HomeMy WebLinkAbout06/20/1995, 1E - APPROPRIATION LIMIT FOR FISCAL YEAR 1995-96 MEETING DATE:
city of san 6.-A s OBISPO - o - s
COUNCIL AGENDA REPORT Iii"NUMBER:
FROM: William C. Statler, Director of Finance
Prepared by: Carolyn Dominguez, Accounting Manager 66
SUBJECT: APPROPRIATION LIMIT FOR FISCAL YEAR 1995-96
CAO RECOMMENDATION
Adopt a resolution establishing the Appropriation Limit for Fiscal Year 1995-96.
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 1995-96, it is projected that appropriations subject to
limitation will be $9.6 million less than the calculated limit of $25.1 million.
Background
The Gann Spending-Limitation Initiative (Article = 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.
MY Of San ' -I S OBS SPO
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.
■ 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
Adjustment Factors
The annual adjustment factors for changes in population and cost of living for the
Appropriations Limit calculation must be selected by a recorded vote of the Council and
include the following.
Cast of Livig 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.
PopuladwL 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. c'
City Of san lis OBI SPO
COUNCIL AGENDA REART
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 .1995-96 is $25,109,300 calculated as
follows:
1994-95 Limit $239600,000
Adjumnent Factors
A. Cost of Living Options
1. Percentage change in non-residential
assessed valuation Not Available
2. Percentage change in California
Per Capita income 4.72%
B. Population Options
1. Percentage change in City population -2.22%
2. Percentage change in County population 1.60%
Compound Percentage Factor 1.06395%
1995-96 Lbnit $25,109,300
The options highlighted in bold print are the recommended adjustment factors in
determining our Appropriation Limit for 1995-96.
FISCAL IWACT
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
between the City's Appropriations Limit and our projected appropriations subject to this
Limit for 1995-96:
1995-96
Estimated
Appropriations Limit $25,109,300
Estimated Appropriations Subject to Limit 15530.800
Favorable Variance $ 9,578,500
ATTACHMENT
Resolution adopting the Appropriation Limit for 1995-96
Exhibit
A. Appropriations Limit History _'
RESOLUTION NO. (1995 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 1995-1996
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 1995-96 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 1995-96:
Appropriations Limit, 199495 $23,6007000
Cost of Living Factor
California Per Capita Income 4.72%
Population Factor
County Population Growth 1.60%
Appropriations Limit, 1995-96 $259109,300
Resolution No. (1995,Series) Pagd 2
Uponmotionof._ _ ,secondedby_. _ _ _ :and
on the following roll call voter
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of 1995.
:Allen Settle, Mayor ------ -- -- ---- -
ATTEST:
City Clerk-- - --- ----- --- ---- .
APPROVED AS TO FORM
FINANCIAL AND STA i ISTICAL TABLES Exhibit-A.
APPROPRIATIONS L ET HISTORY
The Gann spending limit initative,which was adopted by the voters on June 6, 1979,creates a restriction on
the amount of revenue from tax proceeds which can be appropriated in any fiscal year. Under the provisions
of this initiative,a city may not appropriate any proceeds of taxes in excess of its"appropriation limit". If
excess funds are received in any one year,they may be carried over into the subsequent year. Any excess funds
remaining after the second year have to be returned to the taxpayers by reducing tax rates or fees,or as an
alternative,a majority of the voters may approve an override to increase the limit.
The following is a summary of the changes in the City's appropriation limit and appropriations subject to the
limit since the effective date of the Gann spending initiative(fiscal 1978-79). In general,the City's
appropriation limit can increase annually by compound changes in cost-of-living and population. This
summary reflects modifications approved by Proposition 111 in June of 1990,which changed the methodology
for determining the appropriations limit as well as the appropriations subject to it.
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 10.17% -034% 8,803,564 $6,189,680 $2,613,884
1980-81 8,803,564 12.11% 0.52% 9,920,998 5,795,468 4,125,530
1981-82 9190,998 9.12% 1.03% 10,937,298 8,296,846 2,640,452
1982-83 10,937,298 6.79%n 2.59% 11,982,451 8,247,797 3,734,654
1983-84 11,982,451 235% 1.42% 12,438,188 9,414,875 3,023,313
1984-85 12,438,188 4.74% 2.13% 13,305,250 10,356,484 2,948,766
1985-86 13,305,250 3.74% 2.04% 14,084,445 11,451,837 2,632,608
1986-87 14,084,445 230% 2.97% 14,836,316 13,081,774 1,754,542
Pre-Proposition 111
1987-88 14,836,316 3.04% 0.71% 15,395,880 14,411,701 984,179
1988-89 15,395,880 3.93% 4.10% 16,656,977 15,223,479 1,433,498
1989-90 16,656,977 498% 2.93% 17,998,848 16,753,800 1,245,048
Post-Proposition 111
1987-88 14,836,316 3.47% 2.93% 15,800,924 14,411,701 1,389,223
1988-89 15,800,424 4.66% 4.10% .17,215,275 15,223,479 1,991,796
1989-90 17,215,275 5.19% 392% 18,818,610 16,691,715 2,126,895
1990-91 18,818,610 421% 4.59% 20,511,013 15,005,409 5,505,604
1991-92 20,511,013 4.14% 3.04% 22,009,518 14,911,057 7,098,461
1992-93 22,009,518 -0.64% 1.00% 22,087343 18,094,926 3,992,417
1993-94 22,087,343 2.72% 1.86% 23,110,100 15,215,044 7,895,056
1994-95' 23,110,100 0.71% 1.40% 23,600,000 16,778,400 6,821,600 .
1995-96• 23,600,000 4.72% 1.60% 25,109,300 15,530,800 9,578,500
'Appropriations subject to limit are estimates for these years.
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