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Home My WebLink About2011/06/07 Item 09CITY COUNCIL AGENDA STATEMENT -1 J ~`~~ CITY OF CHULAVISTA JUNE 7, 2011, 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 2011- 2012 SUBMITTED BY: DIRECTOR OF FIN E/TREASURED CITY MANAGER REVIEWED BY: ASSISTANT CITY ANAGER Gff 4/STHS VOTE: YES ~ NO ^X 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 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. 9-1 JUNE 7, 2011, 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 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 2011-2012 calculation, the population increased 0.90% and new non-residential construction decreased by -5.62%. California per capita personal income increased by 2.51% 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 2011-12 Appropriation Limit has been calculated as follows: Fiscal Year 2010-11 Appropriation Limit $612,426,486 Increased by an inflation factor composed of the increases in population and CA per capita personal income X 0.9837 Fiscal Year 2011-12 Appropriations Limit 602 The "Proceeds of Taxes" as included in the fiscal year 2011-12 Proposed Budget that are subject to the appropriations limit aze estimated to be $76,394,997 (see attachment). Therefore the City has what is referred to as an appropriation "gap" of $526,033,075 ($602,428,072 - $76,394,997). Simply stated, this means that the City could collect and spend up to $526,033,075 more in taxes during Fiscal Year 2011-2012 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. 9-2 JUNE 7, 201 I, Item Page 3 of 4 CURRENT YEAR FISCAL IMPACT This action will enable the City to appropriate and spend tax revenues estimated at $76,394,997 included in the proposed budget for fiscal year 2011-2012. 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 Deparhveent 9-3 JUNE 7, 2011, Item ~] Page 4 of 4 ATTACHMENT A APPROPRIATION (GANN) LIMIT GAP CALCULATION FOR FISCAL YEAR 2011-12 FY 2011-12 Proceeds of Taxes Proposed Budget Property Taxes 25,230,494 Sales and Use Taxes 26,400,794 Transient Ocupancy Taxes 2,036,377 Utility Taxes 3,240,633 Other Local Taxes Real Property Transfer Tax 849,816 Business License 1,173,000 State Motor Vehicle Licenses 17,201,233 State Homeowners Property Taxes 262,650 Total Proceeds of Taxes 76,394,997 Appropriation Limit 602,428,072 GAP (Under Limit) (526,033,075) orr~ m~ s~e~~y umc ~~ P~ M 97 ffi FvW~ FYIbUi rrini~ ~RU®rE CTazs ~P,p¢natimlimt 9-4 RESOLUTION NO. 2011- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA ESTABLISHING THE APPROPRIATIONS LIMIT FOR THE CITY OF CHULA VISTA FOR FISCAL YEAR 2011/2012 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 2011/2012 calculation, the population increased 0.90% and new non-residential construction decreased by - 5.62%and WHEREAS, California per capita personal income increased by 2.51%; 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 2011/12 Appropriation Limit has been calculated to be $602,428,072; and WHEREAS, the "Proceeds of Taxes" as included in the fiscal year 2011/12 Proposed Budget that are subject to the appropriations limit are estimated to be $76,394,997; and WHEREAS, the City has what is referred to as an appropriation "gap" of $526,033,075 ($602,428,072 - $76,394,997); and 9-5 Resolution No. 2011- Page 2 WHEREAS, this means that the City could collect and spend up to $526,033,075 more in taxes during Fiscal Year 2011/2012 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 $602,428,072 for Fiscal Year 2011/12. Presented by Approved as to form by Maria Kachadoorian Director of Finance Glen R. ~~ity Ati 9-6