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Home My WebLink About27 - Appropriation Limit Hearing FY 2006-07CITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 27 June 13, 2006 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Dennis C. Danner, Administrative Services Director 949 - 644 -3123 ddanner@city.newport-beach.ca.us SUBJECT: 2006 -07 APPROPRIATION LIMIT HEARING RECOMMENDATION: Hold a public hearing and adopt, by Resolution, the City's Appropriation (Gann) Limit for the 2006 -07 fiscal year in the amount of $125,314,360. DISCUSSION: Background: Article XIIIB of the California Constitution (Proposition 4) specifies that appropriations of government entities may increase annually only by a limited amount (primarily to allow for population increases and inflation). As in the past, SB 1352 (Revenue and Taxation Code Section 7910) requires each local government to establish its appropriations limit by resolution each year at a regularly scheduled or noticed special meeting. The attached resolution submitted for Council approval fulfills this requirement. As the following table shows, even without calculating authorized exclusions, the amount by which our Proceeds of Taxes will have been under the Gann Limit for a twelve year period is sufficient to provide a reasonable margin of comfort. 1994 -95 Gann Limit Margin $16,193,661 1995 -96 Gann Limit Margin $19,624,749 1996 -97 Gann Limit Margin $19,711,288 1997 -98 Gann Limit Margin $20,285,768 1998 -99 Gann Limit Margin $20,344,472 1999 -00 Gann Limit Margin $21,751,495 2000 -01 Gann Limit Margin $23,470,251 2001 -02 Gann Limit Margin $26,941,613 2002 -03 Gann Limit Margin $21,883,919 2003 -04 Gann Limit Margin 2004 -05 Gann Limit Margin 2005 -06 Gann Limit Margin 2006 -07 Gann Limit Margin 2006 -07 Appropriation Limit Hearing June 13, 2006 Page 2 $30,781,765 $27,911,157 $28,823,421 $20,785,782 There are several factors which have a bearing on the Gann Limit, and on our expenditures subject to the Limit. However, actions by the State reducing our tax revenues, along with weak economic conditions during the early and mid 1990's established the trend which can be seen above. The detailed population and inflation adjustment calculations are still required, but they have been reduced to a level of relative insignificance by these larger factors. The dramatic increase in the margin in 2003 -04 was primarily the result of the annexation related population adjustment. Although 2006 -07 clearly marks a reversal of the Gann Limit's trend toward obscurity, it is probable that the City is a number of years away from having a problem in this area, if it ever does. One reason for this is that we have not bothered to calculate authorized exclusions for a number of years, since we were so far under the limit. However, it looks like we may not be able to allow ourselves that small luxury for too much longer. Each year stands on its own, and a $20 million gap is still a long ways from being a problem. But if this trend continues next year, we plan to do detailed projections and analyze possible courses of action to address the potential impact in future years. The objective would be to make appropriate adjustments before the problem becomes critical. Submitted by: Dennis Danner Administrative Services Director Attachments: Resolution RESOLUTION NO. 2006- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH DETERMINING AND ESTABLISHING AN APPROPRIATIONS LIMIT FOR FISCAL YEAR 2006- 07 IN ACCORDANCE WITH ARTICLE XIIIB OF THE CALIFORNIA CONSTITUTION AND GOVERNMENT CODE SECTION 7910. WHEREAS, Article XIIIB was added to the California Constitution at the special State -wide election held November 6, 1979 (commonly known as Proposition 4); and WHEREAS, Government Code Section 7910 was added to Chapter 12.05 by Statute at the Regular Session of the California Legislature; and WHEREAS, Proposition 