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Home My WebLink About2008/06/03 Item 3 CITY COUNCIL AGENDA STATEMENT ~f:.. CITY OF h <~ CHULA VISTA :;> JUNE 3, 2008, Item~ ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2008/2009 SUBMITTED BY: REVIEWED BY: DIRECTOR OF FINANCE/TREAS CITY MANAGER 4/5THS VOTE: YES I i NO 0 SUMMARY Article XIIIB of the California Constitution approved by the voters in 1979 and commonly referred to as the Gann Initiative, requires each local government to establish an Appropriations Limit 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. ENVIRONMENT AL REVIEW Not Applicable. RECOMMENDATION The City Council adopt the resolution. BOARDS/COMMISSION RECOMMENDATION Not Applicable. 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 appropriations financed from "Proceeds of Taxes" are limited to a base year (1978/1979) 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 3-1 JUNE 3, 2008, Item~ Page 2 of 3 use taxes, utility users 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 2008/2009 calculation, the population increased 1.51 % and California per capita personal income increased by 4.29%. New non-residential construction increased 16.86% and was used in the formula to compute the limit since this increase was higher than the increase in California per capita personal income. The Fiscal Year 2008/2009 Appropriation Limit has been calculated as follows: Fiscal Year 2007/2008 Appropriation Limit $511,957,324 Increased by an inflation factor composed of the increases in population and new non-residential construction X 1.1862 Fiscal Year 2008/2009 Appropriations Limit $607.303.566 The "Proceeds of Taxes" as included in the fiscal year 2008-09 Proposed Budget that are subject to the appropriations limit are estimated to be $92,391,854 (see attachment). Therefore the City has what is referred to as an appropriation "gap" of$514,911,712 ($607,303,566 - $92,391,854). Simply stated. this means that the City could collect and spend up to $514,911,712 more in taxes during Fiscal Year 2008/2009 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 1 8704.2(a)(l) is not applicable to this decision. FISCAL IMP ACT This action will enable the City to appropriate and spend tax revenues estimated at $97,543,636 included in the proposed budget for Fiscal Year 2008/2009. A TT ACHMENTS Attachment A - Appropriations Gap Calculation Prepared by: Phillip Davis, Assistant Director of Finance, Finance Department 3-2 JUNE 3, 2008, Item~ Page 3 of 3 A TT ACHMENT A APPROPRIATION (GANN) LIMIT GAP CALCULATION FOR FISCAL YEAR 2008/2009 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 FY 2008-09 Proposed Budget 30,232,200 29,677,977 2,752,514 7,122,095 841,402 1,267,000 20,215,866 282,800 92,391,854 607,303,566 GAP (Under Limit) (514,911,712) ~ b ciTaxes ~ to Legal Sperdng Urrit .,$700 c: 0 == $3:D :::;; $3:D $4OJ +- $3JJ $!Xl $100 ro FY()4.{lS ~ FY C5D5 FY= FY07-<:8 FYCBW 1_ A1:x:a;d;ciT""'" -+- Pq:rq:ri2liCJ1 Unit 1 3-3 RESOLUTION NO. 2008- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE APPROPRlA TIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2008/ 2009 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 (1978-1979) 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 ofChula 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 2008/2009 calculation, the population increased 1.51 percent and California per capita personal income increased by 4.29 percent; and WHEREAS, new non-residential construction increased 16.86 percent and was used in the formula to compute the limit since this increase was higher than the increase in California per capita personal income; and WHEREAS, the Fiscal Year 2008/2009 Appropriation Limit has been calculated to be $607,303,566; and WHEREAS, the "Proceeds of Taxes" as included in the Fiscal Year 2008/2009 Proposed Budget that are subject to the appropriations limit are estimated to be $92,391,854; and WHEREAS, the City has what is referred to as an appropriation "gap" of$514,911,712 ($607,303,566 - $92,391,854); and 3-4 Resolution No. 2008- Page 2 WHEREAS, this means that the City could collect and spend up to $514,911,712 more in taxes during Fiscal Year 2008/2009 without exceeding the Constitutional limit. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City ofChula Vista does hereby establish an appropriations limit of$607,303,566 for Fiscal Year 2008/2009. Presented by Approved as to form by Maria Kachadoorian Director of Finance J:\Attomey\RESOIFlNANCElAppropriation Limit for FY 2008-09_ 06-0J-08.doc 3 - 5