City Beat
By Maureen Tobin,
Communications & Engagement Manager
City of Morgan Hill Budget Basics: General Fund Revenue Sources
R
evenue for the City of Morgan Hill is generated from
taxes, building permit fees, business licenses, recreation
memberships, water and sewer user fees and more. The
revenue, or income, is deposited into different funds, like bank
accounts. Unlike personal bank accounts where funds can easily
be transferred from one account to another, the City must comply
with strict laws that require that certain money be maintained
in separate funds and spent for specifi c purposes. For example,
the City cannot increase water rates to pay for police services.
Revenue that is not reserved for a specifi c purpose, like taxes, is
directed into the City’s General Fund, which pays for the general
operations of the City such as: police and fi re services, parks
and street maintenance, economic development, recreation and
community services.
Most of the general fund money comes from the following
primary sources: property tax, sales tax and hotel taxes (TOT).
Current services is made up of recreation fees for service and
other service fees. Since many of these revenue sources are
sensitive to economic conditions, the City of Morgan Hill is
exploring additional funding sources for the future.
Sales Tax
Sales tax is a consumption tax imposed on the sale of certain
goods. The sales and use tax rate for Santa Clara County is 9%,
of which Morgan Hill’s share is 1%. Revenues from sales tax are
expected to reach $9.9 million in the current fi scal year, or 25%
of the total General Fund projected revenue. It is the second
largest revenue source for the City’s general fund.
Transient Occupancy Tax (Hotel Tax)
Transient Occupancy Tax (TOT) is a tax imposed on persons
staying 30 days or less in hotels or other lodging facilities in the
City. TOT revenue for FY 2018-19 and FY 2019-20 is estimated
at $2.8 million and $3.1 million, respectively. Measure H
was passed by Morgan Hill voters in November of 2018 and
increases the TOT in Morgan Hill by 1% (from 10% to11%)
effective March 2019. It is anticipated that this new TOT rate
will bring in an additional $280,000 – $300,000 in general fund
revenue annually.
For more information about all the City of Morgan Hill’s
revenue sources and entire city budget, please visit
morgan-hill.ca.gov/463/Budget.
Property Tax
Property tax is a tax on real property and tangible personal property
based on the assessed property value. The State Constitution
limits the real property tax rate to 1% of the property’s assessed
value plus voter-approved debt rates, parcel taxes, Mello-Roos
taxes, and assessments. The largest portion of property taxes
supports local schools. Morgan Hill’s share of the 1% is equivalent
to 10 cents for every $1.00 collected from property taxes. For the
current fi scal year, FY 2018-19, property tax is projected at $11.8
million or 29% of the total General Fund revenues. Property tax is
the largest revenue source of the General Fund.
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GILROY • MORGAN HILL • SAN MARTIN
april/may 2019
gmhtoday.com