HomeMy WebLinkAbout06/21/2011, C 9 - APPROPRIATIONS LIMIT FOR 2011-12 i
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CITY O F SAN LUIS O B I S P O
FROM: Mary Bradley, Interim Director of Finance & Information Technology
Debbie Malicoat,Finance Manager
SUBJECT: APPROPRIATIONS LIMIT FOR 2011-12
RECOMMENDATION
Adopt a resolution establishing the City's appropriations limit for 2011-12.
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 2011-12, we project that the City's appropriations (for all general
governmental funds) subject to limitation will be about $36.2 million, which is $13.1 million less
than the calculated limit of$49.3 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:
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
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Appropriations Limit for 2011-12 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 i l l 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. Population. Based on data provided annually by the State Department of Finance, cities may
annually choose either the growth in their city's or the county's population.
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.
2. Cost of living. Local governments may annually choose either the percentage 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.
Data for the percentage change in California per capita personal income change is provided
annually by the State Department of Finance. Data for the preceding year in calculating the
increase in the non-residential assessed valuation is not currently available from the County;
therefore, the recommended cost of living factor is California per capita income. However,
when non-residential construction data becomes available from the County, the limit can be
recalculated and retroactively adopted if different results are anticipated.
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 2011-12 is $48,541,400 calculated as follows:
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Appropriations Limit for 2011-12 Page 3
Appropriations
2010-11 Appropriations Limit $47,720,000
Adjustment Factors
A. Cost of Living Options
I. Percentage change in assessed value in the preceding year due to Not currently
new non-residential construction. available
2. Percentage change in California per capita income 2.51%
B. Population Options
1. Percentage change in City population 0.76%
2. Percentage change in County population 0.83%
Compound Percentage Factor(multiplicative not additive) 3.36%
2011-12 Appropriations Limit $49,3239400
The options highlighted in bold print are the recommended adjustment factors in determining our
appropriations limit for 2011-12.
FISCAL IMPACT
There is no negative fiscal impact resulting from adoption of the limit for 2011-12. The
following summarizes the variance between the City's appropriations limit and our projected
appropriations subject to this limit for 2011-12:
2011-12 Estimate
Appropriations Limit $49,323,400
Estimated Appropriations Subject to Limit 36,155,500
Favorable Variance $1371679900
ATTACHMENTS
1. Resolution adopting the City's appropriations limit for 2011-12
2. City's appropriations limit history
GABudget Folders\A. Financial Plans\2011-13 Financial P1an\Appropriations limit\Appropriation Limit Council Agenda Report - June 21
201 LDOC
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Attachment 1
RESOLUTION NO. (2011 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING THE APPROPRIATIONS LIMIT FOR 2011-12
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 2011-12 have been performed by the Department
of Finance&Information Technology 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 2011-12 as follows:
Appropriations Limit: 2010-11 $47,720,000
Cost of Living Factor: Percent change in California per capita income 2.51%
Population Factor: County Population Growth 0.83%
Compound Percentage Factor(multiplicative not additive) 3.36%
Appropriations Limit: 2011-12 $49,323,400
Upon motion of , seconded by ,
and on the following vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted on June 21, 2011.
Mayor Jan Marx
ATTEST:
Elaina Cano, City Clerk
APPROVED AS TO FORM:
stine Dietrick, City Attorney
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Attachment 2
APPROPRIATIONS LIMIT HISTORY
The Gann Spending Limit Initiative,a State constitutional
amendment adopted by the voters on June 6, 1979,restricts Appropriations Limit:1988 to 2011
appropriations from tax revenues by State and local governments. $52.500,000
Under its provisions,no local agency can appropriate proceeds of $45.000.000 .
taxes in excess of its"appropriations limit." Excess funds may
$37,800,000 -
be carried over into the next year. However,any excess funds
remaining after the second year must be returned to taxpayers by $30,000.000 -
reducing tax rates or fees;or a majority of the voters may approve $22.500.000
an override to increase the limit.
$15,000,000
The following summarizes changes in the City's appropriations
limit and appropriations subject to the limit since the effective date $7,$00.000
of the initiative. While there are exceptions, in general,the City's $0
appropriations limit increases annually by compound changes in mm W 8 8
N N N N
cost-of-living and population. This summary also reflects changes Fiscal Year Ending
made by Proposition 111 (adopted in June 1990)in determining -Appropriations Limit �Appropnations Subject to limit
the appropriations limit as well as the appropriations subject to it.
AppropriationsCost-of-Living Population
Fiscal Year Limit.Base Factor Fact.or Limit Subject to Limit Variance
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
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
1996-97 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% 34,821,200 23,227,900 11,593,300
2002-03 34,821,200 0.33% 1.80% 35,565,000 23,018,400 12,546,600
2003-04 35,565,000 2.31% 1.32% 36,866,700 23,072,400 13,794,300
2004-05 36,866,700 3.28% 1.15% 38,513,100 27,670,400 10,842,700
2005-06 38,513,100 5.26% 1.19% 41,021,300 32,371,900 8,649,400
2006-07 41,021,300 3.96% 0.73% 42,957,100 30,757,100 12,200,000
2007-08 42,957,100 4.42% 0.96% 45,286,400 36,582,900 8,703,500
2008-09 45,286,400 4.29% 1.12% 47,758,200 36,795,300 10,962,900
2009-10 47,758,200 0.62% 1.01% 48,540,600 27,159,400 21,381,200
2010-11* 48,540,600 -2.54% 0.87% 47,719,200 34,706,700 13,012,500
2011-12* 47,719,200 2.51% 0.83% 49,323,000 35,000,000 14,323,000
Appropriations subject to limit are estimates for these years.
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