FOR THE COUNCIL MEETING OF AUGUST 16, 2022
COUNCIL AGENDA REPORT
TO: City Council
FROM: City Manager
Prepared by: Director of Finance
SUBJECT: ESTABLISHING THE CITY OF SANTA MARIA'S 2022-23
APPROPRIATION LIMIT
RECOMMENDATION:
That the City Council adopt a Resolution establishing the City of Santa Maria's 2022-23 appropriation limit.
BACKGROUND:
Article XIIIB of the State Constitution requires State and local governments to annually calculate and adopt an appropriation limit. Under the provisions of this article, a city may not appropriate "proceeds of taxes" in excess of its appropriation limit. Each year, municipalities compare the amount of revenues generated from tax proceeds with the previous year's appropriation limit, as modified by the State Department of Finance figures.
The appropriation limit calculation was first applied in 1978-79, as a result of Proposition
4. The Proposition was described as an appropriation limit but, in essence, is a tax revenue limit. Municipal agencies were required to classify revenues as either "proceeds from taxes" or "non -tax proceeds." The total amount of "non -tax proceeds" was deducted from total appropriations and the difference became the municipalities' beginning appropriation limit.
DISCUSSION:
Each year, the municipalities' previous year's appropriation limit is modified by the current per capita personal income change or the change in the local non-residential construction assessment roll and the population change of either cities or counties, as provided by the State Department of Finance.
The City of Santa Maria's 2022-23 appropriation limit was calculated by using the previous year's appropriation limit ($225,433,954), multiplied by the change in the local non-residential construction percentage and multiplied again by the County's population percentage change resulting in the 2022-23 appropriation limit of $244,347,863. The City's tax base revenue is calculated at $90,199,735, which is $154,148,128 less than the legal appropriation limit.
State law (Government Code §7910) requires that the City Council annually establish an appropriation limit, after the documentation used in determining the limit has been made available to the public for 15 days. The documentation consists of the allocation of City revenues between the "proceeds from taxes" or "non -tax proceeds" and the calculation shown in Exhibit A of the Resolution. This calculation has been available for public review on the City's website and in the office of the Director of Finance since August 1, 2022.
Fiscal Consideration
If the City ends a fiscal year with tax -based revenue in excess of the appropriation limit, the City is required to return the excess tax -based revenue to the taxpayers within two years. The excess tax -based revenue is returned by reducing taxes or fees. During the two-year period, the City is entitled to seek voter approval to retain the excess tax revenues.
The City's actual appropriations are 35.6 percent of the appropriation limit. At 35.6 percent, it is highly unlikely that the City would ever experience difficulties in staying within the appropriation limit. The City's appropriations are well below the legal limit; therefore, no further action is required after the adoption of the Resolution.
Impact to the Community
The documentation allocating revenues between "proceeds from taxes" and "non -tax proceeds," are on file in the Department of Finance. The modification of the prior year's appropriation limit by the change in the assessment roll and population change are shown on Exhibit A of the Resolution.
MARY HARVEY
Director of Finance
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MARIA, CALIFORNIA, ESTABLISHING THE CITY OF SANTA MARIA'S 2022-23
APPROPRIATION LIMIT
WHEREAS, Sections 7900 et seq. of the Government Code provide for the effective and efficient implementation of Article XIIIB of the California constitution; and WHEREAS, Government Code Sections 7901 through 7914 provide that annually, the governing body of each local jurisdiction shall, by resolution at a regularly scheduled meeting, establish the annual adjustment factors to be used and the tax proceeds expenditure appropriation limit; and
WHEREAS, Government Code Section 7910(a) requires that documentation supporting the appropriations limit be made available to the public 15 days in advance of the meeting; and
WHEREAS, Government Code Section 7910(b) provides that "a judicial action or proceeding to attack, review, set aside, void, or annul the action of the governing body" taken pursuant to this section shall be commenced within 45 days of the effective date of the Resolution.
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Santa Maria, California, as follows:
1. The change in the local non-residential construction assessment roll and the population of the City of Santa Maria are recognized as the annual adjustment factors for 2022-23; and
2. Documentation supporting the determination of the appropriations limit for 2022-23 has been available to the public on the City's website and in the office of the Director of Finance since August 1, 2022; and
3. The appropriation limit for 2022-23 is hereby set at $244,347,863; and
4. Documentation used in determination of the tax proceeds expenditure appropriation limit is attached hereto as Exhibit A; and
5. This Resolution is effective on its date of adoption; and
6. The Chief Deputy City Clerk is hereby authorized to make minor changes herein to address clerical errors, so long as substantial conformance of the intent of this document is maintained. In doing so, the Chief Deputy City Clerk shall consult with the City Manager and City Attorney concerning any changes deemed necessary.
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Santa Maria held this 16th day of August 2022.
Mayor
ATTEST:
Chief Deputy City Clerk
Exhibit A: Calculation of Appropriation Limit
iPPROV5DASTO F
l City Attorney
APPROVED AS TO CONTENT:
Department Director
ity Manager
CALCULATION OF APPROPRIATION LIMIT FROM
TAX PROCEEDS FOR 2022-23
2021-22 Appropriation Limit $ 225,433,954
Mulitiplied by the appropriation limit change factors:
1. Change in the Local Non -Residential Construction: 1.0824
2. Santa Barbara County Population Change Factor 1.0014 Total appropriation limit change factor 1.0839
2022-23 Appropriation Limit $ 244,347,863
2022-23 Estimated Proceeds of Taxes Subject to Appropriation Limit $ 90,199,735 Appropriation limit change factors:
1. Greater of:
Change in the Local Non -Residential Construction:
Change in California per Capita Income:
Income Change Factor:
2. Greater of:
City of Santa Maria Population Change Factor:
2021 110,969
2022 109,910
Change -1,059
8.24%
7.55%
1 + 0.0824 1.0824
Percentage Change: -1,059 / 110,969 = -0.95%
Santa Barbara County Population Change Factor
2021 438,522
2022 439,133
Change 611
Percentage Change: 611 / 438,522 = 0.14%
Population Change Factor: 1 +
0.0014 = 1.0014
Posted for Public on 8/1/2022 EXHIBIT A