SR-201-004 (3)
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Santa }Icnica,
califortlr, June 21, 1979
"10:
Mayor and City Council
'?-o /--tPtJ tf I 3 c..
FR.JM
Ci ty I'.lanager
SUBJEC-::-:
Review of Gann Initiative
J U N 2 6 1979
Introduction
This report pertains to the Gann Initiative and transmits a
resolution to increase the appropriations of the 1978-79 budget.
Ba.:;kground
PUrSuaLt to Council request at t~e last Council oudge~ ~eeting.
staff ~as reviewed ~he text of the Gann Spendicg ~imitation
I~iviative (copy a~~ached).
We have at~e=pted to determine its
future im9Bct on the CityTs budget beginning ~itt the 1980-81
fiscal year. We have not analyzed ea~h and every expenditure
and revenue so~rce which mayor may not be affec~ed by the ~i~it
8U-: have
instead concentra~ed on the larger ite=s which on
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face are included or excluded from the limitation.
W~ile the initiative seers relatively straightfor~~7C in the
abstract, it is soon obvious} in at~empting specific applicatio~
tiat ma~y of its ~erms &re vague and subject to a variety of
interp"C'etatioDs.
Undoubtedly, mest of the nrovisions will have
to be clarified through ~ourt action or JY legislative er.actDent.
In Section 1, for example, appropriations are limited to the ctanges
in the cost-of-livip-g (CPT) and pop~la~ion fro~ the prior year.
~his ?rovision seems simple but on close ex&,-ination, it is ~ot,
and several questions arise:
1) which ,-onths of the prior year
are used fer the CPI cGmpariso~, January to January, J~ne to June
I :3 c....
JUN 2 6 1979
Mayor
and City counWIJ
e
June 21, 1979
-2-
(figures not available until August); 2) when are popul~tion
figures co~pared (do Santa Monica College stude~ts affect the
figures?);
3) is cpr added to population or are they compounded
((cpr + Population) X base figure or (CPI X base) X Population)?
Other provisions are even more difficult to analyze.
?he a~tached chart (calculation of Appropriations Subject to
Limitation for Fiscal Year 1980 - 81) attempts to show the difference
in the amount of appropriations availaole if ~he attached resolution
is adopted cOffipared to the amount available in 1980 - 81 if the
resolution is not adopted. We have also co~pared the limita~ion
to ~~e 1979 - 30 budget.
Jor 1979 - 80 we have appropriated an adjusted to:al of $27,662,96L
which, had Gann been in effect, would have exceeded ou~ perQitted
ap?ro~riation of $27,123,180 or $539,784 in excess of the limit.
r~ the attached resolution were adopted, ~e could have appropria~ed
a ~aximum S~9,123,180 for 1979 - 88 if the limit were in effect.
The DottoD line appears to be tnis; if the 1978 - 79 budget remains
unchanged~ we will be able to appropriate a ~axiLuD of slightly more
than $29.7 ~illion compared to a maximum of 554 million if tne
resolution increasing the 1978 79 aypropria~ion is adopted,
assuffilng reVenues are available. The effect of tDe attached reSQ-
luticn would simply be to give us core roo~ in 1980 - 81.
];;1~yor a.nd 8i ty counce
e
June 21, 1979
-3-
We have no idea if the courts would uphold our increased appro-
priation as valid. We have no ~ay of proving whether the initiative
will pass 8r fail. We do not knew if the legislature will clarify
the initiative provisions or w~at the courts will rule in the
~yriad of cases sure to ~e generated.
In essence, ~e are in a
guessing game. For exavple, we are still waiting for the legis-
lature to establish t~e ~ax formula for the coning fiscal year
wnich ~egins in nine days.
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A~tacnJIlents (3)
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TEXT OF GANN SPENDING-LIMITATION INITIATIVE
LIMITATION OF GOVERNMENT APPROPRIATIONS. INITIATIVE CONSTITUTIONAL
AMENDMENT. EstablIshes and defmes annual appropriatIOn limIts on state and local
governmental entitles based on annual appropriations for prIOr fiscal year. Requires
adjustments for changes In cost of liVIng, populatlon and other speCIfIed factors.
