AGENDA ITEM NO.
Consent (9)
CITY OF SIMI VALLEY
MEMORANDUM
June 5, 2023
TO: City Council
FROM: Department of Administrative Services
SUBJECT: ADOPTION OF A RESOLUTION ESTABLISHING THE CITY’S F ISCAL YEAR 2023-24 APPROPRIATIONS LIMIT
STAFF RECOMMENDATION
It is recommended that the City Council adopt the attached Resolution No. 2023-29 (page 5) setting the City’s Fiscal Year (FY) 2023-24 Appropriations Limit at $96,712,512.
BACKGROUND AND OVERVIEW
Each year the City is required to adopt a resolution establishing a limit on its appropriations of tax proceeds. For FY 2023- 24, the City’s appropriations limit is calculated to be $96,712,512. Based on net proceeds of taxes subject to the limitation in the amount of $74,170,218 in the FY 2023-24 Proposed Budget, proposed City appropriations are $22,542,294, below the limit.
On November 6, 1979, California voters approved the Gann Spending Limitation Initiative (Proposition 4) establishing Article XIIIB of the State Constitution. Article XIIIB sets limits on the amount of tax revenues that the State and most local governments can appropriate within a given fiscal year. Its basic provisions are as follows:
• Each year, the State and local governments must adopt a resolution establishing an appropriations limit. FY 1978-79 appropriations serve as the base for this limit, with adjustments being made annually to reflect increases in population, the cost of living, and financial responsibility transfers.
• Only tax proceeds are subject to the limit. Charges for services, regulatory fees, grants, loans, donations, and other non- tax proceeds are not subject to the limit.
Exemptions are also made for voter -approved debt, debt that existed prior to January 1, 1979, and the cost of compliance with court or Federal government mandates.
• All tax revenues received in excess of the appropriations limit must be refunded to taxpayers within a two-year period.
• The voters may approve an increase in the appropriations limit. For the increase to remain in effect, however, it must be re-approved by voters at four-year intervals.
2 On June 5, 1990, California voters approved the Traffic Congestion Relief and Spending Limitation Act (Proposition 111), which made various amendments to Article XIIIB of the State Constitution. The major changes, which became effective July 1, 1990, are as follows:
• The change in the cost of living is defined to be either the change in California per capita personal income or the change in assessed valuation due to the addition of non-residential new construction. Previously, the change in the cost of living was defined as the lesser of the change in the U.S. Consumer Price Index or the change in California per capita personal income.
• The change in population is defined as either a change in the City’s population or a change in the County’s population.
• “Qualified capital outlay projects” were added to the items exempted from the appropriations limit. Qualified capital outlay projects must have a useful life of ten or more years and a cost that equals or exceeds $100,000.
• Tax revenues received in excess of the appropri ations limit must be refunded to taxpayers only if the limit is exceeded over a two-year period.
• The annual calculation of the appropriations limit must be reviewed as part of the City’s annual financial audit.
FINDINGS AND ALTERNATIVES
The information used to calculate the City’s FY 2023-24 appropriations limit is presented in Exhibit A (page 7). The City’s appropriations limit for FY 2022- 23 was $92,721,564.
The FY 2023-24 adjustment factor allowed by Proposition 111 due to population and cost of living changes is 1.04304228. Multiplying the FY 2022-23 limit by the adjustment factor results in a FY 2023-24 appropriations limit of $96,712,512.
As indicated above, Proposition 111 provides several options for calculating increases in the appropriations limit. With respect to the change in population, the City’s calculation uses the lesser of the percentage decrease in either the City or the County population.
The decrease in the City’s population was used since it was less er than the County’s (-
0.13% vs. -0.72%).
With respect to the change in the cost of living criterion, the change in California per capita personal income (4.44%) was used, as the change in non-residential assessed valuation information is not yet available from the County. The Ventura County Assessor’s Office has customarily been able to provide assessed value in formation in July of each year.
Staff is of the opinion that the change in non-residential assessed valuation is unlikely to reflect a change that is lower than the change in per capita personal income, which would result in a lower appropriations limit for FY 2023-24 if used in lieu of the per capita income data.
3 The City’s total revenue proceeds from all funds subject to the limit are $90,701,456. Of this amount, $78,295,510 is identified as coming from tax proceeds, while $12, 405,946 is identified as coming from non-tax proceeds. Attachment B (page 9) provides a detailed breakdown, by fund, of budgeted revenues and their classification as tax proceeds or non-tax proceeds.
