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 Gann Appropriations Limit for Fiscal Year 2026/27
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ABSTRACT
The approval of the Gann Appropriations Limit for Fiscal Year 2026/27 is required by the California State Constitution to ensure that municipalities comply with state law and do not exceed constitutionally mandated limits tied to population growth, new non-residential construction, and inflation.
RECOMMENDATION
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Adopt Resolution No. 26-4950, entitled: A Resolution of the City Council of the City of Murrieta, California, Approving the Gann Appropriations Limit for Fiscal Year 2026/27.
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PRIOR ACTION/VOTE
On June 17, 2025, the City Council adopted Resolution No. 25-4845, approving the Appropriations Limit for Fiscal Year 2025/26 (Vote: 5-0).
STRATEGIC ALIGNMENT
The City Council’s goal of maintaining a high performing organization that values fiscal sustainability, transparency, accountability and organizational efficiency is associated with this administrative priority.
DISCUSSION
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 (2) annual inflation factors and two (2) population growth factors for the calculation of the appropriations limit. The base year of appropriated tax proceeds is Fiscal Year (FY) 1978/79 and 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 FY 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 city's or the county's growth rate. Each of these factors is an annual election. For the FY 2026/27 calculation, staff recommends using the increase in the percent change in assessed valuation due to new non-residential construction of 1.98% and the County of Riverside’s change in the population of 0.36%, which is higher than the 0.33% increase in population for the City of Murrieta, as shown below. The calculations, using the recommended factors, are provided in Exhibit 1 to the attached Resolution. Using these factors, the FY 2026/27 appropriations limit is adjusted to $280,313,414, which exceeds the projected $127,233,777, in tax proceeds to be received by the City by $153,079,637. Hence, the appropriations, subject to the Gann Appropriations Limit, for FY 2026/27 total $127,233,777.
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 2026/27.
PRICE/INFLATION OPTION FACTOR
CCPI 4.95%
Percent change in assessed valuation due to
new non-residential construction 1.98%
POPULATION OPTION FACTOR
City of Murrieta 0.33%
County of Riverside 0.36%
To optimize the greatest ratio of change, staff used the percent change in CCPI (4.95%) and the change in population for the County of Riverside (0.36%).
PUBLIC NOTICING
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
CEQA AND REGULATORY OVERVIEW
This action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly.
FISCAL IMPACT
Based on the proposed biennial budget, the City is in compliance with its Gann Limit for FY 2026/27, which the proposed budget is approximately 55% below the appropriation limit as calculated in Exhibit A of Resolution No. 26-4950 and as summarized above.
ATTACHMENTS
ATT 1 - Resolution No. 26-4950
ATT 2 - Price Factor and Population Information