Appropriation Limit

This section provides information concerning the limit on appropriations (the "Gann Limit"). Adoption of the appropriation limit occurs annually, as required by the State Constitution, Article XIIIB (as amended) and Government Code Section 7910. Generally, with certain exceptions, exclusions and qualifications, the Gann Limit restricts the amount of 'proceeds of taxes' revenues that the Town may appropriate.

In November, 1979, the voters of the State of California approved Proposition 4, commonly known as the Gann Initiative. The Proposition created Article XIIIB of the State Constitution placing limits on the amount of revenue which can be spent by all entities of government. Prop 4 became effective for the 1980/81 fiscal year, but the formula for calculating the limits was based on the 1978/79 "base year" revenues. In June 1990 the voters approved Prop 111, which provided adjustment formulas for local agencies to utilize in adjusting their annual Appropriations Limit. Prop. 111 required an annual review of Limit calculations. The Appropriations Limitations imposed by Propositions 4 and 111 creates a restriction on the amount of revenue which may be appropriated in any fiscal year. The Limit is based on actual appropriations during the 1978/79 fiscal year, and is increased each year using the growth of population and inflation. Not all revenues are restricted by the Limit, only those which are referred to as "proceeds of taxes."

The state law also includes a provision for the voters to approve an override of the calculated appropriations limit for a period not to exceed four years. The Town currently has an override, approved by voters November 2018, increasing the override by $3,000,000 to $4,500,000 in FY 2019/2020 with annual increases which is in effect through June 30, 2024. The annual increase is based on the percentage growth in TOT revenues. In fiscal year 2019/2020, due the COVID-19 impact, TOT revenues decreased. The override remains at $4,500,000 for fiscal year 2020/2021 and 2021/2022. In Fiscal Year 2022/2023, the override increased to $4,815,000 based on the percentage growth in TOT revenue.