CITY COUNCIL STAFF REPORT
Meeting Date: June 16, 2025
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: ADOPT RESOLUTION NO. ___-25 ESTABLISHING THE
PROPOSITION 4 APPROPRIATIONS LIMIT PURSUANT TO
ARTICLE XIII B OF THE CALIFORNIA CONSTITUTION FOR
THE FISCAL YEAR 2025/2026
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 2025/2026 (FY 25/26), staff has calculated that the appropriations limit is $41,416,481. Per the proposed biennial budget, the City expects to collect, and has budgeted to appropriate, $32,155,887 of Proposition 4-covered revenue, $9,260,594 below the appropriations limit. The Budget Committee reviewed the proposed appropriations limit at its meeting of June 4, 2025, 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 2025 population growth rates for the City of Pleasant Hill and Contra Costa County as -0.28% and 0.00%, 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 6.44%.
Analysis
Based upon the formula dictated by law, the City’s FY 25/26 Appropriations Limit from tax proceeds is $41,416,481, calculated as shown in the table below. The City expects to collect, and has budgeted to appropriate, $32,155,887 in Proposition 4-covered revenue in FY 25/26, which is $9,260,594 below its Proposition 4 Appropriations Limit.
Appropriations Limit Calculation:
FY 24/25 Appropriations Limit $38,910,636
Adjustment Factors:
Population Growth - x1.0000
Inflation - x1.0644
Total Adjustment Factor x1.06440
FY 25/26 Appropriations Limit $41,416,481
Revenue covered under Proposition 4:
FISCAL IMPACT
There is no direct fiscal impact that would result from adopting the proposed annual Appropriations Limit.
PUBLIC CONTACT
FY 2025/26
Account Description Adopted Budget
101-401010 Property Tax Current Secured $4,491,489
103-402020 Measure K Transaction and Use Tax $5,753,000 101-401019 Property Tax In Lieu VLF $4,886,724
101-402010 Sales Tax $11,120,677
101-403020 Transient Occupancy Tax $2,288,912
101-404010 Business Licenses $3,288,790
101-404015 Property Transfer Tax $240,000
101-420100 Utility Users Tax $63,500
309-420020 Property Development Tax $3,000
309-450010 Property Development Tax Interest $1,000
SUBTOTAL PROCEEDS FROM TAXES $32,137,092
LESS: Business Lic. - Costs of Admin. (1) ($657,758)
SUB-TOTAL PROCEEDS OF TAXES $31,479,334
PLUS: General Fund Interest Proration (2) $676,553
TTL PROCEEDS OF TAXES SUBJECT TO APPROP LMT $32,155,887 (1) COST OF ADMINISTERING THE PROGRAM IS 20% OF TOTAL PROGRAM REVENUES.
THIS AMOUNT IS CONSIDERED "NON-PROCEEDS FROM TAXES".
(2) CALCULATION OF INTEREST PRORATION: PROCEEDS OF TAXES / TOTAL REVENUES X TOTAL INTEREST 32,137,092 37,810,971 796,000 676,553
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 4, 2025.
ATTACHMENT(S)
Proposed Resolution
California Department of Finance Memorandum on Price and Population Information Prepared by: Erick Cheung, Chief Financial Officer
Approved by: Ethan Bindernagel, City Manager