ApproprIatIOn limits may be established or temporarIly changed by electorate. Requires
revenues receIved In excess of appropriatIOns permitted by thIS measure to be returned by
reVIsion of tax rates or fee schedules Within two fIscal years next followmg year excess
created. With exceptions, provides for reimbursement of local governments for new
programs or hIgher level of serViCes mandated by state. FinanCial Impact:
Indeterm mable.
ARTICLE XIII B.
Sec. 1. The total annual approprIations subject to lImItation of the state and of each
local government shall not exceed the appropriatIOns I1mIt of such entIty of government
for the prIor year adjusted for changes In the cost of hYing and population except as
otherWise provided in this Article.
Sec. 2. Revenues received by any entIty of government in excess of that amount
which IS appropriated by such entIty in complIance with thIS ArtIcle durmg the fIscal year
shall be returned by a revision of tax rates or fee schedules withm the next two
subsequent fiscal years.
Sec. 3. The approprIatIOns lImit for any fiscal year pursuant to Sec. 1 shall be
adjusted as follows:
(a) In the event that the fmanclal responsibilIty of provldmg serVIces IS
transferred, In whole or In part, whether by annexatIOn, IncorporatIOn or otherWise, from
one entity of government to another, then for the year m WhICh such transfer becomes
effectIve the appropriations limIt of the transferee entIty shall be Increased by such
reasonable amount as the said entitIes shall mutually agree and the appropriatIOns limit of
the transferor entIty shall be decreased by the same amount.
(b) In the event that the fmanclal responsIbility of prOViding servIces IS
transferred, In whole or In part, from an entIty of government to a private entity, or the
finanCial source for the provIsion of services IS transferred, In whole or In part, from other
revenues of an entlty of government, to regulatory IJcen~es, user charges or user fees,
then for the year of such transfer the approprIations lImit of such entIty of government
shall be decreased accordlOgly.
(c) In the event of an emergency, the appropnatlOn hmlt may be exceeded
prOVided thut the approprIatIOn 111mb in the follOWing three yeM:. lire reduced accordlOgly
to prevent an aggregate Increase In approprw.tlOns resultmg from the emergency.
See 4. The appropriatIOns IlImt lmposed 011 ilny new or eXl'itmg entity of
government by Hus ArtIcle may be €'itabltshed or changed by tl)(' electors of sueh entity,
subject to tHld In conformity WIth con..,tltutlOnal and statutory vot1!lg reqUIrements. The
duratIon of tiny ~u('h change shall be a~ determltlcd by ,:>ald e1('etOI'~, but :-:.hi:iJI In no event
exceed four years from the mo~t recent voll' of ~ald elector,> creutlllg or COr:t'llUlOg ':luch
change.
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(f) "PopulatlonTl of any entity of government, other than a school distrIct, shall
be determmed by a method prescrlbed by the Legi~lature, provIded that such
determmahon shall be revised, as necessary, to reflect the perIOdiC census conducted by
the Umted States Department of Commerce, or successor agency of the Umted States
Government. The populatlOn of any school dlstrlct shall be &uch school distrICt's average
daily attendance as determmed by a method prescribed by the Legislature;
(g) "Debt service" shall mean appropriations reqUired to pay the cost of
mterest and redemption charges, mcludlOg the funding of any reserve or smkmg fund
required In connection therewIth, on lndebtedne~s eXistmg or legally authorIzed as of
January 1, 1979 or on bonded mdebtedness thereafter approved accordmg to law by a vote
of the electors of the ISSUIng entlty votIng 10 an electIOn for such purpose.
(h) The "appropriatlOn~ lIrmt" of each entity of government for each flscal
year shall be that amount WhlCh total annual appropriatiOns subject to llmitatlOn may not
exceed under SectlOn 1 and Section 3; prOVided, however, that the llapproprlatlOns limit"
of each entIty of government for fl'>cal year 1978-79 shaH be the total of the
approprlatIOns subJect to limitatIOn of such entlty for that fiscal year. For fiscal year
1978-79, state subventions to local governments, exclU~lve of federal grants, shall be
deemed to have been dimved from the proceeds of state taxes.
(I) Except as otherWise prOVided In SectlOn 5, t'approprlatlOns subject to
limltatlOntl shaH not mclude local agency loan funds 01' lOdebtedness funds, investment (or
authorlzallons to Invest) funds of the state, or of an entity of local government in
accounts at banks or saVIngs and loan aSSOcIatIOns or in lIquid securItIes.
