CITY COUNCIL STAFF REPORT
Meeting Date: June 15, 2026
TO: THE HONORABLE MAYOR AND CITY COUNCILMEMBERS
TITLE: ADOPT RESOLUTION NO. __-26 ESTABLISHING THE PROPOSITION 4 APPROPRIATIONS LIMIT PURSUANT TO ARTICLE XIII B OF THE CALIFORNIAL CONSTITUTION FOR FISCAL YEAR 2026/2027
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 2026/2027 (FY 26/27), staff has calculated that the appropriations limit is $43,736,090. Per the proposed biennial budget, the City expects to collect, and has budgeted to appropriate, $32,227,731 of Proposition 4-covered revenue, which is $11,508,359 below the appropriations limit. The Budget Committee reviewed the proposed appropriations limit at its meeting of May 28, 2026, 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 2026 population growth rates for the City of Pleasant Hill and Contra Costa County as 0.62% and -0.31%, respectively (memorandum attached). The City used its population growth factor, since it was higher than the County’s. 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 4.95%.
Analysis
Based upon the formula dictated by law, the City’s FY 26/27 Appropriations Limit from tax proceeds is $43,736,090, calculated as shown in the table below. The City expects to collect, and has budgeted to appropriate, $32,227,731 in Proposition 4-covered revenue in FY 26/27, which is $11,508,359 below its Proposition 4 Appropriations Limit.
Appropriations Limit Calculation:
FY 25/26 Appropriations Limit $41,416,481
Adjustment Factors:
Population Growth x1.0062
Inflation x1.0495
Total Adjustment Factor x1.05601
FY 26/27 Appropriations Limit $43,736,090
Revenue covered under Proposition 4:
On May 28, 2026, the Budget Committee reviewed the proposed appropriations limit at its meeting and recommended the City Council adopt the proposed resolution authorizing the appropriations limit.
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
Move to adopt the proposed resolution authorizing the appropriations limit, as recommended by the Budget Committee at its meeting of May 28, 2026.
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