HomeMy WebLinkAboutCC 2026-06-23_09c Appropriation LimitItem 9.c.
MEMORANDUM
TO: City Council
FROM: Nicole Valentine, Director of Administrative Services
BY: Megan Schotborgh, Finance Manager
SUBJECT: Resolution Accepting the Fiscal Year 2026-27 Appropriation Limit (Gann
Limit)
DATE: June 23, 2026
RECOMMENDATION:
1) Adopt a Resolution adopting a tax proceeds expenditure appropriation limit for Fiscal Year
2026-27; and
2) Determine that establishing the appropriation limit for FY 2026-27 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 voters in 1979, adding
Article XIIIB 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 Califo rnia per
capita personal income and the County of San Luis Obispo’s population as adjustment factors.
In May 2026, the California Department of Finance released population and per capita personal
income information. The population between January 2025 and January 2026 for the City
Page 28 of 355
Item 9.c.
City Council
Resolution Accepting the Fiscal Year 2026-27 Appropriation Limit (Gann Limit)
June 23, 2026
Page 2
decreased by eight-tenths of one percent (-0.8%) and the County population decreased by
zero-point two percent (-0.2%). For Fiscal Year (FY) 2026-27, the change in per capita personal
income from the prior year increased by four and ninety-five hundredths percent (4.95%).
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 ($30,708,601), multiplied by the per capita personal income
percentage increase (4.95%), and multiplied again by the greater available population growth
factor, which for FY 2026-27 is the County’s -0.2%.
ANALYSIS OF ISSUES:
The City is responsible for separating citywide revenues between tax and non-tax revenue and
applying the formula to the cumulative appropriation limit. For FY 202 6-27, the appropriation
limit has been calculated to be $32,179,543. This calculation means the City cannot
appropriate more than $32,179,543 tax-based revenues in FY 2026-27. The estimated
proceeds of taxes subject to the appropriation limit for the proposed FY 202 6-27 budget is
estimated to be $28,015,100, which is approximately $4.2 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 6-27;
2. Revise and adopt a Resolution establishing the appropriation limit for FY 2026-27; or
3. Provide other direction to staff.
ADVANTAGES:
Adoption of the Resolution establishing the appropriation limit for FY 202 6-27 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 202 6-27 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 29 of 355
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 2026-27
WHEREAS, sections 7900 et seq. of the Government Code 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.
NOW, THEREFORE BE IT RESOLVED, by the City Council of the City of Arroyo Grande
as follows:
1. 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
2026-27.
2. The appropriation limit for Fiscal Year 2026-27 is hereby set at thirty-two million,
one hundred seventy-nine thousand, five hundred forty-three dollars
($32,179,543).
3. Documentation used in the determination of the tax proceeds expenditure
appropriation limit is attached hereto as Exhibit A and incorporated herein by this
reference.
4. This Resolution is effective on its date of adoption.
On motion of Council Member , seconded by Council Member
, and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 23rd day of June, 2026.
Page 30 of 355
RESOLUTION NO.
PAGE 2
______________________________
CAREN RAY RUSSOM, MAYOR
ATTEST:
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
______
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
Page 31 of 355
RESOLUTION NO.
PAGE 3
EXHIBIT A
Appropriation limit for 2025-26 30,708,601 (A)
Multiplied by the appropriation limit change factors:
Per Capita Personal Income Change:4.95%
=
100
Population Factor - San Luis Obispo County
2025 279,666
2026 279,242 -0.2%
(424)
==
279,242 100
Appropriation limit factor: (B x C)1.0479 (D)
APPROPRIATION LIMIT FOR FISCAL YEAR 2026-26 (A x D7 32,179,543$
28,015,100$
Amount under (over) limit 4,164,443
ESTIMATED 2025-26 PROCEEDS OF TAXES SUBJECT
TO APPROPRIATION LIMIT
Conversion to ratio:(424) -0.2% +100 0.99848 (C)
CITY OF ARROYO GRANDE
CALCULATION OF APPROPRIATION LIMIT FROM TAX PROCEEDS
FOR FISCAL YEAR 2026-27
Conversion to ratio:4.95% +100 1.0495 (B)
Page 32 of 355