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Home My WebLink About2010/06/08 Item 4 CITY COUNCIL AGENDA STATEMENT JUNE 8, 2010, Item--'d--- SUBMITTED BY: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2010- 2011 DIRECTOR OF F~CE/TREASURER/'~ CITY MANAGE ~ ASSIST ANT CIT NAGER 9) ITEM TITLE: REVIEWED BY: 4/STHS VOTE: YES D 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 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. 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 l5060(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. DISCUSSION 4-1 JUNE 8, 2010, Item~ Page 2 of4 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 (1978-79) 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 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 2010-2011 calculation, the population increased 1.56% and California per capita personal income decreased by -2.54%. New non- residential construction decreased by -2.49% consequently new non-residential construction was used in the formula to compute the limit since this decrease was less than the decrease in California per capita personal income. The fiscal year 20 I 0-11 Appropriation Limit has been calculated as follows: Fiscal Year 2009-10 Appropriation Limit $618,401,675 Increased by an inflation factor composed of the increases in population and new non-residential construction X 0.9903 Fiscal Year 2010-11 Appropriations Limit $612.426.486 The "Proceeds of Taxes" as included in the fiscal year 2010-11 Proposed Budget that are subject to the appropriations limit are estimated to be $77,583,665 (see attachment). Therefore the City has what is referred to as an appropriation "gap" of $534,842,821 ($612,426,486 - $77,583,665). Simply stated, this means that the City could collect and spend up to $534,842,821 more in taxes during Fiscal Year 2010-2011 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. CURRENT YEAR FISCAL IMPACT This action will enable the City to appropriate and spend tax revenues estimated at $77,583,665 included in the proposed budget for fiscal year 2010-2011. 4-2 JUNE 8,.2010, Item~ Page 3 of 4 ON-GOING FISCAL IMPACT None. ATTACHMENTS Attachment A - Appropriations Gap Calculation Prepared by: Phillip Davis, Assistant Director of Finance, Finance Department 4-3 JUNE 8, 2010, ItemL Page 4 of 4 ATTACHMENT A APPROPRIATION (GANN) LIMIT GAP CALCULATION FOR FISCAL YEAR 2010-11 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 2010-11 Proposed Budget 24,073,147 23,633,851 1,940,930 8,755,835 841 ,402 1,150,000 16,933,500 255,000 77,583,665 612,426,486 GAP (Under Limit) (534,842,821 ) Aoceeds clTaxes Ca'qJared to Legal Sperdng Unit .,$70) c: 0 ~$m :;; $m . $<<)) $m $aX) $100 :ro FY(5.()7 ------ . . . . FY07-{B FY= FYC9-10 FY10-11 1- Atx:m:!sriT""", -WqJiai01 unit 1 4-4 RESOLUTION NO. 2010- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 20 I 0/20 11 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 tbe 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 tbe City of Chula Vista, since the proceeds of taxes for the City are far less than tbe 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 20 I 0/20 II calculation, the population increased 1.56% and California per capita personal income decreased by -2.54%; and WHEREAS, new non-residential construction decreased by -2.49% consequently new non-residential construction was used in the formula to compute the limit since this decrease was less tban the decrease in California per capita personal income; and WHEREAS, the fiscal year 20 I 0/11 Appropriation Limit has been calculated to be $612,426,486; and WHEREAS, the "Proceeds of Taxes" as included in the fiscal year 20 I 0/11 Proposed Budget that are subject to the appropriations limit are estimated to be $77,583,665; and WHEREAS, tbe City has what is referred to as an appropriation "gap" of $534,842,821 ($612,426,486 - $77,583,665); and WHEREAS, this means that the City could collect and spend up to $534,842,821 more in taxes during Fiscal Year 20 I 0/20 II without exceeding the Constitutional limit . 4-5 Resolution No. 2010- Page 2 NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista does hereby establish an appropriations limit of $612,426,486 for Fiscal Year 2010/11. Presented by Approved as to form by Maria Kachadoorian Director of Finance I;). 'W.' ..Y"f.. ~~ ' . ////1 I /- It PT" '.lIL---' . LEar[ . Mi e d City Attorney 4-6