SR-6-J (67)
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FEe 0 9 1988
. FD:CMD:aks:srgann
Council Meeting: February 9, 1988 Santa Monica, California
TO: Mayor and City Council
FROM: City staff
SUBJECT: Preparation of June 1988 Ballot Measures to Renew
Existing Gann Overrides
Introduction
This is to recommend that the city Council direct the City
Attorney to prepare ballot measures to renew the City's existing
three Gann overrides for an additional four years.
The City currently has three Gann Limit overrides which currently
total to approximately $8.5 million.
Two overrides (Police and Protective Services, and Capital
Improvements and Outlays) which total $8.4 million expire in
November, 1988 and one for $.1 million (Tenant Ownership Rights
Charter Amendment or TORCA) expires in June, 1988. If these
overrides are not renewed for another four years, the Police
Department's FY 1987/88 budget would have to be reduced by up to
$4.5 million or about one-third, the City's General Fund Capital
Improvement Program would have to be reduced by up to $3.9
million or by almost two-thirds, or other General Fund operations
would have to be reduced by similiar amounts.
For voter and administrative convenience, it is also recommended
that these override renewal ballot measures be placed on the June
1988 ballot.
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Background
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In 1979, the voters of California approved an initiative authored
by Paul Gann which placed an appropriation and revenue limit on
all governments in the state. The Gann Limit specifies that each
year: a) a jurisdiction normally cannot spend (with the
exception of a voter approved override or a declared emergency)
more proceeds of taxes subject to limitation than that
jurisdiction spent in FY 1978-79 inflated to the current fiscal
year by the product of the state CPI percentage change or the
state percentage change in personal income (whichever is less)
and the jurisdiction's percentage change in population: and b) a
jurisdiction cannot receive more proceeds of taxes subject to
limitation than its Gann Limit amount.
For the city of Santa Monica, major sources of proceeds of taxes
are the Sales Tax, Property Tax, utility User Tax, Business
License Tax, Transient Occupancy Tax, and the Motor Vehicle
In-Lieu tax.
The City's TORCA override was approved by the voters in June 1984
and the Police and Capital overrides were voter approved in
November 1984. Excerpts from the city Charter which provide for
each of the existing Gann Limit overrides are attached.
Projection of city Gann Limit: FY 1988/89 - FY 1991/92
The following table shows a most probable projection of the
city's Gann Limit through FY1991/92. This projection assumes
that the existing Police and capital overrides are renewed. The
table indicates that if these overrides are renewed, the city
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should not exceed its Gann Limit through FY1991/92. 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.
Projection of
Most Probable City General Gann Limit
(in millions)
88/~~ 89/90 90/91 91/92
Gann Limit Components
- on-going $35.5 $37.6 $39.8 $42.3
- Police Override 4.8 5.0 5.3 5.6
- Capital Override $ 4.2 $ 4.4 $ 4.6 $ 4.9
Total Gann Limit $44.5 $47.0 $49.7 $52.8
Est. Act. Proceeds
of Taxes 43.9 46.5 49.5 52.8
Net-under/(over) $ .6 $ .5 $ .2 -0-
The following table, however, shows the impact of not renewing
these two overrides.
Projection of Impact from Not Renewing
Police and Capital Overrides
(in millions)
88/89 89/90 90/91 91/92
On-going Gann Limit $35.5 $37.6 $39.8 $42.3
Est. Act. Proceeds
of Taxes 43.9 46.5 49.5 52.8
Net-under/ (over) $(8.4) $(8.9) $(9.7) $(10.5)
As this table shows, if the existing Police and Capital overrides
are not renewed, the City will most likely exceed its FY1988/89
on-going Gann Limit by $8.4 million. Under such circumstances,
. the city would be required to reduce its General Fund operations
by $8.4 million and to reduce the associated financing. This
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table also shows that the $8.4 million would most likely grow to
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$10.5 million by FY 1991/92. However, under a pessimistic
economic scenario, the FY1991/92 amount by which the City's
on-going Gann Limit would be exceeded would be about $9.4
million whereas under an optimistic economy scenario it would be
about $12.4 million.
Finally, should general tax proceeds begin to be realized during
this time period from Mall improvements, projects for which
building permits have been issued, and projects for which
approvals are being formalized, the City's on-going Gann Limit
could be exceeded by up to $22.0 million by FY1991/92.
Renewal of overrides
It is essential for the City to be able to continue to receive
over the next four years tax revenues which may be generated by
existing tax rates. These revenues are needed in order to
maintain the high quality of City services which the comm1lnity
now enjoys.
Therefore, to be able to accomplish this goal and to provide for
the fact that the existing Gann Limit increase factors (i.e. the
product of the lesser of US CPI or state personal income change
and city I.S population change) do not keep pace with normal yearly
revenue growth, staff recommends:
- The Police and Protective Services override be renewed as
currently specified in the city Charter at the amount of
$6.0 million.
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- The Capital Improvements and Outlays override be expanded in
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scope to include expenditures necessary to maintain and
improve the quality of other city services such as basic
police and fire protection, library, recreation and parks,
city planning, engineering and associated administrative
support, and be renewed at the amount of $11.4 million.
- 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
available and be exclusively used for the provision and
improvement of housing for low and moderate income
households.
Since the Council has directed that several other ballot measures
be prepared for the June 1988 election, and since the TORCA
override must be renewed by June 1988 to ensure continuation of
the tax financed portion of the overall TORCA program, staff
believes it would be convenient for the voter and
administratively desirable for the city to also place renewal of
the city's other two overrides on the same ballot.
Recommendation
It is recommended that the City Attorney be directed to prepare
appropriate June 1988 ballot measures, as specified above, to
renew the City's three existing Gann Limit overrides for four
years.
Prepared by: Mike Dennis, Director of Finance
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