6-15-2021 AGENDA ITEM NO.7 - ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2021-22AGENDA ITEM NO.7
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: June 15, 2021
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2021-22
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO.2021-67 — A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
WEST COVINA, CALIFORNIA, SETTING THE ANNUAL APPROPRIATIONS LIMIT FOR THE
FISCAL YEAR ENDING JUNE 30, 2022
BACKGROUND:
Article XIIIB of the California Constitution imposes an appropriations limit on units of state and local governments.
In response to a perception that government spending was increasing without any controls, the voters passed
Proposition 4, "The Gann Initiative," which is now included in the California Constitution as Article XIIIB. This
article limits the amount of appropriations (related to tax proceeds) that state or local governments can establish
each year.
The appropriations of tax proceeds excludes revenues from the following sources:
• Special Benefit Assessments
• Licenses and Permits
• Franchise Fees
• Developer Fees
• Fines, Forfeitures and Penalties
• Other Governmental Restricted Revenues
• Gas Taxes
• User Fees
The following revenue sources are subject to the appropriations limit:
• Property Taxes
• Sales and Use Taxes
• Business License Taxes
• Transient Occupancy Taxes
• Other Taxes
Appropriations for debt -financed capital outlay (e.g., the Civic Center, Cameron Community Center, Golf Course
and Big League Dreams bonds) are not subject to the limit.
DISCUSSION:
Pursuant to Article XIII B and its implementing legislation, the annual appropriations limit must be calculated by
adjusting the prior year's appropriation limit for changes in the cost of living and population growth. The City may
choose one of the following factors to use for inflationary adjustment: (a) the growth in California per capita
personal income from the preceding year, or (b) the growth in the non-residential assessed property valuation due to
new construction within the City. For population growth, the City may choose to use either: (a) the population
growth of the City, or (b) the population growth within the County. These two adjustment factors (one for inflation
and one for population) are both annual elections for the City in determining its appropriations limit for the
following Fiscal Year. For the Fiscal Year (FY) 2021-22 calculation, the City is electing to use the population
growth of Los Angeles County as its population growth factor, and the growth in California per capita personal
income as its inflation factor, as detailed in Attachment 1. Such selections must be reflected in the recorded vote of
the City Council per the requirements of Article XIII B and Government Code section 7901. Therefore, the
resolution (Attachment 2) reflects such selections.
The City calculated the FY 2021-22 appropriations limit using the following formula:
Current Year Appropriations Limit multiplied by Growth Factor (change in California per capita personal
income multiplied by change in population for the County).
• Current Year (FY 2021-22) Appropriation Limit - $210,460,447
• Change in California per capita personal income (5.73%) - 1.0573
• Change in County Population (-0.58%) - 0.9942
• Calculation of Growth Factor (1.0573 x 0.9942) - 1.0512
Based on the formula outlined above, staff calculated the FY 2021-22 appropriations limit for the City of West
Covina to be $221,236,022. The City's proceeds from taxes are projected at $48,380,000, which is less than the
appropriations limit.
Documentation used in the establishment of the appropriations limit is available for public inspection in the Finance
Department.
LEGAL REVIEW:
The City Attorney's Office has reviewed the resolution and approved it as to form.
Prepared by: Robbeyn Bird, Finance Director
FISCAL IMPACT:
There is no fiscal impact with this item.
Fiscal Impact
Attachments
Attachment No. 1 - Appropriations Limit Calculation Fiscal Year 2021-22
Attachment No. 2 - Resolution No. 2021-67
CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
ATTACHMENT NO.1
Article XIII B of the State Constitution, commonly referred to as the "Gann Limit", was adopted when California's
voters approved Proposition 4 in November 1979. The limit has been modified by two subsequent initiatives --
Proposition 98 in 1988 and Proposition 111 in 1990--but its basic framework remains in place today.
Article XIII B places an annual limit on the appropriation of tax proceeds that can be made by the state, school districts
and local governments in California. These limits are based on the amount of appropriations in the 1978-79 "base"
year, as adjusted each year for population growth and cost -of -living factors. State and local governments are
precluded from retaining any "excess revenues" above the limit. Article XIII B also requires the state to reimburse
local governments for the cost of certain state mandates. The limit is different for every agency and changes each
year.
For Fiscal Year 2021-22, the estimated tax proceeds appropriated by the West Covina City Council are under the limit.
The Appropriations Limit for Fiscal Year 2021-22 is $221,236,022. This amount is the maximum amount of tax
proceeds the City is able to appropriate and spend in Fiscal Year 2021-22. The appropriations subject to the limit are
$48,380,000 leaving the City with an appropriations capacity under the limit of $172,856,022.
