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Home My WebLink About07 - Adoption of Fiscal Year 2025-26 Appropriations LimitQ �EwPpRT CITY OF s NEWPORT BEACH `q44:09 City Council Staff Report June 10, 2025 Agenda Item No. 7 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Jason AI -Imam, Finance Director/Treasurer - 949-644-3126, jalimam@newportbeachca.gov PREPARED BY: Anthony Alannouf, Budget Analyst - 949-644-3122, aalannouf@newportbeachca.gov TITLE: Resolution No. 2025-28: Adoption of Fiscal Year 2025-26 Appropriations Limit /_1 16"t I:7_T91 6 As a governmental entity, the City of Newport Beach 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's per capita personal income, and must be adopted by resolution. For Fiscal Year 2024-25, the City's Gann appropriation limit totals $256,289,570. For Fiscal Year 2025-26, applicable tax proceeds are estimated at $247,453,704 and the City's Gann appropriation limit totals $273,258,369. Therefore, the City will be $25,804,665 under the Gann Spending Limit. RECOMMENDATIONS: 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; and b) Adopt Resolution No. 2025-28, A Resolution of the City Council of the City of Newport Beach, California, Determining and Establishing the Appropriations Limit for Fiscal Year 2025-26 in Accordance with Article X111B of the California Constitution and Government Code Section 7910, in the amount of $273,258,369. 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 No. 2025-28, submitted for City Council approval, fulfills this requirement. 7-1 Resolution No. 2025-28: Adoption of Fiscal Year 2025-26 Appropriations Limit June 10, 2025 Page 2 The calculation of the City's Appropriations Limit for Fiscal Year 2025-26 is: FY2024-25 Appropriations Limit $256,289,570 Inflation Adjustment Factor' 6.44% Population Adjustment Factor 0.17% FY2025-26 Appropriations Limit $273,258,369 ' Based on California per capita income increases as provided by the California Department of Finance, May 2025. 2 Based on Orange County population growth as provided by the California Department of Finance, May 2025. Article XIIIB of the California Constitution limits the amount of tax proceeds that a government entity may appropriate (i.e., spend) in a given fiscal year. Tax proceeds include revenues from certain taxes levied by the government, unrestricted state subventions, and interest earned on those funds. The City's estimated proceeds from taxes for Fiscal Year 2025-26 is $247,453,704 or $25,804,665 less than the $273,258,369 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. In accordance with Government Code Section 7910, the documents used to calculate the Appropriations Limit were made available for public review at least 15 days prior to the scheduled hearing date. FISCAL IMPACT: There is no fiscal impact related to this item. 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). ATTACHMENT: Attachment A — Resolution No. 2025-28 7-2 ATTACHMENT A RESOLUTION NO. 2025- 28 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, DETERMINING AND ESTABLISHING AN APPROPRIATIONS LIMIT FOR FISCAL YEAR 2025-26 IN ACCORDANCE WITH ARTICLE XIII B OF THE CALIFORNIA CONSTITUTION AND GOVERNMENT CODE SECTION 7910 WHEREAS, Article XIII B 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 have 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, 2025, for the City of Newport Beach is $273,258,369. The computation of appropriations for the 2025-26 fiscal year are set forth in detail in Attachment A hereto, which is incorporated herein by this reference. Section 2: Said appropriations limit shall be adhered to in the City of Newport Beach budget for the 2025-26 fiscal year. Section 3: The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. 7-3 Resolution No. 2025- 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 10th day of June, 2025. Joe Stapleton Mayor ATTEST: Leilani I. Brown City Clerk APPROVED AS TO FORM: CITY A ORNEY'S OFFICE w� Aaron C. Harp City Attorney Attachment A: Computation of Appropriations Limit for FY 2025-2026 7-4 CITY OF NEWPORT BEACH COMPUTATION OF APPROPRIATIONS LIMIT FOR FISCAL YEAR ENDING JUNE 30, 2026 AS PER ARTICLE X11113, CALIFORNIA STATE CONSTITUTION PRIOR YEAR FISCAL YEAR LIMIT INFLATION POPULATION ADJUST. (1) ADJUST. (2) NEW APPROP. LIMIT 2025-2026 256,289,570 6.44% 0.17% 1 273,258,369 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, 2026 Total Estimated Proceeds of Taxes $247,453,704 Less Authorized Exclusions note (3) $0 Net Proceeds of Taxes $247,453,704 note (3): Since 2025-26 estimated proceeds are substantially less than the Appropriations Limit, exclusions were not calculated. AMOUNT UNDER APPROPRIATIONS LIMIT 25,804,665 7-5