Title
Public Hearing to Establish the Proposition 4 (Appropriations) Limit for Fiscal Year 2026-27; and
Adoption of Resolution Establishing the Appropriations Limit for Fiscal Year 2026-27. [City Council] (Finance 10024056)
Body
To: Honorable Mayor and Members of the City Council
From: Adam W. Politzer, Interim City Manager
EXECUTIVE SUMMARY
The State of California Constitution requires each government entity to set an Appropriations Limit, a limit on the amount of tax proceeds that can be appropriated by state and local governments, each fiscal year. City Council must adopt an Appropriations Limit resolution using available annual adjustment factors as stated in Proposition 111.
BACKGROUND
In November 1979, the voters of the State of California approved Proposition 4. The proposition created Article XIIIB of the State Constitution placing limits on the amount of revenue that can be spent by state and local governments in California (Appropriations Limit) and is also known as the Gann Limitations. Each government entity is required to set its Appropriations Limit each fiscal year with Fiscal Year (FY) 1978-79 serving as the base year limit. The Appropriations Limit sets a cap on the amount of proceeds that can be received by the City of Alameda (City) from certain types of taxes. Appropriations Limit adjustments occur each subsequent year using a combination of increases in population and in per capita personal income, whichever is less.
Proposition 4 and its implementing legislation were modified by Proposition 111, which changed the annual adjustment factors beginning with the FY 1990-91 Appropriation Limit. Hereafter, on an annual basis, the government entity can select whichever is greater: the change in per capital income or assessed valuation due to non-residential construction within the City. To determine the population factor, the entity can select the greater of population growth either within the City or the County.
Proceeds of taxes in excess of the limit, with limited exceptions, must be returned to the taxpayers within two years by refund or reduction in tax rates, unless an extension of the limit is approved by majority popular vote.
DISCUSSION
A resolution must be adopted to approve an Appropriations Limit each fiscal year. As described above, annual adjustments for per capita income and population may be made in either of two ways. To adjust per capita income for FY 2026-27, staff recommends using the FY 2025-26 increase in the California State per capita personal income of 4.95% instead of the non-residential new construction of 2.67%. In addition, staff recommends using the percentage change of the County population, which decreased by 0.10%, as the City’s population decreased by 0.06%. The calculation of the City’s Appropriations Limit is attached as Exhibit 1.
ALTERNATIVES
• Establish the Proposition 4 (Appropriations) Limit for Fiscal Year 2026-27 is required by the State Constitution.
FINANCIAL IMPACT
There is no financial impact from the adoption of the City’s Appropriations Limit. For FY 2026-27, the City will continue to maintain a substantial margin between the Appropriations Limit and net proceeds of taxes. The FY 2026-27 Appropriations Limit is established at $188,752,034 as compared to the net proceeds of specific taxes for FY 2026-27, which is estimated to be $138,058,500, which is approximately 73% of the limit.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is consistent with the Alameda Municipal Code.
Receiving this report is in alignment with the City’s FY 2023-26 Strategic Plan under the priority to Practice Fiscally Responsible, Equitable and Inclusive Governance.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (acceptance of the Appropriations Limit), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
CLIMATE IMPACTS
There are no identifiable climate impacts or climate action opportunities associated with the subject of this report.
RECOMMENDATION
Hold a public hearing to establish the Proposition 4 (Appropriations) Limit for fiscal year 2026-27 and adopt a resolution establishing the Appropriations Limit for fiscal year 2026-27.
Respectfully submitted,
Ross McCarthy, Finance Director
Exhibit:
1. Appropriations Limit Calculation