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HomeMy WebLinkAbout06-19-2012 c6 appropriations limit for 2012-13counci ljaGEnaa uEpont C I T Y O F S A N L U I S O B I S P O FROM : Charles Bourbeau, Director of Finance & Information Technolog y Debbie Malicoat, Finance Manage r SUBJECT : APPROPRIATIONS LIMIT FOR 2012-1 3 RECOMMENDATION Adopt a resolution establishing the City's appropriations limit for 2012-13 . DISCUSSION Overview Under the Gann Spending-Limitation Initiative (Article XIII B of the State Constitution) adopte d as Proposition 4 in June 1979 (and subsequently modified by Proposition 111 in June 1990), th e City is required to annually adopt a resolution setting an appropriations limit for the upcomin g fiscal year . For 2012-13, staff project that the City's appropriations subject to limitation will b e $40 .1 million, which is $11 .3 million less than the calculated limit of $51 .4 million . Background and Key Concept s The Gann Spending-Limitation Initiative provides for the limitation of state and loca l government appropriations . As discussed in the following summary of the major provisions o f the Gann Initiative and Proposition 111 modifications, the Gann Initiative is actually a limitatio n on tax revenues rather than a direct limitation on appropriations : Appropriations subject to limitation may not exceed appropriations made in 1978-79 excep t as adjusted for increases in the cost of living, population and service responsibility transfers . 2 . Appropriations financed through service fees (to the degree that they do not exceed the cos t of performing the service), grant programs, fines and forfeitures, and other specified "non - tax" sources are not subject to the appropriations limit . Additionally, appropriations fo r long-term indebtedness incurred prior to 1978-79, debt service on qualified capital outlay s beginning in 1990-91, qualified capital outlays in excess of $100,000 and increased costs as a result of federally-mandated programs, are also excluded from the limit .Essentially, with the exception of major capital-related expenditures, all appropriations funded through ta x revenues are subject to limitation . For the purpose of identifying "proceeds from taxes" under the Gann Initiative, stat e subventions that are unrestricted as to their use (such as motor vehicle in-lieu revenues) ar e considered to be tax sources . On the other hand, the use of subventions like gas tax and transportation development act funds is restricted by the State, and as such, is classified a s non-tax sources . Meeting Date 6—19—201 2 Item Number C6 Appropriations Limit for 2012-13 Page 2 4.Under the original Gann Initiative, all proceeds from taxes received in excess of th e appropriations limit were required to be returned through refunds or revisions in tax rates an d fee schedules within the next two fiscal years ; or voter approval to increase th e appropriations limit was required. Proposition 111 provides a one-year carryover feature t o determine excess revenues under which refunds can be avoided if in the subsequent year the City is below the limit by the amount of the prior year excess . Any voter-approved increas e to the appropriations limit cannot exceed four years . 5.Originally, the Gann Initiative was self-executing, requiring no formal review ; however, Proposition 111 requires that the annual calculation be reviewed as part of the annua l financial audit . 