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AGENDA BILL Agenda Item No. 5(C) Date: June 19, 2012 To: El Cerrito City Council From: Subject: Mary Dodge, Administrative Services Director/City Treasurer Adoption of Gann Appropriation Limit for FY 2012-13 ACTION REQUESTED Adopt a Resolution, which selects the California Per Capita Personal Income option for the Cost of Living Factor and the County Population option for the Population Factor. Utilizing those factors establishes the City's appropriations limit as $105,629,673 for Fiscal Year 2012-13. BACKGROUND Proposition 4, known as the Gann Initiative, was approved by the voters in November, 1979. This measure requires that the City adopt an appropriations limitation each fiscal year. In June of 1990, the voters passed Proposition 111, which modified the previous appropriations limitation requirements of Proposition 4, as follows: The total annual appropriations subject to limitation of the State and of each local government shall not exceed the appropriations limit of the entity of government for the prior year adjusted for the change in the cost of living and the change in population Now chaptered in Article XIIIB of the California Constitution and Government Code §7900-7914, these two measures specify that the new limit be based on the prior year's appropriations limit, adjusted for cost of living and population. Each year, every city must select from two alternatives methods for each of these two adjustment factors, as follows: Cost of Living California Constitution Article XIIIB "Change in the cost of living" for an entity of local government, other than a school district or a community college district, shall be either the percentage change in California per capita personal income from the preceding year, or the percentage change in the local assessment roll from the preceding year for the jurisdiction due to the addition of local nonresidential new construction. ---PAGE BREAK--- Agenda Item No. 5(C) Population Government Code §7901(b): A city or special district may choose to use the change in population within its jurisdiction or within the county in which it is located. These factors are applied to the established FY 1986-87 appropriations limit, as adjusted annually to determine subsequent year limits. Therefore, each year's limit becomes the base for computing the succeeding year's limit. To assist with these computations, the California Department of Finance produces in May of each year the population changes of all cities and counties, as well as the Statewide change in per capita income. In 1991, the California State Board of Equalization asked all County Assessors to compute the annual change in nonresidential new construction. For Contra Costa County, the Auditor-Controller's Office provides cities with these figures. ANALYSIS For FY 2012-13 the respective State and County offices have provided the City with the following optional factors to be used in the Gann limit computation: Cost of Living 1) California Per Capita Personal Income = 3. 77% 2) Nonresidential New Construction, El Cerrito= -5.2% Population 1) Population Change, City ofEl Cerrito= .53% 2) Population Change, County of Contra Costa= .83% In order for the City to achieve the highest possible appropriations limit, it would choose the larger of the two figures in each category, California Per Capita Personal Income (3.77%) and County Population By choosing these two factors, the City's appropriations limit will grow from to $101,104,599 to $105,629,673. It should be noted that these appropriations limits apply only to tax revenues, not to revenues such as fees that recover operating costs. For FY 2012-13, only $18,286,259 of the City's $29,892,174 projected General and Street Improvement Fund revenues, net of operating transfers, are subject to the Gann limit. Therefore, the City will be $87,343,414 under the Gann limit. FINANCIAL CONSIDERATIONS By selecting the Gann limit options, the City may appropriate and expend funds. LEGAL CONSIDERATIONS California Constitution Article XIIIB requires that cities annually select a Gann limit methodology. Further, California Government Code §7910 requires: Page2 ---PAGE BREAK--- Agenda Item No. 5(C) Each year the governing body of each local jurisdiction shall, by resolution, establish. its appropriations limit and make other necessary determinations for the