HomeMy WebLinkAbout06-17-2013 c6 appropriations limit for 13-14counctLIâqenòa pepopt
Mectiq Dar
lem Number
6t17t13
C6
CITY OF SAN LUIS OBISPO
FROM: Wayne Padilla, Interim Director of Finance & Information Technology
SUBJECT: APPROPRIATIONS LIMIT FOR 2013-14
RECOMMENDATION
Adopt a resolution establishing the City's appropriations limit for 2013-14.
DISCUSSION
Overview
The Appropriations Limit imposed by Propositions 4 (also known as the Gann Spending-
Limitation Initiative or the Gann Initiative) and 111 creates a restriction on the amount of
revenue which can be appropriated in any f,rscal year. The Limit is based on actual appropriations
during the 1978-79 fiscal year and is increased each year using the growth of population and
inflation as measured by the California Department of Finance. Not all revenues are restricted by
the Limit, only those which are referred to as "proceeds of taxes."
In addition, proceeds of taxes are allowed to be spent on several types of appropriations which
do not count against the Limit. The law allows a city to appropriate funds for certain expenses
that are deemed to be exempt from the Limit. Among these exempt expenditures are "qualified
capital outlays," voter approved debt service, court orders and federal mandates. Qualified
capital outlay represents an expenditure for an asset, which may include land having a useful life
of 10 or more years and a cost of at least $100,000.
Annually, the City is required to adopt a resolution setting an appropriations limit for the
upcoming f,tscal year. For 20I3-I4, staff projects that the City's appropriations limit will be
$54.3 million while the appropriations subject to the limit total $40.1 million.
Key Concepts
As discussed above, the Gann Spending-Limitation Initiative provides for the limitation of state
and local government appropriations. It is important to note that the Gann Initiative is actually a
limitation on tax revenues rather than a direct limitation on appropriations. Below is a summary
of the major provisions of the Gann Initiative and Proposition 111 modifications:
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 specifred "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, qualif,red 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
c6-1
Appropríations Limit Íor 2013-14 Page 2
exception of major capital-related expenditures, all appropriations funded through tax
revenues are subject to limitation.
3. For the purpose of identiffing "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
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 retumed 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 11 I 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
hnancial audit.
6. Major concepts in implementing the Gann Initiative as modihed 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 líving. 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 Califomia per capita income. However,
when non-residential construction data becomes available from the County, the limit can be
recalculated and retroactively adopted ifdifferent results are anticipated.
c6-2
Appropriations Limit for 2013-14 Page 3
Calculation Summary
A summary of the City's appropriations limit history is provided in Attachment2. As reflected
in that summary, the City's limit for 2013-14 is $54,337,500 calculated as follows:
The options highlighted in bold italics above are the recommended adjustment factors in
determining the City's appropriations limit for 2013-14.
FISCAL IMPACT
Under Article XIII B to the California Constitution as amended, the City is required to adopt the
Appropriation Limit eachyear. As a result of the appropriations subject to the Limit being well
below the calculated Limit for 2013-14 as shown below, no adjustments are required to be made
to the proposed expenditures contained within the Preliminary Financial Plan.
The following summarizes the variance between the City's appropriations limit and the projected
appropriations subject to this limit for 2013-14:
ATTACHMENTS
Resolution adootins the Citv's limit for 2013-141.
2.Citv's appropriations limit history
T:\Council Agenda Reports\2013V013-06-17\Appropriations Limit for 2013-14 (Padilla-Richardson)\Appropriation Limit
Council AgendaReport - June 17 20l3.docx
2012-13 Appropriations Limit
Adjustment Factors
A. Cost of Living Options
l. Percentage change in assessed value in the precedingyear due to
new non-residential construction.
2. Percentage cltange in California per capita income
B. Population Options
1. Percentage change in City population
2. Percentage change in County population
Compound Percentage Factor (multiplicative not additive)
2013-14 Appropriations Limit
$51,423,500
Not currently
available
5.12%
0.51%
0.s2%
1.0s66%
$54,337,500
ns Limit Calculation
Appropriations Lirnit
Estimated Appropriations Subject to Limit
$54,337,500
40,104,100
Favorable Variance $14,233,400
2013-'14 Estimate
c6-3
Attachment 1
RESOLUTION NO.(2013 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
ADOPTING THE APPROPRIATIONS LIMIT FOR 2013-14
WHEREAS, the voters approved the Gann Spending-Limitation Initiative on November 6,
1979 and Proposition 111 on June 5, 1990, which establish and def,rne annual appropriation limits
on state and local government agencies; and
V/HEREAS, 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 2013-14 have been performed by the Department
of Finance & Information Technology and are available for public review.
