Finance committee warned Ojai’s GANN appropriations headroom is shrinking

A consultant and city staff told Ojai City’s Finance & Budget Committee on June 2 that the city’s calculated GANN appropriation limit leaves roughly $895,880 in headroom under the proposed fiscal 2026–27 budget, but cautioned that understated revenue estimates or midyear adjustments could erode that buffer.

Consultant Mr. Sheay, presenting the limit’s mechanics, said the appropriation limit "is the calculated dollar amount which restricts the ability to appropriate the proceeds of taxes" and that it generally rolls forward from the prior year adjusted for inflation and population. He noted limited exceptions, including temporary voter overrides and qualified capital outlay that meet life-and-value thresholds.

The presentation singled out exclusions that typically reduce the amount counted against the limit: certain debt service, qualified capital outlay (assets with a useful life of 10 years or more and value of $100,000 or more), court-ordered or federal-mandate costs, and refunds to taxpayers. The city’s current calculation applies about $3 million of Measure C funding as qualifying capital outlay, staff said.

Committee member Roth pressed staff on how reserve contributions are treated in the calculation. "I would disagree with that. I don't believe that those reserves were actually appropriated to a reserve," Roth said, seeking clarification on whether money placed into reserve counts against the limit in the year contributed or only when spent.

Mr. Sheay replied that contributions of tax proceeds to reserve funds "shall for the purpose of this article constitute appropriations subject to the limitation in the year of contribution," meaning the contribution year is what counts for the GANN calculation even if the money is not spent that year.

City Manager Harvey and other members cautioned that the headroom estimate depends on budgeted revenue assumptions. Harvey said revenues that are consistently underestimated could leave the city with less practical headroom than the calculation suggests and recommended periodic review: "If you were to go back to the GANN limit calculation and recalculate it based on what I think is a closer to reality revenue number, you would see that headroom shrink."

Committee members asked staff for a follow-up meeting to walk through the numbers in more detail. Staff also flagged a planned, more comprehensive review of the city’s reserve policy later this summer to address layered reserves, earmarks for fire mitigation, and potential long-term commitments such as pension prepayments.

The committee also heard a public comment urging that Measure C revenues intended for capital spending be treated as exempt; staff indicated they would provide additional explanation and reconcile line-item groupings in the budget document.

The committee did not take a formal vote on any policy change at the meeting; members asked for additional analysis and possible policy recommendations for future meetings.