PISMO BEACH CITY COUNCIL STAFF REPORT
Agenda Item #9.E
Meeting Date: June 3, 2025
TITLE:
Fiscal Year 2026 Appropriations Limit (Gann Limit)
RECOMMENDATION:
Adopt a Resolution accepting the Fiscal Year 2026 Appropriations Limit.
DISCUSSION:
The California State Constitution requires that government entities calculate and adopt an appropriations limit each year to ensure that expenses don't grow greater than allowed by law.
California Constitution Article 13B, Section 1 provides that “The total annual appropriations subject to limitation of the State and each local government in the Constitution of the State of California, Article 13B Government Spending Limitation, shall not exceed the appropriations limit of the entity of government for the prior year adjusted for the change in the cost of living and the change in population, except as otherwise provided in this article.”
The Council set the Appropriations Limit for Fiscal Year (FY) 2025 at $34,542,433. During FY 2025, the City identified a change to the population factor that should have been used in the calculation. Specifically, the population factor should have been based on total population minus exclusions. With this adjustment, the corrected Appropriations Limit for FY 2025 is $34,150,205.
In order to calculate the FY 2026 Gann Limit, staff calculated the new limit based on the corrected Appropriations Limit of $34,150,205. In a letter dated May 2025, the State Department of Finance (Attachment 2) informed all cities that the percentage change in the California Per Capita Personal Income that can be used for the “change in the cost of living” factor for FY 2026 is 6.44%, that the percent change in Pismo Beach’s population to be used for FY 2026 shall be a -0.69% decrease (from 7,858 to 7,804), and that the percent change in San Luis Obispo County’s population to be used for FY 2026 is a 0.12% decrease. Adjusting the FY 2025 Appropriations Limit by the above percentage changes in California Per Capita Personal Income, and in the San Luis Obispo County population, yields an Appropriations Limit of $36,305,160 for FY 2026 (see calculations, Attachment 1A).
The FY 2026 appropriations that are subject to this Limit amount to $27,720,820, which is below the FY 2026 Appropriations Limit of $36,305,160 by $8,584,341.
Conclusion and Recommendation
Staff recommends that the City Council adopt a Resolution (Attachment 1) to approve the Gann Limit for FY 2026.
FISCAL IMPACT:
None, as FY 2026 appropriations subject to Gann Limit are below the calculated Gann Limit.
ATTACHMENTS:
1. Resolution
1.A. Exhibit A to Resolution: Appropriations Limit Calculation Worksheet
2. May 2025 Letter from State Dept of Finance Price and Population Letter Submitted by: Nadia Feeser, Administrative Services Director City Manager Approval:
RESOLUTION NO. R-2025-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH, CALIFORNIA ACCEPTING THE FISCAL YEAR 2026 APPROPRIATIONS LIMIT WHEREAS, Article XIII-B of the California Constitution provides that the total annual appropriations subject to limitation of each governmental entity shall not exceed the Appropriations Limit of such governmental entity for the prior year, adjusted for changes in population and inflation as mandated by Proposition 4 (commonly called the “Gann Limit”), passed in November 1979, and Proposition 111, passed in June 1990, except as otherwise provided for in said Article XIII-B and implementing State statutes; and WHEREAS, pursuant to Article XIII-B of said California Constitution, and Section 7900 et seq. of the California Government Code, the City is required to set its Appropriations Limit for each fiscal year; and
WHEREAS, the Council set the Appropriations Limit for Fiscal Year (FY) 2025 at $34,542,433; during FY 2025, the City identified a change to the population factor that should have been used in the calculation, specifically that the population factor should have been based on total population minus exclusions; with this adjustment, the corrected Appropriations Limit for FY 2025 is $34,150,205; and
WHEREAS, the State Department of Finance has provided the required information on the change in California Per Capita Personal Income and on the change in population for the County of San Luis Obispo to be used for adjusting the FY 2025 Appropriations Limit to calculate the FY 2026 Appropriations Limit; and
WHEREAS, the City has used the change in California Per Capita Personal Income and change in San Luis Obispo County population data provided by the State Department of Finance in May 2025 to calculate the FY 2026 Appropriations Limit, and, pursuant to Section 7910 of California Government Code, has made available to the public the documentation used to calculate the FY 2026 Appropriation Limit (provided as Exhibit A).
