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Page 1 of 2 Item #6 CITY COUNCIL AGENDA REPORT June 17, 2025 Finance TITLE: ADOPT A RESOLUTION APPROVING THE FISCAL YEAR 2025/26 APPROPRIATIONS LIMIT SUMMARY Pursuant to Article XIIIB of the State Constitution, the City is required to annually adopt an appropriations limit, also known as the spending limit, for appropriations funded primarily from tax revenues for the next fiscal year. The Appropriations Limit is adjusted each year pursuant to Proposition 111 based on both an inflation factor and population changes; for Fiscal Year 2025/26, the Appropriations Limit was calculated based on the percentage change in the county’s population and per capita personal income. The Appropriations Limit for FY 2025/26 is $899,517,044; the City’s FY 2025/265 budget appropriations subject to the Appropriations Limit total is $131,406,600. The City will not exceed the Appropriations Limit in FY 2025/26. RECOMMENDATION Adopt the resolution approving the FY 2025/26 Appropriations Limit of $899,517,044. BACKGROUND In 1979 the voters passed Proposition 4, effectively limiting government spending. Proposition 4 accomplishes this by limiting an agency’s ability to keep and spend its tax revenue based on FY 1978/79 base year spending, adjusted annually by an inflation factor and the agency's increase in population. Due to difficulties with the restrictions of Proposition 4, revisions to the adjustment formulas were made through Proposition 111, which was adopted by the voters in June 1990. Proposition 111 also established FY 1986/87 as the new base year. DISCUSSION The factors used to compute the Proposition 4 limits are either the percentage change in California per capita personal income or the percentage change in the local assessment roll from the preceding year due to the addition of local nonresidential construction in the city, and either the city's own population growth or the population growth of the entire county. The State Department of Finance annually provides the California per capita personal income change percentage for purposes of calculating the Proposition 4 Spending Limit. For FY 2025/26, the California per capita personal income increased by 6.44 percent, which exceeds the 2.33 percentage change in Pleasanton's local assessment roll due to non-residential construction provided by the Alameda County Assessor’s office. The City’s population decrease was 0.38 percent while Alameda County's population increased by 0.31 percent; therefore, the calculation for the FY 2025/26 Appropriations Limit is based on the percentage change in California per capita personal income and the county’s population increase. Exhibit A of the Resolution (Attachment 1) details the calculation of the Appropriations Limit for FY 2025/26 of $899,517,044. As well, the FY 2025/26 appropriations subject to the limit are calculated as part of the budget Page 108 of 864