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Home My WebLink About07 - Adoption of Fiscal Year 2016-17 Appropriations LimitTO: FROM: CITY OF NEWPORT BEACH City Council Staff Report June 14, 2016 Agenda Item No. 7 HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL Dan Matusiewicz, Finance Director - 949-644-3123, dmatusiewicz@newportbeachca.gov PREPARED BY: Katherine Warnke-Carpenter, Budget Analyst PHONE: 949-644-3122 TITLE: Adoption of Fiscal Year 2016-17 Appropriations Limit ABSTRACT: As a governmental entity, the City is subject to the Gann Appropriations Limit Initiative. Under the Gann Limit, a maximum spending threshold is established for tax supported government services thereby limiting the amount of annual appropriation of tax proceeds. 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 2016-17, applicable tax proceeds are estimated at $156.7 million. The City's Gann appropriation limit totals $178.3 million. Therefore, the City is more than $21 million under the Gann Spending Limit. RECOMMENDATION: a) Determine that the 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 it will not result in a physical change to the environment, directly or indirectly; and b) Adopt, by Resolution 2016-75, A Resolution of the City Council of the City of Newport Beach, California, Determining and Establishing an Appropriations Limit (GANN) for Fiscal Year 2016-17 in Accordance with Article X111B of the California Constitution and Government Code Section 7910, in the amount of $178,325,103. FUNDING REQUIREMENTS: There is no fiscal impact related to this item. 7-1 Adoption of Fiscal Year 2016-17 Appropriations Limit June 14, 2016 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. The attached resolution submitted for Council approval fulfills this requirement. The calculation of the City's Appropriations Limit for Fiscal Year 2016-17 is: FY2015-16 Appropriations Limit $167,578,050 Inflation Adjustment Factors 5.37 Population Adjustment Factor2 0.99 FY2016-17 Appropriations Limit $178,325,103 1 Based on California per capita income increases as provided by the California Department of Finance, May 2016. 2 Based on Orange County population growth as provided by the California Department of Finance, May 2016. The City's auditors have advised that we may calculate the City's Appropriations Limit using either the County's population factor or the City's population factor, whichever is larger. The City's population factor is 0.18 and the County's population factor is 0.99, as provided by the California Department of Finance. We have prepared the City's Appropriations Limit for Fiscal Year 2016-17 using the County's population factor. Last year's Appropriations Limit was also prepared using the County's population factor instead of the City's population factor. The City of Newport Beach estimated proceeds from taxes for Fiscal Year 2016-17 is $156,676,804, or $21,648,299 under the Appropriations Limit. Calculation of proceeds of taxes can exclude certain public fund uses, including categories of debt service, contribution to some types of revenues, and federal mandates. The exclusion calculation was not performed as we continue to maintain appropriations significantly below our Appropriations Limit. 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. 7-2 Adoption of Fiscal Year 2016-17 Appropriations Limit June 14, 2016 Page 3 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). The Public Notice for this item was published in the Daily Pilot on June 4, 2016. ATTACHMENT: Attachment A - Resolution No. 2016-75 Exhibit A to Attachment - Computation of Appropriations Limit 7-3 ATTACHMENT A RESOLUTION NO. 2016- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF NEWPORT BEACH, CALIFORNIA, DETERMINING AND ESTABLISHING AN APPROPRIATIONS LIMIT FOR FISCAL YEAR 2016-17 IN ACCORDANCE WITH ARTICLE X11113 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 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 this City's annual budget. NOW, THEREFORE, the City Council of the City of Newport Beach does hereby resolve as follows: 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, 2016 for the City of Newport Beach is $178,325,103. The computation of appropriations for the 2016-17 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 2016-17 fiscal year. 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 recitals provided in this resolution are true and correct and are incorporated into the substantive portion of this resolution. 7-4 Section 5: The City Council finds the establishment of an appropriations limit for Fiscal Year 2016-2017 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. Section 6: This resolution shall take effect immediately upon its adoption, and the City Clerk shall certify the vote adopting this resolution. ADOPTED this 14th day of June, 2016. Diane B. Dixon Mayor ATTEST: Leilani I. Brown City Clerk Attachment: Computation of Appropriation Limit 7-5 EXHIBIT A CITY OF NEWPORT BEACH COMPUTATION OF APPROPRIATION LIMIT FOR FISCAL YEAR ENDING JUNE 30, 2017 AS PER ARTICLE XIIIB, CALIFORNIA STATE CONSTITUTION PRIOR YEAR INFLATION POPULATION NEW APPROP. FISCAL YEAR LIMIT ADJUST. (1) ADJUST. (2) LIMIT 2016-17 note(1). note (2). $167,578,050 5.37 0.99 1 $178,325,103 Based on California per capita income increases Based on Orange County population growth CALCULATION OF ESTIMATED PROCEEDS OF TAXES FOR FISCAL YEAR ENDING JUNE 30, 2017 Total Estimated Proceeds of Taxes Less Authorized Exclusions Net Proceeds of Taxes $156,676,804 note (3) $0 $156,676,804 note(3): Since 2016-17 estimated proceeds are substantially less than the Appropriations Limit, exclusions were not calculated. AMOUNT UNDER APPROPRIATIONS LIMIT $21,648,299 7-6