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FD'CMD:br:f:\f1nance\admin\stfrpts\srgann
Council Meeting: November 7, 1995 Santa Mon1ca, caWfli~_
TO: Mayor and City Council
FROM: City Staff
SUBJECT: PREPARATION OF MARCH 1996 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 eXlsting City
SerV1ces and TORCA Gann overr1des for an additional four years, and
submit the ballot measures for City Council approval at its meeting
of November 14, 1995 in order that they may be subm1tted to Los
Angeles County for printing on the March 1996 pr1mary ballot.
BACKGROUND
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In 1979, State voters approved a change to the State Const1tut1on
establishing a spending limit on the amount of tax revenue
governments can receive and use in any fiscal year. Th1S
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restriction 1S known as the Gann L1m1t. Each jurisdiction's annual
Gann L1ffi1 t 1S equal to actual tax revenues spent 1n the base year
of FY1978!79 increased each year by standard population and
econom1C growth factors. This is the jur1sd1ct1on's t1on-goingtl
limit. In add1t1on, local voters can approve Ilm1t overrides for a
four-year period to enable a Jurisdiction to spend tax proceeds
resultlng froIT- local population and/or economic growth whlch is
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NOV 0 7 1995
greater than the standard growth factors, or to accommodate the
receipt of additional tax revenues used to provide necessary local
services. In Santa Monica, the City Services override has been
approved by approximately two-thlrds of the local voters on four
separate occasions Slnce 1981, and the TORCA override three times
Slnce 1984. They were both last approved in 1992.
For the City of Santa Monlca, major sources of tax revenues are the
Utillty User's Tax, Sales Tax, Property Tax, Business License Tax,
and the TranSlent Occupancy Tax.
ANALYSIS
The City currently has two Gann Llmlt overrides whlch wlll explre
in June 1996 and which total approxlmately $37.9 mllllon for
FY199S!96:
- - Clty Services Override - $27 6 mllllon for malntalnlng and
providing increased pollce serVlces, ald to the public
schools, malntalning basic City services, and for other
speclfled purposes such as capltal lmprovements for parks,
street llghting, librarles and pollce facllltles;
- - TORCA Override - $10.3 mlllion for the Tenant Ownership
Rlghts Charter Amendment (TORCA) program for the prOVlSlon
and improvement of housing for low and moderate income
households.
Excerpts from the City Charter whlch show the wording of existing
Gann Limit overrldes are attached.
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If the City SerVlces override is not renewed for another four
years, the FY1996/97 Police Department operat1ng budget would have
to be reduced by up to $9.1 million or about 27% (representing the
amount of Police Department budget increase Slnce FY1981-82 which
1S appllcable to this Gann overrlde) , and all other General Fund
operations such as aid to the Santa Mon1ca-Malibu Un1f1ed School
District, Parks and Recreation, Library, Engineering, capital
lmprovement, equipment and adminlstrative support services would
have to be reduced up to $18.5 milllon or about 23% If the TORCA
overrlde 1S not renewed, new TORCA program appl1catlons could not
be accepted after June 1, 1996
PROJECTION OF TOTAL CITY GANN LIMIT AND TAX REVENUES: FY1996!97 -
FYI999!OO
The following table shows proJections of the City's on-going Gann
Limit, the City SerV1ces override and future tax revenues through
FY1999-00. The table indlcates that if the C1ty Services override
1S renewed 1n March, 1996 at $25 3 million, the Clty would not
exceed its Gann Limlt through FY1999-00.
ProJectlon of
Total City Gann Llmlt and Tax Revenues
(in mllllons)
Clty Gann Llm1t Components 96/97 97/98 98(99 99/00
- On-going Gann Llmit $ 60.7 $ 62.4 $ 64.2 $ 66 3
- City SerVlces Override 25.3 26.0 26.7 27 6
Total City Gann Limlt $ 86.0 $ 88.4 $ 90.9 $ 93.9
ProJected Tax Revenues $ 85.8 $ 88.2 $ 90 6 $ 93.6
Net-under/(over) $ .2 $ .2 $ .3 $ .3
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The TORCA override is not consldered ln the above analys1s as TORCA
tax revenues can only be used for TORCA specified purposes and
therefore do not impact general City operations. Further, due to
the unpredlctability of the receipt of TORCA tax revenues and the
rate of spend1ng of prev10usly rece1ved tax proceeds, the TORCA
override specifies that the amount of the overrlde, each year,
equals the amount of new tax proceeds actually recelved plus the
amount of previously unspent tax proceeds.
IMPACT OF NOT RENEWING CITY SERVICES AND TORCA OVERRIDES
As the following table shows, if the City Services overrlde 18 not
renewed, the Clty will exceed its FY1996-97 on-golng Gann Limit
component by $25.1 million, and will not be able to continue
existinq City services financed by $104.6 million of tax revenues
over the next four fiscal years which are qenerated by existinq
taxes and tax rates.
Projection of Impact from Not Renew1ng
City Services Override
96/97 97/98 98/99 99(00
On-golng Gann L1mlt $ 60.7 $ 62.4 $ 64.2 $ 66.3
Project1on of Tax Revenues 85.8 88.2 90.6 93.6
Net-under/(over) $(25.1) $(25.8) $(26.4) $(27.3)
It is adv1sable for the TORCA Program Gann Limit Override to be
renewed by the voters to eliminate any question that all future
Tenant-Participating Conversion Tax revenues generated by eX1sting
liens wlll be avallable for the provision and improvement of
add1tlonal hous1ng for low and moderate lncome households.
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SUMMARY
It is essentlal for the City to be able to continue to recelve over
the next four fiscal years all tax revenues whlch wlll be generated
by eXlsting taxes and tax rates. These revenues are needed In
order to maintain the high quality of City services WhlCh the
community now enJoys.
RECOMMENDATION
It is recommended that the City Attorney be directed to prepare
approprlate March 1996 ballot measures, as specifled above, to
renew the City's City Services and TORCA Gann Llmit overrides for
the four-year perl.od June 1996 through June 2000, and to return the
proposed ballot measures to the Clty Councll for approval at its
meetlng of November 14, 1995.
Prepared By' Mike Dennl.s, Director of Fl.nance
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