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Home My WebLink About8.2 Approp Limits FY 05-06 CITY CLERK File # Dï;1~[Q]-~1OJ AGENDA STATEMENT CITY COUNCIL MEETING DATE: June 20, 2005 SUBJECT: Adoption of an Appropriations Limit for Fiscal Year 2005-2006 (Prepared hy: Fred W Marsh, Finance Manager and Lisa Hisatomi, Administrative Analyst II) ATTACHMENTS: I. Resolution 2. Calculation of Fiscal Ycar 2005-2006 Appropriations Limit RECOMMENDATION:~~pprove the selected factors used to calculate the 2005-2006 Limit ~ \! and adopt the Resolution. FINANCIAL STA~MENT: The proposed Limit for Fiscal Year 2005-2006 is $127,853,966 and only $34,363,583 in Appropriations for Fiscal Year 2005-2006 are subject to this Limit. DESCRIPTION: Each year the City Council is required by State Law to adopt an Appropriations Limit (Limit) in conjunction with the annual Budget process. The 2005-2006 Appropriations Limit is calculated by multiplying the adopted Limit for the prior year by a factor reflecting growth increases. Description of Appropriations Limit The laws regulating the application of the Limit forbid an agency from appropriating specific funds that would exceed the Limit. The restriction applies to appropriating monies categorized as "Proceeds of Taxes." The Limit carries forward each year and is subject to an adjustment in accordance with a specified formula. Each govemment entity is required to calculate a Limit and inelude it as part of the Annual Budget. This Limit may also be referred to as the Gann Limit or Proposition 4 Limit. The City has complied with this requirement, as well as the posting of the proposed calculation prior to adoption. The adjustment is made annually and is bascd on a formula which may include the following factors (the City has the discretion to choose one factor from each category below): · Change in City population; or · Change in population for the entire County; and · Change in State per capita income; or · Change in non-residential assessed valuation. ~--~.------------------------------------~._-~-------------------------------------_._~~---~----------------- COPIES TO: 'Db'- ITEM NO. B·? ~ 2005-2006 Proposed Appropriations Limit Staff has preparcd the calculations neeessary to adopt the Limit for Fiscal Year 2005-2006 in accordance with State Law and with the Uniform Guidelines of the League of California Cities. The diseretionary faetors selected in calculating the 2005-2006 Limit are: (I) the change in the City population; and (2) change in State per capita ineome. The data from the County Assessor is considered preliminary. If the Assessor provides a final computation related to "non-residential construetion" added to the tax roll that is significantly different, Staff may rccommend the adoption of a revision to the calculated Limit. Staff wiJI evaluate the desirability of amending the Limit in conjunction with the adoption of the Limit next year. The new 2005-2006 Appropriations Limit as calculated on Attaclnnent 2 of the Proposed Resolution (Attaclnnent I) is $127,853,966, based upon an adjustment factor of 10.1 % over the Revised 2004-2005 Limit. The Preliminary 2005-2006 Budget (ineluding the recommended Higher Service Levels) ineludes appropriations subject to the Limit totaling $34,363,583 that would be categorized as "Proceeds of Taxes". Therefore, the appropriations subjcct to the Appropriations Limit are below the allowed amount by $93,490,383. Although thc City is wcll below its allowed Limit, it is important to make revisions in a timely manncr. For record keeping purposes, the Limit carries forward each Fiscal Year; an accurate base simplifies the calculation for the following Fiscal Year. The City must also adopt a Limit prior to the beginning of the Fiscal Year, in accordance with State Law. Staff has prepared a Resolution (Attachmcnt I) that will adopt an Appropriations Limit for 2005-2006. RECOMMENDATION Staffrecommends that the City Council adopt the attached Resolution. 2. q, L.. . . 1003 RESOLUTION NO. - 05 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN *************************** ADOPTING AN APPROPRIATIONS LIMIT FOR FISCAL YEAR 2005-2006 OF $127,853,966 WHEREAS, State law requires that an Appropriations Limit be adopted by the City Council in conjunction with the Annual Budget process; and WHEREAS, Article XIII B of the California Constitution places certain restrictions on appropriations made by cities; and . WHEREAS, the restrictions are applicable to appropriations, which are defined as "Proceeds of Taxes"; and WHEREAS, the law allows the option to select the factors to be used in the calculation of the Appropriations Limit; and WHEREAS, the City must select between the following factors: (A) the change in City population, or (B) Countywide population, and either: (I) the change in the State per capita income, or, (2) the change in the assessed valuation of local non-residential construction; and WHEREAs, the 2005-2006 Appropriations Limit used the following discretionary factors: (I) the change in the City population and (2) change in State per capita income; and WHEREAS, the calculation of the Appropriations Limit for 2005-2006 is described in Attachment 2, attached hereto and by reference made a part hereof. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Dublin does hereby adopt the City of Dublin Appropriations Limit for Fiscal Year 2005-2006 of$I27,853,966. BE IT FURTHER RESOLVED that the limit has been calculated in accordance with State Law and is shown in Attachment 2, attached hereto. PASSED, APPROVED AND ADOPTED this 20th day of June, 2005. AYES: NOES: ABSENT: ATTEST: Mayor City Clerk Document in Gann Limit.XLS :::r:r€.M "0.1. lD- "2.0-0$ ATTACHMENT 1 . . 2. 0-0 ~ CALCULATION OF FISCAL YEAR 2005-2006 . APPROPRIATIONS LIMIT (Based On Revised Fiscal Year 2004-2005 Limit) A. SELECTION OF OPTIONAL FACTORS 1. Population - City vs. County (% Decrease) 01/01/2004 01/01/2005 % Increase City.of Dublin 36,174 37,852 4.640% OR Alameda County 1,493,441 1,503,926 0.702% Selected Factor #1'= City of Dublin Population Growth 4.64% 2. State Income vs. City Non-Residential Buildinq Change in State Per Capita Income = 5.26% Change in Non-Residential Assessed Valuation = 1.5%** **(Based on preliminary tax roll information available from the Alameda County Assessor May, 2005. The final tax roll Jigure may be different.) . Selected Factor #2 = Change in State Per Capita Income 5.26% QB B. CALCULATION OF GROWTH LIMIT ADJUSTMENT The formula for calculating the adjustment is as follows: Selected Factor 1 + 100 100 = x Selected Factor 2 + 100 100 = Y (X) x (Y) = Fiscal Year 2.005-2006 Appropriations Limit Adjustment Factor 4.64+100 100 = 1.0464 . 5.26+100 100 = 1.0526 1.0464 x 1.0526 = 1.1014 = 2005-2006 Adjustment Factor C. CALCULATION OF APPROPRIATIONS LIMIT Fiscal Year 2004-2005 Revised Appropriations Limit = Fiscal Year 2005"2006 Adjustment Factor Fiscal Year 2005-2006 Appropriations Limit $116,083,136 x 1.1014 $127,853,966 ATTACHMENT 2. .005-2006 - CITY OF DUBLIN. 3 Db ~ APPROPRIATIONS LIMIT (Including a Revision to the Fiscal Year 2004-2005 Base) In accordance with Chapter 1025 of the statutes of 1987, as amended, each government entity is required to include the Appropriations Limit in the annual budget. This limit may also be referred to as the Gann Limit or the Proposition 4 Limit. The City of Dublin has calculated a Fiscal Year 2005-2006 limit in accordance with Article XIII B of the California Constitution and the recognized methodology for calculating adjustments. The details of this calculation are shown on the following page. The Appropriations Limit does not apply to all funds appropriated by the City Council. The law only limits the appropriations that are funded by "proceeds of taxes." State law narrowly defines "proceeds of taxes." Interpretations from judicial rulings have also influenced the methodology used to calculate the application of the Appropriation Limit. The formula used to calculate the limit provides the City with optional factors to be used in making any adjustment. The first option is based on changes in population. The City may either select the change in City of Dublin population or the change in the County Population. For Fiscal Year 2005-2006, the change in the City of Dublin population was larger on a percentage basis than the population growth in the County. The second option allows the City to use either the increase in the State per capita income or the change in local assessed valuation due to "non-residential construction." The approved formula for calculating the change in the assessed valuation compares the total change in assessed valuation to the amount related strictly to non-residential improvements. When the 2004-2005 Appropriations Limit was adopted by the City Council, final information related to the population for the City of Dublin and the amount of Non-Residential Assessed Valuation, both of which are used in the calculation of the Limit, was not available. Now that the information is available, Staff has calculated a revised Limit for Fiscal Year 2004-2005. The 2004-2005 Revised Limit is $116,083,136 and only $30,343,322 in 2004-2005 Appropriations are subject to this limit. The factors selected for calculating the 2004-2005 Revised Limit were the change in City population and the change in State per capita income. In May 2005, the County Assessor provided preliminary data related to Fiscal Year 2005-2006 changes in assessed valuation attributable to non-residential construction. Based upon the preliminary information available, this factor is lower than the growth in the State per capita income (1.5% versus 5.26% respectively). In the event that the final data from the Assessor suggests a material difference from the preliminary figures, Staff will propose the adoption of an adjustment once the information is available. The two factors for growth are combined to arrive at a growth rate for appropriations. This growth rate is factored with the Revised Appropriations Limit for 2004-2005 to arrive at a new limit for Fiscal Year 2005-2006. Based upon the data and the Revised 2004-2005 Limit, the Fiscal Year 2005-2006 Appropriations Limit is $127,853,966 as shown on the following page. The recommended Preliminary Budget for Fiscal Year 2005-2006, including recommended higher service levels, contains appropriations of $34,363,583 that would be categorized as funded by proceeds of taxes. Therefore, the appropriations subject to the Appropriations Limit and contained in the recommended Preliminary Budget are $93,490,383 below the allowed amount calculated for Fiscal Year 2005-2006.