City Council Agenda Report
Meeting Date: June 3, 2025
From: Alice Hui, Director of Finance
Department: Finance
Submitted by: Angela Melgar, Finance Manager
Subject
Fiscal Year 2025-26 Citywide Annual Operating Budget, Capital Improvement Plan, and Appropriations Limit (Gann)
Recommendation
A. Adopt Resolution No. 2025-013 approving and adopting the Annual Operating Budget and the Capital Improvement Plan for Fiscal Year 2025-26; and
B. Adopt Resolution No. 2025-014 adopting the Appropriations Limit for Fiscal Year 2025-26 pursuant to Government Code Section 7910.
Background
FY 2025-26 Operating and Capital Budget
Prior to the Fiscal Year (FY) 2025-26 Budget adoption, 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. Persistent inflation and resulting high interest rate, coupled with tariffs on imported goods are likely to lead to some economic slowdown. In this interim period of key changes to some of the City’s customer base, a cautious approach will ensure the City’s ability to serve its constituents and continue to be an environment where business thrives. Areas of cost-savings and operational efficiencies have been identified, potential new revenue streams are being explored, 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 2025-26 to City Council on May 6, 2025. 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 20, 2025, 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 3, 2025, a public hearing will be held to present the final version of the FY 2025-26 Budget to City Council for adoption to go into effect July 1, 2025 through June 30, 2026. Adoption of Resolution No. 2025-013 approves the Citywide Annual Operating Budget and Capital Improvement Plan.
Appropriation Limit (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 implemented 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 2025-26 Gann appropriations limit calculation, the growth in California per capita income and the percentage growth in County population was used. From FY 2017-18 to FY 2024-25, the growth in non-residential assessed valuation due to new construction within the City and the percentage growth in County population was used.
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. 2025-014 adopts the Appropriations Limit for Fiscal Year 2025-26 pursuant to Government Code Section 7910.
Pursuant to Government Code Section 65090, on May 22, 2025, the public hearing notice was posted at City Hall, the City’s website and published in the Huntington Park Bulletin.
Fiscal Impact
The FY 2025-26 Budget proposes total expenditure appropriations of $406,110,509 which is well under the $3,272,693,266 appropriation limitation imposed pursuant to Gann.
Attachments
1. Resolution No. 2025-013
2. Resolution No. 2025-014
3. Gann Limit Calculation
4. Public Hearing Notice