TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Javier Carcamo, Finance Director
PREPARED BY: RN Mendoza, Financial Analyst
SUBJECT:
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Approval of the Gann Appropriations Limit for Fiscal Year 2024/25
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RECOMMENDATION
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Adopt Resolution No. 24-4742, entitled: A Resolution of the City Council of the City of Murrieta, California, Approving the Gann Appropriations Limit for Fiscal Year 2024/25.
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PRIOR ACTION/VOTE
On June 6, 2023, the City Council adopted Resolution No. 23-4669, approving the Appropriations Limit for Fiscal Year 2023/24 (Vote: 4-0-1).
CITY COUNCIL GOAL
Maintain a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency.
BACKGROUND
Article XIII-B of the California State Constitution, commonly referred to as the Gann Initiative or Gann Appropriations Limit, was adopted by California voters on November 6, 1979, to place limits on the amount of tax proceeds that can be spent by governmental entities. Subsequently, on June 5, 1990, California voters approved the Traffic Congestion Relief and Spending Limitation Act (Proposition 111), which made various amendments to Article XIII-B. As a result of Proposition 111, the City may choose between two annual inflation factors and two population growth factors for the calculation of the appropriations limit. The base year of appropriated tax proceeds in 1978/79 is adjusted annually using a ratio of the changes in population, inflation, and/or the changes in non-residential construction. For cities like Murrieta, which incorporated after 1978/79, the initial appropriations limit is set by voters at the time of incorporation. Murrieta voters approved an appropriations limit of $15,000,000 at the time of the incorporation election on November 6, 1990.
The California Department of Finance (DOF) provides the change in the California Per Capita Personal Income Factor (CCPI), and the population changes in both the City of Murrieta and the County of Riverside to be used in this calculation (Attachment 2). Cities may choose an inflation factor that is either the change in the California CCPI or the change in non-residential construction. The population factor option is either the growth rate in the city or the county. Each of these factors is an annual election. For the Fiscal Year (FY) 2024/25 calculation, staff recommends using the increase in CCPI of 3.62% and the County of Riverside’s change in the population of 0.55%, which is higher than the 0.17% decrease in population for the City, as shown below. The calculations, using the recommended factors, are provided in Exhibit A to the attached Resolution. Using these factors, the FY 2024/25 appropriations limit adjusts to $248,936,865, which exceeds the projection of $120,900,736 in tax proceeds to be received by the City by $128,036,129. Hence, the appropriations, subject to the Gann Appropriations Limit, for FY 2024/25 total $120,900,736.
Should there be any updates to the Gann limit guidelines, staff will bring back revisions to the City Council for review and consideration.
Analysis
The analysis below provides the factors for the estimate of the appropriations limit for FY 2024/25.
PRICE/INFLATION OPTION FACTOR
CCPI 3.62%
Percent change in assessed valuation due to
new non-residential construction 2.44%
POPULATION OPTION FACTOR
City of Murrieta -0.17%
County of Riverside 0.55%
To optimize the greatest ratio of change, staff used the CCPI change in inflation, which is 3.62%, and the change in population for the County of Riverside, which is 0.55%.
FISCAL IMPACT
Based on the proposed biennial budget, the City is in compliance with its Gann limit for FY 2024/25, which the proposed budget is approximately 51% below the appropriation limit as calculated in Exhibit A of Resolution No. 24-4742 and as summarized above.
ENVIRONMENTAL IMPACT
None.
ATTACHMENTS
1. Resolution No. 24-4742
2. Price Factor and Population Information