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HomeMy WebLinkAbout06 - Adoption of Fiscal Year 2022-23 Appropriations Limit and Amendment to the Fiscal Year 2021-22 Appropriations LimitQ �EwPpRT c 9C/FOR TO: FROM CITY OF NEWPORT BEACH City Council Staff Report June 14, 2022 Agenda Item No. 6 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Scott Catlett, Finance Director/Treasurer - 949-644-3123, scatlett@newportbeachca.gov PREPARED BY: Shelby Burguan, Budget Manager sburguan@newportbeachca.gov PHONE: 949-644-3085 TITLE: Resolution Nos. 2022-36 and 2022-37: Adoption of Fiscal Year 2022- 23 Appropriations Limit and Amendment to the Fiscal Year 2021-22 Appropriations Limit ABSTRACT: As a governmental entity, the City of Newport Beach (City) is subject to the Gann Appropriations Limit Initiative, which determines the amount that the City can spend from its tax revenues. The limit is adjusted annually for changes in population, combined with the change in California per capita personal income, and must be adopted by resolution. For Fiscal Year 2021-22, the City's Gann appropriation limit totals $220,661,795. For Fiscal Year 2022-23, applicable tax proceeds are estimated at $210,188,302 and the City's Gann appropriation limit totals $236,775,921. Therefore, the City will be $26,587,618 under the Gann Spending Limit. RECOMMENDATION: a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; b) Adopt Resolution No. 2022-36, A Resolution of the City Council of the City of Newport Beach, California, Amending the Appropriations Limit for Fiscal Year 2021-22 in Accordance with Article XI11B of the California Constitution and Government Code Section 7910, in the amount of $220,661,795-1 and c) Adopt Resolution No. 2022-37, A Resolution of the City Council of the City of Newport Beach, California, Determining and Establishing the Appropriations Limit for Fiscal Year 2022-23 in Accordance with Article XI11B of the California Constitution and Government Code Section 7910, in the amount of $236,775,921. 6-1 Adoption of Fiscal Year 2022-23 Appropriations Limit and Amendment to the Fiscal Year 2021-22 Appropriations Limit June 14, 2022 Page 2 DISCUSSION: Article XIIIB of the California Constitution specifies that appropriations of government entities may increase annually only by a limited amount, primarily to allow for population increases and inflation. Each local government is required to establish its appropriations limit by resolution each year at a regularly scheduled or noticed special meeting of the City Council. Resolution 2022-37 (Attachment B), submitted for City Council approval, fulfills this requirement. The calculation of the City's Appropriations Limit for Fiscal Year 2022-23 is: FY2021-22 Appropriations Limit $220,661,795 Inflation Adjustment Factor' 7.55% Population Adjustment Factor2 -0.23% FY2022-23 Appropriations Limit $236,775,921 ' Based on California per capita income increases as provided by the California Department of Finance, May 2022. 2 Based on Orange County population growth as provided by the California Department of Finance, May 2022. The City's estimated proceeds from taxes for Fiscal Year 2022-23 is $210,188,302 or $26,587,618 less than the $236,775,921 Appropriations Limit. Calculation of proceeds of taxes can exclude certain public fund uses, including categories of debt service, contributions to some types of revenues, and federal mandates. The exclusion calculation was not performed as the City continues to maintain appropriations significantly below its Appropriations Limit. The City selected a new audit firm to perform the City's annual financial statement audit and related tasks beginning with the fiscal year ending June 30, 2021. The audit firm, Davis Farr LLP, recommended revising the methodology employed to calculate the City's Fiscal Year 2021-22 Appropriations Limit to provide for the selection of an alternative population factor that results in a higher limit. Because the Fiscal Year 2022-23 calculation builds upon the limit calculated in the prior year, it is necessary to amend the Fiscal Year 2021-22 calculation and corresponding resolution (Attachment A). FISCAL IMPACT: There is no fiscal impact related to this item. 6-2 Adoption of Fiscal Year 2022-23 Appropriations Limit and Amendment to the Fiscal Year 2021-22 Appropriations Limit June 14, 2022 Page 3 ENVIRONMENTAL REVIEW: Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. NOTICING: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). ATTACHMENTS: Attachment A — Resolution 2022-36, Determining and Amending the Appropriations Limit for Fiscal Year 2021-22 Attachment B — Resolution 2022-37, Determining and Establishing the Appropriations Limit for Fiscal Year 2022-23 6-3 ATTACHMENT A RESOLUTION NO. 2022- 36 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, AMENDING THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2021-22 IN ACCORDANCE WITH ARTICLE X11113 OF THE CALIFORNIA CONSTITUTION AND GOVERNMENT CODE SECTION 7910 WHEREAS, Article X111B was added to the California Constitution at the special State-wide election held November 6, 1979 (commonly known as Proposition 4), WHEREAS, Government Code Section 7910 was added to Chapter 1205 by Statute at the Regular Session of the California Legislature in 1980; WHEREAS, Proposition 111, which, among other things, provides new annual adjustment formulas for the Appropriations Limit, was approved by the voters in June, 1990; WHEREAS, the State of California Department of Finance has published population and per capita income growth indexes, as well as guidelines for the uniform application of