Table 1. Changes to Budgeted Citywide Revenues
Table 2. Changes to Budgeted Citywide Expenditures
Other non-monetary updates were made to the budget document presented to Council on May 26, 2026 and are included in the Revised Proposed version dated June 4, 2026, such as updated narratives to reflect changes listed above; updated Fund Balances Summary; replacement FY 2025- 26 Ten-Year Forecasts for the major funds with those for FY 2026-27; updated City debt section; updated Appendix with refined glossary and amortization schedules for debt obligation transparency.
With these changes implemented, the General Fund budget presented is balanced with $21.6 million budgeted for both revenues and expenditures, and the Measure Q/E Fund utilizes $107K of the $2.0M unassigned fund balance. The City maintains a robust total reserve, or unassigned fund balance, estimated at about 52% of budgeted operating expenditures in the General Fund and Measure Q/E Fund combined, exceeding the target of 50%. This percentage equates to unassigned Fund Description of Change
Original
Proposed
Budget
Increase/
(Decrease)
Revised
Proposed
Budget
Sewer Operating Fund Remove Rental Income 20,000 (20,000) - Gov't Capital Imprv Fund Remove Morro Elementary Financing 5,300,000 (5,300,000) - Gov't Capital Imprv Fund Reduce Annual Pavement Mgmt Prog Funding 1,296,214 (600,000) 696,214 General Fund Increase Sales & Use Tax 2,545,000 20,912 2,565,912 General Fund Increase Transient Occupancy Tax 4,600,000 81,800 4,681,800 Harbor Capital Imprv Fund Increase Project Revenue to Grant Amt 300,000 1,200,000 1,500,000 Total Revenues/Transfers In 14,061,214 (4,617,288) 9,443,926 Revenues/Transfers In Expenditures/Transfers Out
Fund Description of Change
Original
Proposed
Budget
Increase/
(Decrease)
Revised
Proposed
Budget
Gov't Capital Imprv Fund Remove Morro Elementary Acquisition 5,300,000 (5,300,000) - General Fund Remove Morro Elementary Debt Service 664,221 (664,221) - Measure Q/E Fund Reduce Annual Pavement Mgmt Prog Contr 1,000,000 (600,000) 400,000 Gov't Capital Imprv Fund Reduce Annual Pavement Mgmt Prog Budget 1,000,000 (600,000) 400,000 General Fund Remove Asst to City Mgr Position 474,543 (93,231) 381,312 Econ Dev Fund Remove Asst to City Mgr Position 55,346 (55,346) - General Fund Remove Homeless Outreach Case Mgr Position 54,411 (54,411) - General Fund Incr PD Support Svc Tech Position 405,531 26,027 431,558 General Fund Increase Vacancy Factor to 3% (500,000) (25,659) (525,659) Harbor Capital Imprv Fund Increase Project Expenditures to Grant Amt 300,000 1,200,000 1,500,000 Affordable Housing In-Lieu Fund Reduce Housing Element Update to Year 1 235,000 (135,000) 100,000 Total Expenditures/Transfers Out 8,989,052 (6,301,841) 2,687,211
cash of $12.9 million, assuming revenues and expenditures are realized as budgeted. These reserves will protect the City's ability to continue to deliver core services in the event of an emergency, such as a natural disaster or significant fiscal distress. Unassigned fund balance in excess of the target reserve may be allocated per City Council discretion, keeping in mind that best practice dictates allocating excess unassigned balance to one-time costs and not to ongoing costs.
Fiscal Policies: In preparing this budget, staff took its primary direction from the guidelines established in the City of Morro Bay Fiscal Policies. There are several key fiscal policies that rise to the level of Council review and approval standards and are reviewed regularly by City Council. These policies are referenced and summarized in the City’s Budget document and posted in full on the City’s website. This report includes a resolution (Resolution No. 33-26) for Council to readopt the City’s Investment Policy as is required annually by State law (Attachment 2). There are minor updates which will bring the City’s policy into alignment with California Debt and Investment Advisory Commission’s Local Agency Investment Guidelines, most recently revised in January 2026.
Fiscal policies that City Council has reviewed recently but do not require changes at this time include the following, which were last reviewed and updated with the Council resolutions noted: Fund Balance Reserve Policies (Resolution No. 37-22), Revenue and Expenditure Policy (Resolution Nos. 52-21 and 53-21), Debt Management Policy (Resolution No. 43-18), Short-Term Fiscal Emergency Plan (Resolution No. 97-18), Long-Term Financial Planning Policy (Resolution No. 09-19), Financial Policies Related to Capital Assets (Resolution No. 59-19), and Donations and Grant Management Polices (Resolution No. 61-19). These policies are available in full on the City's website.
GANN Limit: State law requires the adoption of an annual appropriations limit, which restricts the growth of tax-funded programs and services by limiting the appropriation of proceeds of taxes. For FY 2026-27, the City of Morro Bay remains more than 47% under its appropriations limit of $39.5 million (see Attachment 3).
Proposition 4, known as the Gann Initiative, was approved by the California electorate in 1979. It is intended to restrict the growth of tax-funded programs and services by limiting the appropriation of the proceeds of taxes to the 1978-79 base year limit, as adjusted annually for changes in population and inflation. Proceeds of taxes in excess of the appropriations limit, with some exceptions, must be returned to the taxpayers by refund or reduction in tax rates unless an extension of the limit is approved by a majority popular vote. Proceeds of taxes include tax revenues and investment earnings related to those tax revenues, proceeds from licenses and users/charges to the extent that they exceed the cost to cover those services, and discretionary tax funds used for contingency, emergency, unemployment, reserve and retirement sinking funds, trust, or similar funds.
In June 1990, California voters approved Proposition 111, amending the Gann Initiative to provide local agencies with the option of using either the city or county population change percentage (whichever is greater). Another provision of the amendment states that the Gann limit would be triggered only if tax proceeds exceed the limit for two consecutive fiscal years. Additionally, the proposition requires an annual review of the appropriations limit calculation by a qualified independent auditor in conjunction with the annual financial audit.
According to the California Department of Finance, the population change for the City of Morro Bay was -0.69%, whereas the population changes for the County of San Luis Obispo was -0.15%. Staff calculated the limit using the population change for the County of San Luis Obispo and the California
Per Capita Personal Income, referred to as the Price Factor (explained in exhibits to Attachment 3).
