City Council Agenda Report
Meeting Date: June 4, 2024
From: Jessica Alcaraz, Financial Services Administrator Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Fiscal Year 2024-25 Citywide Annual Operating Budget, Capital Improvement Plan, and Appropriations Limit (Gann)
Recommendation
A. Adopt Resolution No. 2024-08 approving and adopting the Annual Operating Budget and the Capital Improvement Plan for Fiscal Year 2024-25; and
B. Adopt Resolution No. 2024-09 adopting the Appropriations Limit for Fiscal Year 2024-25 pursuant to Government Code Section 7910.
Background
FY 2024-25 Operating and Capital Budget
In anticipation of the Fiscal Year (FY) 2024-25 Budget adoption, Finance staff presented two Budget Workshops to outline the proposed budget and allow City Council to gain an in depth understanding of the City’s operations and intended fiscal direction. Collaboration between all City departments ensured a unified vision, under the City Administrator’s leadership, for the upcoming fiscal year. The current economic environment remains uncertain. While a full-on recession seems unlikely in the upcoming months, inflation and interest rates remain high and unlikely to decrease in the near future, which is likely to lead to some economic slowdown. In this interim period of key changes to some of the City’s largest and most longstanding customers, a cautious approach will ensure the City’s continued ability to serve its constituents and be an environment where business thrives. Areas of cost-savings and operational efficiencies have been identified, potential new revenue streams are being researched, and continued investment in infrastructure have all been prioritized to maintain the high-quality City services to which residents and businesses are accustomed.
As required by Chapter 8.2 of the City’s Charter, staff presented the proposed budget for FY 2024-25 to City Council on May 7, 2024. Budget Workshop I focused on the vision for the City in the upcoming year and the individual department changes from the previous fiscal year.
Budget Workshop II on May 21, 2024, covered the changes in General and Enterprise Fund budgets from previous versions, detailing the current iterations for Council’s consideration.
Pursuant to Chapter 8.4 of the City’s Charter, on June 4, 2024, a public hearing will be held and the final version of the FY 2024-25 Budget is then presented to City Council for adoption to go into effect July 1, 2024 through June 30, 2025. Adoption of Resolution No. 2024-08 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 2024-25 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. 2024-09 adopts the Appropriations Limit for Fiscal Year 2024-25 pursuant to Government Code Section 7910.
Pursuant to Government Code Section 65090, on May 23, 2024, the public hearing notice was posted at City Hall, the City’s website and published in the Los Angeles Wave (Huntington Park Bulletin).
Fiscal Impact
The FY 2024-25 Budget proposes total expenditure appropriations of $401,931,299 which is well under the $3,065,487,178 appropriation limitation imposed pursuant to Gann.
Attachments
1. Resolution No. 2024-08
2. Resolution No. 2024-09
3. Gann Limit Calculation
4. Public Hearing Notice