Proposition 111; WHEREAS, Government Code Section 7910 et seq. requires the governing body of each local jurisdiction to adopt, by resolution, its appropriations limit; WHEREAS, said appropriations limit must be adhered to in preparing and adopting the City of Newport Beach's annual budget; WHEREAS, the appropriations limit may be based on either the change in the City's population growth or the change in the population growth of the County of Orange; WHEREAS, the appropriations limit established for fiscal year 2021-22 was based on the change in population growth of the County of Orange; WHEREAS, the City Council desires to revise the appropriations limit established for fiscal year 2021-22 to be based on the change in population growth of the City; and WHEREAS, the City has complied with all the provisions of Article XIIIB in determining the appropriations limit for Fiscal Year 2021-22. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Resolution No. 2022- Page 2 of 3 Section 1: In accordance with Article XIIIB of the California Constitution and Government Code Section 7910, the appropriations limit for the fiscal year commencing July 1, 2021, for the City of Newport Beach is $220,661,795. The computation of appropriations for the 2021-22 fiscal year are set forth in detail in the attachment hereto, which is incorporated as though fully set forth herein. Section 2: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. Section 3: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 4: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly. 6-5 Resolution No. 2022- Page 3 of 3 Section 5: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 14th day of June, 2022. Kevin Muldoon Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: CITY ATTORNEY'S OFFICE a,- C ff 06" Aaron C. Harp City Attorney Attachment A: Computation of Appropriations Limit for FY 2021-22 Attachment A CITY OF NEWPORT BEACH COMPUTATION OF APPROPRIATIONS LIMIT FOR FISCAL YEAR ENDING JUNE 30, 2022 AS PER ARTICLE XIIIB, CALIFORNIA STATE CONSTITUTION PRIOR YEAR FISCAL YEAR LIMIT INFLATION POPULATION ADJUST. (1) ADJUST. (2) NEW APPROP. LIMIT 2021-22 210,047,411 5.73% -0.64% 1 220,661,795 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 JUNE 30, 2022 Total Estimated Proceeds of Taxes $190,670,013 Less Authorized Exclusions note (3) $0 Net Proceeds of Taxes $190,670,013 note (3): Since 2022-23 estimated proceeds are substantially less than the Appropriations Limit, exclusions were not calculated. AMOUNT UNDER APPROPRIATIONS LIMIT 29,991,782 6-7 ATTACHMENT B RESOLUTION NO. 2022- 37 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, DETERMINING AND ESTABLISHING THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2022-23 IN ACCORDANCE WITH ARTICLE XIII B 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); WHEREAS, Government Code Section 7910 was added to Chapter 1205 by Statute at the Regular Session of the California Legislature in 1980; WHEREAS, Proposition 111, which, among other things, provides new annual adjustment formulas for the Appropriations Limit, was approved by the voters in June, 1990; WHEREAS, the State of California Department of Finance has published population and per capita income growth indexes, as well as guidelines for the uniform application of Proposition 111; 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 the City of Newport Beach's annual budget. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: In accordance with Article XIII B of the California Constitution and Government Code Section 7910, the appropriations limit for the fiscal year commencing July 1, 2022 for the City of Newport Beach is $236,775,921. The computation of appropriations for the 2022-23 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 2022-23 fiscal year. Section 3: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. .: Resolution No. 2022- Page 2 of 2 Section 4: If any section, subsection, sentence, clause or phrase of this resolution is, for any reason, held to be invalid or unconstitutional, such decision shall not affect the validity or constitutionality of the remaining portions of this resolution. The City Council hereby declares that it would have passed this resolution, and each section, subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or more sections, subsections, sentences, clauses or phrases be declared invalid or unconstitutional. Section 5: The City Council finds the adoption of this resolution is not subject to the California Environmental Quality Act ("CEQA") pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly_ Section 6: This resolution shall take effect immediately upon its adoption by the City Council, and the City Clerk shall certify the vote adopting the resolution. ADOPTED this 14th day of June, 2022. Kevin Muldoon Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: CITY TTORNEY'S OFFICE �Lr-- ar n C. Harp City Attorney Attachment A: Computation of Appropriations Limit Attachment A CITY OF NEWPORT BEACH COMPUTATION OF APPROPRIATIONS LIMIT FOR FISCAL YEAR ENDING JUNE 30, 2023 AS PER ARTICLE XIII B, CALIFORNIA STATE CONSTITUTION PRIOR YEAR FISCAL YEAR LIMIT INFLATION POPULATION ADJUST. (1) ADJUST. (2) NEW APPROP. LIMIT 2022-23 220,661,795 7.55% -0.23% 1 236,775,921 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 JUNE 30, 2023 Total Estimated Proceeds of Taxes $210,188,302 Less Authorized Exclusions note (3) $0 Net Proceeds of Taxes $210,188,302 note (3): Since 2022-23 estimated proceeds are substantially less than the Appropriations Limit, exclusions were not calculated. AMOUNT UNDER APPROPRIATIONS LIMIT 26,587,618 6-10