The Per Capita Cost of Living increased by 4.95%. Applying these factors results in the following:
2026-27 Population and Per Capita Cost of Living Change Calculation:
Per Capita Cost of Living Change = 4.95%
Population Change = -0.15%
Per Capita Cost of Living converted to a ratio: (4.95 + 100) divided by 100 = 1.0495 Population converted to a ratio: ( -0.15 + 100)/100 = 0.9985 Calculation Factor for FY 2026-27: 1.0495 x 0.9985 = 1.0479258 Prior year limit $37,744,894
Calculation Factor per DOF guidance x 1.0479258
Equals Appropriation Limit = $39,553,846
The FY 2026-27 budget estimate of revenues from the proceeds of taxes is $18,802,003, which is well below the appropriations limit (by $18,942,891 or 47.89%). Thus, the City’s finances are not impacted by the appropriation limit. The calculation of estimated proceeds of taxes for FY 2026-27 is shown in detail in Exhibit 1 of Resolution No. 34-26. The calculation of FY 2026-27 Appropriations Limit is shown in Exhibit 2 of Resolution No. 34-26, along with a historical listing of prior year limits. Exhibit 3 of Resolution No. 34-26 is a copy of the California Department of Finance's change in population estimates between January 1, 2025 and January 1, 2026 and the California Department of Finance's published price factor.
CONCLUSION
Staff recommends adopting Resolution No. 32-26, which adopts the Fiscal Year 2026-27 Operating and Capital Budget, including the changes presented as an exhibit to the resolution (Attachment 1).
Staff also recommends approval of Resolution Nos. 33-26 and 34-26 related to the readopted investment policy (Attachment 2), and the GANN appropriations limit (Attachment 3).
ATTACHMENTS
1. Resolution No. 32-26 Adopting the FY 2026-27 Operating and Capital Budget as amended by changes contained in Exhibit 1.
a. Exhibit 1 – Changes since May 26, 2026 Budget Study Session (Errata) b. Exhibit 2 – Link to the Final Budget for FY 2026-27, digital and PDF versions:
https://www.morrobayca.gov/827/Budget.
2. Resolution No. 33-26 Readopting the Investment Policy a. Exhibit 1 – FY 2026-27 Investment Policy
3. Resolution No. 34-26 Adopting the GANN Appropriations Limit for FY 2026-27 a. Exhibit 1 – 2026-27 Calculation of Estimated Proceeds of Taxes b. Exhibit 2 – 2026-27 Calculation of Appropriations Limit c. Exhibit 3 – 2026-27 California Department of Finance Price Factor and Population Estimates
RESOLUTION NO. 32-26
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
ADOPTING THE FISCAL YEAR 2026-27 OPERATING AND CAPITAL BUDGET
T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the City of Morro Bay is required to appropriate and expend funds, to conduct the day-to-day business activity of the City; and
WHEREAS, the Morro Bay City Council finds and determines those appropriations and expenditures are necessary for continued efficiency, economy, and effectiveness of the City government operations; and
WHEREAS, the continuing efforts of staff to operate the business of the City, within an approved budget, and to create savings, wherever feasible, are acknowledged by the City Council; and WHEREAS, the City Council reviewed the Proposed Budget on May 26, 2026 and provided input, and requested changes are reflected in the FY 2026-27 Revised Proposed Operating and Capital Budget; and
WHEREAS, the City Council recognizes that Capital Improvement Projects and one-time expenditures of the General Fund Vehicle Replacement funds that were authorized and approved in the current and prior fiscal years, may not be completed by June 30, 2026; and WHEREAS, the Council desires to approve the addition of a 0.25 FTE for the Police Department’s Support Services Technician to bring that position from 0.75 to 1.0 FTE; and WHEREAS, the total Proposed Citywide revenue budget for FY 2026-27 is $52.99 million and the proposed citywide expenditure budget for FY 2026-27 is $46.99 million (net of transfers); NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California:
1. The Fiscal Year 2026-27 Operating and Capital Budget, attached hereto as Exhibit 2, at https://www.morrobayca.gov/827/Budget, and incorporated herein by reference, including the administrative corrections outlined in Exhibit 1 hereto and any amendments made during the City Council meeting dated June 9, 2026, are adopted and incorporated herein by reference; and
2. Staff is directed to incorporate the administrative corrections outlined in Exhibit 1 hereto and any amendments made during the City Council meeting dated June 9, 2026 and to prepare and publish a final adopted budget document, with approved amendments; and
3. Subject to paragraph 4, below, the City Manager is authorized to transfer appropriations within the adopted budget, including from and to capital projects or capital outlay items, so long as those changes do not significantly and negatively prevent implementation of any City Council direction or policy, and total appropriations are not exceeded; and
4. City Council approval is required to transfer appropriations between funds and may approve amendments to adopted budget by adoption of one or more resolutions; and
5. Notwithstanding paragraph 4 above, the City Council authorizes and directs staff to complete any necessary year-end reconciliation of allocations to and from compensated
absences reserves in accordance with the City of Morro Bay Reserve Policy, established by City Council via Resolution 37-22; and
6. City Council authorizes and directs the carry forward of unspent budget balances for capital projects, and General Fund Vehicle Replacement funds approved in the current and prior fiscal years, but not completed by June 30, 2026, to the Capital Improvement Project budgets, and GF Vehicle Replacement Fund budgets for the FY 2026-27 fiscal year; and
7. City Council approval is required for any proposed increase to the number of CalPERS benefited, budgeted positions.
PASSED AND ADOPTED, by the City Council of the City of Morro Bay, at a regular meeting thereof held on the 9
th day of June 2026, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
______________________________________
CARLA WIXOM, Mayor
ATTEST:
______________________________
DANA SWANSON, City Clerk
Budget Section Subsection(s) Section # Description Fund DepartmeAccount Department Original
Proposed
Budget
Increase/
(Decrease)
Revised
Proposed
Budget
Citywide Budget
Summary
Sewer Operating
Fund 4.7.2 Remove Historical Rental Income from Concrete Plant; no tenant 321 5251 3730 Sewer Operating 20,000 (20,000) - Capital Projects 7.0 Remove Financing for Morro Elementary School Site Acquisition 915 8145 3918 Morro El Site Acquisition 5,300,000 (5,300,000) - Capital Projects 7.0 Reduce Q/E Contribution to Annual Pavement Management Program 915 9614 3801 Pavement Management 1,296,214 (600,000) 696,214 Citywide Budget
Summary
General Fund 4.2.1 Increase to +2% compared to FY2025-26 Amended Budget 001 3510 3051 Sales Tax City PortionBradley Burns 2,545,000 20,912 2,565,912 Citywide Budget
Summary
General Fund 4.2.1 Increase to +2% compared to FY2025-26 Amended Budget 001 3510 3064 Transient Occupancy Tax 4,600,000 81,800 4,681,800 Capital Projects Harbor 7.1.2 Correct North T-Pier Project to recoginize full HUD Grant of 1.5M 923 9930 3306 North T-Pier Renovations 300,000 1,200,000 1,500,000 Total Revenues/Transfers In 14,061,214 (4,617,288) 9,443,926 Expenditures/Transfers Out
Budget Section Subsection(s) Section # Description Fund DepartmeAccount Department Original
Proposed
Budget
Increase/
(Decrease)
Revised
Proposed
Budget
Capital Projects 7.0 Remove Morro Elementary School Site Land Acquisition 915 8145 7201 Morro El Site Acquisition 2,650,000 (2,650,000) - Capital Projects 7.0 Remove Morro Elementary School Site Buildings & Structures Acquisition 915 8145 7201 Morro El Site Acquisition 2,650,000 (2,650,000) - Citywide Budget
Summary
General Fund 4.2.1 Remove estimated debt service for Morro Elementary Site Acquisition loan 001 1111 8130 Undistributed/Nondepartmental 664,221 (664,221) - Citywide Budget
Summary Measure Q/E Fund 4.4 Reduce Q/E Contribution to Annual Pavement Management Program 003 7710 8540 Interfund Transfers 1,000,000 (600,000) 400,000 Capital Projects Streets and
Roadways 7.4.1 Reduce by Q/E Contribution to Annual Pavement Management Program 915 9614 6106 Pavement Management 1,000,000 (600,000) 400,000 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 001 3110 4110 City Manager's Office 327,985 (72,260) 255,725 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 001 3110 4599 City Manager's Office 7,602 (402) 7,200 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 001 3110 4910 City Manager's Office 41,851 (18,312) 23,540 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 001 3110 4911 City Manager's Office 26,009 (5,730) 20,279 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 001 3110 4912 City Manager's Office 71,096 3,473 74,569 Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 907 7410 4110 Economic Development 35,591 (35,591) - Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 907 7410 4599 Economic Development 198 (198) - Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 907 7410 4910 Economic Development 9,019 (9,019) - Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 907 7410 4911 Economic Development 2,822 (2,822) - Budget Overview Personnel 3.3 De-fund Vacant Assistant to the City Manager Position per Council 5/26/26 907 7410 4912 Economic Development 7,715 (7,715) - Budget Overview Personnel 3.3 De-fund Homeless Outreach Case Manager 001 4110 4310 Police Department 46,800 (46,800) - Budget Overview Personnel 3.3 De-fund Homeless Outreach Case Manager 001 4110 4910 Police Department 7,611 (7,611) - Budget Overview Personnel 3.3 Fund increase from 0.75 to 1.0 FTE PD Support Services Tech 001 4150 4110 Support Services 264,893 19,568 284,461 Budget Overview Personnel 3.3 Fund increase from 0.75 to 1.0 FTE PD Support Services Tech 001 4150 4599 Support Services 2,929 376 3,305 Budget Overview Personnel 3.3 Fund increase from 0.75 to 1.0 FTE PD Support Services Tech 001 4150 4910 Support Services 50,005 289 50,294 Budget Overview Personnel 3.3 Fund increase from 0.75 to 1.0 FTE PD Support Services Tech 001 4150 4911 Support Services 30,282 1,552 31,834 Budget Overview Personnel 3.3 Fund increase from 0.75 to 1.0 FTE PD Support Services Tech 001 4150 4912 Support Services 57,421 4,242 61,663 Fund Summary General Fund 4.2.1 Increase Vacancy Savings Factor to 3% 001 1111 4000 Undistributed/Nondepartmental (500,000) (25,659) (525,659) Capital Projects Harbor 7.1.2 Correct North T-Pier Project to recoginize full HUD Grant of 1.5M 923 9930 6106 North T-Pier Renovations 300,000 1,200,000 1,500,000 Fund Summary
Non-Major
Governmental
Funds
4.6.20 Affordable Housing In-Lieu Fund: Decrease funding for 2-year Housing Element update to first year only 941 7105 6105 Community Development 235,000 (135,000) 100,000
Total Expenditures/Transfers Out 8,989,052 (6,301,840) 2,687,211 Exhibit 1. Changes to the Proposed Budget since the May 26, 2026 Budget Study Session Revenues/Transfers In
RESOLUTION NO. 33-26
A RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF MORRO BAY, CALIFORNIA
RESCINDING RESOLUTION NO. 42-25, DESIGNATING AND AUTHORIZING
INVESTMENT TRANSACTION OFFICERS AND ESTABLISHING
INTERNAL CONTROL POLICY FOR INVESTMENT TRANSACTIONS
THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, the City of Morro Bay has cash in its possession that exceeds the amount needed for day-to-day transactions; and
WHEREAS, the City of Morro Bay has an obligation to its citizens to effectively and safely manage that money while optimizing its earning potential; and
WHEREAS, it is necessary to designate, via Resolution, the transaction officers who have the authority to invest the City’s funds; and
WHEREAS, on June 24, 2025, the Morro Bay City Council adopted Resolution No. 42-25, which established the transaction officers with the authority to invest the City’s funds; and WHEREAS, with this Resolution, the Morro Bay City Council is rescinding Resolution No. 42-25 in its entirety; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California:
1. Resolution No. 42-25, relating to designating and authorizing investment transaction officers is rescinded in its entirety and replaced with this Resolution.
2. The “Investment Policy” as set forth in Exhibit A, attached hereto and incorporated herein, is hereby approved and hereby established as City policy.
3. The individuals holding the City offices/positions listed below are designated as transaction officers who are authorized to open and close investment accounts within the scope of the City’s Investment Policy:
City Manager
Finance Director/Treasurer
Accounting/Finance Manager
4. For purposes of internal controls, the City will require written approval of one of the above designated authorized representatives, prior to another one of the designated authorized representatives initiating a deposit, withdrawing funds or making any other change in the account.
///
///
///
/// Page 163 of 180
5. Provision for socially responsible investing have been incorporated as previously adopted by the City Council.
PASSED AND ADOPTED, by the City Council of the City of Morro Bay, at a regular meeting thereof held on the 9
th day of June 2026, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
______________________________________
CARLA WIXOM, Mayor
ATTEST:
____________________________
DANA SWANSON, City Clerk
EXHIBIT “A”
CITY OF MORRO BAY
INVESTMENT POLICY
PURPOSE
This investment policy establishes the practices and procedures to be used in managing the City of Morro Bay's (City) portfolio in accordance with the requirements of the State of California Government Code and the guidelines provided by the California Debt and Investment Advisory Commission (CDIAC) and the Government Finance Officers Association (GFOA).
SCOPE OF THE POLICY
This policy governs the investment of money that is not required to meet the immediate needs of the City. The policy applies to all City funds available for investment, including the General Fund, Special Revenue Funds, Capital Project Funds, Debt Service Funds, and Enterprise Funds, unless otherwise restricted by law, grant requirements, bond indentures, trust agreements, or other governing documents.
LEGAL AUTHORITY
Government Code Sections: California Government Code Sections 53600 to 53609, 53635, and 16429.1 govern the investment of local agency funds.
Legislative Changes: Any applicable legislative actions will be acted on as of their effective dates and will be incorporated into the policy annually, specifying the California Government Code sections that have been added, deleted, or amended.
OBJECTIVES
The City Treasurer will consider the following factors in priority order when assessing investment opportunities:
Safety: The primary objective is the preservation of principal. Capital losses will be avoided, whether from default or erosion of market value, meaning that the City will not sell or trade an investment because of market fluctuation. The two types of risk to be minimized are:
1. Credit risk - the risk that an issuer or other counterparty to an investment will not
fulfill its obligations; and
2. Interest rate or market risk - the risk that changes in interest rates will adversely affect the fair value of an investment.
Liquidity: The second objective is the liquidity of the portfolio. The portfolio should remain sufficiently flexible to enable the City to meet the operating requirements that are reasonably anticipated. To ensure liquidity, the investment policy must recognize that calculating cash flows are the basis of any good investment strategy. Meeting the daily cash flow demand goes hand-inhand with meeting the City's liquidity needs.
Yield: The third objective, behind safety and liquidity, is attaining a market rate of return throughout the budgetary and economic cycles.
While managing the portfolio, the Treasurer, and designated staff, will strive to maintain public trust by avoiding any transactions that might impair public confidence in the City. When selecting investment instruments, the Treasurer, and designated staff, will remain cognizant of any social and policy considerations that have been established and defined in this policy.
GENERAL STRATEGY
The Treasurer, and designated staff, may follow a passive or active investment strategy. Passive investment policies adhere to the investment goal of holding investments to maturity. Active investment strategy is the buying and selling of investments to achieve a certain benchmark objective. Great care, coupled with the advice of a fiscal agent, should be followed with an active investment policy. The City follows the passive investment strategy of holding investments to maturity.
STANDARD OF CARE
Prudent Investor Standard: The prudence standard for trust investing traces back to Harvard College v. Amory, 26 Mass. (9 Pick.) 446 (1830). Judge Samuel Putnam stated that trustees should ''observe how men of prudence, discretion and intelligence manage their own affairs, not in regard to speculation, but in regard to the permanent disposition of their funds, considering the probable income, as well as the probable safety, of the capital to be invested." This standard will be followed by the Treasurer, and designated staff.
Ethics and Conflict of Interest: The Treasurer, and designated staff, shall refrain from personal business activities that could conflict with the proper execution of the investment program or which could impair their ability to make impartial decisions.
Delegation of Authority: The following positions and corresponding City personnel are delegated the power to invest the funds of the City:
City Manager
Finance Director/Treasurer
Accounting/Finance Manager
These designations may change with the annual affirmation of this policy. Each delegate must adhere to the requirements set forth in the investment policy.
SAFEKEEPING AND CUSTODY
Third-party Safekeeping: Ownership of the City's investment securities will be protected through third-party custodial safekeeping. The custodian will provide the City with a safekeeping receipt or monthly, itemized statement. Exceptions to this requirement are m a d e for certificates of deposit, money market funds and investment pools.
Internal Controls: These are designed to ensure that the assets of the City are protected from theft, loss, or misuse. Such internal controls that are in place include:
1. Control of collusion;
2. Separation of duties;
3. Safekeeping of securities; and
4. Written confirmation of telephone transactions and wire transfers.
The City will separate the person who authorizes or performs the transaction from the person or people who ultimately record or otherwise account for the transaction to achieve separation of duties. Moreover, the City will require written approval of one of the above designated authorized representatives who is not also recording the transaction, prior to another one of the designated authorized representatives initiating a deposit, withdrawing funds, or making any other change in the account.
Delivery vs. Payment: All investment transactions should be conducted using standard delivery vs. payment procedures. In delivery vs. payment, the purchaser pays for the securities when they are delivered either to the purchaser or his/her custodian and ensures that securities are deposited in an eligible financial institution prior to the release of funds.
AUTHORIZED FINANCIAL DEALERS AND INSTITUTIONS
The City will only conduct business with approved banks, savings and loans, credit unions, and securities brokers/dealers. A list of financial dealers and institutions is to be maintained.
Broker/dealers and institutions must meet all requirements established by federal and state law .
SUITABLE AND AUTHORIZED INVESTMENTS
Authorized Investment Types: The City, by virtue of California Government Code Sections 53600 - 09, has the ability to invest in numerous types of instruments. The City has looked at its goals, objectives, and standards of care in establishing a list of authorized investment types that also meet statutory requirements. Those types of investment instruments that meet the criteria for the City are:
1. Securities of the U. S. Government, or its agencies;
2. California's Local Agency Investment Fund (LAIF) pool;
3. FDIC Insured Certificates of Deposit up to $250,000; •
4. Bankers' Acceptances (not exceeding 40% of the City's portfolio/max maturity 180 days);
5. Money Market funds;
6. Collateralized deposits;
7. Passbook savings accounts; and
8. Repurchase agreements and reverse repurchase agreements (no more than 20% of the City's portfolio and maximum maturity of 92 days).
Prohibited Investment Types: In addition to a listing of authorized investments, California Government Code Section 53601.6 prohibits local agencies from investing in the following i n s t r u m e n t s :
1. Inverse floaters;
2. Range notes or mortgage-derived, interest-only strips;
3. Any security that could result in zero interest accrual if held to maturity;
4. Stock; and
5. Futures or options.
There may be additional investment instruments in which the City does not want the T r e a s u r e r to invest, and those will be defined in future investment policies.
INVESTMENT PARAMETERS
Diversification of Investments: The City may choose to impose more stringent restrictions or further restrictions on other investment instruments, depending on its investment goals and risk tolerances, than those proposed in the California Government Code Sections 53600 - 09.
The City has indicated those authorized investments as follows:
1. Money market funds;
2. Collateralized deposits;
3. Securities of any one issuer, not to exceed 5% of the City's portfolio, except those obligations of the U.S. government, U.S. governmental agencies, and U.S. governmentsponsored enterprises;
4. Mutual funds; and
5. FDIC insured certificates of deposits.
Maximum Maturity: California Government Code Section 53601 lists the maximum maturity for any instrument as five (5) years. The exception to this time frame is made for investments with LAIF or collateralized deposits.
Minimum Credit Requirements: The City has chosen to follow the California Government Code Section 53601 that sets the minimum credit rating required for certain investment instruments as follows:
1. Short-term debt shall be rated at least ''A-1'' by Standard & Poor's Corporation, ''P-1'' by Moody's Investors Service, Inc., or ''F-1'' by Fitch Ratings. If the issuer of short-term debt has also issued long-term debt, this long-term debt rating shall be rated at least ''A," without regard to +/- or 1, 2, 3 modifiers, by Standard & Poor's Corporation, Moody's Investors Service, Inc., or Fitch Ratings.
2. Long-term debt shall be rated at least ''A," without regard to +/- or 1, 2, 3 modifiers, by Standard & Poor's Corporation, Moody's Investors Service, Inc., or Fitch Ratings.
Maximum Weighted Average Maturity of a Portfolio: As part of the quarterly portfolio performance report that is provided to the City Council, a weighted average maturity (WAM) of the portfolio is calculated. While there are no requirements under state law for a maximum WAM of a portfolio, CDIAC's Local Agency Investment Guidelines suggest that local agencies include and monitor WAM to arrive at an acceptable range for future implementation of a maximum benchmark.
Social Responsibility: Priority will be given to investments that are in compliance with socially responsible goals, to the extent that such investments achieve equivalent safety, liquidity and yield compared to other investments that do not meet the City's socially responsible goals.
When not impacting yield, safety and liquidity, priority will be given to investments that support community well-being through safe, environmentally sound, practices and fair labor practices. Investments are encouraged in entities that support combating climate change and equality of rights regardless of race, sex, religion, age, national or ethnic origin, sexual orientation, or disability.
PORTFOLIO MANAGEMENT ACTIVITY
Active or Passive Portfolio Management: In active portfolio management, treasurers buy and sell securities based on how to maximize portfolio values over a given timeframe. In passive portfolio management, the goal is to match a market rate of return (usually a benchmark).
Weighing the pros and cons of each strategy in light of staff resources and investment, the City has chosen to follow a passive portfolio management strategy.
Competitive Bidding: Investments are purchased in the most cost-effective and efficient manner utilizing approved brokers/dealers on all investment transactions.
Reviewing and Monitoring of the Portfolio: The portfolio requires monthly staff review to ensure the investments are properly tracked and reported, and quarterly reporting to the City Council.
Portfolio Adjustments: If the portfolio demonstrates non-compliance with the investment policy, the Treasurer, and designated staff, shall evaluate the investment and determine an appropriate course of action consistent with the City's objectives of safety, liquidity, and yield. The Treasurer may hold the investment to maturity, sell the investment, or take other corrective action as deemed prudent. Significant instances of non-compliance and the recommended course of action shall be reported to the City Council in the next quarterly investment report.
Performance Standards: The objective of investing is to obtain a rate of return throughout budgetary and economic cy cles , commensurate w i t h investment risk constraints and cash flow needs.
REPORTING
Reporting Methods: On a quarterly basis, the investment portfolio will be presented at a City Council meeting, along with the quarterly financial reports, and will list the following components:
1. Types of investment;
2. Issuer names;
3. Dates of maturity;
4. Par amounts;
5. Dollar amounts;
6. Market values;
7. Descriptions of programs under the management of contracted parties;
8. A statement of compliance with the investment policy; and
9. A statement of the ability to meet cash flow needs for six months.
Governmental Accountings Standards Board (GASB) Statement No. 31 - Marking to Market:
The City's portfolio is to be marked-to-market for the quarterly investment report provided to the City Council and at minimum, annually for the financial statements. Market values are to be obtained from a reputable and independent source and disclosed to the City Council in the quarterly written report. The independent source of pricing should not be one of the parties to the transaction being valued. Such an independent source could include a broker or other financial institution that was not counterparty to the transaction, the custodial bank if the bank was not a counterparty to the transaction, publicly available publications such as The Wal l Street Journal, or other pricing services for which a separate fee would be paid.
This is consistent with GASB Statement No. 31, which requires that governmental entities report investments at fair value, and with the California Governmental Code, which also requires market values of investments be reported.
Calculation of Yield and Costs: All yield rates on investments will be presented at book value.
Investment Policy Adoption, Review, and Amendment: The investment policy will be reviewed, amended, and presented to the City Council annually with budget adoption. The review should ensure that the policy is consistent with the overall objectives of preservation of principal, liquidity, and return, and is in conformance with the law, financial and economic trends, and the cash flow needs of the local agency.
Definitions or Glossary of Terms: This investment policy includes a definition section (Appendix A) in order to establish a common vocabulary between the Treasurer, and designated staff, the City Council, and the public.
APPENDIX A - INVESTMENT POLICY TERMINOLOGY
The following are examples of terminology commonly found in California City investment policies. The inclusion of these sections provides clarity to investment policies and better enables readers to understand important concepts.
Authorized Financial Dealers and Institutions: A list of financial institutions authorized to provide investment services. May also include a list of approved security broker/dealers with which the City can do business. These institutions and broker/dealers are usually selected by their ability to add value to the investment process. Some criteria to consider when choosing an approved broker/dealer include creditworthiness, expertise, and the products in which the financial dealer or institution is familiar. GFOA suggests that all entities qualifying for investment transactions provide audited financial statements; proof of industry group (National Association of Securities Dealers [NASO]) certification; proof of state registration; completed broker/dealer questionnaire; and certification of having read, understood, and agreeing to comply with the investment policy.
Bankers' Acceptance: A draft, bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.
Certificate of Deposit: A time deposit with a specific maturity evidenced by a certificate.
Collateralization: Process by which a borrower pledges securities, property, or other d e p o s i t s for the purpose of securing the repayment of a loan and/or security. California Government Code Section 53601 requires that all repurchase agreements be secured by eligible securities with a market value of 102 percent or greater of the funds borrowed.
California Government Code requires public deposits to be collateralized at 110%.
Delegation of Authority: The granting of authority to manage the investment program to designated officials. Such authority is usually derived from code sections, ordinance, charters, or statutes. Government Code Section 53607, for example, allows the City Council to delegate, for a one-year period, its authority to invest or reinvest funds or to sell or exchange securities held by the local government.
Delivery vs. Payment: A type of securities transaction in which the purchaser pays for the securities when they are delivered either to the purchaser or his/her custodian. It ensures that securities are deposited in an eligible financial institution prior to the release of funds. A thirdparty custodian as evidenced by safekeeping receipts should hold securities.