Sec. 9. "Approprlatlons subJect to hmltatlOnfl for each entIty of government shall
not mclude:
(8.) Debt serVlCe.
(b) AppropriatlOns reqUIred for purposes of complymg with manda.tes of the
courts or the federal government which, WIthout discretIOn, reqUire an expenditure for
additwnal serVIces or WhIch unaVOidably make the provIdmg of eXIsting servICes more
costly.
(c) ApproprIatlOns of any ~pecial distrIct whlch eXIsted on January 1, 1978,
and whICh dId not as of the 1977-78 fIscal year levy an ad valorem tax on property m
excess of 12! cents per $100 of assessed valuej or the approprIatlOns of any speCIal
district then eXisting or thereafter created by a vote of the people, which IS totally funded
by othel' thun the proceeds of taxes.
Sec. 10. ThIS Article shall be effectIve cornmenclDg WIth the first day of the fiscal
yeHr followlIlg Its adoptIOn.
Sec. 11. if allY approprIatIOn cl:ltegory shttll be added to or removed from
appropriatIOns ~ubJect to hrmtatiOn, pur:,uant to fmal Judgment of any court of competent
JurisdIctIOn and rlny Hppf'nJ therefrom, the aprrDrrlatlOn~ IJmit shall be adjusted
accordmgly. if allY ~ectlOn, pl1rt, cIduse or rhrase In thiS Article IS for any reason held
lnVl::llld 01' ullconstltutlonal, tile I'crnl.llllll1g portlon~ of thb Article shaH not be affected but
~b ill r.CllHilll in tull force and effet~t.
'.'1."
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; ::.1 alia.
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League of Calif~~~ia' Citi~~' " /1
Sacramento, Cal1forma
June 8, 1979
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C?' ..... n a S;t!;9S
: J::.~~_ TaQ9~r:er
TO: All City Managers and City Clerks in Non-Manager Cities
SUBJECT: Gann Imtiatlvei Unappropriated 1978-79 Funds; Need to Consiqer ,Action
Before July I
Because many cities have not established forma! procedures for appropriating year-end
fund balances or "workmg capital," It is particularly important that the specific provisions
of the Gann InitIative be studied.
As fiscal year 1978-79 draws to a close, many cty offICials have asked whether, to
anticipate the Gann Imtlative, presently unappropriated city funds should be appropriated
to specific funds/purposes. This and similar questions arise because tlus proposed
constitutiOnal government spending limitation would, if passed by the state electorate,
place an "appropriation lImit" on Cities which 15 pegged to fiscal year 1978-79. With
reference to the computation of the l1mitation, the imtiative provides in Section 5 that
"each entity of government may establish such contmgency, emergency, unemploymentJ
reserve, retirement, smkmg fund, trust or sim1!ar funds as it shaH deem reasonable and
proper.1I The same section further provides In part that contnbutIons to such funds shall
"constItute apprOprlatlOns subject to limitatIon to the year of contribution." The
defmitIon of the phrase "appropriations subject to limitationll in Section 8(b) is keyed to
authoriza t10ns to expend during a fiscal year. From a practical and legal standpoint, our
preliminary understand 109 IS that an "appropriatiOn" is synonymous with an "authorization
to expend." If th1S 15 true, it appears that Cities would be well-advised to make
appropriations to specIfic funds rather than leave an unappropriated balance at the end of
fiscal year 1978-79.
The vahdlty and propnety (d. Section 5) of so domg might be challenged Since such
appropnations would be made at a time when it may well be VIrtually Impossible to make
expenditures durlOg the 1978-79 fIscal year pursuant to such authonzatlOns/appro-
pnations. Our current understandmg of the lOltiative, however, suggests that no
identifIable disadvantages would result from a determination that so appropnatmg
unappropnated funds was not reasonable and proper or otherWIse contrary to the Intent of
the proposed spendmg limitatiOn. Furthermore, regardless of how such appropriatiOns to
speCial funds are ultimately treated for purposes of determmmg the fiscal year 1978-79
spendmg 11mit, it appears that distinct future benefIts may flow from so moving current
unappropriated moneys. ThIS 15 because SectiOn 5 of the Gann Imtiative fmally provides
that withdrawals from such special funds and transfers between or among such funds shaH
not constitute "appropriatiOns subject to limItatIOn." Therefore, the computatlOn of the
appropriatiOn or spending limit for any future year wi11 apparently be unaffected by
expenditures or Inter-fund transfers made from such speCial funds in any year subsequent
to 1978-79.