APPROPRIATIONS LIMIT CALCULATION - FISCAL YEAR 2021-22
Part I - Calculation of Appropriations Limit
Appropriations Limit - Fiscal Year 2020-21:
Change in Per Capita Personal Income (5.73)
Change in City Population (-0.58%):
Calculation of Growth Factor (1.0573 x 0.9942)
Appropriations Limit - Fiscal Year 2021-22:
Part II - Appropriations Subject to the Limit
Proceeds from Taxes
Less: Debt Service Payments
Total Appropriations Subject to the Limit
Part III - Calculation of Appropriations Over/Under the Limit
Appropriations Limit - Fiscal Year 2021-22:
Less: Appropriations Subject to Limitation
Total Appropriations Under the Limit
$ 210,460,447
1.0573 (a)
0.9942 (a)
1.0512
$ 221,236,022
$ 48,380,000
$ 48,380,000
$ 221,236,022
(48,380,000)
$ 172,856,022
w Source: State of California, Department of Finance, Price and Population Information, May 2019
ATTACHMENT NO.2
RESOLUTION NO.2021-67
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF WEST COVINA, CALIFORNIA, DETERNHNING AND
ADOPTING THE ANNUAL APPROPRIATIONS LINHT FOR
FISCAL YEAR 2021-2022
WHEREAS, pursuant to Article XIII B of the California Constitution and California
Government Code section 7910, the City Council must, by resolution, establish its appropriations
limit and make other necessary determinations for the upcoming fiscal year, which commences
July 1, 2021 and ends June 30, 2022; and
WHEREAS, pursuant to Article XIII B, as amended, and California Government Code
provisions implementing Article XIII B, the total annual appropriations limit must be calculated
by adjusting the prior year's appropriations limit for changes in the cost of living and population
growth; and
WHEREAS, pursuant to Section 8(e) of Article XIII B, to determine the change in the
cost of living, the City may select, by a recorded vote of the City Council, either (a) the percentage
change in California per capita personal income from the preceding year, or (b) the percentage
change in the local assessment roll from the preceding year due to the addition of non-residential
new construction in the City; and
WHEREAS, pursuant to Section 8(f) of Article XIII B and Section 7901(b) of the
California Government Code, the City may, by a recorded vote of the City Council, choose to use
the percentage change in population within the City or within the County of Los Angeles to
determine the change in population; and
WHEREAS, Section 7910 of the California Government Code requires that the City make
the documentation used in the determination of the appropriations limit publicly available at least
fifteen (15) days prior to the meeting; and
WHEREAS, the City Council has elected to utilize the percentage change in California
per capita income from the preceding year of 5.73% to calculate the change in cost of living, and
the population percentage increase for the City of West Covina of -0.58% to calculate the change
in population; and
WHEREAS, such documentation was made available for public inspection at least fifteen
(15) days prior to June 15, 2021.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF WEST COVINA,
CALIFORNIA DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The appropriations limit for the City of West Covina for Fiscal Year 2021-
2022 is established in the amount of $221,236,022.
SECTION 2. The City Council, by recorded vote of the City Council in adopting this
Resolution, selects and determines that, for purposes of establishing the appropriations limit for
Fiscal Year 2021-2022, "change in the cost of living" shall be the percentage change in California
per capita income from the preceding year in accordance with Article XIII B, Section 8(e)(1)(A)
of the California Constitution.
SECTION 3. The City Council, by recorded vote of the City Council in adopting this
Resolution, selects and determines that, for purposes of establishing the appropriations limit for
Fiscal Year 2021-2022, "change in population" shall be the population increase for the City of
West Covina in accordance with Section 8(f) of Article XIII B of the California Constitution and
Section 7901(b) of the California Government Code.
SECTION 4. The City Clerk shall certify to the adoption of this resolution and shall enter
the same in the book of original resolutions and it shall become effective immediately.
APPROVED AND ADOPTED this 15th day of June, 2021.
APPROVED AS FORM
Thomas P. Duarte
City Attorney
Letty Lopez-Viado
Mayor
ATTEST
Lisa Sherrick
Assistant City Clerk
I, LISA SHERRICK, ASSISTANT CITY CLERK of the City of West Covina, California,
do hereby certify that the foregoing Resolution No. 2021-67 was duly adopted by the City Council
of the City of West Covina, California, at a regular meeting thereof held on the 15th day of June,
2021, by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk