The State Constitution (Article XII IB) places a limit on the amount of monies that a governmental entity is able to spend based upon projected tax revenues. In accordance with State law, the government entity must adopt an annual appropriations limit. This limit is calculated using a prescribed methodology outlined by the State. The limit is adjusted by the change in the cost of living and the change in population, using the California Department of Finance figures.
In calculating the appropriations limit, the City Council has the option to use either the change in per capita income or the percentage change in the local assessment roll. In addition, the Council may either use the change in population within the City or within the County. For consistency purposes, staff recommends using the California per capita personal income of 3.73% and the population growth for Monterey County of 1.0025%.
The Department of Finance uses a formula that converts the percent change in income and population growth into a ratio and thus the adjustment factors for calculating the GANN limit are 1.0373 for income and 1.0025 for population growth.
These adjustment factors are applied to the current fiscal year (Fiscal Year 2019-2020) GANN limit in order to determine the appropriation limit for the upcoming fiscal year (Fiscal Year 2020-2021). Using this formula, the City’s appropriation limit for Fiscal Year 2020-2021 is $35,230,893. The appropriations subject to the GANN limit is $15,228,048; thus, the City is well within the appropriation limit.