Diversification: A process of investing assets among a range of security types by sector, maturity, credit rating, and call type or structure. This reduces exposure to risk by combining a variety of investments, which are unlikely to all move in the same direction. GFOA suggests diversifying a city's investment portfolio by limiting investments to avoid exposure to a specific sector, limiting investment in securities with higher credit risks, investing in instruments with varying maturities, and continuously investing a portion of the portfolio in readily available funds such as a local government investment pool, money market funds, or
overnight repurchase agreements to ensure that appropriate liquidity is maintained in order to meet ongoing obligations.
Ethics and Conflicts of Interest: The California Political Reform Act of 1974 requires certain designated public officials at all levels of government to publicly disclose their private economic interests and requires all public officials to disqualify themselves from participating i n decisions in which they have a financial interest. As part of this requirement, local agencies are required to adopt and promulgate a Conflict- of - I n t e r e s t Code, with certain required sections.
To further promulgate this Code, investment policies sometimes include language requiring the ethical conduct of investment officers and statements regarding refraining from personal business activity that could conflict with the proper execution and management of the investment program or that could impair their ability to make impartial decisions. To avoid conflicts, GFOA recommends that investment officers disclose material interests in financial institutions with which they do business, disclose personal financial interests that could be related to the performance of the investment portfolio, and refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the local government.
Exemption: Language that grandfathers prohibited investments into the investment policy because they may have been held in the portfolio prior to the prohibition. When these investments mature or are liquidated, the money should be reinvested as provided by the policy and the exemption language should be removed from the policy.
FDIC: Federal Deposit Insurance Corporation is a federal agency that insures bank deposits up to $250,000 per deposit.
General Objectives: The section of an investment policy that illustrates the three main objectives (safety, liquidity, and yield), in order of priority, of a good investment policy. In addition to these commonly included objectives, there are a myriad of other objectives for which an investment policy can strive. Safety is the preservation of principal. Liquidity is how e a s i l y an investment may be redeemed for cash. Yield is the current rate of return on a security generally expressed as a percentage of its current price. As per California G o v e r n m e n t Code Section 53600.5, safeguarding the principal of the funds under its control should be the primary objective of local agencies. Liquidity also s h o u l d be a p r i n c i p a l objective of a portfolio. The portfolio should maintain sufficient liquidity to meet operating requirements. To accomplish this, a local agency can structure a portfolio so that investments m a t u r e when cash is needed and also by investing in liquid securities with an active secondary market. Yield should be the last objective an investment portfolio should strive for, b e h i n d safety and liquidity. Since there are many different ways for yield to be calculated, the investment policy should specify how it is to be calculated.
Internal Controls: The system used to ensure that the local government assets are protected from loss, theft, or misuse. Such a system should provide a reasonable assurance that such loss, theft, or misuse can be prevented. Examples include separation of duties, delegation of authority, and documentation. GFOA suggests that an internal control system address the following points: control of collusion, separation of transaction authority from accounting and recordkeeping, custodial safekeeping, avoidance of physical delivery of securities, clear delegation of authority to subordinate staff, written confirmation of
transactions for investments and wire transfers, and development of a wire transfer a g r e e m e n t with the lead bank and third-party custodian.
Investment Parameters: Specified restrictions on investments to limit the amount of risk in a portfolio. These parameters may be specified in the California Government Code; however, the local agency may choose to further restrict investment options depending on its risk tolerance. Such parameters may include diversification of investment types, percentages, or dollarlimits perissuer and setting maximum maturities.
Investment Types: A recitation of the investment types the local agency has been given authority in which to invest. This may be a list of securities allowable under California Government Code Section 53601 et seq., and may be further restricted by the agency itself. For a description of the allowable California local agency investment instruments, please see CDIAC's latest version of its Local Agency Investment Guidelines, available on its website at Local Agency Investment Guidelines 2026. GFOA recommends the investment in the following types of securities: U.S. government securities and agency obligations; highly-rated certificates of deposit, bankers' acceptances, commercial paper; investment-grade state and local government obligations; repurchase agreements securitized by the previously-mentioned securities; SEC-regulated, dollar-denominated money market mutual funds; and local government investment pools.
LAIF: Local Agency Investment Fund, the State of California's investment pool in which cities, counties and special districts may participate.
Liquidity: A liquid asset is one that can be quickly and easily converted into cash without loss in value.
Market Value: The price at which a security is trading at a point in time. Selling an investment at market value can result in a gain ($500,000 investment sold for $515,000 = $15,000 gain) or loss ($500,000 investment sold for $498,000 = $2,000 loss). Gains and losses are dependent on changes in the current rate of interest as compared to the interest rate of the investment that is being considered for sale.
Marking-to-Market: The act of recording the price or value of a security to reflect its current market value rather than its book value.
Maximum Maturities: Maturity is the date on which the security or obligation is redeemed by the issuer in exchange for cash. California law states that local governments cannot invest in instruments with terms remaining to maturity in excess of five years unless they receive express authority from their legislative bodies to do so. Local governments should attempt to match investment maturities with anticipated cash flow requirements. There is no requirement under California law for local governments to have a weighted average maturity (WAM) restriction for their portfolio, although CDIAC's Local Agency Investment Guidelines suggests that local agencies consider adopting a WAM restriction.
Performance Standards: The criteria by which a stated goal is measured. An investment portfolio's performance and risk exposure should be evaluated against appropriate benchmarks on a regular basis. One standard that should be strived for should be a market rate of return in a given interest rate environment.
Policy Considerations: The local ordinances or other requirements that place restrictions on the policy. Local governments should consider what should be exempted from the policy and also when, or under what circumstances, the policy should be amended.
Pooling of Funds: A statement in the investment policy that except for certain restricted or special funds, cash balances should be consolidated from all funds to maximize investment e a r n i n g s .
Portfolio: The collection of investment instruments held.
Prudent Investor Standard: Legal maxim that all investments should be made with care, skill, prudence and diligence under the circumstances then prevailing, which persons of prudence, discretion, and intelligence exercise in the professional management of their business affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived.
Reporting: Presentation of evaluation data or other information to communicate processes, roles, and results. Investment policies should include reporting requirements such as methods of reporting investments, the standards against which investments should be reported, and the requirement for calculating market value.
Reporting Methods: Ways in which investment outcomes are reported including listing of instrument values, dollar value returns, percentage yields, etc. GFOA suggests that local governments prepare investment reports at least quarterly. In California, investment reports are no longer required to be submitted to legislative bodies. This requirement is now permissive. GFOA goes on to list some suggested components of investment reports, including listing of securities, gains and losses, average weighted yield to maturity as compared to benchmarks, listing of investment by maturity date, and percentage of the total portfolio which each type of investment represents.
Repurchase Agreements: A repurchase agreement is a form of short-term borrowing for dealers in government securities, which are highly valued and thus considered a good source of collateral. The dealer sells the government securities to investors, usually on an overnight basis, and buys them back the following day. Investments in repurchase agreements may be made when the term of the agreement does not exceed one year.