following fiscal year pursuant to Article XIIIB at a regularly scheduled meeting or noticed special meeting. RECOMMENDATION Staff recommends that City Council adopt the Resolution, which approves the City's FY2012-13 Gann limit as $105,629,673. Reviewed by: ~ scott Hanin City Manager Attachments: 1. Resolution 2. Gann Limit Calculation Page 3 ---PAGE BREAK--- RESOLUTION 2012-XX Agenda Item No. 5(C) Attachment 1 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO SETTING THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2012-13 AND SELECTING THE CALIFORNIA PER CAPITA PERSONAL INCOME AND CONTRA COSTA COUNTY POPULATION ADJUSTMENT FACTORS WHEREAS, Article XIIIB of the California Constitution establishes a limitation on spending by cities of funds from proceeds of taxes; and WHEREAS, in accordance with Government Code Section 7910, the City Council must establish an annual appropriations limit; and WHEREAS, in accordance with Government Code Section 7910, the City Council must select annually the per capita change in the cost of living for purposes of calculating the appropriations limit; and WHEREAS, in accordance with Government Code Section 7910, the City Council must select annually the population growth factor for purposes of calculating the appropriations limit; and WHEREAS, an appropriations limit has been calculated in accordance with applicable law; and WHEREAS, in accordance with Government Code Section 7910, the information on the calculation of the appropriations limit has been made available to the public at least 15 days prior to the date of adoption of this resolution, and continues to be available for public inspection. NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF EL CERRITO DOES HEREBY FIND, DETERMINE AND RESOLVE AS FOLLOWS: SECTION 1. In accordance with Article XIIIB of the Constitution and Government Code Section 7900 et seq., the adjustment factors to be applied to the appropriations limit for the 2010-11 fiscal year shall be the California Per Capita Personal Income adjustment factor and the Contra Costa County population adjustment factor. , SECTION 2. In accordance with Article XIIIB of the Constitution and Government Code Section 7902, the appropriations limit for the 2012-13 fiscal year shall be $105,629,673 which exceeds the City's projected applicable appropriation amount by $87,343,414. SECTION 3. The City Council reserves the right to change or revise any adjustment factors associated with the calculation of the appropriations limit if such changes or revisions would result in a more advantageous appropriations limit in the present or future. * * * * * Page 1 of2 ---PAGE BREAK--- Agenda Item No. S(C) Attachment 1 I CERTIFY that at the regular meeting on June 19, 2012 the El Cerrito City Council passed this resolution by the following vote: A YES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: IN WITNESS of this action, I sign this document and affix the corporate seal of the City ofEl Cerrito on June XX, 2012. Cheryl Morse, City Clerk APPROVED: William C. Jones III, Mayor Page 2 of2 ---PAGE BREAK--- Year Prior year limit 2012-13 $101 '1 04,599 City of El Cerrito Gann Limit Calculation COL CPI 3.77 COL Ratio 1.0377 Population County* 0.83 Agenda Item No. 5(C) Attachment 2 Population Calculation New limit Ratio Factor 1.0068 1.04475636 $105,629,673 Sources: Taxes Subject of Calculation (18,286,259) For 2012-13 the COL factor is the CPI and the Population factor is the County. Information provided by the Calfornia Department of Finance. Revenues Subject to Computation Property Tax Property Tax (Homeowners' Exemption) Sales Tax Transient Lodging Tax Business License Tax Real Property Transfer Tax Motor Vehicle In Lieu Tax Construction Tax Utility Users Tax Franchise Fees Licenses and Permits Fines and Forfeitures Rents Charges for Current Services Revenue From Other Agencies Miscellaneous Revenues Interest Income Subtotal Percent of total TotafRevenues Subject to Computation Proceeds Proceeds from from Taxes Non-Taxes Total 5,963,300 75,000 6,840,000 90,000 675,000 85,000 4,900 3,500,000 1,050,000 5,963,300 75,000 6,840,000 90,000 675,000 85,000 0 4,900 3,500,000 1,050,000 669,936 669,936 265,000 265,000 326,080 326,080 5,210,896 5,210,896 4,818,362 4,818,362 313,700 313,700 29,887, 17 4 61.17% 38.83% 100.00% 3,059 1,941 5,000 $18,286,259 $11,605,915 $29,892,17 4 Difference $87,343,414