The City is entitled to make certain deductions from its FY 202 3-24 tax proceeds of $78,295,510 for the purpose of calculating the Net Proceeds of Taxes Subject to the Limit.
The first of these is a deduction of $ 3,520,900 for qualified capital outlay projects.
Attachment C (page 10) provides background information for this deduction including the capital outlay projects, funding sources, and the classification of appropriations into tax and non-tax proceeds.
The City is also entitled to deduct the cost of compliance with Federal mandates, which is $604,392 in FY 2023-24. Medicare and Social Security are two such mandates that are relatively easy to identify and to calculate. Detailed information on the City’s Medicare and Social Security costs is provided in Attachment D (page 11). The deduction has been limited to the portion of total cost to be paid from tax proceeds.
Having taken the available deductions into consideration, the FY 2023- 24 Proposed Budget contains appropriations subject to the limitation of $74, 170,218. This amount is $22,542,294 below the City's legal appropriations limit of $96,712,512.
The following alternatives are available to the City Council:
1. Adopt the attached resolution (page 5) establishing the City’s FY 2023- 24 appropriations limit at $96,712,512;
2. Provide staff with other direction.
Staff recommends Alternative No. 1.
SUGGESTED COUNCIL MOTION
I move to approve the adoption of Resolution No. 2023-29 establishing the City’s FY 2023-24 appropriations limit.
4 SUMMARY
E
ach year the City is required to adopt a resolution establishing a limit on its appropriations of tax proceeds. The Traffic Congestion Relief and Spending Limitation Act (Proposition 111), approved by the voters on June 5, 1990, changed some of the factors used to calculate the limit. For FY 2023- 24, the City’s appropriations limit is calculated to be $96, 712,512. The City’s Proposed Budget contains appropriations subject to the limit of $74,170,218. Therefore, the portion of the FY 2023- 24 Proposed Budget subject to the limit is $22,542,294 less than the City’s FY 2023-24 appropriations limit.
Carolyn Johnson
Administrative Services Director
Prepared by: Johanna Medrano, Deputy AS Director (Budget & Purchasing) INDEX Page
R
esolution No. 2023-29 ......................................................................................... 5 Exhibit A – Computation of FY 2023-24 Appropriations Limit ................................ 7 Attachment A – Comparison of Proposed Budget to Appropriations Limit ............ 8 Attachment B – Calculation of Proceeds of Taxes Subject to FY 2023-24 Limit ... 9 Attachment C – Identification of Qualified FY 2023-24 Capital Outlay Projects…10 Attachment D – Federal Mandate – Medicare/Social Security Calculation………11 Attachment E – Interest Earnings Produced by Taxes……………………………..12 R
ESOLUTION NO. 2023-29
A
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SIMI VALLEY ESTABLISHING AN APPROPRIATIONS LIMIT
FOR FISCAL YEAR 2023-24
W
HEREAS, the voters approved the Gann Spending Limitation Initiative (Proposition 4) on November 6, 1979, adding Article XIIIB to the Constitution of the State of California to establish and define annual appropriations limits on State and local government entities; and
W
HEREAS, Chapter 1205, Statutes of 1980 (SB 1352) provides for the implementation of Article XIIIB by defining various terms used in the Article and prescribing procedures to be used in implementing specific provisions of the Article, including the establishment by resolution each year by the governing body of each local jurisdiction of its appropriations limit; and
W
HEREAS, the voters approved the Traffic Congestion Relief and Spending Limitation Act (Proposition 111) on June 5, 1990, amending Article XIIIB of the Constitution of the State of California; and
W
HEREAS, Chapter 60, Statutes of 1990 (SB 88) provides for the implementation of Proposition 111 by defining various terms used in the Article and prescribing procedures to be used in implementing the amendments to the Article; and W
HEREAS, the required computations to determine the appropriations limit for Fiscal Year 2023-24 have been performed by the Department of Administrative Services, are on file with the Office of the City Clerk, and are available for public review; and
W
HEREAS, these computations are provided in Exhibit A, which is incorporated herein by reference and attached hereto.
