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Home My WebLink About16 - PH-5 - Adoption of FY2021-2022 Appropriations - 6/1/20211 CITY COUNCIL AGENDA REPORT MEETING DATE: JUNE 1, 2021 ITEM NUMBER: PH-5 SUBJECT: ADOPTION OF FISCAL YEAR 2021-22 APPROPRIATIONS LIMIT DATE: JUNE 1, 2021 FROM: FINANCE DEPARTMENT PRESENTATION BY: CAROL MOLINA, FINANCE DIRECTOR FOR FURTHER INFORMATION CONTACT: CAROL MOLINA, FINANCE DIRECTOR (714) 754-5036 RECOMMENDED ACTION Staff recommends that the City Council approve Resolution 20-XX (Attachment 1) establishing the Fiscal Year 2021-2022 Appropriations Limit for the City of Costa Mesa at $267,363,952, as statutorily required by using the City of Costa Mesa’s population growth for population adjustment, and the California per capita income growth for inflationary adjustment. BACKGROUND Article XIII B of the Constitution of the State of California requires that each City establish an Appropriations Limit each year. This appropriations limit determines the maximum amount of specific tax revenues which an agency is allowed to spend and was implemented through voter-approved Proposition 4 in November 1979. Proposition 4 (Article XIIIB) limits the level of appropriations from tax sources that the state and local government entities are permitted to make in any given year. Pursuant to Article XIII B and its implementing legislation, the total annual appropriations limit for each city must be calculated by adjusting the prior year’s appropriations 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 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. 2 For the 2021-2022 calculation, the City is electing to use the population growth of the City of Costa Mesa rather than the population growth of the County of Orange as its population growth factor, and the growth in California per capita income as its inflation factor. ANALYSIS The methodology used to determine the City's Appropriations Limit is to multiply the inflation and population adjustment factors by the prior year's Appropriations Limit. For Fiscal Year 2021-2022, the inflation and population figures provided by the State Department of Finance are as follows: California Per Capita Income Percentage Change 5.73% City of Costa Mesa’s Population Growth -0.78% These percentages were converted to ratios of 1.0573 and 0.9922, respectively. Once the ratios were calculated, they were multiplied together to calculate the adjustment factor for Fiscal Year 2021-2022, which equaled 1.0490. This factor was multiplied by the Fiscal Year 2020-2021 Appropriations Limit of $254,875,073 for an Appropriations Limit for Fiscal Year 2021-2022 of $267,363,952. The total estimated revenues generated from general tax proceeds for Fiscal Year 2021- 2022 is $124.3 million. This estimate is $143 million, or 53.49%, below the Appropriations Limit for Fiscal Year 2021-2022. ALTERNATIVES CONSIDERED No alternatives considered. Section 7910 of the California Government Code requires the City to establish an Appropriations Limit on an annual basis. FISCAL REVIEW The City is $143 million or 53.49% below the proposed Fiscal Year 2021-2022 Appropriations Limit. Therefore, the City is well within its Appropriations Limit established pursuant to Section 7910 of the California Government Code and will not exceed this limit during Fiscal Year 2021-2022. There is no fiscal impact related to this report. LEGAL REVIEW The City Attorney has reviewed and approved this report and the proposed resolution as to form. CONCLUSION Staff recommends that the City Council adopt the proposed resolution (Attachment 1), establishing the Fiscal Year 2021-2022 Appropriations Limit for the City of Costa Mesa at $267,363,952 by using the City of Costa Mesa’s population growth for population adjustment, and the California per capita income growth for inflationary adjustment. 3 CAROL MOLINA Finance Director LORI ANN FARRELL HARRISON KIMBERLY HALL BARLOW City Manager City Attorney Attachments: 1 Resolution No.21-xx, Adopting the FY2021-22 Appropriations Limit 2. Calculation of the Appropriations Limit FISCAL YEAR 2021-22 Appropriations Limit June 1, 2021 v v 2 CALIFORNIA CONSTITUTIONAL REQUIREMENT •Article XIIIB of the Constitution of the State of California provides a formula that places annual limits (or ceilings) on the appropriation of tax proceeds that can be made by the state, school districts, and local governments in California. •Article XIIIB requires state and local governments to return any funds to taxpayers in excess of the amount (appropriation limit) for a given fiscal year. v v 3FISCAL YEAR 2021-22 APPROPRIATIONS LIMIT CALCULATION Multiplies the following data points: •California Per Capital Income Percentage Change of 5.73%; •City of Costa Mesa Population Growth of -0.78%; and •Fiscal Year 2020-21 Appropriations Limit of $254,875,073. *Results in the Fiscal Year 2021-22 Appropriations Limit of $267,363,952 v v 4FISCAL YEAR 2021-22 APPROPRIATIONS LIMIT •Established FY 2021-22 Appropriations Limit is: $267.4 million. •Total estimated revenues generated from general tax proceeds for FY 2021-22 is $124.3 million: Property Tax: $49.6 million Sales Tax:$61.0 million Transient Occupancy Tax (TOT): $5.6 million Other Taxes (Franchise Fees): $6.1 million Cannabis Tax (Measure Q):$2.0 million •The above estimate is $143.1 million or 53.5% below the Appropriations Limit for FY 2021-22 of $267.4 million. QUESTIONS RESOLUTION NO. 21-xx A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA, CALIFORNIA, DETERMINING AND ADOPTING THE APPROPRIATIONS LIMIT FOR FISCAL YEAR 2021-2022, IN ACCORDANCE WITH ARTICLE XIII-B OF THE CONSTITUTION OF THE STATE OF CALIFORNIA, AS AMENDED BY PROPOSITION 111 AND SENATE BILL 88. THE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY FIND AND DECLARE AS FOLLOWS: WHEREAS, Article XIII-B was added to the Constitution of the State of California at a general election held on November 6, 1979; and WHEREAS, Article XIII-B was subsequently modified by Proposition 111 and Senate Bill 88 (Chapter 60/90) at a general election held on June 5, 1990; and WHEREAS, in accordance with Section 7910 et seq. of the Government Code of the State of California, an annual appropriations limit must be established for the City effective for the fiscal year beginning July 1, 2021; and WHEREAS, the City has chosen to use the California per capita income percentage change of 5.73% and the City’s population growth rate of -0.78% as the factors to be used in calculating its appropriations limit for Fiscal Year 2021-2022; and WHEREAS, these factors are applied to the City’s adopted appropriations limit for Fiscal Year 2020-2021 in determining the City’s appropriations limit for Fiscal Year 2021-2022; and WHEREAS, all legal prerequisites to the adoption of this Resolution have occurred. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Costa Mesa as follows: The appropriations limit for Fiscal Year 2021-2022 is established at $267,363,952. PASSED AND ADOPTED this 1st day of June, 2021. ________________________ John Stephens, Mayor ATTEST: APPROVED AS TO FORM: ________________________ ___________________________________ Brenda Green, City Clerk Kimberly H. Barlow, City Attorney ATTACHMENT 1 STATE OF CALIFORNIA) COUNTY OF ORANGE ) ss CITY OF COSTA MESA ) I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No.21-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 1st day of June, 2021, by the following roll call vote, to wit: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Seal of the City of Costa Mesa this day of June, 2021. __________________________________ BRENDA GREEN, CITY CLERK CITY OF COSTA MESA CALCULATION OF APPROPRIATIONS LIMIT FOR FY 2021-2022 The City's Appropriations Limit for FY 21-22 is calculated as follows: Step 1 Appropriations Limit for FY 20-21 $ 254,875,073 Multiply the FY 20-21 Appropriations Limit by the cumulative growth factors for changes in the California per capita personal income and the Step 2 population change for the City of Costa Mesa. 1.0490 Appropriations Limit for FY 21-22 $ 267,363,952 *CALCULATION OF CUMULATIVE GROW TH FACTORS: Personal Income Factor 1.0573 Orange County Population Change 0.9916 Costa Mesa Population Change 0.9922 *(1.0573 x 0.9922) = 1.0490 Per capita converted to ratio (5.73+100/100) 1.0573 Orange County Population converted to ratio (-0.84+100/100) 0.9916 Costa Mesa Population converted to ratio (-0.78+100/100) 0.9922 ATTACHMENT 2