REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Establishing the Fiscal Year 2019/20 Appropriations Limit
Report
BACKGROUND
Annually, the City is required to calculate the expenditure appropriation limit from tax proceeds to determine compliance with Propositions 4 (Gann Initiative) and 111 (Spending Limitation Act of 1990). On November 6, 1979, the California electorate passed Proposition 4, which created Article XIIIB of the State Constitution placing limits on the amount of revenue that can be spent by governmental agencies. This constitutional amendment, also known as the GANN Initiative, placed limits on the growth of expenditures for publicly funded programs by restricting the amount of revenue that the City can appropriate in any fiscal year. Not all revenues are restricted by the limit, only those that are categorized as proceeds of taxes.
The City's limit has been based on actual appropriations during FY 1978/79, increased annually by an adjustment factor. On June 5, 1990, the California electorate approved Proposition 111, which modified the method of adjusting the annual Appropriations Limit. Beginning with the FY 1990/91 appropriations limit, the City may choose from the following indices when arriving at an adjustment factor:
1. The annual growth in the City's population or the annual growth in the County's population as provided by the State Department of Finance; and
2. The annual growth in the California Per Capita Income or the growth in the non-residential assessed valuation due to new construction within the City.
DISCUSSION
The City is responsible for dividing citywide revenues between tax and non-tax revenue and applying the formula to the cumulative appropriation limit. For FY 2019/20, the appropriations limit was computed using the annual population growth of the County of Santa Clara (0.33%) and the annual growth in the California Per Capita Income (3.85%). Utilizing these adjustment factors, the appropriations limit for the C...
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