111, which, among other things, provides new annual adjustment formulas for the Appropriations Limit, was approved by the voters in June, 1990, and WHEREAS, The League of California Cities and the State of California Department of Finance have published population and per capita income growth indexes, as well as guidelines for the uniform application of Proposition 111, and WHEREAS, Government Code Section 7910 requires the governing body of each local jurisdiction to adopt, by resolution, its appropriations limit; and WHEREAS, said appropriations limit must be adhered to in preparing and adopting this City's annual budget. NOW, THEREFORE, the City Council of the City of Newport Beach does hereby resolve as follows: Section 1: In accordance with Article XIIIB of the California Constitution and Government Code Section 7910, the appropriations limit for fiscal year commencing 1 July 2006 for the City of Newport Beach is $125,314,360. The computation of appropriations for the 2006- 07 fiscal year are set forth in detail in the attachment hereto, which is incorporated as though fully set forth herein. Section 2: Said appropriations limit shall be adhered to in the City of Newport Beach budget for the 2006 -07 fiscal year. ATTEST: ADOPTED this 13th day of June, 2006. City Clerk Mayor CITY OF NEWPORT BEACH COMPUTATION OF APPROPRIATION LIMIT FOR FISCAL YEAR ENDING 30 JUNE 20071 AS PER ARTICLE X11113, CALIFORNIA STATE CONSTITUTION PRIOR YEAR INFLATION POPULATION FISCAL YEAR LIMIT ADJUST. (1) ADJUST. (2) NEW APPROP. LIMIT 2006 -07 $119,548,685 0.0396 0.0083 1 $125,314,360 note (1). Based on California per capita income increases note (2): Based on Orange County population growth CALCULATION OF ESTIMATED PROCEEDS OF TAXES FOR FISCAL YEAR ENDING 30 JUNE 2007 Total Estimated Proceeds of Taxes $104,528,578 Less Authorized Exclusions Net Proceeds of Taxes note (3) $0 $104,528,578 note (3): Since 2006 -07 estimated gross proceeds were substantially less than appropriations limit, exclusions were not calculated. AMOUNT UNDER APPROPRIATIONS LIMIT $20,785,782 AuEhorized to Publish Advettisemems of all kinds including Public nodces by Dem-w of the superior Court of Omnge County, Califoruia. Number A- 6211, September 29,1961, and A -24831 June 11, 1963. PROOF OF PUBLICATION STATE OF CALIFORNIA) ) ss. COUNTY OF ORANGE ) I am a Citizen of the United States and a resident of the County aforesaid; i am . over the age of eighteen years, and not a parry to or interested in the below entitled matter. I am a principal clerk of the NEWPORT BEACH - COSTA MESA DAILY PILOT, a newspaper of general circulation, printed and published in the City of Costa Mesa, County of Orange, State of California, and that attached Notice is a true and complete copy as was printed and published on the following dates: MAY 27,2006 i declare, under penalty of perjury, that the foregoing is true and correct. Executed on MAY 27,2006 at Costa Mesa, California'. A r-A I LL i� e / Signature k -0 -0�- -t�2&OfAl. 7 ' - lD R4 '06 JIUN -7 A 9 13 OFFiI.= C,F ; -`v r. :6 CITY OF'4 -WPut2 i" @cACH LEGAL NOTICE CE IS HEREBY GIVEN THAT the �oncil of the City of Newport Beach Id a joint public hearing regarding: ;lminary Budget for the 2006 -07 Year, pursuant to Section 1102 of #port Beach City Charter and, (2) I, itity's Appropriation Limit for the. Fiscal Year, pursuant to Article `the State Constitution. ICE IS HEREBY GIVEN THAT said hearing will be held on the 13th. day e,,2006, at the hour of 7 :00 p.m. in ity Hall Council Chambers, 3300 )rt, Boulevard, Newport Beach, CA ,:at which time and place interested is may appear and be heard n' TOTAL BUDGET ALL FUNDS - IDING CAPITAL IMPROVEMENTS: s and Benefits ' $104,391,495 nance ar^rl Operations 52,178,534 Outlay 4,315,872 JImpmvements 41,103,101 9ervic€ 3.954,147 Total. Budget Year $205.943.149 $125,314,360 104,528.578 Amount Under Limit $ 20.785.782