HomeMy WebLinkAbout06/20/2000, C7 - APPROPRIATIONS LIMIT FOR 2000-01 council MamgDw
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CITY O F SAN LUIS O B I S P O
FROM: Bill Statler,Director of Finance
Prepared By: Carolyn Dominguez,Accounting Manager e-
SUBJECT: APPROPRIATIONS I=FOR 2000-01
CAO RECONDKENDATION
Adopt a resolution establishing the City's appropriations limit for 2000-01.
DISCUSSION
Overview
Under the Gann Spending-Limitation Initiative (Article XIII B of the State Constitution) adopted
as Proposition 4 in June of 1979 (and subsequently modified by Proposition 111 in June of
1990), the City is required to annually adopt a resolution setting an appropriations limit for the
upcoming fiscal year. For 2000-01,we project that the City's appropriations subject to limitation
will be about$18.2 million,which is $16.5 million less than the calculated limit of$35.3 million.
Background and 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 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 tax revenues are subject to limitation.
■ For the purpose of identifying `proceeds from taxes" under the Gann Initiative, state
subventions that are unrestricted as to their use (such as motor vehicle in-lieu revenues)
are considered to be tax sources. On the other hand, the use of subventions like gas tax
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Council Agenda Report—Appropriations Limit for 2000-01
Page 2
and transportation development act funds is restricted by the State, and as such, are
classified as non-tax sources.
■ 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 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 increase to the appropriations limit cannot 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, are subject to refimd.
Adjustment Factors
The annual adjustment factors for changes in population and cost of living for the appropriations
Emit calculation must be selected by a recorded vote of the Council, and include the following:
■ Cost of living. 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 growth in their city's or the county's
population.
With the exception of assessed value changes, which would need to be provided by the County,
the data needed to calculate the City's appropriation limit is provided by the State Department of
Finance. The data necessary to calculate the increase in the non-residential assessed valuation is
not readily available from the County; therefore, the recommended cost of living factor is
California per capita income. When non-residential construction data becomes available from
the County, the limit can be recalculated and retroactively adopted if different results are
anticipated. 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.
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Council Agenda ReportAppropriations Limit for 2000-01
Page 3
Calculation Summary
A summary of the City's appropriations limit history is attached. As reflected in that summary,
the City's limit for 2000-01 is$35,309,000 calculated as follows:
Appropriations Limit Calculation
1999-00 Appropriations Limit $32,848,400
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 4.91%
B. Population Options
1. Percentage change in City population 1.37%
2. Percentage change in County population 2.46%
Compound Percentage Factor 7.49%
2000-01 Appropriations Limit $3573099000
The options highlighted in bold print are the recommended adjustment factors in determining our
appropriations limit for 2000-01.
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 in
determining appropriations subject to the limit, there is no negative fiscal impact resulting from
adoption of the limit for 2000-01. The following summarizes the variance between the City's
appropriations limit and our projected appropriations subject to this limit for 2000-01:
2000-01 Estimate
Appropriations Limit $35,309,000
Estimated Appropriations Subject to Limit 18,802,000
Favorable Variance $1695079900
ATTACHMENTS
■ Resolution adopting the City's appropriations limit for 2000-01
■ City's appropriations limit history
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ATTACHMENT 1
RESOLUTION N0. (2000 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING THE APPROPRIATIONS LIMIT FOR 2000-01
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 agencies; and
WHEREAS, regulations require that the governing body of each local agency establish its
appropriations limit and annual adjustment factors by resolution; and
WHEREAS, the required calculations to determine the City's appropriations limit and
estimated appropriations subject to limitation for 2000-01 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
hereby adopts the City's appropriations limit and annual adjustment factors for 2000-01 as follows:
Appropriations Limit: 1999-00 $32,848,400
Cost of Living Factor. California Per Capita Income 4.91%
Population Factor. County Population Growth 2.46%
Appropriations Limit: 2000-01 $35,309,000
Upon motion of ,seconded by ,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted this day of ,2000.
Mayor Allen Settle
ATTEST:
Lee Price, City Clerk
APPROVED AS TO FORM:
J . Jor ease Ci Attorney
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ATTACHMENT Z
APPROPRIATIONS LUvff 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"appropriations 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 retained 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 appropriations limit and appropriations subject to the
limit since the effective date of the Gann spending initiative(1978-79). In general,the City's appropriations limit
can increase annually by compound changes in cost-of-living and population. This summary reflects
modifications made by Proposition 111 in June of 1990,which ganged the methodology for determining the
appropriations limit as well as the appropriations subject to it.
Cost-of-Living Population Appropriations Appropriations
Fiscal Year Limit Base Factor Factor Limit Subject to Limit Variance
1978-79 $8,018,200
1979-80 $8,018,200 10.17% -0.34% 8,803,600 $6,189,700 2,613,900
1980-81 8,803,600 12.11% 0.52% 9,921,000 5,795,500 4,125,500
1981-82 9,921,000 9.12% 1.03% 10,937,300 8,296,800 2,640,500
1982-83 10,937,300 6.79% 2.59% 11,982,500 8,247,800 3,734,700
1983-84 11,982,500 235% 1.42% 12,438;200 9,414,900 3,023,300
198485 12,438,200 4.74% 2.13% 13,305,300 10,356,500 2,948,800
1985-86 13,305,300 3.74% 2.04% 14,084,500 11,451,800 2,632,700
1986-87 14,084,500 2.30% 2.97% 14,836,300 13,081,800 1,754,500
Pre-Proposition 111
1987-88 14,836,300 3.04% 0.71% 15,395,900 14,411,700 984,200
1988-89 15,395,900 3.93% 4.10% 16,657,000 15,223,500 1,433,500
1989-90 16,657,000 4.98% 2.93% 17,998,800 16,753,800 1,245,000
Post-Proposition 111
1987-88 14,836,300 3.47% 2.93% 15,800,900 14,411,700 1,389,200
1988-89 15,800,900 4.66% 4.10% 17,215,200 15,223,500 1,991,700
1989-90 . 17,215,200 5.19% 3.92% 18,818,600 16,691,800 2,126,800
1990-91 18,818,600 4.21% 4.59% 20,511,000 15,005,400 5,505,600
1991-92 20,511,000 4.14% 3.04% 22,009,500 14,911,100 7;098,400
1992-93 22,009,500 -0.64% 1.00% 22~087,300 18,094,900 3,992,400
1993794 22,087,300 2.72% 1.86% 23,110,100 15,215,000 7,895,100
199495 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
1996-97 25,109,300 4.67% 2.31% 26,889,000 16,825,500 10,063,500
1997-98 26,889,000 4.67% 2.06% 28,724,500 17,513,200 11,211,300
1998-99 28,724,500 4.15% 2.70% 30,724,300 17,291,800 13,432,500
1999-00* 30,724,300 4.53% 2.28% 32,848,400 18,030,500 14,817,900
2000-01 * 32,848,400 4.91% 2.46% 35,309,000 18,802,000 16,507,000
*Appznpriations subject to limit are estimates for these years.
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