CITY COUNCIL STAFF REPORT
Meeting Date: June 27, 2022
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-22 ESTABLISHING THE PROPOSITION 4 APPROPRIATIONS LIMIT PURSUANT TO ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION FOR THE FISCAL YEAR 2022/2023
SYNOPSIS
The City is required, by the State Constitution, to annually establish and adhere to a limit on the amount of its appropriations. The limit is prescribed by a State formula. For the fiscal year 2022/2023 (FY 22/23), staff has calculated that the appropriations limit is $36,041,538. Per the adopted budget, the City expects to collect, and has budgeted to appropriate, $29,589,754 of Proposition 4-covered revenue, $6,451,784 below the appropriations limit. The Budget Committee reviewed the proposed appropriations limit at their meeting of June 10, 2022 and recommended the City Council adopt the proposed resolution authorizing the appropriations limit.
DISCUSSION
Background
In November 1979, California voters approved Proposition 4, “The Gann Initiative” which is incorporated in Article XIIIB of the California State Constitution. Proposition 4 limits the amount of tax revenue that State and local government agencies can appropriate. A jurisdiction’s annual appropriations limit is calculated based upon the level of appropriations in fiscal year 1979 and subsequent changes in the local population and cost of living.
A jurisdiction may choose between two population growth factors and two cost of living factors when calculating its appropriations limit. The choice offered regarding population growth is between the growth in city or county population. The California State Department of Finance provided the 2022 population growth rates for the City of Pleasant Hill and Contra Costa County as -0.90% and -0.41%, respectively (memorandum attached). The City used the County population growth factor, which was lower. The choice offered for the annual cost of living factor is between the growth in California per capita income and the growth in non-residential assessed valuation due to new construction within the City. The City used the growth in California per capita income, which was 7.55%.
Analysis
Based upon the formula dictated by law, the City’s FY 22/23 Appropriations Limit from the proceeds from taxes is $36,041,538, calculated as shown in the table below. The City expects to collect, and has budgeted to appropriate, $29,589,754 in Proposition 4-covered revenue in FY 22/23, $6,451,784 below its Proposition 4 Appropriations Limit.
FY 21/22 Appropriations Limit $33,649,387
Adjustment Factors:
Population Growth x0.9959
Inflation x1.0755
Total Adjustment Factor x1.0711
FY 22/23 Appropriations Limit $36,041,538
FISCAL IMPACT
There is no direct fiscal impact that would result from adopting the proposed annual Appropriations Limit.
PUBLIC CONTACT
Public contact was made through posting of the City Council agenda on the City’s official notice bulletin board, at the Pleasant Hill Senior Center and at the Pleasant Hill Police Department. The agenda and staff report are posted on the City’s web page.
RECOMMENDED CITY COUNCIL ACTION
Adopt the proposed resolution as recommended by the Budget Committee at their meeting of June 10, 2022.
ALTERNATIVES TO RECOMMENDED ACTION
Do not adopt the attached resolution.
ATTACHMENT(S):
Proposed Resolution
California Department of Finance Memorandum on Price and Population Information Prepared by: Erick Cheung, Finance Manager
Approved by: June Catalano, City Manager