additional buildings.

That 1981 Plan established a series of recommendations for the Downtown area, many of which have since been implemented, with the key change being the Monterey Road streetscape with its large median and wide sidewalks.

Continuity of interesting shops
Attractive storefronts
Restaurants with windows on the
street
Residences converted to
interesting shops and offi ces
Examples from other
communities

November 2009
Morgan Hill Downtown Specific Plan
1-2
£¤101
£¤101
Monterey
Hale
Main
Hill
Llagas
Dunne
Watsonville
Edmundson
Willow Springs
Tennant
Oak Glen
Cochrane
Santa Tere sa
San Martin
Southern Pacific Railroad
Old Monterey
Oak Glen
San Martin

LLAGAS CREEK

WEST LITTLE LLAGAS CREEK

EAST LITTLE LLAGAS CREEK
Coyote Creek Park Chain Coyote Creek Park Chain Anderson Reservoir Anderson Reservoir Local Vicinity
Figure 1
´ 012 0.5
Miles
Legend
Downtown Specific Plan
City Boundary
Project Site
*
Project Location
Monteray
Bay
Gilroy
San Jose
Salinas

REGIONAL VICINITY

November 2009 1-3
CHAPTER 1: VISION

E MAIN AVE

E DUNNE AVE

MONTEREY RD

DIANA AVE

W MAIN AVE

BUTTERFIELD BLVD

W DUNNE AVE

DEPOT ST
VE

CALLE MAZATAN

CHURCH ST

RAILROAD AVE
E 5TH ST
E 4TH ST
W 5TH ST
W 1ST ST

BISCEGLIA AVE
W 2ND ST
E 3RD ST W3RD ST

CIOLINO AVE
E 2ND ST

WARREN AVE
E 1ST ST

MYRTLE AVE

CALLE ASTA
R

CALLE DEL SOL

CORY DR

KEYSTONE AVE

CALLE CABALLERIA

W CENTRAL AVE

MARKROSS
CT

CALLE CABEZAL

CALLE CERRO

MANOR CT

CALLE ATAVIO

SAN LUIS

CALLE VERDE
CORT
C
W 4TH ST

RAILROAD AVE

DEL MONTE AVE

BUTTERFIELD BLVD

CREEKSIDE LN
Project Boundary
Figure 2
0 250 500 1,000
Feet ´
Legend
Downtown Specific Plan
Downtown RDCS
Downtown Core
Creek / Easement

November 2009
Morgan Hill Downtown Specific Plan
1-4
In 2003, a task force worked with the community
and a consulting fi rm to prepare an update
to the 1981 Plan. The 2003 update built on
the success of the original Plan and proposed
many recommendations and guidelines for
Downtown improvements. Because full
implementation of the Plan required preparation
of an Environmental Impact Report (EIR), it
was decided that the City Council would accept,
rather than adopt the 2003 Plan. A Mitigated
Negative Declaration was adopted and was used
in conjunction with approval and implementation
of certain aspects of the Plan, such as ordinances
to increase density on certain opportunity sites
and to modify certain parking requirements.

Following acceptance of the 2003 Downtown
Plan, the City’s Residential Density Control
System (RDCS) was amended to make it easier
for higher density residential and vertical
mixed-use Downtown projects to compete
for residential building allocations against the
detached single-family residential projects. In
2005, the City held a competition for projects in
the area in and around Downtown (see Figure 2
for the Downtown RDCS boundary), resulting in
363 residential building allocations awarded into
fi scal year ’09/’10. Of the 363 units, 255 were
located within the 18-block boundary of this
Specifi c Plan.

In November 2006, voters approved a ballot
measure (which modifi ed the RDCS) to allocate
100 additional units for projects of 25 units or less
within the Specifi c Plan “Downtown Core” area.

The measure also allows projects with Downtown
RDCS allocations spread out over multiple years
to advance the timing of construction.

In May 2009, voters approved another ballot
measure which provides an exemption from the
RDCS for 500 housing units located in the 20-
block area of the Downtown.

In 2007, another update to the Plan was initiated
to refi ne land use and public improvement
objectives for Downtown, and to add the
necessary information to so that it would become
a “specifi c plan”, which is a legal document that
supplements the Morgan Hill General Plan and
Zoning Ordinance for the Downtown area. The
intent of the Downtown Specifi c Plan update is
to focus on:
increased residential density within the
Specifi c Plan boundary, as well as on
opportunity sites outside the Specifi c
Plan boundary;
development standards for new
commercial spaces;
coordination of a parking strategy with
realistic growth projections;
examination of circulation patterns; and
creating a plan for public investment,
given that the Redevelopment Plan
Amendment was approved in 2005,
which provides a substantial amount
of funding for downtown and public
infrastructure projects and activities.

Appendix A (Background) contains a more
detailed history of the City and the Plan, as
well as major topics from the previous plans.

Appendix B (Workshop Results) provides a
summary from the joint Planning Commission/
City Council special meeting from June 19, 2007,
the Downtown Plan Update Process Workshop
from October 16, 2007, and the Downtown
Specifi c Plan Stakeholder Workshop from
February 19, 2008.

This chapter presents urban design goals and a
vision statement for the Morgan Hill Downtown
Specifi c Plan. The Downtown Task Force
created this vision statement during the 2003
Morgan Hill Downtown Plan update process. It
addresses the following key elements: land use,
parking, Downtown access, Downtown focal
point, landscaping and lighting, and signage.
▪
▪
▪
▪
▪

November 2009 1-5
CHAPTER 1: VISION
Urban Design Goals
The primary urban design goals and objectives
addressed by this Specifi c Plan include:
creating an active Downtown village
through intensifying residential, retail,
restaurant, and entertainment uses,
within an urban setting improved with
unifi ed landscaping and streetscape
improvements;
making Monterey Road and Third
Street more pedestrian and retail
friendly, and improve other roads with
better street lighting and streetscape
improvements;
strengthening Downtown’s identity
and scale with new design related to a
traditional character; and
creating visual and physical linkages
to Downtown with landscaping, bike
paths and entry area features; and with
linking downtown commercial uses to
common parking areas available to the
general public.
▪
▪
▪
▪
Vision Statement
Strengthening Downtown as the gathering place,
a connecting force, the social and activity heart of
Morgan Hill, is the overriding aspiration of this
Plan – a place where residents from all segments
of the community can live, work, meet, shop, dine
and participate in public celebrations, and share
in the richness of Morgan Hill’s community life.

It will be a place like nowhere else – a place with
its own scale, character and uses.

Land Use
Downtown will encourage and accommodate a
wide diversity of uses serving the community. It
will offer needed goods and services as well as
provide a congenial home for new and unique
businesses. It will be a village where each use
has its own distinct character, and where walking
from use to use is an interesting and stimulating
experience. Preserving public views of Nob Hill
and El Toro will be a consideration as Downtown
develops with new buildings.

A diversity of restaurant and entertainment uses
will draw offi ce workers to Downtown during
the day, and provide a destination for individuals
and families at night and on the weekend.

Specialty retail and food stores (i.e. bakeries, wine
shops, and take-home gourmet meal delis) will
serve commuters as well as provide residents
with a greater range of shopping choices.

New and existing homes and apartments in
and around downtown will provide support for
Downtown businesses.

A variety of offi ce and small businesses uses such
as gift shops, bookstore, copy service, fi nancial
services, and law offi ces will provide a worker
population in the downtown and offer needed
supplies and services.

November 2009
Morgan Hill Downtown Specific Plan
1-6
Parking
Existing Downtown parking lots will be improved
with landscaping and lighting to provide convenient
and attractive one-stop locations to leave the car
while walking to several destinations along welllandscaped sidewalks. Additional pedestrian and vehicular linkages between Downtown parking
lots will be created. On-street parking spaces will
serve as convenient spaces for quick in-and-out
stops while additional parking lots will be added
over time to accommodate longer term parking
needs. Shared parking will be encouraged.