Risk: Two of the most common risks associated with local government portfolio investing are credit risk and interest rate risk. Credit risk is the risk to an investor that an issuer will default in the timely payment of interest and/or principal on a security. Interest rate risk is t h e risk that the market value of securities in the portfolio will fall due to changes in general interest rates. Limiting investment to the safest types of securities, pre-qualifying financial i n s t i t u t i o n s , broker/dealers, and others with which the local agency will do business, and d i v e r s i f y i n g the number of issuers in an investment portfolio can minimize credit risk.
Interest rate risk can be minimized by structuring the portfolio so that investments mature at the same time that cash is required or investing operating funds in highly liquid, shorterterm s e c u r i t i e s (e.g., U.S. Treasury bills or notes).
Safekeeping and Custody: Rules derived to ensure the safety of an investment and within whose control the investment resides. Some examples include third-party safekeeping, developing lists of authorized financial dealers and institutions, developing internal controls, and using a delivery vs. payment standard for transactions. Local agencies should consider r e q u i r i n g securities to be held by third-party custodians, evidenced by timely statements illustrating the balance held by these custodians.
Scope: The types of funds that the policy covers (e.g., operating funds, bond proceeds, etc.).
In general, investment policies cover short-term operating funds. Longer-term funds such as retirement funds are covered by other policies. The investment of bond funds usually is governed by the bond documents such as the trust indenture.
Standards of Care: The degree of care that a reasonably prudent person would exercise in the investment of local agency funds.
RESOLUTION NO. 34-26
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
ESTABLISHING THE ANNUAL PROPOSITION 4
APPROPRIATIONS LIMIT FOR THE FISCAL YEAR 2026-27
THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, Article XIIIB of the California Constitution restricts the appropriation of tax proceeds that the City receives in any given fiscal year; and WHEREAS, the City has calculated the FY 2026-27 appropriations limit, in accordance with the provisions of Article XIIIB of the California Constitution; and WHEREAS, in June 1990, the California voters approved Proposition 111, amending the Gann Initiative to provide local agencies with the option of using either the city or county population change percentage, whichever is greater. The City is calculating this limit using the San Luis Obispo County population change and the California Per Capita Personal Income, referred to as the Price Factor (outlined in Exhibit 3, attached hereto); and WHEREAS, the City has complied with Government Code 7910.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, to adopt Resolution No. 34-26, which accepts the calculation of the FY 2026- 27 appropriations limit, as prepared by the Morro Bay Finance Department, and establishes the FY 2026-27 appropriations limit at $39,553,846, based on the calculation detailed in Exhibits 1 and 2 attached hereto.
PASSED AND ADOPTED, by the City Council of the City of Morro Bay, at a regular meeting thereof held on the 9
th day of June 2026, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
______________________________________
CARLA WIXOM, Mayor
ATTEST:
______________________________
DANA SWANSON, City Clerk
005 045 050
001 003 Unfunded Developer Gov't 051 052 250 260 201-206 280 282 299 302 303 430 General District Compensable Reimbursment Vehicle State Road Maint. Traffic SLESF Parking LTF LTF Risk Fund Trans Tax Leave Agreements Replacement GFER GF Fac Maint Gas Tax & Rehab SB1 CDBG Safety COPS In-Lieu Bikepaths Roads Management Property taxes 6,179,220 - - - - - - - - - - - - -
Intergovernmental Revenues 562,500 - - - - - - 323,442 296,214 - - 150,000 12,928 29,000 - Other taxes:
Sales and Use Tax 2,781,312 4,500,000 - - - - - - - - - - - - - Cannabis City Tax 502,250 - - - - - - - - - - - - - -
Transient Occupancy Tax 4,681,800 - - - - - - - - - - - - - - Franchise fees 834,500 - - - - - - - - - - - - - -
Other - - - - - - - - - - - - - - -
Licenses/permits 769,040 - - - - - - - - - - - - - -
Revenues From Current Services 2,041,443 - - - - - - - - - - - - - - Fines/Forfeitures 11,105 - - - - - - - - - 15,000 - - - - Other Revenues 786,400 - - 220,000 - - - - - - - - - - 1,978,132 Use of money and property:
Interest 425,000 5,000 - - - - - - - - - 12,500 13,000 2,500 - 40,000 Rent 466,100 - - - - - 66,336 - - - - - - - -
Revenue from other agencies: - -
State - - - - - - - - - - - - - - -
State/County grants - - - - - - - - - - - - - - -
Federal grants - - - - - - - - - - - - - - -
20,040,670 4,505,000 - 220,000 - - 66,336 323,442 296,214 - 15,000 162,500 13,000 15,428 29,000 2,018,132 450 311 & 921 315 321 & 922 331 & 923 500 & 565 570 515-2430 900 904 907 915 925 924 941 All Funds Water Sewer Special Special Gov't Capital TOTAL
Information Operating & Utility Operating & Harbor Ops Assessmt Assessmt PEG Gov Park Economic Improvement Triangle Lot State Park Housing ESTIMATED Technology Capital Imprv. Discount Capital Imprv. & Equipment Districts Cloisters Fees Impact Fees Dev. Projects Boat Yard Marina In-Lieu REVENUES Property taxes - - - - - 8,477 148,944 - - - - - - - 6,336,641 Intergovernmental Revenues - - - - 1,525,750 - - - - - - - - - 2,899,834 Other taxes: -
Sales and Use Tax - - - - - - - - - - - - - - 7,281,312 Cannabis City Tax - - - - - - - - - - - - - - 502,250
Transient Occupancy Tax - - - - - - - - - - - - - - 4,681,800 Franchise fees - - - - - - - - - - - - - - 834,500
Other - - - - - - - - - - - - - - -
Licenses/permits - - - - - - - - - - - - - - 769,040
Revenues From Current Services 82,800 7,649,200 - 9,460,000 2,815,026 - - - 122,000 - - - 130,000 10,000 22,310,469 Fines/Forfeitures - 55,000 - 30,000 8,500 - - - - - - - - - 119,605 Other Revenues 42,867 - - 399,152 - 21,454 - - - 430,000 - - - 3,878,005 Use of money and property: -
