CITY COUNCIL STAFF REPORT
Meeting Date: June 26, 2023
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-23 ESTABLISHING THE PROPOSITION 4 APPROPRIATIONS LIMIT PURSUANT TO ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION FOR THE FISCAL YEAR 2023/2024
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 2023/2024 (FY 23/24), staff has calculated that the appropriations limit is $37,506,272. Per the mid-year review, the City expects to collect, and has budgeted to appropriate, $30,350,571 of Proposition 4-covered revenue, $7,155,701 below the appropriations limit. The Budget Committee reviewed the proposed appropriations limit at its meeting of June 14, 2023, 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 2023 population growth rates for the City of Pleasant Hill and Contra Costa County as -0.89% and -0.36%, 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 4.44%.
Analysis
Based upon the formula dictated by law, the City’s FY 23/24 Appropriations Limit from the proceeds from taxes is $37,506,272, calculated as shown in the table below. The City expects to collect, and has budgeted to appropriate, $30,350,571 in Proposition 4-covered revenue in FY 23/24, which is $7,155,701 below its Proposition 4 Appropriations Limit.
FY 22/23 Appropriations Limit $36,041,538
Adjustment Factors:
Population Growth x0.9964
Inflation x1.0444
Total Adjustment Factor x1.0406
FY 23/24 Appropriations Limit $37,506,272
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 its meeting of June 14, 2023.
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: Ethan Bindernagel, Interim City Manager