Downtown Access
Pedestrian and bicycle access to Downtown will
become more common in the future as bicycle
lanes are added to Monterey Road north and
south of Downtown, with links along Depot
Street to the rail station. As streets are beautifi ed
with landscaping and street furniture, walking in
Downtown will be a more pleasant experience. A
trail along Upper Llagas Creek has been proposed
as part of fl ood control improvements. This trail
would provide pedestrians and bicyclists access
from Downtown to areas north and south along
the creeks. Due to right-of-way limitations, an
off-street trail along the entire length of Upper
Llagas Creek may not be feasible and Downtown
sidewalks and bike lanes may be used as necessary.

This trail is discussed further in Chapter 2 (Land
Uses and Development Standards) and Chapter
8 (Implementation and Plan for Investment).

Key Downtown Streets and Focal Point
Along with Monterey Road, Third Street will
become a focus of activity and outdoor dining in
downtown. Widened sidewalks with landscaping
and tree plantings on each side of Third Street
will accommodate outdoor dining and specialty
shops such as art galleries. Portions of the street,
designed more as a plaza than a street, will be
closed for special events including activities such
as music and art shows. A focal point, possibly
with public art, near the Monterey Road end of
Third Street will provide a gathering place for
activities and lighting will add a festive quality to
the street.

November 2009 1-7
CHAPTER 1: VISION
Third Street Plaza
Third Street

November 2009
Morgan Hill Downtown Specific Plan
1-8
Example of a side street west of Monterey Road in Downtown Landscaping and Lighting
Downtown will have the feel of a well landscaped neighborhood with side streets lined with trees and street lights of a character related to the quality of landscaping and paving along Monterey Road and Third Street. Streetscape improvements along side streets (i.e. First, Second, Fourth, and Fifth Streets; and Main Avenue) will add to the quality of Downtown and provide a positive image of place and pride to those visiting from other areas. Attention to paving will bring additional scale and interest to pedestrian areas. Individual shops will have fl ower boxes and pots in front of their storefronts and entries to add color and an individual personality to each business. Side streets east of Monterey Road will be more urban, while side streets west of Monterey Road will transition from “Main Street” to a more “downtown residential” character.

November 2009 1-9
CHAPTER 1: VISION
Variety of restaurants and menus
Diversity of shops
Indoor/outdoor businesses
Attractive second fl oor uses
Examples from Downtown Morgan Hill and other communities Public art
Sculptures

November 2009
Morgan Hill Downtown Specific Plan
1-10
Signage with unique personality Distinctive storefronts and signage Examples from other communities
Creative and user-friendly directional signage
Signage
New public signage will assist in fi nding public parking lots and other destinations, while directional signage near Highway 101 and throughout Morgan Hill will assist visitors in fi nding their way to Downtown. Identity signs or gateway features marking the Downtown entries will have a character unique to Morgan Hill, and will assist in announcing to motorists that they are entering a pedestrianoriented zone where speeds are slower and pedestrian crossings are frequent.

Private signs will be well designed to provide visual interest and express the individuality of each business.

Examples from the Draft Citywide Directional Sign Program

November 2009 2-1
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Chapter 2: Land Uses and Development Standards
Overview
Downtown Morgan Hill is unique in that it has a commuter rail station within easy walking distance to a variety of retail, offi ce, and residential uses. Figure 3 shows the existing land uses and highlights special uses, such as the Morgan Hill Community and Cultural Center.

Future development should focus on promoting pedestrian activity, increasing the Downtown residential population, and increasing shopping and employment opportunities with appropriately designed spaces throughout Downtown. The Specifi c Plan General Plan land use designations and Zoning Ordinance classifi cations refl ect the development needs of Downtown Morgan Hill. Figures 4 and 5 show the General Plan land use designations and Zoning Ordinance classifi cations, respectively.

Mixed Use land use designation and the CBD zoning district make up the majority of the area along Monterey Road and between Monterey Road and the railroad tracks. A variety of residential densities are designated for a majority of the area west of Monterey Road and at the north and south ends of Butterfi eld Boulevard. Public Facilities exist at the Morgan Hill Community and Cultural Center, along Monterey Road and Dunne Avenue, as well as the future fi re station and County Courthouse along Butterfi eld Boulevard. The Ground Floor Overlay (GFO) covers certain properties along Monterey Road and Third Street. The intent of this overlay is to provide ground-fl oor retail, as well as restaurant and entertainment uses to encourage pedestrian activity.

Morgan Hill voters approved a ballot measure in May 2009 modifying the Residential Development Control System (RDCS) to better accommodate Downtown development, by providing an exemption for 500 housing units located in the 20-block Downtown area. The RDCS is an ordinance approved by City voters aimed at controlling residential growth in the City. The current RDCS extends through the year 2020, and is focused on a City population of 48,000 in 2020. The RDCS has helped to assure that residential development pays for itself and that the rate of development does not outstrip the availability of public services and infrastructure to serve the City’s residents. The RDCS has also encouraged more effi cient patterns of development by directing growth to areas that are contiguous to existing development and served by adequate infrastructure. Proposed residential projects are rated on a point-based system to determine which projects would best serve the City. Several Downtown property and business owners have expressed concern that this system favors development outside of Downtown. The RDCS is an obstacle for mixed use and attached housing projects, which are key types of developments desired in the Downtown Specifi c Plan area. Downtown residential development encourages walking and transit use, utilizes previously developed land, and supports local businesses. Since this Specifi c Plan guarantees infrastructure keeps pace with development (see Chapter 7: Infrastructure and Chapter 8: Implementation and Plan for Investment) and since development included in this Specifi c Plan is City-centered growth, the approved modifi cation of the RDCS to allow for 500 Downtown housing units to the year 2020 to be exempt from the RDCS and its competition requirement, will assist with attaining the community’s vision for Downtown.

This Specifi c Plan assigns block numbers to Downtown blocks for ease of discussion (see Figure 3).

Blocks 1-14 are within the Downtown Core and Blocks 1-18 are within the Specifi c Plan boundary.

This Specifi c Plan also addresses land uses for Blocks 19 and 20, which are outside the Specifi c Plan boundary.

November 2009
Morgan Hill Downtown Specific Plan
2-2

CENTRAL AVE

MONTEREY RD

DEPOT ST

BUTTERFIELD
BLVD

HALE AVE

E MAIN AVE

W MAIN AVE

W DUNNE AVE
E 5TH ST
E 4TH ST
W 5TH ST
W 1ST ST
W 2ND ST
W 3RD ST E 3RD ST

CIOLINO AVE
E 2ND ST
E 1ST ST

MYRTLE AVE

DIANA AVE
CAL

CHURCH ST

WARREN AVE

NOB HILL TER

KEYSTONE AVE

CALLE CERRO
W 4TH ST

E DUNNE AVE

DEL MONTE AVE

RAILROAD AVE
Existing and Approved Land Uses
Figure 3
´
03 150 00 600
Feet
Community and Cultural
Center
South County
Courthouse
Britton School /
Ball Fields
Approved R-4 with 134
Dwelling Units
Future Fire Station
Approved PUD with
80 Dwelling Units
and Commercial
VTA /
Caltrain Parking
Approved R-4 with
134 Dwelling Units
Legend
Single-Family Residential
Multi-Family Residential
Mixed-Use
Retail
Office
Industrial/Warehouse
Service Station
Recreational/Community Facility
Church
Public Open Space
Public Facility
Downtown Specific Plan
Downtown Core
Creek / Easement
Block 17
Block 7
Block 8
Shopping Center
Vacant
School
Unimproved Right-of-Way
Block 18
Block 16
Block 15
Block 1
Block 2
Block 3
Block 4
Block 5
Block 6
Block 9
Block 10
Block 11
Block 12
Block 13
Block 14
Block 20
Block
19