Interest 40,000 700,000 - 1,300,000 50,000 2,500 6,500 - 40,000 10,000 - - - 40,000 8,000 2,695,000 Rent - - - - - - - - - - - 55,000 - - 587,436
Revenue from other agencies: - - -
State - - - - - - - - - - - - - - -
State/County grants - - - - - - - - - - - - - - -
Federal grants/loans - - - - - - - - - - - - - - -
165,667 8,404,200 - 10,790,000 4,798,428 10,977 176,898 - 162,000 10,000 - 430,000 55,000 170,000 18,000 52,895,892
CITY OF MORRO BAY
APPROPRIATION LIMIT DOCUMENTATION
FISCAL YEAR 2026/27
CITY OF MORRO BAY
APPROPRIATION LIMIT DOCUMENTATION
FISCAL YEAR 2026-27
PROCEEDS OF TAXES CALCULATION APPROPRIATION LIMIT CALCULATION [1] PROCEEDS TOTAL [2] [3]
PROCEEDS OTHER THAN ESTIMATED CALIFORNIA POPULATION
OF TAXES TAXES REVENUES YEAR PCPI CHANGE CHANGE LIMIT
PROPERTY TAXES $ 6,336,641 6,336,641 1978-79 BASE YEAR $ 3,046,393 INTERGOVERNMENTAL 2,899,834 2,899,834 1979-80 10.17% 1.38% 3,402,527 OTHER TAXES 12,465,362 834,500 13,299,862 1980-81 10.53% 0.26% 3,770,591 PERMITS 769,040 769,040 1981-82 9.12% 1.39% 4,171,660
REVENUE FROM AGENCIES - 1982-83 6.79% 2.04% 4,545,796
STATE - 1983-84 2.35% 1.81% 4,736,835
STATE/COUNTY GRANTS - 1984-85 4.74% 1.75% 5,048,185
FEDERAL GRANTS - 1985-86 3.74% 1.62% 5,321,826
USE OF MONEY & PROPERTY - 1986-87 2.30% 4.12% 5,668,530 INTEREST 2,695,000 2,695,000 1987-88 3.04% 2.93% 6,011,990 RENT 587,436 587,436 1988-89 3.93% 3.83% 6,487,570
FINES & FORFEITURES 119,605 119,605 1989-90 4.98% 3.92% 7,077,629 CHARGES FOR SERVICES 22,310,469 22,310,469 1990-91 4.21% 4.59% 7,714,137 OTHER REVENUES 3,878,005 3,878,005 1991-92 4.14% 3.04% 8,277,721 1992-93 -0.64% 1.00% 8,306,991
$ 18,802,003 $ 34,093,889 $ 52,895,892 1993-94 2.72% 1.86% 8,691,654 1994-95 0.71% 1.40% 8,875,912
TRUE 1995-96 4.72% 1.60% 9,443,573
1996-97 4.67% 2.31% 10,112,922
1997-98 4.67% 2.06% 10,803,250
1998-99 4.15% 2.70% 11,555,378
1999-2000 4.53% 2.28% 12,354,234
2000-01 4.91% 2.46% 13,279,663
2001-02 7.82% 1.60% 14,547,223
2002-03 -1.27% 1.80% 14,620,998
2003-04 2.31% 1.32% 15,156,198
2004-05 3.28% 1.15% 15,833,334
2005-06 5.26% 1.19% 16,864,495
2006-07 3.96% 0.73% 17,660,315
2007-08 4.42% 0.96% 18,617,934
2008-09 4.29% 1.12% 19,634,110
2009-10 0.62% 1.01% 19,955,375
2010-11 -2.54% 0.87% 19,617,710
2011-12 2.51% 1.09% 20,329,315
2012-13 3.77% 0.47% 21,194,880
2013-14 5.12% 0.52% 22,395,914
2014-15 -0.23% 0.09% 22,364,513
2015-16 3.82% 0.78% 23,399,944
2016-17 5.37% 0.77% 24,846,376
2017-18 3.69% 0.59% 25,915,210
2018-19 3.67% 0.35% 26,960,330
2019-20 3.85% 0.24% 28,065,499
2020-21 3.73% -0.42% 28,990,070
2021-22 5.73% -0.30% 30,559,247
2022-23 7.55% 0.28% 32,958,496
2023-24 4.44% -0.50% 34,249,744
2024-25 3.62% -0.08% 35,461,193
2025-26 6.44% 0.00% 37,744,894
2026-27 4.95% -0.15% 39,553,846
PROCEEDS OF TAXES 18,802,003
PROCEEDS OF TAXES
UNDER APPROPRIATION LIMIT $ 18,942,891
May 1, 2026
Dear Fiscal Officer:
Price Factor and Population Information
Appropriations Limit
California Revenue and Taxation Code section 2227 requires the Department of Finance to transmit an estimate of the percentage change in population to local governments.
Each local jurisdiction must use their percentage change in population factor for January 1, 2026, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2026–27. Attachment A provides the change in California’s per capita personal income and an example for utilizing the factors to calculate the 2026–27 appropriations limit. Attachment B provides the city and unincorporated county population percentage change. Attachment C provides the population percentage change for counties and their summed incorporated areas. The population percentage change data excludes federal and state institutionalized populations and military populations.
Population Percent Change for Special Districts
Some special districts must establish an annual appropriations limit. California Revenue and Taxation Code section 2228 provides additional information regarding the appropriations limit. Article XIII B, section 9(C) of the California Constitution exempts certain special districts from the appropriations limit calculation mandate. Special districts required by law to calculate their appropriations limit must present the calculation as part of their annual audit. Any questions special districts have on this requirement should be directed to their county, district legal counsel, or the law itself. No state agency reviews the local appropriations limits.
Population Certification
The population certification program applies only to cities and counties. California Revenue and Taxation Code section 11005.6 mandates Finance to automatically certify any population estimate that exceeds the current certified population with the State Controller’s Office. Finance will certify the higher estimate to the State Controller by June 1, 2026. Please note: The prior year’s city population estimates may be revised.
The per capita personal income change is based on historical data.
If you have any questions regarding this data, please contact the Demographic Research Unit at (916) 323-4086.
/s Erika Li
Attachment
May 2026
Attachment A
A. Price Factor: Article XIII B specifies that local jurisdictions select their cost of living factor to compute their appropriation limit by a vote of their governing body. The cost of living factor provided here is per capita personal income. If the percentage change in per capita personal income is selected, the percentage change to be used in setting the fiscal year 2026–27 appropriation limit is:
Per Capita Personal Income
Fiscal Year Percentage change
(FY) over prior year
2026-27 4.95
B. Following is an example using sample population change and the change in California per capita personal income as growth factors in computing a 2026–27 appropriation limit.
2026–27:
Per Capita Cost of Living Change = 4.95 percent
Population Change = -0.14 percent
Per Capita Cost of Living converted to a ratio: 4.95 + 100 = 1.0495 100
Population converted to a ratio: -0.14 + 100 = 0.9986
100
Calculation of factor for FY 2026–27: 1.0495 x 0.9986 = 1.0480