CITY COUNCIL STAFF REPORT
Meeting Date: June 17, 2024
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
SUBJECT: ADOPT RESOLUTION NO. ___-24 ESTABLISHING THE PROPOSITION 4 APPROPRIATIONS LIMIT PURSUANT TO ARTICLE XIII B OF THE CALIFORNIA CONSTITUTION FOR THE FISCAL YEAR 2024/2025
SYNOPSIS
The City is required, by the State Constitution, to establish and adhere annually to a limit on the amount of its appropriations. The limit is prescribed by a State formula. For the fiscal year 2024/2025 (FY 24/25), staff has calculated that the appropriations limit is $38,910,636. Per the proposed biennial budget, the City expects to collect, and has budgeted to appropriate, $31,252,936 of Proposition 4-covered revenue, $7,657,700 below the appropriations limit. The Budget Committee reviewed the proposed appropriations limit at its meeting of June 5, 2024, 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 XIII B 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 2024 population growth rates for the City of Pleasant Hill and Contra Costa County as 0.12% and -0.28%, respectively (memorandum attached). The City used the County population growth factor, which was higher. 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 3.62%.
Analysis
Based upon the formula dictated by law, the City’s FY 24/25 Appropriations Limit from tax proceeds is $38,910,636, calculated as shown in the table below. The City expects to collect, and has budgeted to appropriate, $31,252,936 in Proposition 4-covered revenue in FY 24/25, which is $7,657,700 below its Proposition 4 Appropriations Limit.
FY 23/24 Appropriations Limit $37,506,272
Adjustment Factors:
Population Growth x1.0012
Inflation x1.0362
Total Adjustment Factor x1.0374
FY 24/25 Appropriations Limit $38,910,636
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 authorizing the appropriations limit, as recommended by the Budget Committee at its meeting of June 5, 2024.
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, City Manager