November 2009 2-3
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS

KEYSTONE AVE

CENTRAL AVE
From: Commercial
To: Multi-Family Medium
From: Public Facilities
To: CBD Mixed Use
From: Multi Family Low
To: Multi-Family Medium
From: Multi Family Low
To: Multi-Family Medium
From: Public Facilities
To: Mixed Use
From: Commercial
To: Mixed Use
Block 10
Block 9
Block 11
Block 12
Block 13
Block 14
Block 1
Block 2
Block 3
Block 4
Block 5
Block 6
Block 20
Block
19 Block 15
Block 16
Block 17
Block 18
From: Mixed Use
To: Multi-Family Medium,
Commercial, and Office

E MAIN AVE
E DUN

MONTEREY RD

W MAINAVE

DEPOT ST

W DUNNE AVE

CHURCH ST
E 5TH ST
E 4TH ST
W 5TH ST
W1ST ST
W 2ND ST
E 3RD ST W 3RD ST

CIOLINO AVE
E 2ND ST

WARREN AVE
E 1ST ST

MYRTLE AVE

CALLE DEL SOL CALLE CERRO
C
W 4TH ST

BUTTERFIELD BLVD

DEL MONTE AVE
Proposed General Plan Land Use Designations
Figure 4
´
03 150 00 600
Feet
Legend
Downtown Specific Plan
Downtown Core
Residential Estate (0-1 du/ac)
Single Family Medium (3-5 du/ac)
Multi-Family Low (5-14 du/ac)
Mixed Use (8-20 du/ac)
Light Commercial-Residential
Open Space
Public Facilities
Commercial
Industrial
Creek / Easement
Office Industrial
Unimproved Right-of-Way
Multi-Family Medium (14-21 du/ac)
CBD Mixed Use (no min/max density)
Multi-Family High (21-40 du/ac)

November 2009
Morgan Hill Downtown Specific Plan
2-4

KEYSTONE AVE

CENTRAL AVE
PF
CBD
CBD
CBD
CBD

CBD CBD
CO
PF
R2
R2
RE
CC-R
CC-R
CC-R
CC-R
RE
R3
ML
R2
R2
OS
R3
RPD
R2
CC-R
CC-R
R1
R2
R2
R3
PF
From: PUD
To: R3
From: R2
To: D-R3
From: R2
To: D-R3
From:PF
To: CBD
From: PF
To: CC-R
From: PUD
To: CC-R
CC-R
D-R3
RPD
From: PUD
To: D-R3, CC-R, and CO
ML

E MAINAVE

E DUNNE AVE

MONTEREY RD

DIANA AVE

DEPOT ST

W MAIN AVE

W DUNNE AVE

HALE AVE
CALLE

MAZATAN

BARNELL AVE
E 5TH ST
E 4TH ST
W5TH ST
W 1STST
W 2ND ST
E 3RD ST W 3RDST

CIOLINO AVE
E 2ND ST

WARRENAVE
E 1S T ST

DEL MONTE AVE

MYRTLE AVE

CALLE ASTA

NOB HILL TER

CHURCH ST

CALLE DEL SOL

CALLE CABALLERIA

CALLE CABEZAL

CALLE CERRO

CALLE ATAVIO
W 4TH ST

BUTTERFIELD BLVD

DELMONTEAVE

RAILROAD AVE
Proposed Zoning Designations
Figure 5
´
0 150 300 600
Feet
Legend
Downtown Specific Plan
Downtown Core
Creek / Easement
Unimproved Right-of-Way
Downtown Ground Floor Overlay District
CU Commercial Use Overlay
CC-R Central Commercial Residential: 8-20 du/ac
CBD Central Business District: no min/max density
CL-R Light Commercial Residential
MG General Industrial
ML Light Industrial
CO Administrative Office
OS Open Space
PF Public Facilities
R1 Single Family: 3-5 du/ac
RE Residential Estate: 0-1 du/ac
R2 Medium Density Residential: 5-14 du/ac
R3 Medium Density Residential / D-R3 Downtown Medium Density Residential: 14-21 du/ac R4 High Density Residential / D-R4 Downtown High Density Residential: 21-40 du/ac RPD Residential Planned Development

November 2009 2-5
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Goals, Policies, and Actions
The Morgan Hill General Plan identifi es a goal
of the Downtown to be “a vibrant, identifi able
downtown”. The following land use goals
and objectives will guide public planning and
implementation activities.

Land Use Goals and Objectives
Encourage a diverse mix of uses
emphasizing specialty retail, restaurant,
entertainment, residential and
commuter-serving uses.

Emphasize Monterey Road and Third
Street as the main commercial spines in
Downtown.

Emphasize transit-oriented uses which
do not require large amounts of on-site
parking.

Rehabilitate existing Downtown
residential units within residential
areas; encourage redevelopment of key
opportunity sites currently occupied
with low-intensity residential uses to
more intense mixed use projects.

Add a substantial number of residential
units in and near Downtown with
densities ranging from 18 to 40 or more
dwelling units per acre.

Strengthen downtown through
emphasis on the infi ll development of
vacant lots along Monterey Road and
Third Street.

Encourage the conversion of residential
uses on side streets between Monterey
Road and Depot Street to mixed-use
projects consistent with CBD zoning.

Increase allowable density in the
residential neighborhood west of
Monterey Road and along Dunne
Avenue, Fifth Street, and part of
Fourth Street (Blocks 13 and 14).

Allow for visitor-serving lodging
and “bed and breakfast” uses in the
Downtown Area.

The following policies and actions support and
will help implement these goals and objectives.
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Policies
Encourage new development to expand
pedestrian-oriented uses and amenities,
especially along Monterey Road and
Third Street.

Encourage land uses that have weekend
and evening peak demands to better
accommodate shared parking.

Promote high- and medium-density
residential units in mixed-use
development to increase the Downtown
residential population. Adoption of
this Specifi c Plan includes land use
and zoning changes resulting in higher
density near Dunne Avenue and Fifth
Street (Block 14 and portions of Block
13) and on the VTA/Caltrain parking
lot (Block 16).

Encourage mixed-use development
that accommodates both the retail and
residential land uses.

Promote Transit-Oriented
Development along Third and Depot
Streets, as well as on Block 16, to
strengthen the relationship between
the train station and residential uses.

While Block 16 is designated for Mixed
Use-CBD, desired development is for
high-density residential use, Caltrain/
VTA parking, with perhaps some offi ce
uses. Any commercial service use
should be minor or ancillary, and retail
uses are prohibited under this Specifi c
Plan, as the goal is that retail uses be
concentrated in the Downtown Core.

Encourage the preservation of the
small-scale residential neighborhoods
west of Monterey Road and north of
Fourth Street.

Encourage development surrounding
Downtown to promote transit-oriented,
pedestrian-friendly development that
would complement Downtown.

Allow residential-to-commercial
conversions for uses such as offi ces,
gift shops, beauty salons, health spas,
restaurants, art galleries and studios,
bed and breakfast hotels, or other
similar uses.
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November 2009
Morgan Hill Downtown Specific Plan
2-6
Actions
Provide funding assistance using
redevelopment funds for programs
such as facade improvement grants,
commercial rehabilitation loans, and
housing rehabilitation loans.

Implement the Third Street Plaza/
Promenade streetscape reconstruction
and beautifi cation project.

Work with and encourage the
Downtown Association and Chamber
of Commerce to attract new businesses
and to provide educational sessions
for Downtown property and business
owners.

Review plans for new developments
to ensure they provide suffi cient retail
building space, where appropriate.

Enhance lighting by installing
streetlights throughout Downtown,
including along side streets and
in parking areas to create a safe
environment.

Work with the Downtown Association
and Downtown businesses to
encourage more consistent operating
hours and days.

Work with the Downtown Association
and other relevant organizations to
provide assistance for Downtown
activities, such as farmers markets,
art shows, concerts, and other similar
events.

