DATE: June 27, 2024
TO: Mayor and Members of the City Council
FROM: John R. Gillison, City Manager
INITIATED BY: Noah Daniels, Finance Director
Rick Flinchum, Finance Manager
SUBJECT: Consideration of a Resolution Adopting the Amended Article XIIIB Appropriations Limit for Fiscal Years 2012/13 through 2023/24. (RESOLUTION NO. 2024-058) (CITY)
RECOMMENDATION:
Staff recommends that the City Council approve the resolution adopting the amended Article XIIIB Appropriations Limit for Fiscal Years 2012/13 through 2023/24.
BACKGROUND:
In conjunction with the adoption of the annual budget, the State of California Constitution, Article XIIIB, requires that an appropriations limit, referred to as the GANN limit, be established annually by the City Council. The GANN limit is intended to keep inflation adjusted, per-person government spending under 1978-79 levels.
There are established guidelines for setting the appropriations limit, including the use of four distinct factors in developing the annual limit:
1. Consumer Price Index (CPI) change for the subject year (CPI Factor);
2. Assessed Valuation due to new non-residential construction per the San Bernardino County Assessor (Price Factor);
3. Change in the City’s population per the State of California Department of Finance (City Population Factor); and,
4. Change in the County’s population per the State of California Department of Finance (County Population Factor).
Historically, the City solely utilized the CPI Factor and the City Population Factor during each budget adoption; however, the guidelines indicate that the CPI Factor or Price Factor and City Population or County Population Factor can be utilized to determine the higher factor to increase the appropriations limit by each year. As such, the appropriations limit is below what otherwise could have been calculated.
ANALYSIS:
As stated, each year the City Council approves a resolution establishing the appropriations limit for the upcoming fiscal year. On June 22, 2023, the City Council established the appropriations limit for Fiscal Year 2023/24 at $110,522,140. At that time, the City’s Fiscal Year 2023/24 appropriations subject to this limit totaled $85,043,430, which anticipated that the City would be at 76.95% of its GANN Limit at the fiscal year’s end of June 30, 2024.
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Staff has conducted an analysis of the appropriations limit adoptions since Fiscal Year 2010/11 to review the factors used to set the appropriations each year, historically the C.P.I. Factor and City Population Factor. This analysis has shown that, while all factors utilized in setting the limit were correct, the two aforementioned factors were not those that would provide an optimized appropriations limit in each year. Therefore, the appropriations limit has historically been well below the threshold it otherwise would be if guidelines were followed as intended. To ensure the City appropriations limit is optimized for efficient management of the City’s resources, staff is recommending a restatement of appropriations limits beginning with Fiscal Year 2012/13 through the current fiscal year. Though not every fiscal year will need new factors utilized, because of the rolling nature of appropriations limits, it is necessary to restate each fiscal year subsequent to 2012/13.
In recent fiscal years, inflation has driven up appropriations faster than the factors previously used in this calculation. Therefore, it is necessary to ensure the appropriations limit is adequate for City operations and that the limit is not exceeded. This action will ensure that the limit is sufficiently established within the guidelines set by Article XIIIB and optimized for the growth in City appropriations. The table below summarizes these changes.
Fiscal
Year
Factors Previously Used Former Limit New Factors Used New Limit 2012/13 CPI Factor: 3.77%%
City Population: 1.07%
$64,177,737 Price Factor: 11.57%
City Population: 1.07%
$69,005,753
2013/14 CPI Factor: 5.12%
City Population: 1.13%
$68,227,352 Price Factor: 5.96%
City Population: 1.13%
$73,946,565
2014/15 CPI Factor: -0.23%
City Population: 1.1%
$68,820,930 Price Factor: 3.09%
City Population: 1.1%
$77,074,505
2015/16 CPI Factor: 3.82%
City Population: 1.1%
$72,241,330 CPI Factor: 3.82%
City Population: 1.1%
$80,905,108
2016/17 CPI Factor: 5.37%
City Population: 1.18%
$77,016,368 CPI Factor: 5.37%
City Population: 1.18%
$86,261,026
2017/18 CPI Factor: 3.69%
City Population: 0.94%
$80,597,771 CPI Factor: 3.69%
County Population: 1.16%
$90,487,816
2018/19 CPI Factor: 3.67%
City Population: 0.79%
$84,216,611 Price Factor: 7.14%
County Population: 0.95%
$97,871,622
2019/20 CPI Factor: 3.85%
City Population: 0.44%
$87,846,347 Price Factor: 5.02%
County Population: 0.90%
$103,714,558
2020/21 CPI Factor: 3.73%
City Population: 0.18%
$91,289,924 Price Factor: 7.48%
County Population: 0.51%
$112,042,837
2021/22 CPI Factor: 5.73%
City Population: 0.01%
$96,566,481 CPI Factor: 5.73%
County Population: 0.17%
$118,664,569
2022/23 Price Factor: 9.3%
County Population: 0.14%
$105,692,014 Price Factor: 9.3%
County Population: 0.14%
$129,890,237
2023/24 CPI Factor: 4.44%
County Population: 0.12%
$110,522,139 CPI Factor: 4.44%
County Population: 0.12%
$135,826,221
FISCAL IMPACT:
There is no fiscal impact as a result of this action. The recommendation by staff ensures the City’s compliance with Article XIIIB of the State Constitution.
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COUNCIL MISSION / VISION / VALUE(S) ADDRESSED:
The adoption of the amended Article XIIIB Appropriations Limits supports the City Council’s core value of providing and nurturing a high quality of life for all by demonstrating the active management of the City’s financial resources to support the various services provided to Rancho Cucamonga residents, businesses and stakeholders.
ATTACHMENTS:
Attachment 1 – Resolution No. 2024-058