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Home My WebLink About2017-029 Ad Valorem TaxesORDINANCE B ORDINANCE NO. 2017-029 AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to discharge the expected expenses and obligations for the 2018 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $18,825,904 in revenue must be raised by ad valorem taxes on real and personal property within the corporate limits of the City of Yakima to discharge the expected expenses and obligations for the 2018 Budget for the City of Yakima, now therefore, BE IT ORDAINED BY THE CITY OF YAKIMA: Section 1. There is hereby fixed to be raised by general property taxes upon real and personal property within the City of Yakima the amount of $18,825,904 for the following purposes: General Government Levy Operating Funds Firemen's Relief & Pension Fund Amount of tax levy for General Government Purposes (1) Special Purpose Tax Levy Total Levy Amount (1) $17,688,980 1,136, 924 $18,825,904 0 $18,825,904 (1) Includes an additional $100,000 to provide for final adjustments in State assessed, refunds, new construction, and annexation values. Section 2. The City Clerk is directed to transmit and file a certified copy of this ordinance with the Board of Yakima County Commissioners and the Yakima County Assessor on or before November 30, 2017. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 7, 2017. PASSED BY THE CITY COUNCIL, signed and approved this 7th day of November, 2017. ATTEST: \1 Publication Date: November 10, 2017 Effective Date: November 7, 2017 ITEM TITLE: SUBMITTED BY: BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDASTATEMENT 1 Item No. 8. For Meeting of: November 7, 2017 Public hearing and ordinances pertaining to Ad Valorem Taxes to be levied for collection in Fiscal Year 2018 Cliff Moore, City Manager Tara Lewis, Financial Services Manager SUMMARY EXPLANATION: Ordinance A—Declaring the City Council's intent to increase the City's 2018 regular property tax levy up to 101% of the amount levied in the previous year, plus new construction, annexations, and refunds. Ordinance B—Fixing and levying the 2018 ad valorem property taxes and excess levy taxes for the City of Yakima. The attached memorandum discusses the proposed Property Tax levy for collection in 2018, and requests approval of a 1% increase in the levy as allowed by state law and as included in the 2018 Preliminary Budget. ITEM BUDGETED: Yes STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL: STAFF RECOMMENDATION: City Manager Conduct a public hearing on the 2018 property tax levy, and pass the ordinances. BOARD/COMMITTEE RECOMMENDATION: ATTACHMENTS: Description Upload Date • Memo regarding the 2018 Property Tax Lew 10/25/2017 • Exhibit I - Property Tax Limitation Calculation 10/25/2017 • Ordinance A 10/25;2017 • Ordinance B 10/25/2017 ID Attach nts 1-5 10/25/2017 2 Type Co\kr Memo Cover Memo Ordinance Ordinance Backup Material 3 Memorandum Date: November 7, 2017 To: The Honorable Mayor and City Council Cliff Moore, City Manager From: Tara Lewis, Financial Services Manager Re: 2018 Property Tax Levy Background State law requires several administrative and legal steps to establish the property tax levy. This agenda item includes two (2) separate ordinances. Ordinances A and B, described in further detail below, will set the property tax levy for collection in 2018, based on the limit of a 1% increase over the prior year base levy, plus new levies for construction and annexation. The law defines the rate of inflation as measured by the Implicit Price Deflator (IPD) for consumer goods. For this year, the IPD increased by 1.553% from June 2016 to June 2017 which exceeds the statutorily allowed increase of 1%. The 2018 budget was developed assuming a 1% increase in the overall levy. Exhibit I details the calculation of the property tax levy with a base of 101% of the prior year using preliminary information obtained from the County Assessor's office. According to state law, the certification of ad valorem taxes must be filed with the Board of Yakima County Commissioners on or before November 30, 2017 or the City will receive no funding from this source in 2018. The Commissioners have requested to receive this packet by November 20th so they can incorporate all of the requests into their required legislation. Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2017 levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2018 tax collections by any amount over 2017 levels. Ordinance B fixes the maximum tax levy for collection by the City in 2018. This ordinance complies with RCW 35.33.135 and in accordance with Article VII, Section 2 of the City Charter, requires a super -majority approval (i.e. a minimum affirmative vote of five members) by City Council. General Government Revenue Discussion General Government revenues fall into four categories that each comprise about a quarter of the total. Sales Tax (including the City's allocation of both county -wide Criminal Justice sales taxes) represents about 27% of the total. Property tax as proposed is about 23%; Utility Taxes as presented in the Preliminary Budget make up about 23%; and all other revenue comprise the remaining 27%. (See Attachment 2 for a summary of General Government revenues.) 