HomeMy WebLinkAbout06/15/2004, C5 - APPROPRIATIONS LIMIT FOR 2004-05 councit D� 6-15-04
j acEnba REpoRt
CITY OF SAN LUIS OBISPO
FROM: Bill Statler, Director of Finance&Information Technology
Carolyn Dominguez,Finance Manager
SUBJECT: APPROPRIATIONS LIMIT FOR 2004-05
CAO RECOMMENDATION
Adopt a resolution establishing the City's appropriations limit for 2004-05.
DISCUSSION
Overview
Under the Gann Spending-Limitation Initiative (Article JOII 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 2004-05,we project that the City's appropriations subject to limitation
will be about $27.7 million,which is $10.8 million less than the calculated limit of$38.5 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:
1. 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.
2. 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.
3. 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 and
Appropriations Limit for 2004-05 Page 2
transportation development act funds is restricted by the State, and as such, is classified as
non-tax sources.
4. 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.
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 annual
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 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:
1. 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 that
is attributable to non-residential new construction.
2. 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.
Appropriations Limit for 2004-05 Page 3
Calculation Summary
A summary of the City's appropriations limit history is provided in Attachment 2. As reflected in
that summary, the City's limit for 2004-05 is $38,513,100 calculated as follows:
AppropHations Limit Calculation
2003-04 Appropriations Limit $36,865,900
Adjustment Factors
A. Cost of Living Options
1. Percentage change in assessed value due to new non-residential
construction. Not available
2. Percentage change in California per capita income 3.28%
B. Population Options
1. Percentage change in City population -0.11%
2. Percentage change in County population 1.15%
Compound Percentage Factor (multiplicative not additive) 4.47%
2004-05 Appropriations Limit $38,513,100
The options highlighted in bold print are the recommended adjustment factors in determining our
appropriations limit for 2004-05.
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 200405. The following summarizes the variance between the City's
appropriations limit and our projected appropriations subject to this limit for 2004-05:
2004-05 Estimate
Appropriations Limit $38,513,100
Estimated Appropriations Subject to Limit 27,670,400
Favorable Variance $109842J00
ATTACHMENTS
1. Resolution adopting the City's appropriations limit for 200405
2. City's appropriations limit history
G:Finance/Budget Folders/Financial Plan Supplements/2003-05 Supplement/Appropriations Limit/Council Agenda Report,June 15.2004
cs�3
RESOLUTION NO. (2004 Series) A$#achmen#��„
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING THE APPROPRIATIONS LIMIT FOR 2004-05
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 2004-05 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 200405 as follows:
Appropriations Limit: 2003-04 $36,865,900
Cost of Living Factor. Percent change in California per capita income 3.28%
Population Factor: County Population Growth 1.15%
Compound Percentage Factor(multiplicative not additive) 4.47%
Appropriations Limit: 200405 $38,513,100
Upon motion of , seconded by
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted on June 15, 2004.
Mayor David F. Romero
ATTEST:
City Clerk
APPROVED AS TO FORM:
Jona an owell, City Attorney
C�"-1
FINANCIAL AND STATISTICAL TABLES Attachment.L
APPROPRIATIONS LRVIIT HISTORY
The Gann Spending Limit Initiative,a State constitutional
amendment adopted by the voters on June 6, 1979,restricts Appropriations Limit:1979 to 2005
appropriations from tax revenues by State and local governments. $40.000,000
Under its provisions,no local agency can appropriate proceeds of
taxes in excess of its "appropriations limit." Excess funds may $30,000.000
be carried over into the next year. However,any excess funds
remaining after the second year must be returned to taxpayers by
reducing tax rates or fees;or a majority of the voters may approve $20.000.000
an override to increase the limit.
$10.000.000
The following summarizes changes in the City's appropriations
limit and appropriations subject to the limit since the effective date
of the initiative. While there are exceptions,in general,the City's $"
appropriations limit increases annually by compound changes in W
L L M E
cost-of-living and population. This summary also reflects changes Fscal Year Ending
made by Proposition I I I (adopted in June 1990)in determining -Appropriations Limit Appropriations Subjectto U-t
the appropriations limit as well as the appropriations subject to it.
AppropriationCost-of-Living Poputation,
Fiscal Year Limit Base Factor Factor Limit Subject to Limit Variance'
1978-79 $8,018,200 $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 2.35% 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 1I1
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
1993-94 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% 29,671,300 17,291,800 12,379,500
1999-00 29.671,300 4.53% 2.28% 31,717,100 18,030,500 13,686,600
2000-01 31,717,100 4.91% 2.46% 34,093,000 18,802,000 15,291,000
2001-02 34,093,000 0.33% 1.80% 34,820,900 23,227,900 11.593,000
2002-03 34,820,900 0.33% 1.80% 35,564,400 25,040,000 10,524,400
2003-04* 35,564,400 2.31% 1.32% 36,865,900 26,022,400 10,843,500
2004-05* 36,865,900 3.28% 1.15% 38,513,100 27,670,400 10,842,700
*
Appropriationssubjectto limit are estimates for these years ��