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CC SR 20250617 E - GANN Limit CITY COUNCIL MEETING DATE: 06/17/2025 AGENDA REPORT AGENDA HEADING: Consent Calendar AGENDA TITLE: Consideration to establish the City’s appropriation limit for Fiscal Year 2025-26. RECOMMENDED COUNCIL ACTION: (1) Adopt Resolution No. 2025-__, A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES ESTABLISHING THE FISCAL YEAR (FY) 2025-26 APPROPRIATION LIMIT AT $41,067,843 FOR THE CITY OF RANCHO PALOS VERDES. FISCAL IMPACT: None. Amount Budgeted: N/A Additional Appropriation: N/A Account Number(s): N/A ORIGINATED BY: Robert Moya, Deputy Director of Finance RM REVIEWED BY: Vina Ramos, Deputy Director of Finance VR APPROVED BY: Ara Mihranian, AICP, City Manager ATTACHED SUPPORTING DOCUMENTS: A. Resolution No. 2025-__ (page A-1) B. FY 2025-26 Gann limit calculation (page B-1) C. California Department of Finance Price Factor and Population Information (page C-1) BACKGROUND: In conjunction with the adoption of the annual budget, the City adheres to statewide guidelines when calculating the Gann appropriation limit (named after Paul Gann the author of the Measure). In November 1979, under Article XIIIB of the California Constitution, known as the Gann Spending Limitation Initiative, governmental agencies in California have been subject to limitations on the total amount of annual appropriations 1 from the proceeds of taxes. The appropriation limit establishes a ceiling on the amount of tax revenue the City can collect and appropriate for spending each year. The amount is adjusted each year using inflationary and population growth statistics provided by the California Department of Finance (DOF). In addition to the guidelines, Section 1.5 of Article XIIIB of the California Constitution, the annual calculation of the appropriations limit is subject to an agreed -upon procedures review in connection with the annual audit. DISCUSSION: Staff has completed calculating the Gann limit for Fiscal Year 2025-26. The necessary information to calculate the limit was obtained from the DOF website which included the percentage change in the population factor as of January 1, 2025, as well as the change in cost living or price factor specific to the City of Rancho Palos Verdes. The key points are as follows: • The DOF reported a 6.44% change over the prior year for the California Per Capital Personal Income. • The annual percentage change in population , minus exclusions for the City, decreased by 0.25%, while Los Angeles County increased by 0.30%. Based on the above information, the City’s FY 2025-26 appropriation limit is $41,067,843. Based on the FY 2025-26 draft budget of $33,113,200 for tax proceeds, the City meets the Gann limit. This allocation constitutes 81% of the Gann appropriation limit (see Attachment B). CONCLUSION: Based on the above discussion, Staff recommends the City Council adopt the attached resolution (Attachment A) to establish the City’s appropriation limit of $41,067,843 for FY 2025-26. ALTERNATIVES: In addition to the Staff recommendation, the following alternative actions are available for the City Council’s consideration: 1) Do not adopt the attached resolution and provide Staff with direction for consideration at a future meeting. 2) Take other action, as deemed appropriate. 2 RESOLUTION NO. 2025__ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES ESTABLISHING THE FISCAL YEAR (FY) 2025-26 APPROPRIATION LIMIT AT $41,067,843 FOR THE CITY OF RANCHO PALOS VERDES WHEREAS, the City of Rancho Palos Verdes has established its Appropriation Limit of $41,067,843 (Forty-One Million, Sixty-Seven Thousand and Eight Hundred Forty- Three Dollars) for FY 2025-26; and, WHEREAS, by a letter dated May 2025, the California Department of Finance has provided the following factors relevant to the calculation of the Appropriation Limit for FY 2025-26: California Per Capita Personal Income change: 6.44% (Six Point Forty-Four Percent) City of Rancho Palos Verdes Population Adjustment: -0.25% (Negative One Point Twenty-Five Percent) WHEREAS, the City’s Finance Department Staff has calculated the Appropriation Limit for FY 2025-26 based upon the foregoing factors and the provisions of Article XIII B of the Constitution of the State of California. The working papers supporting the calculation are maintained in the files of the Finance Department within the City. WHEREAS, the Appropriation Limit for the City of Rancho Palos Verdes establishes the ceiling for which proceeds from taxes can be appropriated during FY 2025-26. NOW BE IT, THEREFORE, RESOLVED BY THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES: Section 1: The Appropriation Limit of the City of Rancho Palos Verdes is $41,067,843 (Forty-One Million, Sixty-Seven Thousand and Eight Hundred Forty-Three Dollars) for FY 2025-26. Section 2: The Appropriation Limit of the City of Rancho Palos Verdes in the amount of $41,067,843 (Forty-One Million, Sixty-Seven Thousand and Eight Hundred Forty-Three Dollars) for FY 2025-26 exceeds the proceeds from taxes, calculated in the amount of $33,113,200 (Thirty-Three Million, One Hundred Thirteen Thousand and Two Hundred Dollars) for FY 2025-26. Therefore, the City of Rancho Palos Verdes shall be in compliance with the provisions of Article XIII B of the Constitution of the State of California. Section 3: The City Clerk shall certify to the passage of this resolution. A-1 APPROVED AND ADOPTED THE 17th DAY OF JUNE 2025. ___________________________ David L. Bradley, Mayor ATTEST: ______________________________ Teresa Takaoka, City Clerk State of California ) County of Los Angeles ) ss City of Rancho Palos Verdes ) I, TERESA TAKAOKA, City Clerk of The City of Rancho Palos Verdes, hereby certify that the above Resolution No. 2025-__ was duly and regularly passed and adopted by the said City Council at a regular meeting thereof held on June 17, 2025. __________________________ Teresa Takaoka, City Clerk A-2 City of Rancho Palos Verdes Ten- Year Gann Limit Calculation FY 2025-26 Year No. Fiscal Year Califronia per Capita LA Population Change RPV Factor Factor Appropriation Limit Proposed Budget Proceeds of Taxes % of Budget to Limit 10 2025-26 6.44 0.3 -0.25 1.06174 $41,067,843 $33,113,200 81% 9 2024-25 3.62 0.05 -0.5 1.03102 $38,679,792 $33,113,200 86% 8 2023-24 4.44 -0.75 -1.02 1.06786 $37,516,080 $30,989,920 83% 7 2022-23 7.55 -0.71 -0.98 1.06786 $36,291,352 $28,333,280 78% 6 2021-22*5.73 -0.89 -0.7 1.04789 $33,984,996 $24,285,400 71% 5 2020-21*3.73 -0.11 -0.26 1.03616 $32,431,834 $23,621,500 73% 4 2019-20 3.85 -0.01 -0.24 1.0384 $31,300,056 $25,513,980 82% 3 2018-19 3.67 0.51 0.22 1.04199 $30,142,693 $25,078,500 83% 2 2017-18 3.69 0.57 0.31 1.04281 $28,928,085 $24,109,140 83% 1 2016-17 5.37 0.85 0.46 1.06266 $27,740,504 $22,903,240 83% *FY 2020-21 Appropriation Limit corrected from $31,301,409 *FY 2021-22 Appropriation Limit corrected from $32,800,435 B-1 CALCULATION OF PROCEEDS OF TAXES DRAFT BUDGET FY 2025-26 NON PROCEEDS PROCEEDS GENERAL FUND OF TAXES OF TAXES TOTAL TAXES Property Tax 11,100,000 11,100,000 Property Tax In-Lieu of Sales Tax 0 0 Property Tax In-Lieu of VLF Revenues 6,650,000 6,650,000 Property Tax Redev Tax Trust 60,000 60,000 Property transfer Tax 400,000 400,000 Golf Tax 770,000 770,000 Franchise Tax 2,400,000 2,400,000 Sales and Use Tax 2,750,000 2,750,000 Sales and Use Tax - PW (PSAF)103,500 103,500 Utility Users Tax 2,457,200 2,457,200 Transient Occupancy Tax 7,000,000 7,000,000 Business license Tax 966,000 966,000 TOTAL TAXES 32,153,200 2,503,500 34,656,700 LICENSES AND PERMITS Bldg and safety permits & geology fees 2,898,500 2,898,500 Planning permits 425,000 425,000 Right of way & parking permits 98,000 98,000 Business License Penalty 18,000 18,000 Film permits 21,000 21,000 Animal control fees 20,000 20,000 TOTAL LICENSES AND PERMITS 0 3,480,500 3,480,500 FINES AND FORFEITURES Tow fees 4,000 4,000 False alarm fines 8,000 8,000 Tickets and Citations 126,700 126,700 TOTAL FINES AND FORFEITURES 0 138,700 138,700 RENTS Leases and Rentals 802,900 802,900 TOTAL RENTS 0 802,900 802,900 INTEREST Interest earnings 960,000 240,000 1,200,000 TOTAL INTEREST 960,000 240,000 1,200,000 CHARGES FOR SERVICES Administrative Overhead 160,000 160,000 Recreation fees 275,900 275,900 TOTAL CHARGES FOR SERVICES 0 435,900 435,900 REVENUES FROM OTHER AGENCIES TOTAL REVENUES FROM OTHER AGENCIES 0 0 0 OTHER REVENUES Donations 30,000 30,000 CASP Fees 5,000 5,000 Successory Agency Admin 0 0 RDA Loan Repayment 280,000 280,000 PVIC Gift Shop 150,000 150,000 Miscellaneous Revenues 300,500 300,500 TOTAL OTHER REVENUES 0 765,500 765,500 Inter-Fund Transfers Transfers in Public Safety 240,000 240,000 B-2 CALCULATION OF PROCEEDS OF TAXES DRAFT BUDGET FY 2025-26 NON PROCEEDS PROCEEDS Transfers in Building Replacement 80,000 80,000 Transfers in Waste Reduction 0 0 Transfers in Measure A Maintenance 0 0 TOTAL INTER-FUND TRANSFERS 0 320,000 320,000 TOTAL GENERAL FUND 33,113,200 8,687,000 41,800,200 NON PROCEEDS PROCEEDS ALL FUNDS OF TAXES OF TAXES TOTAL GENERAL FUND 33,113,200 8,687,000 41,800,200 Gas Tax 2,444,042 2,444,042 1972 ACT 301,100 301,100 EL PRADO LIGHTING DISTRICT 5,300 5,300 1911 ACT 997,400 