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pismo Beach that the Appropriation Limit for Fiscal Year FY 2026 shall be set in the amount of $36,305,160.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 3rd day of June 2025, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
Attachment 1
RECUSED:
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
IN WITNESS WHEREOF, I have hereunto set my hand on _______________________. ________________________
Erica Inderlied, City Clerk
Attachment 1
City of Pismo Beach
Appropriations Limit Calculation Worksheet
For
Fiscal Year 2025-2026
FY 2025 Appropriations Subject to Limit 28,290,177$
APPROPRIATION LIMIT CALCULATION
Item #
1 FY 2025 Appropriation Limit 34,150,205$
2 Population Factor - San Luis Obispo County X 0.998780779 3 Subtotal =34,108,569$
4 California Per Capita Personal Income Facto X 1.0644000 5 Total Adjustment %X 1.0631023
6 FY 2026 APPROPRIATION LIMIT (3) X (4)36,305,160$
7 Annual Adjustment in Dollars (1) X (5)2,154,955$
8 FY 2026 Appropriations Subject to Limit 27,720,820$
9 Over (Under) Limit (8,584,341)$
Attachment 1.A
May 2025
Dear Fiscal Officer:
Subject: 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, 2025, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2025-26. Attachment A provides the change in California’s per capita personal income and an example for utilizing the price factor and population percentage change factor to calculate the 2025-26 appropriations limit. Attachment B provides the city and unincorporated county population percentage change along with 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. The code section and the California Constitution can be accessed at the following website: http://leginfo.legislature.ca.gov/faces/codes.xhtml .
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, 2025.
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.
JOE STEPHENSHAW
Director
By:
ERIKA LI
Chief Deputy Director
Attachment
Attachment 2
May 2025
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 2025-26 appropriation limit is:
Per Capita Personal Income
Fiscal Year Percentage change
(FY) over prior year
2025-26 6.44
B. Following is an example using sample population change and the change in California per capita personal income as growth factors in computing a 2025-26 appropriation limit.
2025-26:
Per Capita Cost of Living Change = 6.44 percent
Population Change = 0.28 percent
Per Capita Cost of Living converted to a ratio: 6.44 + 100 = 1.0644 100
Population converted to a ratio: 0.28 + 100 = 1.0028 100
Calculation of factor for FY 2025-26: 1.0644 x 1.0028 = 1.0674
Attachment 2
FISCAL YEAR 2025-26
Attachment B
Annual Percent Change in Population Minus Exclusions*
January 1, 2024 to January 1, 2025 and Total Population January 1, 2025 City County Percent Change 24-25
Population Minus
Exclusions 1-1-24
Population Minus
Exclusions 1-1-25 Total Population 1-1-25
Arroyo Grande City San Luis Obispo -0.64 18,025 17,910 17,910 Atascadero City San Luis Obispo -0.72 29,305 29,093 30,134 El Paso de Robles City San Luis Obispo 0.24 30,988 31,061 31,061 Grover Beach City San Luis Obispo -0.35 12,455 12,411 12,411 Morro Bay City San Luis Obispo 0.00 10,404 10,404 10,404 Pismo Beach City San Luis Obispo -0.69 7,858 7,804 7,804 San Luis Obispo City San Luis Obispo 1.52 48,791 49,534 49,534 Balance of County San Luis Obispo -0.61 118,580 117,852 120,079 Incorporated San Luis Obispo 0.25 157,826 158,217 159,258 County Total San Luis Obispo -0.12 276,406 276,069 279,337 Attachment 2