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Home My WebLink About06/21/1994, C-4 - APPROPRIATION LIMIT FOR FISCAL YEAR 1994-95 M. III I��VIIII��IIUn�u�� City Of San IDIS OBISPO M6 — / IN - MEM NUMBER 8jiS COUNCIL AGENDA REPORT FROM: William C. Statler, Director of Finance f J� Prepared by: Carolyn Dominguez, Accounting Manager C SUBJECT: APPROPRIATION LIMIT FOR FISCAL YEAR 1994-95 CAO RECOMMENDATION Adopt a resolution establishing the Appropriation Limit for Fiscal Year 1994-95. DISCUSSION Overview Under the Gann Spending-Limitation Initiative adopted in June of 1979 (and subsequently modified by Proposition 111 in June of 1990), the City is required to adopt an Appropriation Limit for each fiscal year. For 1994-95, it is projected that appropriations subject to limitation will be $6.8 million less than the calculated limit of $23.6 million. Background The Gann Spending-Limitation Initiative (Article XIIIB of the State Constitution) as amended by Proposition 111 in June of 1990, calls for the annual adoption of the City's Appropriation Limit by resolution. Additionally, it requires a recorded vote of the Council regarding the annual adjustment factors selected for each year. Key Concepts The Gann Spending-Limitation Initiative provides for the limitation of state and local government appropriations. As discussed in the following summary of the major provisions of the Gann Initiative and Proposition 111 modifications, the Gann Initiative is actually a limitation on tax revenues rather than a direct limitation on appropriations: ■ Appropriations subject to limitation may not exceed appropriations made in 1978- 79 except as adjusted for increases in the cost of living, population, and service responsibility transfers. ■ Appropriations financed through service fees (to the degree that they do not exceed the cost of performing the service), grant programs, fines and forfeitures, and other specified "non-tax" sources are not subject to the Appropriations Limit. Additionally,appropriations for long-term indebtedness incurred prior to FY 1978- 79, debt service on qualified capital outlays 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 the proceeds of taxes are subject to limitation. � � / ��n�►nH►�►Illlli�p� IIUpi city of sari AS ogispo COUNCIL AGENDA REPORT ■ For the purpose of identifying proceeds from taxes under the Gann Initiative,state subventions which are unrestricted as to their use (such as Motor Vehicle revenues) are considered to be tax sources. Gas Tax and Transportation Development Act Funds are identified as non-tax sources as their use is restricted by the State. ■ Under the original Gann Initiative, all proceeds from taxes received in excess of the Appropriations Limit were required to be returned through refunds or revisions in tax rates and fee schedules within the next two fiscal years; or voter approval to increase the Appropriation Limit was required. Proposition 111 provides a one-year carryover feature to determine excess revenues: 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 increase to the Appropriation Limit is valid for a period not to exceed four years. i ■ Proposition 111 requires that the annual calculation be reviewed as part of the annual financial audit. Originally, the Gann Initiative was self-executing, requiring no formal review. ■ 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 Appropriation Limit, not actual expenditures or appropriations, may have to be returned. i Adjustment Factors The annual adjustment factors for changes in population and cost of living for the j Appropriations Limit calculation must be selected by a recorded vote of the Council and include the following: i Cost of Loving. Local governments may annually choose either the change in California per capita personal income or the percentage change in the jurisdictions' assessed valuation which is attributable to nonresidential new construction. Prior to Proposition 111 the inflation factor used was the lesser of U.S. Consumer Price Index or California per capita personal income. Population. Cities may annually choose either the City population growth or the County population growth. Previously only the City growth factor was allowed. These figures are provided by the State Department of Finance, Population Research Unit. The data necessary to calculate the increase in the non-residential assessed valuation is not readily available. Therefore, the cost of living factor used is the California Per Capita Income. When the non-residential construction data is available,. the Limit can be