AGENDA ITEM NO. 12
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AGENDA STAFF REPORT
City of West Covina | Office of the City Manager
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| DATE: | June 16, 2026 |
TO: |
Mayor and City Council |
FROM: |
Milan Mrakich, City Manager |
SUBJECT: |
CONSIDERATION OF ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2026-2027
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RECOMMENDATION:
It is recommended that the City Council adopt the following resolution:
RESOLUTION NO. 2026-45 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST COVINA, CALIFORNIA, DETERMINING AND ADOPTING THE ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2026-2027
RESOLUTION NO. 2026-45 - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF WEST COVINA, CALIFORNIA, DETERMINING AND ADOPTING THE ANNUAL APPROPRIATIONS LIMIT FOR FISCAL YEAR 2026-2027
BACKGROUND:
Article XIII B of the California Constitution imposes an appropriations limit on units of state and local governments. In response to a perception that government spending was increasing without any controls, in 1979, the voters passed Proposition 4, "The Gann Initiative," which is now included in the California Constitution as Article XIII B. This article limits the amount of appropriations (related to tax proceeds) that state or local governments can establish each year.
The appropriations of tax proceeds excludes revenues from the following sources:
The following revenue sources are subject to the appropriations limit:
Pursuant to Article XIII B and its implementing legislation, set forth in Sections 7901-7914 of the California Government Code, the annual appropriations limit must be calculated by adjusting the prior year's appropriation limit for changes in the cost of living and population growth. Each year, the City must calculate the limit using the following formula:
= Current Year Appropriation Limit
The appropriations of tax proceeds excludes revenues from the following sources:
- Special Benefit Assessments
- Licenses and Permits
- Franchise Fees
- Developer Fees
- Fines, Forfeitures and Penalties
- Other Governmental Restricted Revenues
- Gas Taxes
- User Fees
The following revenue sources are subject to the appropriations limit:
- Property Taxes
- Sales and Use Taxes
- Business License Taxes
- Transient Occupancy Taxes
- Other Taxes
Pursuant to Article XIII B and its implementing legislation, set forth in Sections 7901-7914 of the California Government Code, the annual appropriations limit must be calculated by adjusting the prior year's appropriation limit for changes in the cost of living and population growth. Each year, the City must calculate the limit using the following formula:
Fiscal Year 2026-2027 Appropriation Limit
x Cumulative Growth Factor (1)= Current Year Appropriation Limit
(1) Inflation change factor (change in California per capita personal income from the preceding year or change in the local assessment roll from the preceding year due to the addition of non-residential new construction) multiplied by population change factors (change in population for either the City or the County).
Factors are calculated using the following formula:
(Percentage Change + 100) / 100 = Factor DISCUSSION:
The City may choose one of the following factors to use for inflationary adjustment: (a) the growth in California per capita personal income from the preceding year, or (b) the growth in the non-residential assessed property valuation due to new construction within the City. For change in population, the City may choose to use either: (a) the change in population within the City, or (b) the change in population within the County. These two adjustment factors (one for inflation and one for population) are both annual elections for the City in determining its appropriations limit for the following Fiscal Year.
For the Fiscal Year (FY) 2026-27 calculation, the City is electing to use the change in population within the City as its population change factor, and the growth in California per capita personal income as its inflation factor, as detailed in Attachment No. 1. Such selections must be reflected in the recorded vote of the City Council per the requirements of Article XIII B and California Government Code section 7901. Therefore, the resolution (Attachment No. 2) reflects such selections. These have been the selections in the last 5 years.
Based on the formula outlined above, staff calculated the FY 2026-27 appropriations limit for the City of West Covina to be $212,879,359. The City's proceeds from taxes are projected at $72,970,730, which is less than the appropriations limit.
Documentation used in the establishment of the appropriations limit was made available for public inspection on June 1, 2026 and is available for public inspection in the Finance Department.
For the Fiscal Year (FY) 2026-27 calculation, the City is electing to use the change in population within the City as its population change factor, and the growth in California per capita personal income as its inflation factor, as detailed in Attachment No. 1. Such selections must be reflected in the recorded vote of the City Council per the requirements of Article XIII B and California Government Code section 7901. Therefore, the resolution (Attachment No. 2) reflects such selections. These have been the selections in the last 5 years.
Based on the formula outlined above, staff calculated the FY 2026-27 appropriations limit for the City of West Covina to be $212,879,359. The City's proceeds from taxes are projected at $72,970,730, which is less than the appropriations limit.
Documentation used in the establishment of the appropriations limit was made available for public inspection on June 1, 2026 and is available for public inspection in the Finance Department.
LEGAL REVIEW:
The City Attorney's Office has reviewed the resolution and approved it as to form.
Prepared by:
Karen Ogawa, Finance Director
Additional Approval:
Roxanne E. Lerma, Assistant City Manager
Attachments
- Attachment No. 1 - Appropriations Limit Calculations Fiscal Year 2026-27
- Attachment No. 2 - Resolution No. 2026-45
CITY COUNCIL GOALS & OBJECTIVES:
Achieve Fiscal Sustainability and Financial Stability