4 2017 General Government revenue is estimated to be $79.5 million which is approximately $5.4 million or 7.3% more than 2016, due primarily to a large project to replace street lighting with more efficient LED modules, moderate growth in the economy which has generated increased sales tax growth and a year of extreme weather conditions which generated moderately elevated levels of utility taxes. For 2018, general government revenues, when adjusted for the one-time bond proceeds for the LED project in Streets and Traffic, are projected to grow by $1.9 million or 2.5% from the 2017 estimate. The proposed 1% increase in Property Tax is projected to generate about $184,000 in additional revenue in 2018. The initial estimates from the County on the 2018 property tax levy included a growth rate for new construction that is 0.8% or $149,000, along with a refund levy of about $26,000. These estimates have been included in the 2018 Budget projection. Property Tax Discussion The total 2018 City of Yakima proposed property tax levy includes the 101% levy, and amounts for new construction and prior year refunds. The 2018 budget currently includes an estimated revenue of $18,929,392 for the regular levy, an increase of $345,831 over the 2017 year-end estimate of $18,583,561. The total operating tax rate for next year is estimated to be $2.9962 per $1,000 of Assessed Valuation (AV), a decrease of approximately 8.7 cents per thousand of Assessed Valuation. The 2017 rate was $3.0830. It should be noted that the amount of the new levy in Exhibit I is slightly different from the budgeted amount due to the timing of collections. Some collections of prior year taxes are likely to occur in 2018. A home with an assessed value of $100,000 in 2017 was assessed $308.30 for the regular levy. That home, if its value increased by the countywide average would be valued at $103,900 and would be assessed $311.31 in 2018, an increase of $3.01 or approximately 1%. If the assessed value remained at $100,000, the property tax assessment decrease to $299.62, a decrease of $8.68 or 2.8%. According to the preliminary valuation estimate provided by the County Assessor, the underlying assessed value of all taxable property in the City grew by approximately 3.9%. Property tax is a vital component of General Government revenue. Based upon the information provided in this memo, City management/budget staff respectfully requests the passage of both Ordinances A and B to set the 2018 property tax levy, which is a fundamental component of the proposed 2018 Budget. 5 EXHIBIT I City of Yakima Property Tax Limitation Calculation 2017 Tax 2018 Assessed Rate Levy Value Applied Dollars (Dollars in Thousands) Prior Year (2017) = Base $ 5,957,828.341 $ 3.0830 $ 18,367,991 Implicit Price Deflator (IPD) - 1.553% Increase Max = 1% of Base 183,680 2018 Tax Rate @ 101% of Base $ 18,551,671 Valuation Increase - 3.9% New Construction - .8% State Assessed Value Tax Limit Before Annexations 235,274.954 48,236.781 n/a 3.0830 3.0830 n/a 148,714 $ 6,241,340.076 2.9962 $ 18,700,385 Add for Annexation - 2.9962 Limit for Subsequent Years $ 6,241,340.076 2.9962 18,700,385 Plus Refunds (Estimate) 25,519 Plus Contingency 100,000 Total Ordinance $ 18,825,904 Est. Change in rate per $1,000 of Assessed Value (~0.0868) State of Washington Constitutional Limit 2017 Maximum Assessed Maximum Levy Value Rate Dollars 2017 Assessed Valuation $ 6,241,340.076 3.6000 $ 22,468,824 Less: Library Levy (Estimate) 0.4611 (2,877,882) 2017 Levy for Collection in 2018 (Estimate) $ 3.1389 $ 19,590,942 9 ATTACHMENT #1 RESERVE BALANCES GENERAL GOVERNMENT FUNDS 2017 2013 2014 2015 2016 Year End 2018 General Government Actual Actual Actual Actual Estimate Projected Chng Beginning Fund Balance $10,902,309 $10,885,034 $9,412,400 $7,152,826 $7,933,127 $7,934,677 Revenues 63,522,204 67,382,678 70,265,428 74,051,847 76,698,525 78,617,140 2.5% Expenditures 63,539,479 68,855,312 72,525,002 73,271,546 76,696,975 78,022,587 1.7% Ending Fund Balance $10,885,034 $9,412,400 $7,152,826 $7,933,127 $7,934,677 $8,529,230 7.5% Reserve as a % of Expenditures 17.1% 13.7% 9.9% 10.8% 10.3% 10.9% Note: 2017 Year -End Estimate shown net of LED project revenue and expenditure of $2,783,846. The table above reflects the General Fund balance as a percentage of expenditures. The target percentage for an adequate operating reserve is a minimum two months expenses, or 16.7%. The