997,400 WASTE REDUCTION 216,100 216,100 AQMD 42,800 42,800 PROPOSITION C 895,376 895,376 PROPOSITION A 1,141,774 1,141,774 PUBLIC SAFETY GRANTS 192,700 192,700 MEASURE R 758,782 758,782 MEASURE M 2,417,780 2,417,780 HABITAT RESTORATION 174,600 174,600 SUBREGION 1 MAINTENANCE 67,300 67,300 MEASURE A MAINTENANCE & CAPITAL 662,700 662,700 ABALONE COVE SEWER DISTRICT 82,405 82,405 GINSBURG CULTURAL ARTS BLDG 0 0 DONOR RESTRICTED DONATIONS 52,200 52,200 CDBG 470,000 470,000 CIP 7,526,550 7,526,550 ARPA 2,000 2,000 FEDERAL GRANTS 2,574,900 2,574,900 STATE GRANTS 1,883,100 1,883,100 QUIMBY 8,538 8,538 LOW-MOD INCOME HOUSING 51,200 51,200 AFFORDABLE HOUSING IN LIEU 32,900 32,900 ENVIRONMENTAL EXCISE TAX 13,500 13,500 BIKEWAYS 158,000 158,000 MEASURE W 704,200 704,200 WATER QUALITY 0 0 BEAUTIFICATION FUND 0 0 EQUIPMENT REPLACEMENT FUND 310,800 310,800 EMPLOYEE PENSION FUND 437,100 437,100 IA PORT BEND 17,100 17,100 IA AB COVE 22,800 22,800 TOTAL ALL FUNDS 33,113,200 33,352,047 66,465,247 PROCEEDS OF TAXES 33,113,200 GANN LIMIT 41,067,843 % OF GANN LIMIT 81% B-3 May 2025 Dear Fiscal Officer: Subject: Price Factor and Population Information Appropriations Limit California Revenue and Taxation Code Section 2227 requires the Department of Finance to transmit an estimate of the percentage change in population to local governments. Each local jurisdiction must use their percentage change in population factor for January 1, 2025, in conjunction with a change in the cost of living, or price factor, to calculate their appropriations limit for fiscal year 2025-26. Attachment A provides the change in California’s per capita personal income and an example for utilizing the price factor and population percentage change factor to calculate the 2025-26 appropriations limit. Attachment B provides the city and unincorporated county population percentage change along with the population percentage change for counties and their summed incorporated areas. The population percentage change data excludes federal and state institutionalized populations and military populations. Population Percent Change for Special Districts Some special districts must establish an annual appropriations limit. California Revenue and Taxation Code Section 2228 provides additional information regarding the appropriations limit. Article XIII B, Section 9(C) of the California Constitution exempts certain special districts from the appropriations limit calculation mandate. The code section and the California Constitution can be accessed at the following website: http://leginfo.legislature.ca.gov/faces/codes.xhtml. Special districts required by law to calculate their appropriations limit must present the calculation as part of their annual audit. Any questions special districts have on this requirement should be directed to their county, district legal counsel, or the law itself. No state agency reviews the local appropriations limits. Population Certification The population certification program applies only to cities and counties. California Revenue and Taxation Code Section 11005.6 mandates Finance to automatically certify any population estimate that exceeds the current certified population with the State Controller’s Office. Finance will certify the higher estimate to the State Controller by June 1, 2025. Please Note: The prior year’s city population estimates may be revised. The per capita personal income change is based on historical data. If you have any questions regarding this data, please contact the Demographic Research Unit at (916) 323-4086. JOE STEPHENSHAW Director By: ERIKA LI Chief Deputy Director Attachment C-1 May 2025 Attachment A A. Price Factor: Article XIII B specifies that local jurisdictions select their cost of living factor to compute their appropriation limit by a vote of their governing body. The cost of living factor provided here is per capita personal income. If the percentage change in per capita personal income is selected, the percentage change to be used in setting the fiscal year 2025-26 appropriation limit is: Per Capita Personal Income Fiscal Year Percentage change (FY) over prior year 2025-26 6.44 B. Following is an example using sample population change and the change in California per capita personal income as growth factors in computing a 2025-26 appropriation limit. 2025-26: Per Capita Cost of Living Change = 6.44 percent Population Change = 0.28 percent Per Capita Cost of Living converted to a ratio: 6.44 + 100 = 1.0644 100 Population converted to a ratio: 0.28 + 100 = 1.0028 100 Calculation of factor for FY 2025-26: 1.0644 x 1.0028 = 1.0674 C-2