City Council Agenda Report
Meeting Date: June 6, 2023
From: Scott Williams, Director of Finance
Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Citywide Annual Operating Budget, Capital Improvement Plan, and Appropriations Limit (Gann) for Fiscal Year 2023-24
Recommendation
A. Adopt Resolution No. 2023-09 approving and adopting the Annual Operating Budget and the Capital Improvement Plan for Fiscal Year 2023-2024; and B. Adopt Resolution No. 2023-10 adopting the Appropriations Limit for Fiscal Year 2023-2024 pursuant to Government Code Section 7910.
Background
Fiscal Year 2023-24 Operating and Capital Budget
In preparation for the upcoming Fiscal Year (FY) 2023-24 Budget adoption, staff facilitated two separate Budget Workshops to present the proposed budget and allow City Council to gather an understanding of the City’s operations and intended fiscal direction, and staff’s plan to address Citywide issues, functions, and needs. Because each department faces unique challenges and identifies its own specific goals, collaboration between Finance and the individual departments was required in the weeks preceding workshops. The current economic environment has presented additional complexities this year. With an outlook of persistent inflation, rising interest rates, banking turmoil, and softening business investment activity, a concerted effort by management was required to determine expenditures that could be deferred and cost savings that could be realized, while also focusing on current revenues and potential new income sources.
The May 2, 2023 Budget Workshop I focused on the previous year's highlights and the vision for the City departments as they move forward into the new fiscal year. Council provided initial feedback and requested to see different scenarios related to the Wellness Equity Alliance (WEA) health services model. The City Administrator and Finance Director continued to work with all departments to find areas for additional cost savings and increased revenues during the weeks that followed.
On May 16, 2023, staff presented Budget Workshop II which covered the changes in General Fund and the Enterprise Funds from the previous version of the budget presented to Council, and focused discussion on the revised iteration; and, the Director of Health and Environmental Control along with the Public Health Officer presented different implementation options for WEA services. Council made further recommendations to increase the CommUNITY Promotion budget, specifically the budget for grants to non-profit organizations and scholarships. For WEA, Council directed an implementation of the “full” core public health services and “reduced” community health services.
For deliberation at its June 6, 2023 meeting, Council is presented with a proposed FY 2023-24 Citywide Budget that incorporates the modifications requested by Council over the course of the City’s May budget sessions, and any additional feasible expenditure reductions identified by staff.
Adoption of Resolution No. 2023-09 approves the Citywide Annual Operating Budget and Capital Improvement Plan.
Gann Limit
California voters approved an initiative on November 6, 1979 that added Article XIIIB to the State Constitution, which placed limits on the amount of revenue that can be appropriated by all entities of government. This State Appropriations Limit is often referred to as the Gann Limit (Gann), named after Paul Gann, the author of the measure placing the limit in the State constitution. In accordance with that legislation, the governing body of each government jurisdiction must, by resolution, establish its annual Appropriations Limit for the coming year at a regularly scheduled meeting or noticed special meeting.
The original Article XIIIB (Proposition 4) and its implementing legislation, Chapter 1205/80, was modified in June 1990 by Proposition 111 and SB 88 (Chapter 60/90). As a result of Proposition 111, the City is required to choose between two annual inflation factors: (1) the growth in California per capita income; or (2) the growth in non-residential assessed valuation due to new construction within the City; and two population factors: (1) the growth in the City; or (2) county population. For the FY 2023-24 Gann appropriations limit calculation, the growth in nonresidential assessed valuation due to new construction within the City and the percentage growth in County population was used, which has been the same method used since FY 2017-18.
The City’s appropriations subject to the limit have remained well below the Gann Appropriations Limit. Given the size of this gap, it is unlikely that the City will exceed the Appropriations Limit in the upcoming years without significant changes to the City’s tax structure. The documentation used in the determination of the appropriations limit has been made available for public inspection on the City’s website at least 15 days prior to adoption. Adoption of Resolution No. 2023-10 adopts the Appropriations Limit for Fiscal Year 2023-24 pursuant to Government Code Section 7910.
Pursuant to Government Code Section 65090, on May 25, 2023, the public hearing notice was posted at City Hall, City‘s website and published in the Los Angeles Wave (Huntington Park Bulletin) (Attachment No. 4).
Fiscal Impact
The Fiscal Year 2023-24 Budget proposes total expenditure appropriations of $369,067,754 which is well under the $2,626,172,281 appropriation limitation imposed pursuant to Gann.
Attachments
1. Resolution No. 2023-09
2. Resolution No. 2023-10
3. Gann Limit Calculation
4. Public Hearing Notice