General Fund balance dipped to a low of only 9.9% in 2015, but with careful budgeting and modest increases in revenue, the fund balance is projected to increase to 10.9% by the end of 2018. The 2018 revenue projection includes the 1% property tax levy increase allowed by State law, plus additional amounts for new construction and prior year refunds, as detailed in the attached memo. Sales Tax 26.80 $21,070,958 GENERAL GOVERNMENT REVENUE (Based on 2018 Budget of $78.6 million) ;MIMS TWATT ME MAL MUMMA Property Tax 22.60 $17,792,468 Franchise & Utility Tax 22.80 $17,914,429 1'11 A221 10 ATTACHMENT #2 Intgov"t & State Shared Other 5.70 2.90 $4,456,526 $2,304,243 I I !3565 A Km Licenses, Permits & Charges f/Services 14.70 $11,536,620 GENERAL GOVERNMENT RESOURCES THREE YEAR COMPARISON Fines & Other Taxes 4.50 $3,541,896 2017 2018 % of - 2018 vs. 2017 - 2016 Year -End % Projected 2017 Increase % Source Actual Estimate Change Revenue Total (Decrease) Change General Sales Tax $ 16,588,736 $ 17,130,691 3.3 % $ 17,644,612 22.4% $ 513,921 3.0 % Criminal Justice Sales Tax 3,283,170 3,336,781 1.6 % 3,426,346 4.4% 89,565 2.7 % Property Tax 16,793,571 17,377,367 3.5 % 17,792,468 22.6% 415,101 2.4 % Utility & Franchise Taxes 16,059,061 16,968,054 5.7 % 17,914,429 22.8% 946,375 5.6 % Charges for Services 9,740,369 10,433,146 7.1 % 10,701,918 13.6% 268,772 2.6 % State Shared Revenue 3,291,510 3,542,278 7.6 % 3,692,807 4.7% 150,529 4.2 % Fines and Forfeitures 1,676,293 1,752,492 4.5 % 1,790,632 2.3% 38,140 2.2 Other Taxes 1,403,586 1,572,858 12.1 % 1,751,264 2.2% 178,406 11.3 % Transfers from other Funds 1,475,329 1,513,060 2.6 % 1,513,060 1.9% - % Licenses and Permits 882,357 809,848 (6.9)% 834,702 1.2% 24,854 3.1 Intergovernmental/Grants 1,039,448 1,062,905 2.3 % 763,719 1.0% (309,186) (29.1)% Other Revenue 1,818,417 3,982,890 119.0 % 791,183 1.0% (3,191,707) (80.1)% Total Revenue 74,051,847 79,482,370 7.3 % 78,617,140 100.1% (865,230) (1.1)% Note: Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for capital needs. 2017 Year -End Estimate shown is inclusive of LED project revenue of $2,783,846. 11 ATTACHMENT #3 2018 PROPOSED GENERAL PROPERTY TAX LEVY - BY FUNCTION General Fund $10,900,969 57.6% Fire & Police Pension $2,064,421 10.9% Parks 52,822,565 14.9% Streets $3,141,437 16.6% 2018 PROPOSED GENERAL PROPERTY TAX LEVY - BY FUND 2017 2017 2018 2017 Est. 2016 Amended Year -End Projected vs. 2018 Fund Actual Budget Estimated Revenue Budget General Fund $ 10,901,717 $ 10,859,450 $ 11,369,235 $ 11,828,466 4.0 % Parks & Recreation 2,614,909 2,629,900 2,680,551 2,822,565 5.3 % Street & Traffic 3,279,962 3,580,100 3,327,581 3,141,437 (5.6)% Sub -Total General Government 16,796,588 17,069,450 17,377,367 17,792,468 2.4 % Fire Pension 1,312,385 1,333,160 1,206,194 1,136,924 (5.7)% Total 18,108,973 18,402,610 18,583,561 18,929,392 1.9 12 ATTACHMENT #4 The graph below shows how the City of Yakima compares to other cities of somewhat similar population relative to property tax, and shows that Yakima's property tax is below the state average. This data was compiled from the State Auditor's Local Government Comparative Statistics for 2016, and includes comparisons of comparable Washington State cities with population between 50,000 and 145,000. $500 $400 5300 $200 $100 $0 $156 5177 $193 PROPERTY TAX $229 S242 $293 5312 $332 $362 S383 $386 Pasco Kennewick Kent Yakima Auburn Marysville Bellevue Richland Kirkland Renton Everett Redmond Yakima's per capita property tax revenue is $193, which is $72 less than the average city per capita of $265 PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 10.2-0 General Fund Parks X2.0 Streets 92.5%, Fire Pension Property Tax % Other Revenue 13 ATTACHMENT #5 The largest revenue source for the General Government Funds is sales tax. Yakima is just slightly below the average per capita sales tax compared with similar cities in the State. However, Yakima is in the lower 1/4 of ranking in all other revenue comparisons per capita and is the fourth lowest out of the twelve cities compared in combined per capita revenue. This comparison demonstrates that the City of Yakima has limited revenue/tax base compared with most cities of its size in the state, and yet provides similar or enhanced services to its citizens. (For example, of the cities included in the comparison, only Everett has a transit system; there are no other city -owned irrigation systems; and a few of the cities are members of a Regional Fire Authority, so have no fire expenditures). 55,000 $4,000 53,000 52,000 51,000 $0 $1,311 $1,320 $1,482 $1,694 TOTAL REVENUES 52,158 $2,196 $2,283 $2,317 53,156 $3,304 $3,378 $3,660 Pasco Kenn. Marysville Yakima Auburn Kirkland Renton Kent Everett Bellevue Richland Redmond Yakima's per capita total revenues are 51,694, which is 5661 less than the average city per capita of $2,355