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June 14, 2022
ITEM TITLE
Gann Initiative: Establish Appropriations Limit for Fiscal Year 2022-23
Report Number: 22-0172
Location: No specific geographic location
Department: Finance
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
Recommended Action
Adopt a resolution establishing the GANN initiative appropriations limit for the City of Chula Vista for fiscal year 2022-23.
SUMMARY
Article XIIIB of the California Constitution approved by the voters in 1979 and commonly referred to as the Gann Initiative, requires each local government to establish an Appropriations Limit for the General Fund by resolution each year at a regularly scheduled meeting or noticed special meeting. The purpose of the limit is to restrict spending of certain types of revenues to a level predicated on a base year amount increased annually by an inflation factor.
ENVIRONMENTAL REVIEW
The Director of Development Services has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that approval of this resolution establishing the City’s appropriation limit for fiscal year 2021 -22 is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is required.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not applicable.
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DISCUSSION
Article XIIIB of the California Constitution, approved by the voters in 1979, imposed the concept of spending limits on local governments. This Constitutional provision and related implementing legislation specify that annual increases in general fund appropriations financed from “Proceeds of Taxes” are limited to a base year (1978-79) amount increased annually by an inflation factor comprised of the change in population of the city combined with the greater of the change in new non-residential construction or the change in the California per capita personal income. By definition, “Proceeds of Taxes” includes such revenues as property taxes, sales and use taxes, utility user taxes, transient occupancy taxes, and state subventions. Revenues from other sources like fees/charges and federal grants are considered “Non-Proceeds of Taxes” and are not subject to the annual spending limit. This calculation has always been perfunctory for the City of Chula Vista, since the proceeds of taxes for the City are far less than the statutory appropriation limit.
The State Department of Finance and the San Diego County Assessor’s Office are charged with providing the data necessary for local jurisdictions to establish their appropriation limit. According to these sources, for purposes of the fiscal year 2022 -23 calculation, the population decreased 0.05%. California per capita personal income increased by 7.55% and new non -residential construction increased by 2.1 6%.
Consequently, per capita personal income was used in the formula to compute the limit since this increase is the greater of the two amounts.
The fiscal year 2022-23 Appropriation Limit has been calculated as follows:
Fiscal Year 2021-22 Appropriations Limit $1,139,948,192 Increased by an inflation factor composed of the
Decrease in Population and
Increase in Per capita income X 1.0749623
Fiscal Year 2022-23 Appropriations Limit $1,225,401,274 The “Proceeds of Taxes” as included in the fiscal year 202 2-23 Proposed Budget that are subject to the appropriations limit are estimated to be $ 148,997,068 (see attachment). Therefore, the City has what is referred to as an appropriation “gap” of $1,076,404,206 ($1,225,401,274 - $148,997,068). Simply stated, this means that the City could collect and spend up to $1,076,404,206 more in taxes during Fiscal Year 2022-23 without exceeding the Constitutional limit.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and has determined that it is not site-specific and consequently, the real property holdings of the City Council members do not create a disqualifying real property-related financial conflict of interest under the Political Reform Act (Cal. Gov't Code § 87100, et seq.).
Staff is not independently aware and has not been informed by any City Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
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CURRENT-YEAR FISCAL IMPACT
This action will enable the City to appropriate and spend tax revenues estimated at $ 148,997,068 included in the proposed budget for fiscal year 2022-23.
ONGOING FISCAL IMPACT
The adoption of the resolution will result in no ongoing fiscal impact.
ATTACHMENTS
1. FY2022-23 Gann Limit Calculation
Staff Contact: Sarah Schoen, Director of Finance