PREPARED BY: ARTURO CASTILLO DATE OF MEETING: 06/15/2026
SUBJECT:
TITLE
CONSIDER ADOPTING RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN PABLO AMENDING THE ANNUAL APPROPRIATIONS (GANN) LIMIT FOR FISCAL YEAR 2025-26 TO CORRECT THE POPULATION ADJUSTMENT FACTOR, AND SUPERSEDING RESOLUTION 2025-074
CEQA: This proposed action is not a project as defined by CEQA.
Label
CITY MANAGER RECOMMENDATION
Recommendation
Adopt Resolution
Body
Compliance statements
Continue Best Management Practices, Fiscal Excellence, and Fiscal Transparency is an adopted City Council Priority contained in the adopted Fiscal Year 2025-2027 City Council Priority Workplan, effective April 7, 2025.
CEQA Compliance Statement
This proposed action is not a project as defined by CEQA.
BACKGROUND
On November 6, 1979, California voters approved the Gann Spending Limitation Initiative (Proposition 4) establishing Article XIIIB of the State Constitution. Subsequently, on June 5, 1990, California voters approved the Traffic Congestion Relief and Spending Limitation Act (Proposition 111), which made various amendments to Article XIIIB of the State Constitution. Article XIIIB sets limits on the amount of tax revenues that the State and most local governments can appropriate within a given fiscal year.
The Appropriation Limit is based on actual appropriations during the 1978-79 fiscal year, as increased each year using specified population and inflationary growth factors. The original legislation implementing the provisions of Article XIIIB became effective January 1, 1981. In accordance with that legislation, the governing body of each government jurisdiction must, by resolution, establish its annual Appropriation Limit for the coming year (prior to July 1) at a regularly scheduled meeting or noticed special meeting. Based on Article XIIIB, the City of San Pablo can use the larger of two measurements of population growth, (county or city population growth), and price factor (percentage change in per capita personal income statewide, or the percentage change in the local assessment rolls due to nonresidential new construction) in the Appropriations Limit calculation.
Each May, the California Department of Finance publishes a Price Factor and Population Information memo to assist municipalities in calculating their appropriations limits. The State California Department of Finance Price Factor and Population memo (Attachment B), provides three of the four amounts the City may use to calculate the limit. The last number, the percentage change in the local assessment rolls, is provided by HdL Coren & Cone (HdL), the company contracted to do property tax analysis for the City, per its 2024-2025 Preliminary Property Tax Report prepared 10/17/24 (Attachment C).
Population Factor
For Fiscal Year 2025-26 the Department of Finance lists the changes for the City and County as follows:
San Pablo 0.20%
Contra Costa County 0.00%
As the change in the City population is more beneficial, Finance has selected this factor for consideration (Attachment B).
Price Factor
For Fiscal Year 2025-26 the Department of Finance lists the change in State Per Capita Income at 6.44%. HDL has calculated the percentage change in property value at 8.32%. As the assessed value change is higher, Finance has selected this factor for consideration (Attachment C).
The Appropriations Limit applies only to those revenues defined as “proceeds of taxes.” Certain expenditures of tax proceeds do not count as Appropriations Subject to Limit including those for voter approved debt, qualified capital outlay and the costs of complying with court orders and federal mandates, contractual payments including revenues received under section 7.1 of the Municipal Services Agreement with the Lytton Band of Pomo Indians, and certain types of leases.
California Government Code Section 7910 requires a governing body to annually adopt by resolution, an Appropriations (Gann) Limit for the upcoming fiscal year when the budget is adopted. The Appropriations Limit is adjusted annually based on population and per capita income changes. This updated information is received from the California Department of Finance in May and is included within the final Appropriations Limit calculation.
The FY 2025-26 Gann Appropriations Limit was originally adopted by the City Council on June 2, 2025 (Resolution 2025-074). This report and the accompanying amending resolution correct an error in that calculation identified by the City’s auditors in April 2026, as described below.
April 2026 Audit Finding and Correction
In April 2026, during the City’s audit, Maze and Associates identified an arithmetic error in the FY 2025-26 Gann limit calculation adopted June 2, 2025. The City’s population change was applied as 2.00% (a ratio of 1.0200) instead of the correct 0.20% (a ratio of 1.0020) reported in the California Department of Finance May 2025 Price & Population report. The price factor 8.32%, a ratio of 1.0832 and the prior-year limit $62,173,149 were correct. When corrected, the combined adjustment factor is 1.085 and the FY 2025-26 Appropriations Limit is $67,480,647, a reduction of $1,212,227 from the originally adopted $68,692,874.
This correction is a reporting-accuracy matter and did not result in a compliance failure: the City’s proceeds of taxes subject to the limit $18,203,122 remained well below both the originally adopted and corrected limits, so the City was, and remains, in compliance with Article XIIIB and Government Code Section 7910 for FY 2025-26. Because the establishment of the limit is a legislative act under Government Code Section 7910(a), the correction is made by an amending resolution that supersedes Resolution 2025-074. Documentation used to determine the corrected limit has been available to the public for at least fifteen (15) days before this meeting as required by Government Code Section 7910(a); the meeting complies with the Ralph M. Brown Act; and under Government Code Section 7910(b), any judicial action to challenge this determination must be commenced within forty-five (45) days of the resolution’s effective date. The corrected limit of $67,480,647 becomes the prior-year base for the FY 2026-27 calculation.
Budget, Fiscal & Legislative Standing Committee (BFLSC) Review
On June 10, 2026, the BFLSC (Mayor Pabon-Alvarado and Council Member Ponce) reviewed the FY 2025-26 Gann Limit Correction to be formally considered and approved by the City Council on June 15, 2026.
FISCAL IMPACT
Finance staff has recalculated the FY 2025-26 Gann limit to be $67,480,647. The City’s tax proceeds subject to the FY 2025-26 Gann Limit are estimated at $18,203,122. Therefore, the City is deemed to be under the Gann limitation by $49,277,525, and in compliance with State law (Attachment 1; Exhibit A).
|
Description |
2021-22 |
2022-23 |
2023-24 |
2024-25 |
2025-26 |
|
Appropriations Limit |
50,377,828 |
53,959,210 |
56,152,121 |
62,173,149 |
67,480,647 |
|
Proceeds of Taxes |
15,317,883 |
14,884,689 |
16,881,322 |
18,130,734 |
18,203,122 |
|
Difference |
35,059,945 |
39,074,521 |
39,270,799 |
44,042,415 |
49,277,525 |
|
% of Limit |
30.4% |
27.6% |
30.1% |
29.2% |
27.0% |
ATTACHMENTS:
Att A. Resolution Amending and Superseding Resolution 2025-074
Exh 1. to Att A - FY 2025-26 Gann Appropriations Limit Calculation (Corrected)
Att B. Price and Population Memo 2025
Att C. HdL Property Tax Report dated 10/17/24
Att D. Historical Gann Appropriations Limit Table (Corrected)