Provide Redevelopment Agency
assistance to ensure that an operating
theater use is retained Downtown.

This could involve redevelopment of
the Granada Theatre site or in another
suitable location.

Concurrent with adoption of this
Specifi c Plan, amend the General Plan
and Zoning Ordinance to extend the
Mixed Use land use and CC-R (Central
Commercial Residential) zoning
designation north to Block 19.
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Concurrent with the adoption of this
Specifi c Plan, amend the General Plan
and Zoning Ordinance to increase
the maximum density for Mixed Use
land use designation and CC-R zoning
district from 18 dwelling units per acre
to 20 dwelling units per acre.

Review plans for new development
or remodels within the R2 and D-R3
zoning districts throughout Downtown
to ensure compatibility with the existing
residential development.

This Specifi c Plan assumes that the
shopping center at the intersection
of Del Monte Avenue and West
Second Street is retained. This site
could be rezoned as CBD or R2 for
redevelopment as a mixed-use or
residential project if determined to be
feasible and desirable.

Concurrent with this Specifi c Plan,
change land use designation and
zoning, and support redevelopment of
the existing shopping center located
at the southwest corner of Dunne
Avenue and Monterey Road (Block 20)
to CC-R east of the SCVWD Upper
Llagas Creek easement and D-R3 use
west of the SCVWD easement, with
a Commercial Use Overlay for the
residential portion.

Use Redevelopment Agency resources
to facilitate mixed-used development
along Third Street.
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November 2009 2-7
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Land Use Targets
While the vision for Downtown Morgan Hill is
one welcoming a diversity of uses, it is important
to work toward a mix of uses that are mutually
supportive and consistent with the vision of a
pedestrian-oriented downtown. Emphasis is
placed on retaining and attracting the following
uses:

1. Restaurants
A wide range of eating establishments
is desired from simple grilles to white
tablecloth restaurants. However, in
the context of Morgan Hill, franchise
fast food restaurants are felt to be
appropriately located in places other
than Downtown. Restaurants with
outside dining or with openable window
walls adjacent to the sidewalk will be
especially promoted.

2. Entertainment Uses
Entertainment uses are desired.

Cinema venues and music provided in
conjunction with restaurant dining are
most desirable.

3. Food Shops
Bakeries; natural food and local produce
markets; wine, cheese and olive shops;
and other special food businesses will add
richness to the Downtown environment
and provide convenient services near
the commuter rail station.

4. Home Furnishings
The income levels of Morgan Hill
residents offer a market for art and
interior decorating items and services.

Art galleries and decorative arts shops
will increase the visual appeal of
storefront windows and add to the
pedestrian experience in Downtown.

5. Specialty Retail Uses
Niche markets will continue to allow
for diverse and interesting additions
to Downtown - especially those small
businesses started by local residents with
an interest in and passion for unique
goods and a willingness to become
active retailers. The feasibility of an
“international walk of shops” that offers
imported items from countries around
the world should be analyzed. Such
a use could develop in Downtown if
determined to be feasible and desirable.

6. Professional Offi ces
Offi ces will provide additional life and
vitality to Downtown as offi ce workers
provide activity on the sidewalks, and
support retail shops and restaurants.

Careful location of these uses, however,
will be important to avoid gaps in retail
and active frontages. Locations on upper
fl oors above retail and restaurant uses,
on side streets away from the Monterey
Road and East Third frontages, and
near Butterfi eld Boulevard will be most
appropriate.

7. Commercial Services
Uses that serve Downtown visitors,
residents, businesses, and commuters
will increase the diversity of Downtown
and increase the amount of time spent
on each individual trip to the area. Beauty
and nail salons, real estate and insurance
offi ces, and businesses providing services
to other businesses will be included.

These uses are encouraged on streets
other than Monterey Road and East
Third Street to maximize the amount of
retail along these corridors. Conversion
of existing homes or new construction
of small buildings on the side streets
offer opportunities for these uses.

November 2009
Morgan Hill Downtown Specific Plan
2-8

8. Residential Apartments and For-Sale
Housing
Residents in and adjacent to Downtown
will assist in extending the hours of
activity in the area while providing
important support for Downtown
businesses and restaurants. Housing
types that are appropriate to a location
near a commuter rail station will be
emphasized while low density housing
projects that are similar to those in other
areas of the community will not be
allowed Downtown.

9. Grocery Market
A grocery store should be developed in
or near Downtown to serve residents
of Downtown and the surrounding
neighborhoods. Smaller specialty
food, wine, produce, bakery and deli
goods are desired and anticipated to
locate throughout Downtown. The
grocery store and specialty shops are
not expected to be in direct competition
with one another.

10. Non-Retail Uses (e.g., Banks)
The Redevelopment Agency and Morgan
Hill Downtown Association should work
with banks and other non-retail uses on
key sites within the Downtown Core
along Monterey Road and Third Street,
to either relocate to areas not zoned
CBD, or to temporarily relocate the uses
until the sites are intensifi ed with more
intensive mixed-use projects, when the
uses would return to the sites.

In particular, the property owners,
business owners and Morgan Hill
Redevelopment Agency are strongly
encouraged to pursue as priority
projects the redevelopment of the two
existing banks at the southwest and
southeast corners of Main Avenue
and Monterey Road, in a manner that
would accommodate desirable road
improvements and widening to address
traffi c congestion of the Main Avenue
road segment.

11. Mixed Use Opportunities outside
Specifi c Plan Area
The Britton School fi eld south of
the auditorium, located west of
Monterey Road and between West
Central and Keystone Avenues
(Block 19), is currently designated
as Public Facilities. This area
should be reclassifi ed to Mixed Use
/ CC-R to accommodate mixed-use
development with a mix of offi ce
and residential uses (Block 19).

Concurrent with adoption of
this Specifi c Plan, the site of the
existing shopping center at the
southwest corner of Monterey
Road and Dunne Avenue (Block
20), should be reclassifi ed to
Mixed Use/CC-R east of the creek
easement and Medium Density
Residential/D-R3 west of the
easement (with a Commercial Use
Overlay). This area should include
a mix of residential and commercial
uses with mixed-use or commercial
uses on the east portion of site and
residential uses on the west portion
on the site. This site may offer an
opportunity for a larger “national
retailer” type of tenant, with from
15,000 to 20,000 square feet of
ground fl oor space.

Note: For the purpose of this Specifi c Plan,
the term “retail use” includes restaurants,
entertainment uses, food and grocery stores,
retail uses, home furnishings, and other uses
determined to be “retail” in nature, as opposed
to offi ces, personal services and the like.
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November 2009 2-9
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Retail Real Estate Overview
Downtown offers a quaint, pedestrian-friendly
environment, and acts as the central hub of
activity in Morgan Hill. Its close proximity to
the train station and bus transit facilities provide
direct access for residents and visitors. There
is signifi cant interest among municipal and
local property owners to transform Downtown
into a more successful vibrant environment.

In addition, there is interest in increasing
Downtown residential, commercial and retail
densities. Historically, Downtown has had a
successful schedule of annual events including
the Mushroom Mardi Gras, Taste of Morgan
Hill, Fourth of July celebration, and Summer
Music Series. Additionally, the new courthouse
is anticipated to increase the daytime business
population, generating employees and visitors to
the area.

Types of Retail
The amount of “supportable” retail is directly
proportional to the size of the trade area and
the amount of other retail in the trade area.

Supportable retail can also vary based on
geography, competition, success of existing retail,
proximity to customer traffi c generators; and it
can expand or contract based on the combination
of these factors.

The size of a retail facility determines whether it is
a destination or convenience use. Larger format
stores present depth and breadth of a wider
range of merchandise, which allows them to be
more destination uses. Smaller format stores are
limited in what products or services they can offer,
thus they are more convenience uses. Typically,
destination uses are anchor business, which
attract people to an area. Convenience uses are
supported by customers of the destination uses
and by nearby business and residents.

