HomeMy WebLinkAbout06/18/1996, C-3 - APPROPRIATIONS LIMIT FOR FISCAL YEAR 1996-97 council °_ Cr
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CITY OF SAN LUIS OBISPO
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FROM: Bill Statler, Director of Finance n
Prepared By. Carolyn Dominguez, Accounting Manager 0,
SUBJECT: APPROPRIATIONS LIMIT FOR FISCAL YEAR 1996-97
CAO RECOMMENDATION
Adopt a resolution establishing the Appropriations Limit for Fiscal Year 1996-97
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
Appropriations Limit for each fiscal year. For 1996-97, it is projected that appropriations
subject to limitation will be $10.1 million less than the calculated limit of $26.9 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
Appropriations 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
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Council Agenda Report - Appropriations limit for 1996-97
Page 2
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.
■ 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 in-lieu
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 Appropriations 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 Appropriations Limit is valid for a period not to
exceed four years.
■ 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 annual financial audit
■ 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, 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 Lh*.. Local governments may annually choose either the change in
California per capita personal income or the percentage change in their jurisdiction's
assessed valuation which is attributable to non-residential new construction.
■ Population. Cities may annually choose either the City population growth or the
County population growth.
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
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Council Agenda Report - Appropriations Limit for 1996-97
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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.
Calculation Summary
A summary of the City's Appropriations Limit history is provided in Exhibit A. As reflected
in this summary, the City's Limit for 1996-97 is $26,889,000 calculated as follows:
1995-96 Lbnit $25,109,300
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 4.67%
B. Population Options
1. Percentage change in City population 1.57%
2. Percentage change in County population 2.31%
Compound Percentage Factor 7.09%
1996-97 L bnit $26,889,000
The options highlighted in bold print are the recommended adjustment factors in
determining our Appropriations Limit for 1996-97.
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 between
the City's Appropriations Limit and our projected appropriations subject to this Limit for
1996-97:
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Council Agenda Report - Appropriations Limit for'1996-97
Page 4
1996=97
Estimated
Appropriations Limit $26,889,000
'Estimated.Appropriations Subject t6 timit 16:82 1500
Favorable Variance $10;063;500
ATTACHMENTS
Resolution adopting.the Appropriations Limit for 1996=97. .
EXHIBITS
A. Appropriations Limit History
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RESOLUTION NO. (1996 Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING THE APPROPRIATIONS LIMIT AND SELECTING
ADJUSTMENT FACTORS FOR FISCAL YEAR 1996-97
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
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 1996-97 have been performed by the Department of Finance and are
available for public review.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of San Luis
Obispo hereby adopts the following appropriations limit and annual adjustment factors for Fiscal
Year 1996-97:
Appropriations Limit, 1995-96 $25,109,300
Cost of Living Factor
California Per Capita Income 4.67%
Population Factor
County Population Growth 2.31%
Appropriations Limit, 1996-97 $26,889,000
Upon motion of seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this _ - _ day of ,
1996: -- --- - —- - - --
ATTEST:
City Clerk Mayor Allen Settle
APPROVED.AS TO FORM:
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FINANCIAL AND STA i`iSTICAL TABLES Exhibit A
APPROPRIATIONS LIMIT HISTORY
The Gann spending limit imitative,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
Emit 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% 052% 9,920,998 5,795,468 4,125,530
1981-82 9,920,998 9.12% 1.03% 10,937,298 8,296,846 2,640,452
1982-83 10,937,298 6.79% 259% 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% 13,305250 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 14,836316 3.04% 0.71% 15,395,880 14,411,701 984,179
1988-89 15,39500 3.93% 4.10% 16,656,977 15,223,479 1,433,498
1989-90 16,656,977 4.98% 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 15,800,924 4.66% 4.10% 17,215,275 15,223,479 1,991,796
1989-90 17,215,275 5.19% 3.92% 18,818,610 16,691,715 2,126,895
1990-91 18,818,610 421% 459% 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% 22,087„343 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
1996-97s 25,109,300 4.67% 231% 26,889,000 16,825,500 10,063,500
•Appropriations subject to limit are estimates for this year.
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