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City of Pleasanton Operating Budget • FY 2023/24 - FY 2024/25E - 2
<br />Proposition 4 Analysis
<br />In November 1979 the voters of the State of California passed Proposition 4 (the Gann Initiative).
<br />Proposition 4 placed a limit on the amount of revenue which can be spent by the City and was based
<br />on 1978-79 “base year” revenues. The limit is adjusted annually for inflation and population growth.
<br />In the early years of Proposition 4, the high rate of inflation increased the limit faster than the City’s
<br />revenues grew. However, as the Stoneridge Mall and North Pleasanton development occurred in the
<br />1980’s, the City experienced double digit increases in both property tax and sales tax revenues. By
<br />1984-85 the City exceeded its limit. In April 1986, Pleasanton voters approved a Proposition 4 override
<br />election, allowing the City to use the “excess” revenues for certain capital projects. Specifically, the City
<br />spent over $14 million for the library, land for the Pleasanton Middle School, Valley Avenue Extension
<br />and partial funding for the Centennial Park and Downtown improvements.
<br />In June 1990, California voters passed Proposition 111, which provides for new adjustment formulas to
<br />make the Gann appropriations limit more reflective of increased service demand due to commercial
<br />growth. One of the flaws in Proposition 4 was that it assumed that City’s service costs would grow
<br />in proportion to inflation and population growth. Commercial growth, its revenues, and its service
<br />demands were ignored. Because the City’s commercial growth far outpaced its residential growth,
<br />the change in formula resulted in a significant increase in the City’s appropriation limit. Beginning with
<br />the FY 1990/91 appropriations limit, cities were allowed to apply new growth factors retroactively to
<br />the mid 1980’s to compute the FY 1990/91 limit. The City’s FY 1990/91 limit was therefore recalculated
<br />from $30,785,144 to $52,803,755. With the choice to use the most optimal growth factors, the City’s
<br />appropriation limit has continued to grow significantly. The appropriation limit for FY 2023/24 is
<br />projected to $817,463,288, which is over six times the anticipated City revenues subject to it. This trend
<br />should continue for the foreseeable future.
<br />Actual
<br />FY 2022/23
<br />Projected
<br />FY 2023/24
<br />Projected
<br />FY 2024/25
<br />GROWTH FACTORS A & B (Use the greater of each)
<br />(A)
<br />City Population Growth Factor (%) OR -1.67% -1.37% -1.44%
<br />County Population Growth Factor (%)-0.62% -0.47% -0.49%
<br />(B)
<br />Prior year change in non-residential construction
<br />assessed value ($)$28,744,350 $34,624,186 $43,000,000
<br />Prior year annual increase in all city assessed value ($)$724,704,602 $1,790,171,610 $1,800,000,000
<br />% change due to non-residential construction 3.97% 1.93% 2.39%
<br />Per capita personal income % change over prior year 7.55% 4.44% 5.36%
<br />NEW FACTOR TO APPLY TO PROP 4 LIMIT
<br />(City or County population factor X change in per
<br />capita personal income) 1.069 1.039 1.048
<br />GANN LIMIT $786,407,036 $817,463,288 $857,049,242
<br />ESTIMATED REVENUES SUBJECT TO THE LIMIT $122,789,000 $125,235,400 $131,146,400
<br />LESS EXCLUSIONS:
<br />Qualified Capital Outlay & Debt Service(est)$7,714,516 $2,000,000 $2,000,000
<br />NET APPROPRIATIONS SUBJECT TO LIMIT $115,074,484 $123,235,400 $129,146,400
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