NO'W, 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 2013-14 as follows:
Upon motion of seconded by
and on the following vote:
AYES:
NOES:
ABSENT:
the foregoing resolution was adopted on June 17,2013
Mayor Jan H. Marx
ATTEST:
Maeve Kennedy Grimes, City Clerk
APPROVED AS TO FORM:
Appropriations Limit: 2012-13
Cost of Living Factor: Percent change in California per capita income
Population Factor: County Population Growth
Compound Percentage Factor (multiplicative not additive)
$51,423,500
5.t2%
0.52%
r.0s7%
Appropriations Limit z 2013-14 $54,337,500
J. Christine Dietrick, City Attorney
c6-4
Attachment 2
APPROPRIATIONS LIMIT HISTORY
The Gann Spending Limit Initiative, a State
constitutional amendment adopted by the
voters on June 6, 1979,restricts appropriations
from tax revenues by State and local governments.
Under its provisions, no local agency can
appropriate proceeds oftaxes in excess ofits
"appropriations limit." Excess funds may 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; a majority of the voters may
approve an override to increase the limit.
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 cost-of-living and
population. This summary also reflects changes
made by Proposition 111 (adopted in June 1990)
in determining the appropriations limit as well as
the appropriations subject to it.
r 987-88
1988-89
1 989-90
1990-91
1991-92
1992-93
1993-94
1994-95
r99s-96
r996-97
1997-98
1998-99
1 999-00
14,836,300
1 5,800,900
t7,215,200
I 8,8 I 8,600
20,5 I 1,000
22,009,500
22,087,300
23,1 10,100
23,600,000
25,109,300
26,889,000
28,724,500
29,671,300
3t,717,100
34,093,000
34,821,200
35,565,000
36,866,700
38,5 1 3,1 00
41,Q21,300
42,957,100
45,286,400
47,758,200
48,540,600
47,719,200
49,323,000
3.47yo
4.66Yo
5.l9Yo
4.21o/o
4.14%;o
-0.64y,
2.72o/o
0.7lYo
4.72Vo
4.67%
4.670/o
4.l5Yo
4.53Yo
4.91%
0.33o/o
0.33%
2.3lYo
328%
5.260/o
3.96%
4.420
4.29%
0.62%
-2.54Yo
2.5l%o
3.77%
5.l2yo
2.93vo
4.1ÙYo
392Yo
459%
3.04yo
1.00%
l.86Yo
1.40%
1.600/0
2.3|Yo
2.06Yo
2.70%
2.28o/o
2.46Yo
1.80%
1.80%
1.32v,
1.lsYo
t.t9%
0.73%
0.96%
1.12Yo
l.jlYo
0.87%
0.83Yo
0.47Yo
0.52Y.
r 5,800,900
17,215,200
l 8,8 I 8,600
20,511,000
22,009,s00
22,087,300
23,t10,r00
23,600,000
25,109,300
26,889,000
28,724,500
29,671,300
31,7t7,100
34,093,000
34,82t,200
3 5,565,000
36,866,700
38,5 13, I 00
4t,021,300
42,957,100
45,286,400
47,758,200
48,540,600
47,719,200
49,323,000
5t,423,500
14,411,700
15,223,500
16,691,800
15,00s,400
14,91 1,100
18,094,900
15,215,000
16,778,400
I 5,530,800
I 6,825,500
17,5r3,200
17,291,800
1 8,030,500
I 8,802,000
23,227,900
23,018,400
23,072,400
27,670,400
32,371,900
30,757,100
36,582,900
36,795,300
27,159,400
34,706,700
35,000,000
40,154,900
I,389,200
1,991,700
2,126,800
5,505,ó00
7,098,400
3,992,400
7,895,100
6,821,600
9,578,500
I 0,063,500
11,2r1,300
12,379,500
I 3,686,600
15,29 1,000
I 1,593,300
12,546,600
13,794,300
10,842,700
8,649,400
12,200,000
8,703,500
10,962,900
21,381,200
13,012,500
14,323,000
11,268,600
l-02
-04
2004-05
2005-06
2006-07
2007-08
2008-09
2009-10
2010-l 1*
1.011-12*
)on-nr
2013-14*5l
Appropriations Limit: 1988 to 2014
$52,500,000
$45,000,000
$37,500,000
$30,000,000
$22,500,000
$15,000,000
$7,500,000
$0
F,A/J Y
@
o
N ooo ooN
EoN
ooN
N
oN
Fiscal Year End¡ng
-
Appropriations Limit
-
Appropriations Subject to L¡m¡t
Appropr¡ations
Limit
Appropriations
Subject to Lim¡tF¡scal Year L¡mit Base
Cost-of-L¡v¡ng Population
Factor Factor Variance
* Appropriations subject to limil are estimates for these years.
3t 500 40,1 100
c6-5
Page intentiona I ly left
blank.
c6-6