Title
Adopt a Resolution to Approve the City’s Gann Appropriation Limit for Fiscal Year 2025-2026
Staffreport
SUMMARY AND RECOMMENDATIONS
Staff recommends the City of San Leandro City Council adopt a resolution establishing the City’s Gann Appropriation Limit for Fiscal Year 2025-2026, including to correct the previously approved appropriations limit for Fiscal Year 2024-2025. Staff completed calculations required for determining the appropriation limit for Fiscal Year 2025-2026 at $341,146,079. Budget appropriations subject to the Fiscal Year 2025-2026 appropriation limitation total $126,825,964. This is $214,320,115 below the new appropriation limit.
BACKGROUND
In 1979, California voters passed Proposition 4 limiting governmental expenditures and taxation. Statutes clarifying provisions of the proposition are codified in Article XIIIB of the California Constitution. This article is known as the Gann Limit.
Because the Gann Limit constrained local governments effectively responding to demands of rapid growth in California, a legislative-business-labor coalition drafted and supported Proposition 111, adopted in 1990. Proposition 111 allows flexibility in a growing economy, while retaining limits on government spending. While the law sets limits on spending and taxation, it does allow for increases on the appropriation limit based on both population and personal income growth.
ANALYSIS
During any fiscal year, a city may not appropriate any proceeds of taxes it receives in excess of its established limit. Excess funds received in any year may be carried into the subsequent year for use if the city is below its limit for that year. Any excess funds remaining after the second year would be required to be returned to local taxpayers by reducing tax rates or fees. As an alternative, a majority of the voters may approve an "override" to increase the city's appropriations limit.
Senate Bill 1352 requires that 1) the governing body of each local jurisdiction shall, by legislative action, establish its appropriations limit at a regularly scheduled or special meeting and that the documentation used in the determination of the appropriations limit shall be made available to the public fifteen days before that meeting. Government Code Section 7910 requires that the City adopt its appropriations limit prior to the beginning of each fiscal year.
The Finance Department of the City of San Leandro compiles the data and makes calculations incident to the determination of the XIIIB appropriations limit.
In addition to the adoption of the FY 2025-2026 appropriations limit, corrections were made to the appropriations limits for FY 2024-2025. The calculations performed during the prior fiscal year reflected an incorrect County population percent change. During the annual audit testing performed by Maze & Associates, the independent auditor reviewed the Gann Limit (appropriations limit) calculations and found an error in the calculation percentage used for the County population percent change. The auditors recommended that staff revise the calculation and update the resolution for the FY 2024-2025 Gann Limit.
In adjusting for the correct County population percent change, the appropriations limit for FY 2024-2025 is $319,515,027. The original appropriations limit stated for FY 2024-2025 was $325,136,898. By including these corrections to the appropriations limits for the prior fiscal year, the City will remain in compliance with the Gann Limit requirement. The City did not exceed its Gann Limit in either year with the original or with the corrected limit.
The resolution establishes the appropriations limit FY 2025-2026 to be $341,146,079 and reestablishes corrected appropriations limits for FY 2024-2025 to be $319,515,027.
Current City Council Policy
The Council adopts the appropriation limit annually during the final budget adoption process.
Fiscal Impact
None. Impacts the City only if the appropriation limit is exceeded by the proposed fiscal year 2025-2026 appropriation subject to limitation. The City has never exceeded the Gann Limit.
CONCLUSION
Staff recommends City Council approval of a resolution establishing the City’s appropriation limit of $341,146,079 for FY 2025-2026, and approval to correct FY 2024-2025 appropriation limit of $319,515,027.
ATTACHMENTS
A: Resolution Approving Gann Limit Appropriation
o Ex A1: Gann Appropriation Limitation Calculation
PREPARED BY: Nicole Gonzales, Finance Director