Types of Customers
There are three groups of retail customers, each
having distinct hours for shopping and dining:

Local Residents: If employed outside
the area, local residents will shop or
dine in the late afternoon through the
evening, and on weekends. Others will
shop or dine from 11:00 a.m. to 5:00
p.m. or later
Daytime Business Population
Employees: This group of people
will dine from 11:00 a.m. to 2:00 p.m.,
and shop and/or dine after 5:00 p.m.
on weekdays. Most will not return on
weekends.

Visitors: Visitors will shop and/or dine
from 11:00 a.m. to 8:00 or 9:00 p.m.
every day, but because they have time
to invest in shopping, they are more
willing to travel to other competing
shopping destinations.

Site Selection
The key factor for a retailer’s assessment of a
location is the sales potential. In the retail business, location is directly linked to sales and profi tability.

Sales potential determines whether to invest
money and “people capital” in that particular
location relative to other opportunities.

Selecting a potentially profi table location is
dependent on several factors, including:
complementary retail uses;
pedestrian access;
easy parking access;
demographics of the trade area;
cost of the leasable space; and
historical sales performance.
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November 2009
Morgan Hill Downtown Specific Plan
2-10
Transitional/Temporary Uses
Until there is a strong market demand for retail in
Downtown, property owners might fi nd it diffi cult
to fi nd retail tenants. Property owners should
design ground-fl oor spaces to accommodate
retail uses (i.e. building depth, outdoor eating
areas, and ground-fl oor ceiling height) and should
actively search for retail tenants. Once there is
a stronger demand for retail, interim uses such
as offi ce uses can transition out while retail uses
take over the spaces.

Challenges to Retail
The most signifi cant challenge with improving
Downtown is attracting a strong retail and
entertainment base. Currently, there is not
enough residential critical mass in and around
Downtown to support a dramatic increase in retail
and service uses. Regional retail competition also
poses challenges. Many residents shop at regional
competition retail centers including Valley Fair,
Oakridge, Gilroy Premium Outlets, Gilroy
Crossing and Cochrane Commons. Currently,
there is limited regional draw to downtown,
mostly due to the lack of retail critical mass of
destination uses.

Additionally, as the Downtown Core increases its
retail square footage, creation of enough parking
becomes necessary. Other challenges include the
lack of a daytime business population and the
lack of consistent hours of operation by retail
and restaurant owners. It is a combination of
factors that will attract a retail base, residential
uses, entertainment destination uses, and
additional offi ce space. This plan seeks to create
a critical mass by increasing residential densities,
working with or modifying the RDCS to ensure
accommodation of Downtown development,
and ensuring construction of appropriately
designed commercial space.
2015 and 2030 Development
Projections
Redevelopment within Downtown Morgan
Hill is expected to occur gradually over time.

Major factors affecting the pace of development
include:
how RDCS applies to Downtown;
the amount and type of public
investment in Downtown;
the success of initial Downtown
redevelopment projects; and
the risk levels Downtown property
owners are willing to accept.

Overall, Downtown is expected to be a vibrant,
mixed-use and pedestrian-friendly environment
with an average of three story heights especially
along Monterey Road and East Third Street.

Larger sites of about one-half acre in size will be
able to develop with up to four stories.

The City’s Redevelopment Agency has completed
various improvements throughout the Downtown
area, including the construction of bulbouts
at several intersections and infrastructure
improvements along Depot Street, including
street trees, lighting, and wide sidewalks. The
Redevelopment Agency is investing up to $40
million on additional improvements and projects
throughout Downtown. These improvements
will greatly affect the timing of future private
development projects.

Properties such as the Sunsweet site and the
Downtown Mall site have received residential
allotments for mixed-use projects. Other property
owners may look to the success of these projects
before moving forward with projects of their
own. These property owners will need to closely
evaluate the risk associated with redevelopment.

If this risk is beyond their comfort level, they may
choose not to redevelop or the Redevelopment
Agency will have to provide assistance as a
public/private partnership project.
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November 2009 2-11
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
With these and other factors in mind, City
Staff, RBF Consulting, Johnston Real Estate
Services, and DKS Associates projected the
sites most likely to redevelop by 2015 and 2030.

The purpose of the projection was to guide
development and phasing assumptions in the
Master Environmental Impact Report (EIR) and
traffi c analysis, and to guide development of the
Parking Resources Management Strategy (see
Chapter 4 for a summary). The sites projected
to redevelop by 2015 were selected based on
communications with property owners and
an assessment of the existing built conditions.

Likewise, the development projected to occur
between 2015 and 2030 is based on present and
expected market conditions and an understanding
of parking and retail needs in the Downtown
area.

The sites selected for the 2015 Development
Projection generally have residential allotments
through the Residential Development Control
System (RDCS) and have property owners
or developers who are actively evaluating and
preparing development plans. For the purpose of
defi ning a fi rst phase, this Specifi c Plan assumes
that Blocks 1, 2, 3, 4, 7, portions of 13 and 14, 15,
17, and 18 would redevelop by 2015 (see Figure
3 or 6 for block numbers). Block 20 (outside of
the Specifi c Plan boundary) was initially projected
to redevelop by 2015, but due to 2008/2009
Recession conditions, it was determined that
the Master EIR Traffi c Study would assume
continued commercial use of the block, in order
to present “worst case” traffi c conditions. The
previously projected 82 new residential units for
this block were shifted for the purpose of the
Traffi c Study to Block 16, the Caltrain parking lot
site. However, redevelopment of Block 20 in the
manner proposed by the Specifi c Plan, to Multifamily Medium/R-3 west of the SCVWD ROW and Mixed Use/CC-R east of the ROW remains
a land use goal for Block 20. A “Commercial
Use Overlay” has been added to the Multi-Family
Medium parcels, to allow for use of a Commercial
Administrative Use Permit Process for Block 20,
so that commercial use could continue to occur in
the interim before redevelopment of the block is
feasible. Property owners are encouraged to work
with the City/Redevelopment Agency to develop
and carry out a strategy for redevelopment of the
west portion to residential use.

It must be emphasized that the phasing
assumptions are not intended to and will
not be interpreted to act as a geographic or
numeric constraint to the location, level and/
or timing of development. Under this adopted
Specifi c Plan, other blocks, or portions of
blocks, may redevelop fi rst. The overall level
and location of actual development will be
monitored by the City to ensure that land use
regulations, parking management activities,
and environmental (CEQA) compliance is
appropriate to actual conditions over time.

Also, the projections do not represent the
maximum buildout potential of all sites or of
all of Downtown, which is determined by the
maximum development permitted by the Zoning
Ordinance, and future development applications
submitted by property owners may propose
different types or densities of development.

Again, actual development will be monitored,
with future actions taken as necessary, for
consistency and appropriate regulatory and
CEQA compliance.

The projections intend to present a realitybased “likely redevelopment scenario” for 2015 and 2030, for the purpose of focusing policies,
programs and activities. The Master EIR and
Parking Resources Management Strategy will
use these projections instead of the “maximum
buildout” in order to realistically assess the
future of Downtown. Using the maximum
potential development approach would likely
result in providing excessive parking or requiring
unnecessary mitigations. It is intended that the
Master EIR provide environmental clearance to
the projected realistic 2030 level of development,
and if future projects exceed that level, a future
CEQA document will be needed.

November 2009
Morgan Hill Downtown Specific Plan
2-12
Figure 6 shows the Ground Floor Overlay (GFO),
which requires ground-fl oor retail uses along
portions of Monterey Road and Third Street. See
the Ground Floor Overlay (GFO) discussion in
the Zoning Districts section below for minimum
ground-fl oor retail building depths and fl oor to
ceiling heights required by the GFO.

Figure 7 shows areas encouraged to include
ground-fl oor retail uses and the recommended
ground-fl oor retail building depths for these
locations. These recommendations are based
on an analysis prepared by Johnston Real
Estate Services and discussions with City Staff,
RBF Consulting, and Downtown business and
property owners.

