HomeMy WebLinkAbout0159.091February 14, 1991
HONORABLE CITY COUNCIL
Palo Alto, California
Attention: Finance and Public works Committee
Members of the CQuncil:
Report ill Brief'
The purpose of this rep~rt is to inform Council of the probable
effect of i~plamentation of the Uniform Guidelines: Article XITIB
Appropriations Limitation, about to be published by ~~e League of
California Cities, on the City's Gann limit calculation. OWe to
changes in the 1) calculation of the limit; 2) classification of
certain revenues; and J) exemption of certain capital projects from
the limit, it now appears that the City will be well within its
.1991-92 Gann limit, and .. ill not need to place a request for
override on the November 1991 ballot.
Baeltqroun4
In November 198', the citizens of Palo Alto approved ~n override to
the City's Article XIIIB (Gann) appropriations li~it, in conjunc
tion with approval of a utility users tax. Measure C stipulated
that the appropriations limit would be changed by increasing the
1987-88 base amount by $5.5 mil1icn~ The revised base amount was
used to calculate the appropriations limit for the ensuing three
years, throuqh 1990-91. In September 1.990 (CMR:483:0), staff
informed the Council that projections for the 1991-92 budgEt and
Gann limit indicated that the City would be over its Gann limit in
1991-92, When the $5.5 million override author-ity expired. The
CI!R:159:91
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problem was exacerbated by the fact that the 1991-92 budget did not
include any proposed expenditures for CUbberley, since the Maste.r
Plan process was still underway and the council had made no
decisions as to the Sil~ or scope of the CUbberley project. ~'Y
'Work on Cubberley 'Would drive City appropria.tions substantially
beyond the Gann limit marqin. council decided to act in early 1991
to place another override measure on the ballo~ in November 1991~
prow_it-foil :111
Proposition 111, approved by the california ~lectorate in November
1990, made important changas in the way cities can calculate
cOlDpliance with their Gann lilll.it. Three of the changes are
important to Palo Alto: a change to the appropriations limit
formula; exemption for qualifie.d capital outlay projects; and
requirement of review of compliance in conj~nction with the annual
audit~
The appropriations limit is calculated by using 1978-79 as a -base
year" and determining appropriations ·subject to the limit,·
consistinq for the most p~rt of tax proceeds and state sUbventions.
The appropriations limit in each year subsequent to the base year
is calculated by increasing the limit for the previous year by
inflation and population qro~th. As a result of Proposition 11l,
beginning with the 1990-91 appropriations limit cities may nOli
choose to measure inflation by either the qro~h in california per
capita income or the growth in the non-residential assessed
valuation due to new construction within the city. In the past,
the Beasurement of inflation ~as the U.S. Consumer Price Index or
california per capite income, .... hichever was less. To measure
population qrowth, cities may now use either the growth in the
city's population or that of the county. In the past. cities could
use only the growth in their o~n population. The revised annual
adjustment factors a.re retroactively applied to the 1986-87 limit
and each year in between to calculate the 1990-91 li~i~. Applica
tion of the new factors to the city of Palo Alto's limit increases
the projected limit for 1991-92 by ~pproximately $600,000.
proposition 111 also providpQ that cities ~ay exclude from
appropriations # subject to the limit, expenditures for -qualified
capital outlay,· defir.~d as fixed assets with a v~lue of more than
$10.0,000 and an expected life of ten years or more. With the
assistance of the City Attorney's Office, staff has revie~ed the
1991-92 Capital Improvement Program and identified $2.3 to $3.1
million in capital proje~ts that ~ay be exempted from the limit.
Finally, Proposition 111 requires that cities conduct a review of
their appropriations limit during their annual financial audit. To
assist cities in achieving consistency in meeting the requirements
of Article XIIIB, the League of California cities has prepared and
'",ill soon issue VnifoIJP. Guidel~ __ ! Article XIIIB Appropriations
CIIR:159:91
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Limitation, 'Which recommends interpretations and fo:-mulas which the
League feels are most consistent with the intent of Propositions C
and 111, state law, and cou!'"t decisions. Application of the
Guidelines results in a reclassification of $2.1 million in City
revenues trom proceeds of taxes to non-proceeds of taxes.
In summary, chan-;es to the appropriations limit calculation and
compliance guidelines made as a result of Proposition 111 will qive
the City an estimated $5~O and $5~8 million in additional room from
its Gann limit. Attachment A is a preliminary calculation of Gan~
limit compliance for 1991-92. As Co~ncil has not yet taken action
on the CUbberley Master Plan.. no. appropriations for work at
CUbberley are included. Mo".ever, it can be seen that there is
adequate room for begin...,ing the Cubberley ... ·ork 'With the revised
Gann limit calculation~ It should also be noted that the city will
be revising its revenue and expenditure budgets for 1991-92 during
the interim budqet p~ocess. If, as expected, tax revenue projec
tions are reduced as a result of the current economic environme~t,
this ~ill provide additional flexibility for the City, since these
revenues are considered proceeds of taxes subject to the appropria
tions limit.
staff will
published.
recommends
Gann li~it
notify Council as soon as the proposed Guidelines are
Based on the draft Guidelines as discussed above., staf.!
that council take no action ~ith regard to placing a
override measure on the November 1991 ballot • . ~~;;;l~S:::iOd
EMILY HARRISON
D~rector o~nce
Lr-¥,--P.? WILLI ZANER
city nager
Attachment A
Related Staff Reports: CMR:48):O
CMR:159:91 J
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10 TIACIIEJIT A
~l)M!T 19iI-92
Ge.oer.l Spec;-1.1 Debt
.....fImlL Reyeo\J!, ~ervice ... HL W31
Tot.l Appropri.tion, 56.60 1.22 2.80 9.40 70,02
less: Debt Serv; ce 1.13 1.13
topital Out1>y 1.67 (1) 0.00 1.67
lets! Non-Proceeds
of fixes 20.66 (2) D.45 0.78 21. 89
Net Appropriations
Sobject to Limit 35.94 0.77 0.00 8.62 45.33
Appropriations limit (3) 48,50
Over(under) l;~jt (:>.17)
(lJ Does not include $2.3 t~ $3.] Rlil1i{)n in capital improvements. that Blay be
exempted from limit.
(2) Includes odditional $1.0 million Ie Court fines/Parking Citations that are
cl issified is "loca11y Rafsed Revenoc-under new gUidel h,es; and $1.1
mill10n in Use of ~ney and Prop~rt" similarly reclassified.
(3J Refle-cts $.6 minion additjonal -room" restJTti"9 from Proposition 111
changes to calculation fo~la.
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