recalculated and retroactively adopted if different results are. anticipated. For this year's calculations, the County's population growth factor exceeded the City's factor. i�ii�l�►�►►�i�ililllllli;;�9��@I city Of San LUIS OBISPO COUNCIL AGENDA REPORT Calculation Summary A summary of the City's Appropriation Limit history is provided in Attachment A. As reflected in this summary, the City's Limit for 1994-95 is $23,600,000 calculated as follows: 1993-94 Limit $23,110,100 i Adjustment Factors A. Cost of Living Options 1. Percentage change in non-residential assessed valuation Not Available 2. Percentage change in California Per Capita income 0.71% i B. Population Options 1. Percentage change in City population 0.71% 2. Percentage change in County population 1.40% Compound Percentage Factor 1.0212% 1994-95 Limit $23,600,000 i The options highlighted in boldprint are the recommended adjustment factors in determining our Appropriation Limit for 1994-95.. FISCAL IMPACT Because tax revenues have not kept pace with changes in population and cost-of-living and because of the favorable impacts of Proposition 111 in calculating the Appropriations Limit and determining appropriations subject to the Limit, there is no negative fiscal impact resulting from adoption of the Limit. The following is a summary of the variance i between the City's Appropriations Limit and our projected appropriations subject to this Limit for 1994-95: 1994-95 Estimated Appropriations Limit $23,600,000 Estimated Appropriations Subject to Limit 16.778.400 Favorable Variance $ 6,821,600 ATTACHMENT Resolution adopting the Appropriation Limit for 1994-95 Exhibit A. Appropriations Limit History c�-3 RESOLUTION NO. (1994 Series) A RESOLUTION OF COUNCIL OF THE CITY OF SAN LUIS OBISPO ADOPTING THE APPROPRIATION LIMIT AND SELECTING THE ADJUSTMENT FACTORS FOR THE FISCAL YEAR 1994-1995 WHEREAS, the voters approved the Gann Spending-Limitation Initiative on November 6, 1979 and Proposition 111 on June 5, 1990, which established and defined annual appropriation limits on State and local government entities; and, WHEREAS,regulations provide for the establishment by resolution by the governing body of each local jurisdiction of its appropriations limit and the annual adjustment factors; and, WHEREAS, the required computations to determine the estimated appropriations subject to limitation for Fiscal Year 1994-95 have been performed by the Department of Finance and are available for public review. NOW, THEREFORE, BE IT RESOLVED, that the Council of the City of San Luis Obispo does hereby adopt the following appropriation limit and annual adjustment factors for Fiscal Year 1994-95: Appropriations Limit, 1993-94 $23,110,100 Cost of Living Factor California Per Capita Income 0.71% Population Factor County Population Growth 1.40% Appropriations Limit, 1993-94 $23,600,000 Resolution No. (1994 Series) Page 2 Uponmotionof ,secondedby and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted this day of 1994. Peg Pinard, Mayor ATTEST: City Clerk APPROVED AS TO FORM for y �s City of San Luis Obispo APPROPRIATION LIMIT HISTORY ExhibilA Limit Inflation Population Appropriation Appropriations Fiscal Year Base Factor Factor Limit Subject to Limit Variance 1978-79 $8,018,152 1979-80 $8,018,152 1.1017 0.9966 8,803,.564 $6,189,680 $2,613,884 1980-81 8,803,564 1.1211 1.0052 9,920,998 5,795,468 4,125,530 1981-82 9,920,998 1.0912 1.0103 10,937,298 8,296,846 2,640,452 1982-83 10,937,298 1.0679 1.0259 11,982,451 8,247,797 3,734,654 1983-84 11,982,451 1.0235 1.0142 12,438,188 9,414,875 3,023,313 1984-85 12,438,188 1.0474 1.0213 13,305,250 10,356,484 2,948,766 1985-86 13,305,250 1.0374 1.0204 14,084,445 11,451,837 2,632,608 1986-87 14,084,445 1.0230 1.0297 14,836,316 13,081,774 1,754,542 Pre-Prop 111 1987-88 14,836,316 1.0304 1.0071 15,395,880 14,411,701 984,179 1988-89 15,395,880 1.0393 1.0410 16,656,977 15,22.3,479 1,433,498 1989-90 16,656,977 1.0498 1.0293 17,998,848 16,753,800 1,245,048 Post-Prop 111 1987-88 14,836,316 1.0347 1.0293 15,800,924 14,411,701 1,389,223 1988-89 15,800,924 1.0466 1.0410 17,215,275 15,223,479 1,991,796 1989-90 17,215,275 1.0519 1.0392 18,818,610 16,691,715 2,126,895 1990-91 18,818,610 1.0421 1.0459 20,511,013 15,005,409 .5,505,604 1991-92 20,511,013 1.0414 1.0304 22,009,.518 14,911,057 7,098,461 1992-93 22,009,518 0.9936 1.0100 22,087 343 18,094,926 3,992,417 1993-94* 22,087,343 1.0272 1.0186 23,110,118 1.5,215,044 7,895,074 1994-95 * 23,110,118 1.0071 1.0140 23,600,039 16,778,400 6,821,639 ' Appropriations subject to limit are estimates for these two years. • J n