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Home My WebLink About2013/06/11 Item 06CITY COUNCIL AGENDA STATEMENT ~~ CITY OF CHULAVISTA JUNE 11, 2013 Item ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE GANN INITIATIVE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2013-2014 p SUBMITTED BY: DIRECTOR OF FIN E/TREASURER"''( j~/`~~~ CITY MANAGER v REVIEWED BY: ASSISTANT CIT MANAGER 4/STHS VOTE: YES ~ NO SUMMARY Article XIIIB of the California Constitution approved by the voters in 1979 and commonly referred to as the Gann Initiative, requires each local governrnent to establish an Appropriations Limit for the General Fund by resolution each year at a regularly scheduled meeting or noticed special meeting. The purpose of the limit is to restrict spending of certain types of revenues to a level predicated on a base year amount increased annually by an inflation factor. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that establishing the appropriations limit is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA. RECOMMENDATION Council adopts the resolution. BOARDS/COMMISSION RECOMMENDATION Not Applicable. 6-1 JUNE 11, 2013 Item_(~ Page 2 of 4 DISCUSSION Article XIIIB of the California Constitution, approved by the voters in 1979, imposed the concept of spending limits on local governments. This Constitutional provision and related implementing legislation specifies that annual increases in general fund appropriations financed from "Proceeds of Taxes" are limited to a base year (1978-79) amount increased annually by an inflation factor comprised of the change in population of the City combined with the greater of the change in new non-residential construction or the change in the California per capita personal income. By definition, "Proceeds of Taxes" includes such revenues as property taxes, sales and use taxes, utility user taxes, transient occupancy taxes, and state subventions. Revenues from other sources like fees/charges and federal grants are considered "Non-Proceeds of Taxes" and are not subject to the annual spending limit. This calculation has always been perfunctory for the City of Chula Vista, since the proceeds of taxes for the City are far less than the statutory appropriation limit. The State Department of Finance and the San Diego County Assessor's Office are charged with providing the data necessary for local jurisdictions to establish their appropriation limit. According to these sources, for purposes of the fiscal year 2013-14 calculation, the population increased 1.39% and new non-residential construction increased by 1.137%. California per capita personal income increased by 5.12% consequently California per capita personal income was used in the formula to compute the limit since this increase is the greater of the two amounts. The fiscal year 2013-14 Appropriation Limit has been calculated as follows: Fiscal Year 2012-13 Appropriation Limit $666,335,002 Increased by an inflation factor composed of the increases in population and CA per capita personal income X 1.065812 Fiscal Year 2013-14 Appropriations Limit $710.187.628 The "Proceeds of Taxes" as included in the fiscal year 2013-14 Proposed Budget that are subject to the appropriations limit are estimated to be $80,465,230 (see attachment). Therefore the City has what is referred to as an appropriation "gap" of $629,722,398 ($710,187,628 - $80,465,230). Simply stated, this means that the City could collect and spend up to $629,722,398 more in taxes during Fiscal Year 2013-2014 without exceeding the Constitutional limit. DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations section 18704.2(a)(1) is not applicable to this decision. 6-2 NNE 11, 2013 Item ~o Page 3 of 4 CURRENT YEAR FISCAL IMPACT This action will enable the City to appropriate and spend tax revenues estimated at $80,465,230 included in the proposed budget for fiscal year 2013-2014. ON-GOING FISCAL IMPACT The adoption of the resolution will result in no on-going fiscal impact. ATTACHMENTS Attachment A -Appropriations Gap Calculation Prepared by: Phillip Davis, Assistant Director of Finance, Finance Department 6-3 7[JNE 11, 2013 Item ~o Page 4 of 4 ATTACHMENT A APPROPRIATION (GANN) LIMIT GAP CALCULATION FOR FISCAL YEAR 2013-14 Proceeds of Taxes Property Taxes Sales and Use Taxes Transient Ocupancy Taxes Utility Taxes Other Local Taxes Real Property Transfer Tax Business License State Motor Vehicle Licenses State Homeowners Property Taxes Total Proceeds of Taxes Appropriation Limit GAP (Under Limit) FY 2013-14 Proposed Budget 25, 944, 576 29,854,685 2,365,005 3,512,026 800,482 1,295, 889 16,447, 870 244,697 80,465,230 710,187,628 (629,722,398) Proceeds of Taxes Compared to Legal Spending Limit y $800 C '~ $700 $600 $500 $400 $300 $200 $100 $0 ~ Proceeds of Taxes tAppropriation Limit 6-4 FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-1~ RESOLUTION N0.2013- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE GANN INITIATIVE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2013-2014 WHEREAS, Article XIIIB of the California Constitution, approved by the voters in 1979, imposed the concept of spending limits on local governments; and WHEREAS, this Constitutional provision and related implementing legislation specifies that annual increases in appropriations financed from "Proceeds of Taxes" are limited to a base year (1978-79) amount increased annually by an inflation factor comprised of the change in population of the City combined with the greater of the change in new non-residential construction or the change in the California per capita personal income; and WHEREAS, by definition, "Proceeds of Taxes" includes such revenues as property taxes, sales and use taxes, utility users taxes, transient occupancy taxes, and state subventions; and WHEREAS, revenues from other sources like fees/charges and federal grants are considered "Non-Proceeds of Taxes" and are not subject to the annual spending limit; and WHEREAS, this calculation has always been perfunctory for the City of Chula Vista, since the proceeds of taxes for the City are far less than the statutory appropriation limit; and WHEREAS, the State Department of Finance and the San Diego County Assessor's Office are charged with providing the data necessary for local jurisdictions to establish their appropriation limit; and WHEREAS, according to these sources, for purposes of the fiscal year 2013-2014 calculation, the population increased 1.39% and new non-residential construction increased by- 1.37%and WHEREAS, California per capita personal income increased by 5.12%; consequently California per capita personal income was used in the formula to compute the limit since this increase was greater than the increase in new non-residential construction; and WHEREAS, the fiscal year 2013-14 Appropriation Limit has. been calculated to be $710,187,628; and WHEREAS, the "Proceeds of Taxes" as included in the fiscal year 2013-14 Proposed Budget that are subject to the appropriations limit are estimated to be $80,465,230; and WHEREAS, the City has what is referred to as an appropriation "gap" of $629,722,398 ($710,187,628 - $80,465,230); and J:\Attorney\FINAL RESOS AND ORDINANCES\2013\06 ] 1 13\Reso - FY 14 Gann Appropriation Limit.doc 5/29/2013 8:32 AM 6-5 Resolution No. 2012- Page 2 WHEREAS, this means that the City could collect and spend up to $629,722,398 more in taxes during Fiscal Year 2013-2014 without exceeding the Constitutional limit. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby establish an appropriations limit of $710,187,628 for Fiscal Year 2013-14 pursuant to the requirements of Article XIIIB of the California Constitution. Presented by _ Maria Kachadoorian Director of Finance J:\Attorney\FINAL RESOS AND ORDINANCES\2013\06 11 ]3\Reso - FYl4 Gann Appropriation Limit.doc 5/29/2013 8:32 AM 6_6 Approved as to form by