Title
Staff Report for Resolution Establishing the City's Appropriation Limit for Fiscal Year 2015-16
Staffreport
SUMMARY AND RECOMMENDATIONS
Staff recommends City Council approval of a resolution establishing the City's appropriation limit for fiscal year 2015-16. Staff has completed the calculations required for determining the City's appropriation limit for 2015-16, which is $191,284,931. Budget appropriations that are subject to the 2015-16 limitation total $90,508,228 which is $100,776,703 below the limit.
BACKGROUND
On November 6, 1979, California voters passed Proposition 4. Statutes clarifying certain provisions of the proposition are now codified in article XIIIB of the California Constitution. This Article is commonly known as the "Gann Initiative." The Initiative established constitutional spending limits allowable for California governmental agencies based on the Consumer Price Index and population growth. Concurrent with Proposition 4, the Revenue and Taxation Code, Section 7910, requires each local governmental unit to establish its appropriations limit by the beginning of each fiscal year.
Due to Gann's constraint on State and local governments to respond effectively to the demands of rapid growth around California, a legislative-business-labor coalition drafted and supported Proposition 111, which was adopted June 5, 1990. Proposition 111 makes crucial adjustments to the Gann Initiative, by allowing it the flexibility to operate in a growing economy, while retaining its purpose in placing a limit on government spending. The following are the changes Proposition 111 made to the Gann Initiative.
Prior law required spending limits to be tied to the Consumer Price Index or California Per Capita Personal Income growth factor, whichever was lower. The new provisions allow an agency to select the California Per Capita Personal Income growth factor or the Non-residential Property Assessed Valuation growth factor, whichever is higher. Cities may choose to use the percentage rate of change in population within the City or county, whichever is higher.
ANALYSIS
The Appropriation Limit for prior fiscal years was predominantly based on the county population factor multiplied by the assessed valuation change factor. After the passage of Proposition 111, cities are able to use the higher of the population factors (City or county) and the higher of the California per capita personal income factor or the Non-residential property assessed valuation growth factor. This amended approach has been applied to fiscal years 1990-91 through 2010-11 to recalculate the ending limits. The revised calculations will continue to be applied in subsequent years.
For fiscal year 2015-16 staff is using the County Population Growth factor of 1.30% multiplied by the Non-Residential Assessed Valuation factor 7.49% since the county's population factor is higher than the City of San Leandro's population factor (1.013 x 1.0749 = 1.0889). Similarly, the City's non-residential assessed valuation factor is higher than the State's per capita income growth factor. The non-residential assessed valuation factor includes a significant property "new construction" of $42 million for Chill Build LLC, and a property adjustment exclusion of $714,000 for Kaiser Foundation Hospitals since the hospital is exempt from property taxes.
The calculated 2014-15 Appropriation Limit of $175,666,900 multiplied by the adjustment factor of 1.0889 produces the 2015-16 Appropriation Limit of $191,284,931. A Resolution is attached which authorizes the new Appropriation Limit for next fiscal year and includes the Attachment 1 Calculation. The actual budget subject to the limitation excludes self-supporting funds, capital improvement funds, capital outlay grant funds and specific exclusions such as the Gas Tax Fund. The fiscal year 2015-16 appropriation subject to the Gann Limit is $90,508,228 and is significantly below the Appropriation Limit by over $100 million.
Current City Council Policy
The Council adopts the appropriation limit during the budget adoption process.
Fiscal Impact
None. Impacts the City only if the appropriation limit is exceeded by the proposed fiscal year 2015-16 appropriation subject to limitation.
ATTACHMENT
ยท Attachment 1 - Gann Appropriation Limitation Calculation 2015-16
PREPARED BY: David Baum, Finance Director, Finance