Item 14AGENDA ITEM NO. 14
AGENDA STAFF REPORT
City of West Covina I Office of the City Manager
DATE: June 7, 2022
TO: Mayor and City Council
FROM: David Carmany
City Manager
SUBJECT: CONSIDERATION OF ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2022-23
RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO. 2022-52 — A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST
COVINA, CALIFORNIA, DETERMINING AND ADOPTING THE ANNUAL APPROPRIATIONS
LIMIT FOR FISCAL YEAR ENDING 2022-2023
BACKGROUND:
Article XIII B 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, in 1979, the voters passed Proposition 4, 'The Gann Initiative," which is now included in the
California Constitution as Article XIII B. 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 outlays (e.g., the Civic Center, Cameron Community Center, Golf
Course and Big League Dreams bonds) are not subject to the limit.
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. Each year, the City must calculate the limit using the following formula:
Fiscal Year 2021-2022 Appropriation Limit
x Cumulative Growth Factor
= Current Year Appropriation Limit
(1) Inflation change factor (change in California per capita income from the preceding year or change in the local assessment roll
from the preceding year due to the addition of non-residential new construction) multiplied by population change factors (change
in population for either the City or the County).
Factors are calculated using the following formula
Percentage Change + 100 = Factor
100
DISCUSSION:
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 change in population, the City
may choose to use either: (a) the change in population within the City, or (b) the change in population
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) 2022-23 calculation, the City is electing to use the change in population within the City as its
population change factor, and the growth in California per capita personal income as its inflation factor,
as detailed in Attachment No. 1. Such selections must be reflected in the recorded vote of the City
Council per the requirements of Article XIII B and California Government Code section 7901. Therefore,
the resolution (Attachment No. 2) reflects such selections.
Based on the formula outlined above, staff calculated the FY 2022-23 appropriations limit for the City of
West Covina to be $237,231,386. The City's proceeds from taxes are projected at $57,149,500, 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: Maria-Luisa Olea, Assistant Finance Director
Attachments
Attachment 1 - Appropriations Limit Calculation Fiscal Year 2022-23
Attachment No. 2 - Resolution No. 2022-52
CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability
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 2022-23, the estimated tax proceeds appropriated by the West Covina City Council are under the limit.
The Appropriations Limit for Fiscal Year 2022-23 is $237,231,386. This amount is the maximum amount of tax
proceeds the City is able to appropriate and spend in Fiscal Year 2022-23. The appropriations subject to the limit are
$57,149,500 leaving the City with an appropriations capacity under the limit of $180,081,886.
Part I - Calculation of Appropriations Limit
Appropriations Limit - Fiscal Year 2021-22:
Change in Per Capita Personal Income (7.55)
Change in City Population (-0.30%):
Calculation of Growth Factor (1.0755 x 0.9970)
Appropriations Limit - Fiscal Year 2022-23:
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 2022-23:
Less: Appropriations Subject to Limitation
Total Appropriations Under the Limit
$
221,236,022
1.0755 (a)
0.997 (a)
1.0723
$
237,231,386
$
57,149,500
$
57,149,500
$
237,231,386
(57,149,500)
$
180,081,886
(a) Source: State of California, Department of Finance, Price and Population Information, May 2022
ATTACHMENT NO.2
RESOLUTION NO. 2022-52
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF WEST COVINA, CALIFORNIA, DETERMINING AND
ADOPTING THE ANNUAL APPROPRIATIONS LIMIT FOR
FISCAL YEAR 2022-2023
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, 2022 and ends June 30, 2023; 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 7.55% to calculate the change in cost of living, and
the change in population for the City of West Covina of -0.30% to calculate the change in
population; and
WHEREAS, such documentation was made available for public inspection at least fifteen
(15) days prior to June 7, 2022.
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 2022-
2023 is established in the amount of $237,231,386.
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 2022-2023, "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 2022-2023, "change in population" shall be the change in population 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 7th day of June, 2022.
APPROVED AS TO FORM
Thomas P. Duarte
City Attorney
Dario Castellanos
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. 2022-52 was duly adopted by the City Council
of the City of West Covina, California, at a regular meeting thereof held on the 7th day of June,
2022, by the following vote of the City Council:
AYES:
NOES:
ABSENT:
ABSTAIN:
Lisa Sherrick
Assistant City Clerk