Overall Assumptions
Currently the Downtown Core (Blocks 1-14)
has approximately 123,000 square feet of retail,
122,000 square feet of offi ce, 1,500 square feet of
industrial, 53,000 square feet of public facilities,
and 190 residential units (City of Morgan Hill
data, 2007).

Future projections for Downtown are described
below and are shown in the tables on the
following pages.

Future projections were calculated based on total
development by 2015 and total development by
2030 (which includes the development included
in the 2015 projections).

These projections are then classifi ed as “net new”
and “total” development. Net new development
represents the amount of new development less
any existing development that will be replaced.

For example, if a site with a 1,000 square foot
building is to be redeveloped with a project with a
5,000 square foot building, this would represent a
net new development of 4,000 square feet (5,000
new square feet minus 1,000 existing square feet
to be redeveloped). Total development represents
the net new development plus additional existing
development. For example, if the above 4,000
net new square feet is developed in an area with
10,000 additional existing square feet, the total
development would be 14,000 total square feet
(4,000 net new square feet plus 10,000 additional
existing square feet).

The future projections were further classifi ed
into three boundaries to better assess the future
of Downtown development and to provide more
specifi c information for related reports, such as
the Parking Resources Management Strategy and
the Master Environmental Impact Report (EIR).

These three boundaries are the Downtown
Core boundary (Blocks 1-14), the Specifi c Plan
boundary (Blocks 1-18), and the Specifi c Plan
boundary with Blocks 19 and 20 (Blocks 1-20).

The 2015 residential development projections
assume the existing residential development
control system (RDCS) of 255 units within
Blocks 1-20 (allocations awarded by March 2006),
an additional 100 residential units provided by
Measure F (November 2006 ballot measure), and
495 of the 500 exempt housing units provided
by the May 2009 ballot measure approved by the
voters, for a total of 850 units.

These projections serve to identify the potential
change in development for the CEQA analysis,
Parking Resources Management Strategy, traffi c
analysis, and other relevant studies and analyses.

Refer to Appendix C (Development Projections
by Block) for a more detailed table summarizing
the development projections and assumptions by
block.

November 2009 2-13
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Block 6
Block 14
Block 9 Block 1
Block 4
Block 11 Block 3
Block 13
Block 10 Block 2
Block 12
Block 18
Block 7
Block 15
Block 8
Block 17
Block 16
Block
19 Block 20
Block 5

E MAIN AVE

DEPOT ST

W MAIN AVE

DIANA AVE

WDUNNE AVE

E DUNNE AVE
E5TH ST
E4TH ST
W 5TH ST
W 1STST
W 2ND ST
W3RD ST E 3RD ST
E 2ND ST

WARREN AVE
E1ST ST

CALLE DEL SOL

KEYSTONE AVE

CALLE CERRO

RAILROAD AVE
W4TH ST

CHURCHST

DEL MONTE AVE

BUTTERFIELD BLVD

MONTEREY RD
Ground Floor Retail Overlay
Figure 6
´
03 150 00 600
Feet
Legend
Downtown Specific Plan
Downtown Core
Unimproved Right-of-Way
Creek / Easement
Ground Floor Retail Overlay

November 2009
Morgan Hill Downtown Specific Plan
2-14
Block 6
Block 14
Block 9 Block 1
Block 4
Block 3 Block 11
Block 13
Block 10 Block 2
Block 12
Block 18
Block 7
Block 15
Bl
Block 17 ock 8
Block 16
60-100
100-120 60-100 60-100
60-100 60-120
60-80
80-100
80-100 50-80
50-80
80-
100
Block
19 Block 20
80-
100
50-80
50-80
80-
100
60-
100
60-100 60-100
60-100 60-100
60-100 60-100 60-100
Block 5

EMAIN AVE

DEPOT ST

W MAIN AVE

DIANA AVE

WDUNNE AVE

EDUNNE AVE
E5TH ST
E4TH ST
W 5TH ST
W 1ST ST
W 2ND ST
W3RD ST E 3RD ST
E 2ND ST

WARREN AVE
E1ST ST
C

CALLE DEL SOL

KEYSTONE AVE
CA
CALL

CALLE CERRO
CAL

RAILROAD AVE
CALLE
W 4TH ST

CHURCHST

DEL MONTE AVE

BUTTERFIELD BLVD

MONTEREY RD
Retail Building Depth Recommendations
Figure 7
´
03 150 00 600
Feet
Legend
Downtown Specific Plan
Downtown Core
Unimproved Right-of-Way
Recommended Range for Retail Building Depth (ft)
Creek / Easement
Note: The sites selected on this map were chose because of their location to Monterey Road, Third Street, and other key locations. The "red" areas represent general guidelines for recommended ground-floor retail building depths, should retail development occur. Other sites may develop with ground-floor retail uses, and should use the nearby recommendations to determine encouraged building depths.

November 2009 2-15
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
City of Morgan Hill
Downtown Specific Plan
2030 Development Summary - Blocks 1-14 (Downtown Core)
Retail 123,365 Sq Ft 94,221 Sq Ft 217,586 Sq Ft 166,490 Sq Ft 289,855 Sq Ft Residential 193 DU 546 DU 739 DU 681 DU 874 DU
Office/Service 122,248 Sq Ft 30,157 Sq Ft 152,405 Sq Ft 60,591 Sq Ft 182,839 Sq Ft 1 Blocks 1-14 excluding public facilities (including schools, Community and Cultural Center, churches, social halls) and industrial Existing Retail Development to be Replaced by Projected Redevelopment 16,800 sq ft from the existing Downtown Mall at Monterey Road and First Street (Block 2) 20,050 sq ft from the existing bookstore building along Depot Street (Block 3) 2,050 sq ft from the existing liquor store at Monterey Road and Third Street (Block 4) total 38,900 sq ft
Assumptions
Total Net New Total
Land Use Existing
Development 1
Development by 2015 Development by 2030
Net New
City of Morgan Hill
Downtown Specific Plan
2030 Development Summary - Blocks 1-18 (Downtown Specific Plan Boundary) Retail 123,365 Sq Ft 94,221 Sq Ft 217,586 Sq Ft 166,490 Sq Ft 289,855 Sq Ft Residential 193 DU 760 DU 953 DU 1,081 DU 1,274 DU
Office/Service 122,248 Sq Ft 30,157 Sq Ft 152,405 Sq Ft 60,591 Sq Ft 182,839 Sq Ft 1 Blocks 1-18 excluding public facilities (including schools, Community and Cultural Center, churches, social halls) and industrial Existing Retail Development to be Replaced by Projected Redevelopment 16,800 sq ft from the existing Downtown Mall at Monterey Road and First Street (Block 2) 20,050 sq ft from the existing bookstore building along Depot Street (Block 3) 2,050 sq ft from the existing liquor store at Monterey Road and Third Street (Block 4) total 38,900 sq ft
Assumptions
Total Net New Total
Land Use Existing
Development 1
Development by 2015 Development by 2030
Net New
City of Morgan Hill
Downtown Specific Plan
2030 Development Summary - Blocks 1-20 (Downtown Specific Plan Boundary and Blocks 19-20) Retail 213,365 Sq Ft 21,221 Sq Ft 234,586 Sq Ft 93,490 Sq Ft 306,855 Sq Ft Residential 201 DU 850 DU 1,051 DU 1,190 DU 1,393 DU 2
Office/Service 122,248 Sq Ft 30,157 Sq Ft 152,405 Sq Ft 85,591 Sq Ft 207,839 Sq Ft 1 Blocks 1-20 excluding public facilities (including schools, Community and Cultural Center, churches, social halls) and industrial 2 Includes an additional 10 dwelling units to account for the increase in density for the CC-R zoning district Existing Retail Development to be Replaced by Projected Redevelopment 16,800 sq ft from the existing Downtown Mall at Monterey Road and First Street (Block 2) 20,050 sq ft from the existing bookstore building along Depot Street (Block 3) 2,050 sq ft from the existing liquor store at Monterey Road and Third Street (Block 4) 90,000 sq ft from the existing shopping center at Monterey Road and Dunne Avenue (Block 20) total 128,900 sq ft
Assumptions
Total Net New Total
Land Use Existing
Development 1
Development by 2015 Development by 2030
Net New

November 2009
Morgan Hill Downtown Specific Plan
2-16
Assumptions by Block
Each block in Downtown has a distinct character
and potential for redevelopment based on the
land use, zoning, and proximity to Monterey Road
and East Third Street. Refer to Figure 6 for the
required minimum retail depths for properties
within the Ground Floor Overlay (GFO) district
and Figure 7 for encouraged ground-fl oor retail
locations and recommended building depths.

Development assumptions by block include:

Block 1: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. The projected
redevelopment occurs primarily
along Monterey Road and includes
ground-fl oor retail uses with offi ces or
residential on the upper fl oor(s). The
required minimum depth of groundfl oor retail is 60 feet along Monterey Road and 80 feet at each intersection
with Monterey Road (therefore a
minimum of 80 feet by 80 feet and a
minimum of 6,400 square feet). This
block contains an existing bank located
at the southeast corner of Main Avenue
and Monterey Road. The property
owner and the Redevelopment Agency
are encouraged to work together to
redevelop the site in a manner that
would accommodate desirable road
improvements and widening to address
traffi c congestion of the Main Avenue
road segment, better accommodate left
turns from Monterey, and improve the
Main/Monterey intersection.

Block 2: This block has a CBD
Mixed Use (General Plan) and CBD
(Zoning Ordinance) designation.

The projected redevelopment occurs
primarily along Monterey Road and
includes ground-fl oor retail uses with
offi ces or residential on the upper
fl oor(s). Redevelopment of this
block may incorporate a remodeled
or new Granada Theater for a cinema
or entertainment use, however the
Specifi c Plan does not require this, and
a cinema on an alternate downtown
site is acceptable. Under any scenario,
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however, it is a goal of the Specifi c
Plan that the existing Granada upright
sign and marquee be retained in the
downtown, associated with a cinema
or entertainment use. The projected
redevelopment offers the potential for
a parking structure internal to the block
or underground parking. The required
minimum depth of ground-fl oor retail
is 60 feet along Monterey Road and 80
feet at each intersection with Monterey
Road (therefore a minimum of 80 feet
by 80 feet and a minimum of 6,400
square feet). Retail spaces along East
First and Second Streets are strongly
encouraged with depths between 80
and 120 feet.

Block 3: This block has a CBD
Mixed Use (General Plan) and CBD
(Zoning Ordinance) designation.

The projected redevelopment occurs
primarily along Third Street and
includes ground-fl oor retail uses with
offi ces or condominiums/apartments
on the upper fl oor(s). Restaurants with
outdoor dining areas and specialty
shops are encouraged along Third
Street. Property owners of smaller
parcels are encouraged to combine lots
and take advantage of the higher fl oorarea ratio (2.25 FAR for sites of 22,000 square feet or more, rather than the
base 2.0 FAR for sites less than 22,000
square feet). Four story heights may be
proposed on sites of 22,000 square feet
or more, with a fourth fl oor stepback.

Development on this block should
act as a landmark for Downtown
and should be more intense than
development along adjacent streets.

Large projected redevelopment sites
offer the potential for underground
parking. The required minimum depth
of ground-fl oor retail is 60 feet along
Monterey Road and Third Street,
and 80 feet at each intersection with
Monterey Road and Depot Street
(therefore a minimum of 80 feet
by 80 feet and a minimum of 6,400
square feet). Retail spaces along East
Second Street are strongly encouraged
with depths between 80 and 120 feet.

Relocation of the Granada Theater
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November 2009 2-17
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
sign and marquee to the Monterey
Road frontage of this block would be
a suitable redevelopment project, for a
new cinema or entertainment use if the
existing Granada Theater site is used
for other purposes.

Block 4: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. The projected
redevelopment occurs primarily on
the parcels generally referred to as
the “Sunsweet Site” and includes
ground-fl oor retail uses with offi ces
or condominiums/apartments on
the upper fl oor(s). Restaurants with
outdoor dining areas and specialty
shops are encouraged along Third
Street. Property owners of smaller
parcels are encouraged to combine lots
and take advantage of the higher fl oorarea ratio (2.25 FAR for sites of 22,000 square feet or more, rather than the
base 2.0 FAR for sites less than 22,000
square feet). Four story heights may be
proposed on sites of 22,000 square feet
or more, with a fourth fl oor stepback.

Development on this block should
act as a landmark for Downtown
and should be more intense than
development along adjacent streets.

Large projected redevelopment sites
offer the potential for underground
parking. The required minimum depth
of ground-fl oor retail is 60 feet along
Monterey Road and Third Street,
and 80 feet at each intersection with
Monterey Road (therefore a minimum
of 80 feet by 80 feet and a minimum of
6,400 square feet).

Block 5: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. This block is
not within the Ground Floor Retail
Overlay (GFO) zoning district. Should
ground-fl oor retail uses develop, the
recommended minimum depth of such
uses is between 50 and 80 feet along
Monterey Road and at the intersection
of Monterey Road and Fourth Street.
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Block 6: This block has a CBD Mixed
Use and Public Facilities (General
Plan) and D-PF and CBD (Zoning
Ordinance) designation. This block
is not within the GFO district. No
redevelopment of existing buildings
is assumed; however redevelopment
may occur on the existing residential
properties. This Plan projections for
this block assumed the retention of
the existing Community and Cultural
Center (CCC), Gavilan Collage
building, and outdoor amphitheater.

The site offers the potential for
structured parking on the existing
CCC surface parking lot to increase the
public parking supply and the parking
could be a designated parking area for
Downtown employees. The Specifi c
Plan identifi es a preferred future project
consisting of re-routing Depot Street
through the CCC parking lot, in order
to create an intersection with Church
Street at the signal. This allows Depot
Street to remain connected to Dunne
Avenue even when the Dunne/UPRR
grade separation project (undercrossing
of RR tracks) occurs. This project
should be designed in a manner that
allows suffi cient site area for structured
parking, accommodates private
property access requirements, and
facilitates pedestrian travel to CCC and
Gavilan uses.

Block 7: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. This block
is not within the GFO district. The
site offers the potential for structured
parking on the existing surface parking
lot to increase the parking supply.

Long-term and visitor secured bicycle
parking facilities are encouraged within
the parking area.

Block 8: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. This block
is not within the GFO district. The
site offers the potential for surface
or structured parking to increase the
parking supply.
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November 2009
Morgan Hill Downtown Specific Plan
2-18
Block 9: This block has a CBD Mixed
Use (General Plan) and CBD (Zoning
Ordinance) designation. The required
minimum depth of ground-fl oor retail
is 60 feet along Monterey Road and 80
feet at each intersection with Monterey
Road (therefore a minimum of 80 feet
by 80 feet and a minimum of 6,400
square feet). The bank parcel offers an
opportunity for redevelopment with
a mixed-use project. The property
owners and the Redevelopment Agency
are encouraged to work together to
redevelop the offi ce building site
and/or the existing bank site at the
southwest corner of Main/Monterey
in a manner that would accommodate
desirable road improvements and
widening to address traffi c congestion
of the Main Avenue road segment
and improve the Main/Monterey
intersection. It is also desirable on this
block to pursue a continuous parking
lot from Main Avenue through to First
Street, behind the Monterey frontage
buildings.

