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June 10, 2025
ITEM TITLE
Gann Limit: Establish Appropriations Limit for Fiscal Year 2025-26
Report Number: 25-0073
Location: No specific geographic location
Department: Finance
G.C. § 84308 Regulations Apply: No
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 appropriations limit (Gann Limit) for the City of Chula Vista for Fiscal Year 2025-26.
SUMMARY
Article XIIIB of the California Constitution 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 appropriations 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 (“Appropriations Limit”).
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 the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines because the proposed activity consists of a governmental fiscal/administrative activity which does not result in a physical cha nge in the environment. Therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines, the activity is not subject to CEQA.
BOARD/COMMISSION/COMMITTEE RECOMMENDATION
Not Applicable
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DISCUSSION
Article XIIIB of the California Constitution imposes the concept of spending limits on local governments. This Constitutional provision and related implementing legislation specifies that annual increases in general fund appropriations financed from “Proceeds of Taxes” are limited to a base year amount incr eased annually by an inflation factor (“Appropriations Limit”). 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. The proceeds of taxes for the City of Chula Vista (“City”) have historically been less than the statutory Appropriations Limit.
Under current guidelines, local jurisdictions may choose among measures of population growth and inflation to compute the annual inflation factor. These measures of growth are provided by the State Department of Finance and the San Diego Assessor’s Office. According to these sources, the City’s population increased 0.19 percent. California per capita personal income increased by 6.44 percent and the City’s local assessment roll increased by 3.85 percent from the addition of local, nonresidential new construction.
The City of Chula Vista’s annual population growth (0.19%) and the annual change in California’s per capita personal income (6.44%) were selected to calculate the fiscal year 2025-26 Appropriations Limit.
The fiscal year 2025-26 Appropriations Limit has been calculated as follows:
Fiscal Year 2024-25 Appropriations Limit $1,362,259,057
Increased by an inflation factor composed of the
Increase in population and
Increase in California per capita income X 1.0664224
Fiscal Year 2025-26 Appropriations Limit $1,452,743,519
The “Proceeds of Taxes” included in the fiscal year 2025-26 proposed budget that are subject to the Appropriations Limit are estimated to be $239,352,012 (see Attachment 1). The City has what is referred to as an appropriation “gap” of $ 1,213,391,507 ($1,452,743,519 - $239,352,012). As a result, the City may collect and spend up to $ 1,213,391,507 more in taxes during fiscal year 2025-26 without exceeding the Constitutional limit.
DECISION-MAKER CONFLICT
Staff has reviewed the decision contemplated by this action and 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
There is no current-year fiscal impact as a result of this action.
ONGOING FISCAL IMPACT
This action will enable the City to appropriate and spend tax revenues estimated at $239,352,012 included in the proposed budget for fiscal year 2025-26.
ATTACHMENTS
1. Fiscal Year 2025-26 Gann Limit
Staff Contact: Sarah Schoen, Director of Finance/Treasurer