NO
W, THEREFORE, THE CITY COUNCIL OF THE CITY OF SIMI VALLEY DOES RESOLVE AS FOLLOWS:
S
ECTION 1. The Appropriations Limit for the City of Simi Valley for Fiscal Year 2023-24 is $96,712,512.
S
ECTION 2. The adjustment factors for the City’s Appropriations Limit are the decrease in the City of Simi Valley’s population and the change in California per capita personal income.
5 RES. NO. 2023-28
S
ECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the Office of the City Clerk.
PASSED
and ADOPTED this 5th day of June 2023.
A
ttest:
Lucy Blanco, City Clerk Fred D. Thomas, Mayor of the City of Simi Valley, California
A
pproved as to Form: Approved as to Content:
David L. Caceres, City Attorney Brian Paul Gabler, City Manager Carolyn Johnson
Administrative Services Director
6 EXHIBIT A
FY 2022-23 Appropriations Limit $92,721,564
Change in Per Capita Income * 4.44%
(Change in Non-Residential Assessed Valuation Not Available) Change in City of Simi Valley Population* -0.13%
(Change in City of Simi Valley Population = -0.13%)
Cumulative Compound Change Factor
(1.0444 X .9987) 1.04304228
FY 2023-24 Appropriations Limit $96,712,512
* SOURCE: State of California, Department of Finance, Price and Population Factors - May 2023 COMPUTATION OF FY 2023-24 APPROPRIATIONS LIMIT
CITY OF SIMI VALLEY
7 ATTCHMENT A
FY 2023-24 Total Proceeds of All Funds Subject to Limit $90,701,456 (From Attachment B)
Less: Non-Tax Proceeds (From Attachment B) (12,405,946) FY 2023-24 Proceeds of Taxes 78,295,510
Less: Qualified Capital Outlay Projects (From Attachment C) (3,520,900) Less: Federal Mandates (From Attachment D) (604,392)
FY 2023-24 Net Proceeds of Taxes Subject to the Limit 74,170,218 Less: FY 2023-24 Appropriations Limit (From Exhibit A) 96,712,512 Budget Appropriations Over/(Under) the Limit ($22,542,294)
CITY OF SIMI VALLEY
COMPARISON OF PROPOSED BUDGET
TO APPROPRIATIONS LIMIT
8 ATTACHMENT B
Tax Perc
ent Non-Tax Percent
Total Proceeds Of Total Proceeds Of Total Notes
GENERAL FUND:
Taxes and Franchises $74,793,349 $69,993,349 $4,800,000 1 Licenses and Permits 3,072,000 0 3,072,000
Fines and Forfeitures 400,000 0 400,000
Leases and Rentals 697,440 0 697,440
From Other Governments 542,486 240,000 302,486 2
Grants 295,705 0 295,705
Service Charges 1,082,900 0 1,082,900
Other Revenues 1,469,100 0 1,469,100
Transfers In 4,823,366 4,719,166 104,200
Subt
otal 87,176,346 74,952,515 85.98% 12,223,831 14.02%
Interest (from Attachment E) 650,000 528,100 121,900 3
Total General Fund 87,826,346 75,480,615 12,345,731
LIBRARY FUND:
Taxes and Franchises 2,805,110$ 2,805,110$ -$
Licenses and Permits - - -
Fines and Forfeitures 4,000 - 4,000
Leases and Rentals 3,000 - 3,000
From Other Governments - - -
Grants - - -
Service Charges 6,000 - 6,000
Other Revenues 47,000 - 47,000
Transfers In - - -
Subtotal 2,865,110$ 2,805,110$ 98% 60,000$ 2%
Interest (from Attachment E) 10,000 9,785 215 3
Total Li
brary Fund 2,875,110$ 2,814,895$ 60,215$
TOTAL ALL FUNDS SUBJECT
TO THE LIMIT $90,701,456 $78,295,510 $12,405,946
Notes:
2 3
1 All tax revenues have been classified as proceeds of taxes with the exception of Franchise Fees, which the courts have held to be a user fee.
Interest Earnings have been prorated between tax and non-tax proceeds based on the relative share that total tax and non-tax revenues bear to total fund revenues.