6.Major concepts in implementing the Gann Initiative as modified by Proposition 111 include : appropriations funded through tax sources are subject to the limit, not actual expenditures ; and any excess of actual tax revenues over the appropriations limit, not actual expenditures or appropriations, are subject to refund. Adjustment Factor s The annual adjustment factors for changes in population and cost of living for the appropriation s limit calculation must be selected by a recorded vote of the Council and include the following : 1.Population .Based on data provided annually by the State Department of Finance, cities ma y annually choose either the growth in their city's or the county's population . For this year's calculation, the County's population growth factor (which exceeded the City's factor) is the recommended adjustment factor as discussed below . 2.Cost of living.Local governments may annually choose either the percentage change i n California per capita personal income or the percentage change in their jurisdiction's assesse d valuation that is attributable to non-residential new construction . Data for the percentage change in California per capita personal income change is provide d annually by the State Department of Finance . Data for the preceding year in calculating th e increase in the non-residential assessed valuation is not currently available . from the County ; therefore, the recommended cost of living factor is California per capita income . However, when non-residential construction data becomes available from the County, the limit can b e recalculated and retroactively adopted if different results are anticipated . Appropriations Limit for 2012-13 Page 3 Calculation Summary A summary of the City's appropriations limit history is provided in Attachment 2 . As reflecte d in that summary, the City's limit for 2012-13 is $51,423,500 calculated as follows : Appropriations Limit Calculatio n 2011-12 Appropriations Limit $49,323,40 0 Adjustment Factor s A. Cost of Living Option s 1 . Percentage change in assessed value in the preceding year due t o new non-residential construction. 2 . Percentage change in California per capita income Not currently availabl e 3.77% B . Population Option s 1 . Percentage change in City population 0 .09 % 2 . Percentage change in County population 0.47% Compound Percentage Factor (multiplicative not additive)1.0426 % 2012-13 Appropriations Limit $51,423,50 0 The options highlighted in bold italics are the recommended adjustment factors in determinin g our appropriations limit for 2012-13 . FISCAL IMPAC T There is no negative fiscal impact resulting from adoption of the limit for 2012-13 . The following summarizes the variance between the City's appropriations limit and our projecte d appropriations subject to this limit for 2012-13 : 2012-13 Estimat e Appropriations Limit $51,423,50 0 Estimated Appropriations Subject to Limit 40,154,900 Favorable Variance $11,268,600 ATTACHMENT S 1.Resolution adopting the City's appropriations limit for 2012-1 3 2.City's appropriations limit histor y G:\Budget Folders\B . Financial Plan Supplements\2011-13 Financial Plan Supplement - 2012-13 Budget\Appropriations Limit\Appropriatio n Limit Council Agenda Report - June 19 2012 .doc Attachment 1 RESOLUTION NO . (2012 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISP O ADOPTING THE APPROPRIATIONS LIMIT FOR 2012-1 3 WHEREAS, the voters approved the Gann Spending-Limitation Initiative on November 6 , 1979 and Proposition 111 on June 5, 1990, which establish and define annual appropriation limit s on state and local government agencies; and WHEREAS, regulations require that the governing body of each local agency establish it s appropriations limit and annual adjustment factors by resolution ; and WHEREAS, the required calculations to determine the City's appropriations limit an d estimated appropriations subject to limitation for 2012-13 have been performed by the Department of Finance & Information Technology and are available for public review . NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis Obisp o hereby adopts the City's appropriations limit and annual adjustment factors for 2012-13 as follows : Appropriations Limit : 2011-12 $49,323,40 0 Cost of Living