SR-9-A (18)
. ...
Cf-A
FD:CMD:br:srgann
Council Meeting: February 11, 1992
FE2 1 i:::~2
Santa Monica, California
TO: Mayor and City council
FROM: city staff
SUBJECT: PREPARATION OF JUNE 1992 BALLOT HEASURES TO RENEW
EXISTING GANN OVERRIDES
Introduction
This is to recommend that the City council direct the city
Attorney to prepare a ballot measure to renew the City's existing
Gann overrides for an additional four years, and submit the
ballot measures for City Council approval at its meeting of
February 25, 1992 in order that they may be submitted to Los
Angeles county for printing on the June 1992 general ballot.
Background
In 1979, state voters approved a change to the state constitution
establishing a spending limit on the amount of tax revenue
governments can receive and use in any fiscal year.
This
restriction 1S known as the Gann Limit.
Each jurisdiction's
annual Gann Limit is equal to actual tax revenues spent in the
base year of FY1978-79 increased each year by standard population
and economic growth factors.
This is the jurisdiction's
"on-going" limit.
In addition, local voters can approve limit
overrides for a four-year period to enable a jurisdiction to
spend tax proceeds resulting from local population and/or
econom1c growth which lS greater than the standard growth
factors, or to accommodate a specialized tax source.
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In Santa
9----4
F~O i ~ 1997.
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Monica, such overrides have been approved by over two-thirds of
the local voters on three separate occasions since 1981. They
were last approved in 1988.
For the City of Santa Monica, major sources of general proceeds
of taxes are the utility Users Tax, Sales Tax, Property Tax,
Business License Tax, Transient Occupancy Tax, Motor vehicle
In-Lieu Tax, and the Real Property Transfer Tax.
Analysis
The City currently has three Gann Limit overrides which expire in
June 1992 and which total approximately $19.8 million for
FY1991/92:
$7.4 million for increasing public safety services such
as Police and Fire protection;
$11.8 million for increasing capital improvements for
such things as streets, traffic controls, parks, the
Pier, libraries, and the maintenance of such facilities;
and
$ 6 6 million for the Tenant
Amendment (TORCA) program
improvement of housing for
households.
Ownership
for the
low and
Rights Charter
provision and
moderate income
Excerpts from the C1ty Charter which show the wording of existing
Gann Limit Overrides are attached.
If these overrides are not renewed for another four years, the
Police and/or Fire Department's FY1992/93 budgets would have to
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be reduced by about $7.8 million or about 25%, the city's General
Fund capital improvement, equipment and maintenance programs
would have to be reduced by up to $12.3 million or about 50%, or
all other General Fund operations such as aid to the Santa
Monica-Halibu Unified School District, Parks and Recreation,
Library, Engineering and administrative support services would
have to be reduced by $20.1 million or about 33%. These
reductions would be in addition to the 5% reductions that
departmental managers have already been asked to make to their
budgets for FY1992/93.
For voter and administrative convenience, it is also recommended
that the public safety and capital improvements overrides be
combined into one override for the June 1992 ballot. The TORCA
override should remain separate as it is for a separate fund and
its tax proceeds can only be used for specialized housing
purposes.
Projection of City Gann Limit: FY1992/93 - FY199S/96
The following table shows the most probable proj ection of the
on-going, and public safety and capital improvements override
components of the City's total Gann Limit through FY1995/96. The
table indicates that if these overrides are renewed in June 1992
at the recommended amount, the city should not exceed its Gann
Limit through FY1995-96. The TORCA override is not considered in
this analysis as TORCA tax proceeds can only be used for TORCA
specified purposes and therefore do not impact general city
operations.
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,
Projection of
Most Probable City Gann Limit
(in millions)
92/93 93/94 94/95 95/96
Gann Limit Components
- On-going Component $ 53.7 $ 55.4 $ 59.4 $ 62.8
- Override Component 25.3 26.1 28.0 29.6
Total Gann Limit $ 79.0 $ 81.5 $ 87.4 $ 92.4
Est. Act. Proceeds $ 73.8 $ 80.6 $ 87.3 $ 92.0
of Taxes
Net-under/(over) $ 5.2 $ .9 $ .1 $ .4
The following table, however, shows the impact of not renewing
these overrides.
Projection of Impact from Not Renewing
Public Safety and Capital Improvements overrides
(in millions)
on-going Gann Limit
92/93
$ 53.7
93/94
$ 55.4
94/95
$ 59.4
95/96
$ 62.8
Est. Act. Proceeds
of Taxes
73.8
80.6
87.3
92.0
Net-under/(over)
$(20.1)
$(25.2)
$(27.9)
$(29.2)
As this table shows, if these overrides are not renewed, the City
will exceed its FY1992/93 on-going Gann Limit component by $20.1
million, and will not be able to receive and spend to continue
City services $102.4 million in tax proceeds over the next four
fiscal years.
Renewal of Overrides
It is essential for the City to be able to continue to receive
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over the next four fiscal years all tax revenues which will be
generated by existing tax rates. These revenues are needed in
order to maintain the high quality of city services which the
community now enjoys.
Therefore, to be able to accomplish this goal and to provide for
the fact that standard Gann Limit increase factors do not keep
pace with normal yearly revenue growth, staff recommends:
A combined public safety and capital improvements
override be placed on the June 1992 ballot in the amount
of $24.5 million. However, it should be emphasized that
this is the amount of override required based on
existing tax rates. If, over the next four fiscal
years, tax rates are to be increased, the amount of this
Gann Override should be correspondingly increased at
this time.
The TORCA override be renewed as currently specified in
the City Charter. This will ensure that all Tenant-
Participating Conversion Tax revenues will continue to
be avallable and be exclusively used for the provision
and improvement of housing for low and moderate income
households.
Recommendation
It is recommended that the City Attorney be directed to prepare
appropriate June 1992 ballot measures, as specified above, to
renew the city's Gann Limit overrides for four years, and to
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return the proposed ballot measures to the City Council for
approval at its meeting of February 25, 1992.
Prepared by: Mike Dennis, Director of Finance
Attachment
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