Block 10: This block has a CBD Mixed
Use and Multi-Family Low (General
Plan) and CBD, R2, and RPD (Zoning
Ordinance) designation. The required
minimum depth of ground-fl oor retail
is 60 feet along Monterey Road and 80
feet at each intersection with Monterey
Road (therefore a minimum of 80 feet
by 80 feet and a minimum of 6,400
square feet).
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Block 11: This block has a CBD Mixed
Use and Multi-Family Low (General
Plan) and CBD and R2 (Zoning
Ordinance) designation. The required
minimum depth of ground-fl oor
retail is 60 feet along Monterey Road
and 80 feet at each intersection with
Monterey Road (therefore a minimum
of 80 feet by 80 feet and a minimum
of 6,400 square feet). Retail spaces
along West First and Second Streets
are strongly encouraged with depths
between 80 and 120 feet. The Cityowned parcel at Upper Llagas Creek is planned for a passive park with a creek
interpretive element, which would link
to a pedestrian/bicycle pathway to Del
Monte Avenue. As stated above in the
Actions section, the existing shopping
center at the intersection of Del Monte
Avenue and West Second Street is
assumed to be retained. If feasible and
desirable, this site could redevelop with
a mixed use or residential project.

Block 12: This block has a CBD Mixed
Use, Multi-Family Low, and Residential
Estate (General Plan) and CBD, R2, and
RE (Zoning Ordinance) designation.

This block contains the “Nob Hill”
geographic feature, which has the
large-lot residential designation given
the hillside topography. The required
minimum depth of ground-fl oor
retail is 60 feet along Monterey Road
and 80 feet at each intersection with
Monterey Road (therefore a minimum
of 80 feet by 80 feet and a minimum of
6,400 square feet). The site offers the
potential for a restaurant development
oriented toward the Upper Llagas Creek
corridor. The RDA parcel could serve
as a passive park.
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November 2009 2-19
CHAPTER 2: LAND USES AND DEVELOPMENT STANDARDS
Block 13: This block has a CBD
Mixed Use, Multi-Family Medium,
and Residential Estate (General Plan)
and CBD, D-R3, and RE (Zoning
Ordinance) designation. This block
is not within the GFO district. The
projected redevelopment assumes
the existing multi-family low (R2)
designation is increased to multi-family
medium (R3) to a density of up to
21 dwelling units per acre. The site
offers the potential for a restaurant
development oriented toward the
Upper Llagas Creek corridor.

Block 14: This block has a CBD
Mixed Use and Multi-Family Medium
(General Plan) and CBD and D-R3
(Zoning Ordinance) designation. This
block is not within the GFO district.

The projected redevelopment assumes
the existing multi-family low (R2)
designation is increased to Downtown
multi-family medium (D-R3) to a
density of up to 21 dwelling units per
acre. Redevelopment of the site offers
the potential for residential uses and
approximately 30,000 square feet of
offi ces.

Block 15: This block has a MultiFamily High (General Plan) and D-R4 (Zoning Ordinance) designation. This
block is not within the GFO district.

The projected redevelopment includes
development of an approved housing
project with 134 dwelling units (99 of
which have RDCS allotments). The
Redevelopment Agency is providing
assistance so that the existing concrete
batch plant will be relocated from this
site to a more suitable site outside of
the Downtown area.

Block 16: This block has a CBD Mixed
Use (General Plan) and CBD Central
Business District (zoning), with no
maximum density. Redevelopment
of the surface parking lot offers
the potential for a transit-oriented
development with high density
residential units. Offi ces could also
be appropriate in a mixed use project.

Redevelopment of this block assumes
the retention of the Caltrain parking
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spaces, but the spaces may be provided
in a structure on the site or nearby.

The level of projected development
assumed in the EIR Traffi c Study
included 268 residential housing units
and the parking spaces. If other uses
beyond residential and parking are
considered for this block, offi ces would
be appropriate, and perhaps some
minor or ancillary commercial services,
however retail uses are prohibited on
this block, in order to support the
Specifi c Plan goal that retail uses locate
within the 14-block Downtown Core.

It would be appropriate to develop this
block with land use intensity, and four
story heights are allowed on this block,
subject to Design Review.

Block 17: This block has a Public
Facility (General Plan) and D-PF
(Zoning Ordinance) designation. This
block is not within the GFO district.

This block is the site of the South
County Courthouse, which opened in
April 2009. This block is also the site of
a planned fi re station and a pedestrian
plaza connection offering an at-grade
pedestrian/bike connection across the
railroad tracks to East Third Street.

Block 18: This block is planned for
a mix of uses. The existing parcels
with frontage on Butterfi eld Boulevard
are proposed for a General Plan
change from “Mixed Use” to “Offi ce
Industrial” and a zoning change from
“PUD” to “CO - Administrative
Offi ce”. The parcel containing the
existing Mama Mia’s restaurant would
remain designated Mixed Use, with
a CC-R zoning. The parcels on the
remainder of the block are proposed
for a General Plan change from “Mixed
Use” to “Multi-Family Medium” and
a zoning change from “PUD” to
“D-R3 Downtown Medium Density
Residential/PUD”, and this portion of
the block has 80 residential allocations
in place.
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November 2009
Morgan Hill Downtown Specific Plan
2-20
Block 19: This block is outside of
the Specifi c Plan boundary, but is
recommended for land use designation
changes concurrent with adoption of
this Specifi c Plan. This block has a
Mixed Use (General Plan) and CC-R
(Zoning Ordinance) designation. This
block is not within the GFO district.

The projected redevelopment offers the
potential for a mixed-use development
with 27 dwelling units and 25,000
square feet of offi ce uses fronting
Monterey Road, south of the existing
school auditorium.

Block 20: This block is outside of
the Specifi c Plan boundary, but is
recommended for land use designation
changes concurrent with adoption of
this Specifi c Plan. This block has a
Mixed Use and Multi-Family Medium
(General Plan) and CC-R and R3
(Zoning Ordinance) designation with
a Commercial Use Overlay on the
R-3 portion. This block is not within
the GFO district. The projected
redevelopment offers the potential for
mixed use development east of the
creek easement and medium density
residential units west of the creek
easement, to total approximately 90
dwelling units and 17,000 square feet of
ground-fl oor retail uses on the block.

However, due to 2008/2009 Recession
conditions, it was determined that the
Master EIR Traffi c Study would assume
continued commercial use of the block,
in order to present “worst case” traffi c
conditions. The previously projected
82 new residential units for this block
were shifted for the purpose of the
Traffi c Study to Block 16, the Caltrain
parking lot site. The goal of the Plan
for the westerly portion of the block
is for multi-family medium use, but a
Commercial Use Overlay District will
allow for a Commercial Administrative
Use Permit Process for at least 5
years so that commercial use can
continue to occur in the interim before
redevelopment of the block is feasible.
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Ground Floor Overlay District and
Downtown Administrative Use Permit
To enhance the pedestrian character of Downtown
and assist in guiding the location of businesses
in support of Downtown’s vision, ground fl oor
spaces along portions of Monterey Road and
Third Street within the Downtown Ground Floor
Overlay District (GFO) will be restricted to retail
shops, restaurant and entertainment uses, and
certain service commercial businesses that are
determined to support a continuity of display
window visual interest. These businesses could
include fl orists, dry cleaners, and similar uses that
serve the community and commuters on a daily
or weekly basis. Recently constructed buildings
that are clearly designed for offi ce uses and civic
buildings are not included in the GFO (assessor
parcel numbers 767-07-027, -028, and -029). See
Figure 6 for the location of the GFO.

The Downtown Administrative Use Permit
(DAUP) allows for commercial, professional and
medical offi ce uses, and personal services uses to
locate in fi rst fl oor locations on parcels located
within the GFO district if the retail market is not
yet suffi ciently strong to accommodate a retail
use within the space. Ground fl oor personal
service uses may be allowed within a tenant space
if the use is ancillary to a retail use occupying
the same space and will provide continuity of
display window visual interest that includes the
retail component.