Factor: Percent change in California per capita income 3 .77 % Population Factor : County Population Growth 0 .47 % Compound Percentage Factor (multiplicative not additive) 1 .043 % Appropriations Limit : 2012-13 $51,423,500 Upon motion of , seconded by and on the following vote : AYES : NOES : ABSENT : the foregoing resolution was adopted on June 19, 2012 . Mayor Jan H . Marx ATTEST : Sheryll Schroeder, Interim City Cler k APPROVED AS TO FORM : J . Christine Dietrick, City Attorney C6-4 Attachment 2 FINANCIAL AND STATISTICAL TABLE S APPROPRIATIONS LIMIT HISTORY The Gann Spending Limit Initiative ,a State constitutional amendment adopted by the voters on June 6, 1979, restrict s appropriations from tax revenues by State and local governments . Under its provisions, no local agency can appropriate proceeds o f taxes in excess of its "appropriations limit ." Excess funds ma y be carried over into the next year . However, any excess fund s remaining after the second year must be returned to taxpayers b y reducing tax rates or fees ; or a majority of the voters may approv e an override to increase the limit . The following summarizes changes in the City's appropriation s limit and appropriations subject to the limit since the effective dat e of the initiative . While there are exceptions, in general, the City's appropriations limit increases annually by compound changes i n cost-of-living and population . This summary also reflects change s made by Proposition 111 (adopted in June 1990) in determinin g the appropriations limit as well as the appropriations subject to it . * Appropriations subject to limit are estimates for these years . Cost-of-Living Populatio n Factor Factor Appropriations Appropriation s Limit Subject to Limi tFiscal Year Limit Base Varianc e Post-Proposition 11 1 1987-88 14,836,30 0 1988-89 15,800,90 0 1989-90 17,215,20 0 1990-91 18,818,60 0 1991-92 20,511,000 1992-93 22,009,500 1993-94 22,087,30 0 1994-95 23,110,10 0 1995-96 23,600,00 0 1996-97 25,109,30 0 1997-98 26,889,00 0 1998-99 28,724,50 0 1999-00 29,671,30 0 2000-01 31,717,10 0 2001-02 34,093,00 0 2002-03 34,821,20 0 2003-04 35,565,00 0 2004-05 36,866,70 0 2005-06 38,513,10 0 2006-07 41,021,30 0 2007-08 42,957,10 0 2008-09 45,286,40 0 2009-10 47,758,20 0 2010-11 48,540,60 0 2011-12*47,296,80 0 2012-13*48,886,400 3 .47% 4 .66% 5 .19% 4 .21 % 4 .14% -0 .64% 2 .72 % 0 .71 % 4 .72 % 4 .67 % 4 .67 % 4 .15 % 4 .53 % 4 .91 % 0 .33 % 0 .33 % 2 .31 % 3 .28 % 5 .26 % 3 .96 % 4.42 % 4 .29 % 0.62 % -2 .54 % 2 .51 % 3 .77% 2 .93 % 4 .10 % 3 .92 % 4 .59 % 3 .04 % 1 .00 % 1 .86 % 1 .40 % 1 .60 % 2 .31 % 2 .06 % 2 .70 % 2 .28 % 2 .46% 1 .80 % 1 .80 % 1 .32 % 1 .15 % 1 .19% 0 .73 % 0 .96% 1 .12% 1 .01 % 0 .87 % 0 .83 % 0 .47% 15,800,90 0 17,215,20 0 18,818,60 0 20,511,00 0 22,009,50 0 22,087,30 0 23,110,100 23,600,000 25,109,300 26,889,000 28,724,500 29,671,300 31,717,10 0 34,093,00 0 34,821,20 0 35,565,00 0 36,866,700 38,513,10 0 41,021,30 0 42,957,10 0 45,286,40 0 47,758,20 0 48,540,60 0 47,296,80 0 48,886,40 0 50,967,800 14,41 .1,700 1,389,20 0 15,223,500 1,991,700 16,691,800 2,126,800 15,005,400 5,505,600 . 14,911,100 7,098,400 18,094,900 .3,992,400 15,215,000 7,895,100 16,778,400 6,821,600 15,530,800 9,578,500 16,825,500 10,063,500 17,513,200 .11,211,300 17,291,800 12,379,500 18,030,500 .13,686,60 0 18,802,000 15,291,00 0 23,227,900 11,593,30 0 23,018,400 12,546,60 0 23,072,400 13,794,30 0 27,670,400 10,842,70 0 32,371,900 8,649,40 0 30,757,100 12,200,00 0 36,582,900 8,703,50 0 36,795,300 10,962,900 ' 27 ;159,400 21,381,200 . 32,058,100 15,238,70 0 36,155,500 12,730,90 0 40,154 ;900 10,812,90 0 Appropriations Limit : 1988 to 201 1 $52,500,000 $45,000,000 $37,500,000 $30,000,00 0 $22,500,00 0 $15,000,00 0 $7,500,00 0 $o Fiscal Year Endin g Appropriations Limit Appropriations Subject to Limi t H-35 C6-5 Page intentionally lef t blank .