One fmal caveat to the foregomg is that thiS response to the immediate questions raised
by city offtcials is based upon our general understandmg of a complex and ambiguous
proposal and not upon any authontatlve interpretatiOn. The latter, as with PropoSItion 13,
WIll not be forthcommg until well after any approvmg vote on the Gann InItIative.
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CALCULATIO~F "APPROPRIATIONS SUBJECT TO L!TATIOW1
FOR FISCAL YEAR 1980-81
Total Budget
Additional Appropr1ations for FY 78-79
People Mover Project
Contingent expenditures
Transportat1on Department facilities
Less enterprise expenditures
General Budget expenditure appropriation
Less appropriations financed by revenue
sources not subject to appropriation
1 i mi ta t ion:
Redevelopment Agency
CETA
CDBG
Federal Revenue Sharing
Appropriation "Subject to Limitationll
ProJected allowable increase to base for
FY 79-80 (assuming 100/, CPI increase)*
79-80 maximum appropriation subJect to
1 imitati on
Projected allowable increase to base for
FY 80-81 (assuming 10% increase)*
80-81 maximum appropriation subject to
1 imitation
1978-79 Budget
As Originally With Proposed
Approved Add 11 Approp.
$47,547,499
$47,547,499
-13,729,662
$33,817,837
- 4,138,962
- 2,875,979
- 1,363,000
782,460
$24,657,436
$ 2,465,744
$27,123,180
$ 2,612,318
$29,735,498
1979-80 Budget
As
Approved
$47,547,499
6,000,000
11,000,000
3,000,000
$67,547,499
-13,729,662
$53,817,837
$56,232,476
$56,232,476
- 15,502,931
$40,729,545
- 4,138,962
- 2,875,979
- 1,363,000
782,460
$44,657,436
- 8,390,286
- 2,444,295
- 1,457,000
775,000
$27,662,964
S 4,465,744
$49,123,180
$27,662,964
$ 4,912,318
$54,035,49~
* The increase is determined by the percentage increase in the Consumer Price Index (CPI) and
the percentage of change in population. However, the increase calculated in that manner
may not exceed the percentage increase in average personal earnings for the State of
Californ1a. We estimate we will be allowed 10% because the CPI from May 1978 to May 1979
increased by that much. We are estimating that level of inflat10n will continue. The
percentage increase in average personal earnirgswas 11.9% from 1977 to 1978.
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RESOLUTION NO.
(City Council Series)
RESOLUTION OF THE CITY COUNCIL OF
THE CITY OF SANTA ~ONICA AMENDING
THE 1979-80 BUDGET.
THE CITY COUNCIL OF THE CITY OF SANTA MONICA RESOLVES AS
FOllOWS:
SECTION 1. Funds for the following prOJects shall be allocated:
(l) $6.000~OOO for People Mover Project; (2) 511,000,000 for Contingent
Expenditures - Non-Departmental; (3) 53,000.000 for Transportat1on
Department Facilities; Total. $20.000~OOO.
SECTION 2. Monies. for the proJects indicated in Section 1. shall
be made available from the following funds: (1) $11.000,000 from the
General Purpose Fund; (2) 51.500.000 from the Transportatlon Depreciation
Fund; (3) $7.500,000 from Transportatlon Senate Bill 325 Fund; Total,
$20.000,000.
SECTION 3. The City Clerk shall certify to the adoption of this
resolution, and thenceforth and thereafter the same shall be in full force
and effect.
day of
1979.
ADOPTED AND APPROVED this
MAYOR
ATTEST:
cITY CLERK
.
.
I hereby certify that the foregoing resolution was duly adopted
by the City Council of the City of Santa ~onica at a regular meeting
thereof, held on the
day of
, 1979, by the following
vote of the Council:
AYES:
Counc1l Member:
NOES:
Council Member:
ABSENT:
Council Member:
CIT'r CLER'K
APPROVED AS TO FORM:
~!..
~. Si6iol'k
RICHARD L. KNICKERBOCKER
City Attorney