CITY OF SIMI VALLEY
CALCULATION OF PROCEEDS OF TAXES SUBJECT TO FY 2023-24 LIMIT All Funds From Other Governments have been classified as tax proceeds with the exception of Peace Officers Standardized Training (P.O.S.T.) and Unfunded Mandates (SB 90) 9 ATTACHMENT C
Total Appropriation Appropriation
General Fund of Tax of Non-Tax
Appropriations Proceeds Proceeds
PUBLIC FACILITY IMPROVEMENT FUND
City Hall HVAC Controls Upgrade 25,000 21,500 3,500 AC Unit City Hall Computer Room 100,000 86,000 14,000 PSC Maintenance Facility Roof 60,000 51,600 8,400 Cultural Arts Center Repairs 100,000 86,000 14,000 Total Public Facility Improvement Projects 285,000 245,100 39,900
STREETS & ROADS FUND
Major Streets Rehabilitation 2,000,000 1,719,600 280,400 Minor Street Overlay 750,000 644,800 105,200 Dewatering Wells Rehabilitation 120,000 103,200 16,800 Los Angeles Ave. West of First Street 100,000 86,000 14,000 West of Los Angeles Ave. Widening 10,000 8,600 1,400 Slurry Seal and Crack Seal 250,000 214,900 35,100 Arroyo Simi Greenway 34,000 29,200 4,800
Highway Safety Improvement - Cycle 11 96,000 82,500 13,500 Sign Repair Replacement 100,000 86,000 14,000 Tree Removal Stump Grinding 150,000 129,000 21,000 Curb, Gutter, Asphalt and Sidewalk Repair 200,000 172,000 28,000 Total Streets & Roads Projects 3,810,000 3,275,800 534,200 TOTAL QUALIFIED CAPITAL 4,095,000 3,520,900 574,100
OUTLAY PROJECTS
Notes:
CITY OF SIMI VALLEY
IDENTIFICATION OF QUALIFIED FY 2023-24 CAPITAL OUTLAY PROJECTS All identified projects have a total project cost in excess of $100,000 and an expected useful life of over ten years. In some cases, FY 2023-24 appropriations reflect annual rather than total project costs. Revenues have been allocated based on the relationship between tax and non-tax proceeds for total General Fund revenues (85.98% to 14.02%), exclusive of interest earnings.
10 ATTACHMENT D
Total Tax Non-Tax
Medicare/SS Proceeds Proceeds
General Fund $700,994 $602,700 $98,294
Workers Compensation 3,371 - 3,371
Library Fund 1,728 1,692 36
Total $706,093 $604,391.81 $101,701
Notes:
CITY OF SIMI VALLEY
FEDERAL MANDATE - MEDICARE/SOCIAL SECURITY CALCULATION
Medicare/Social Security appropriations have been allocated based on the relationship between tax and non-tax proceeds for total General Fund and Library Fund Revenues, exclusive of interest earnings.
0% of the Transit Fund's personnel costs are paid for by the City's General Fund. Therefore, 0% of Transit's Medicare/Social Security costs have been allocated in the same manner as discussed above.
11 ATTACHMENT E
GENERAL FUND
1. Non-Interest Tax Proceeds (from Attachment B) $74,952,515
2. Less Exclusions:
Capital Projects (from Attachment C) (3,520,900)
Federal Mandates (from Attachment D) (602,700)
3. Net Invested Taxes (Item 1 - Item 2) 70,828,915
4. Total Non-Interest Budget (from Attachment B) 87,176,346
5. Tax Proceeds as Percent of Budget (Item 3 / Item 4)) 81.25%
6. Interest Earnings (Budgeted Amount) 650,000
7. Amount of Interest Earned From Taxes (Item 5 x Item 6) 528,100
8. Amount of Interest Earned from Non-Taxes (Item 6 - Item 7) 121,900
LIBRARY FUND
1. Non-Interest Tax Proceeds (from Attachment B) 2,805,110$
2. Less Exclusions:
Federal Mandates (from Attachment D) (1,692)
3. Net Invested Taxes (Item 1 - Item 2) 2,803,418
4. Total Non-Interest Budget (from Attachment B) 2,865,110
5. Tax Proceeds as Percent of Budget (Item 3 / Item 4)) 98%
6. Interest Earnings (Budgeted Amount) 10,000
7. Amount of Interest Earned From Taxes (Item 5 x Item 6) 9,785
8. Amount of Interest Earned from Non-Taxes (Item 6 - Item 7) 215
CITY OF SIMI VALLEY
INTEREST EARNINGS PRODUCED BY TAXES
12