HomeMy WebLinkAboutCC 2025-06-24_09b FY 25-26 Appropriation LimitItem 9.b.
MEMORANDUM
TO: City Council
FROM: Nicole Valentine, Director of Administrative Services
SUBJECT: Resolution Accepting the Fiscal Year 2025-26 Appropriation Limit
(Gann Limit)
DATE: June 24, 2025
RECOMMENDATION:
1) Adopt a Resolution adopting a tax proceeds expenditure appropriation limit for Fiscal
Year 2025-26; and
2) Determine that establishing the appropriation limit for FY 2025-26 is not a project
subject to the California Environmental Quality Act (“CEQA”) because it has no potential
to result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There are no significant fiscal or personnel impacts associated with approval of the
appropriation limit.
BACKGROUND:
Proposition 4, known as the Gann Initiative, was approved by California vot ers in 1979,
adding Article 13B to the California Constitution. This Article established an annual limit
on the appropriations of tax proceeds for government agencies , also known as the Gann
Limit. In 1990, the article was modified by Proposition 111 and SB 88, which included
new adjustment formulas that allow cities a choice in methodologies for determining both
the annual growth and inflation factors. The annual population growth factor can be
calculated by using the greater of the City or the County population growth. Agencies
have a choice of using the growth in California per capita personal income or the growth
in non-residential assessed valuation due to new construction within their city. The City’s
calculation uses the changes in California per capita personal income and the County of
San Luis Obispo’s population as adjustment factors.
In May 2025, the California Department of Finance released population and per capita
personal income information. The population between January 202 4 and January 2025
for the City decreased by six-tenths of one percent (-0.6%) and the County population
decreased by zero point one percent (-0.1%). For FY 2024-25, the change in per capita
Page 14 of 211
Item 9.b.
City Council
Resolution Accepting the Fiscal Year 2025-26 Appropriation Limit (Gann Limit)
June 24, 2025
Page 2
personal income from the prior year increased by six and forty-four hundredths percent
(6.44%).
In accordance with Proposition 111, the City’s annual spending limit must be approved
by the City Council at the beginning of each fiscal year. The limit is calculated using the
previous year’s appropriation limit ($28,875,036), multiplied by the per capita personal
income percentage increase (6.44%), and multiplied again by the greater available
population growth factor, which for FY 2024-25 is the County’s -0.1%.
ANALYSIS OF ISSUES:
The City is responsible for separating citywide revenu es between tax and non-tax
revenue and applying the formula to the cumulative appropriation limit. For FY 202 5-26,
the appropriation limit has been calculated to be $30,708,601. This calculation means the
City cannot appropriate more than $30,708,601 of tax-based revenues in FY 2025-26.
The estimated proceeds of taxes subject to the appropriation limit for the proposed FY
2025- 26 budget is estimated to be $27,233,700, which is approximately $3.5 million less
than the appropriation limit. Therefore, the City is in compliance with Article XIIIB of the
California Constitution.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Adopt a Resolution establishing the appropriation limit for FY 202 5-26;
2. Revise and adopt a Resolution establishing the appropriation limit for FY 2025-26;
or
3. Provide other direction to staff.
ADVANTAGES:
Adoption of the Resolution establishing the appropriation limit for FY 2025-26 will ensure
that the City is in compliance with Article 13B of the California Constitution.
DISADVANTAGES:
There are no disadvantages identified with the recommended action.
ENVIRONMENTAL REVIEW:
Establishing the appropriation limit for FY 2025-26 is not a project subject to the California
Environmental Quality Act (“CEQA”) because it has no potential to result in either a direct,
or reasonably foreseeable indirect, physical change in the environment. (State CEQA
Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City’s website in accordance with
Government Code Section 54954.2.
ATTACHMENTS:
1. Resolution
Page 15 of 211
ATTACHMENT 1
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARROYO GRANDE ADOPTING A TAX PROCEEDS
EXPENDITURE APPROPRIATION LIMIT FOR FISCAL
YEAR 2025-26
WHEREAS, Government Code sections 7900 et seq. provide for the effective and
efficient implementation of Article XIIIB of the California Constitution; and
WHEREAS, Government Code sections 7901 through 7914 provide that each year, the
governing body of each local jurisdiction shall, by resolution adopted at a regularly
scheduled meeting, establish the annual adjustment factors to be used and the tax
proceeds expenditure appropriation limit; and
WHEREAS, establishing the appropriation limit for Fiscal Year 2025-26 is not a project
subject to the California Environmental Quality Act (“CEQA”) because it has no potential
to result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of Arroyo Grande
as follows:
1. The recitals above are true and correct and are incorporated herein by reference,
and adopted as findings by the City Council.
2. The California per capita income and the population for the County of San Luis
Obispo, California are recognized as the annual adjustment factors for Fiscal Year
2025-26.
3. The appropriation limit for Fiscal Year 2025-26 is hereby set at thirty million, seven
hundred eight thousand, six hundred and one dollars ($30,708,601).
4. Documentation used in the determination of the tax proceeds expenditure
appropriation limit is attached hereto as Exhibit A and incorporated herein by this
reference.
5. This Resolution is effective on its date of adoption.
On motion of Council Member , seconded by Council Member
, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 24th day of June, 2025.
Page 16 of 211
ATTACHMENT 1
RESOLUTION NO.
PAGE 2
______________________________
CAREN RAY RUSSOM, MAYOR
ATTEST:
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
______
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
Page 17 of 211
ATTACHMENT 1
EXHIBIT A
Appropriation limit for 2024-25 28,875,036 (A)
Multiplied by the appropriation limit change factors:
Per Capita Personal Income Change:6.44%
=
100
Population Factor - San Luis Obispo County
2024 279,568
2025 279,337 -0.1%
(231)
==
279,337 100
Appropriation limit factor: (B x C)1.0635 (D)
APPROPRIATION LIMIT FOR FISCAL YEAR 2025-26 (A x D)30,708,601$
27,233,700$
Amount under (over) limit 3,474,901
ESTIMATED 2025-26 PROCEEDS OF TAXES SUBJECT
TO APPROPRIATION LIMIT
1.0644
Conversion to ratio:(231) -0.1% +100 0.99917 (C)0.99917
CITY OF ARROYO GRANDE
CALCULATION OF APPROPRIATION LIMIT FROM TAX PROCEEDS
FOR FISCAL YEAR 2025-26
Conversion to ratio:6.44% +100 1.0644 (B)
Page 18 of 211