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HomeMy WebLinkAbout2007-057 2008 Ad Valorem Taxes ORDINANCE B ORDINANCE NO 2007 -57 AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance estimated revenue with estimated expenditures for the 2008 Budget for the City of Yakima WHEREAS, the City Council finds that the total net amount of $15,147,997 in revenue must be raised by ad valorem taxes on real and personal property within the corporate limits of the City of Yakima to balance estimated revenues and expenditures for the 2008 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 $15,147,997 for the following purposes. General Government Levy Operating Funds $13,596,267 Firemens' Relief & Pension Fund 1,551,730 Amount of tax levy for General Government Purposes (1) $15,147,997 Special Purpose Tax Levy 294,000 Total Levy Amount (1) $15,441,997 (1) Includes an additional $150,000 to provide for final adjustments in State assessed, 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, 2007 Section 3 Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 20, 2007 PASSED BY THE CITY COUNCIL, signed a.. approve; this 20th day of November, 2007 ATTEST / David Edler? ayor CTCT� City Clerk Publication Date 11 -23 -07 Effective Date 11 -20 -07 ORD NO. 2007-57 2008 Property Tax 12/5/2007 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No For Meeting Of 11/20/07 ITEM TITLE. Public Hearing on Revenue Sources and Consideration of Legislation pertaining to Ad Valorem Taxes to be levied for collection in Fiscal 2008 Year SUBMITTED BY Dick Zais, City Manager Rita M DeBord, Finance Director Cindy Epperson, Financial Services Manager - CONTACT PERSON/TELEPHONE. Dick Zais / 575 -6040 Rita M. DeBord / 575 -6070 Ray Paolella / 575 -6030 Cindy Epperson / 575 -6070 SUMMARY EXPLANATION Background State law, based on Initiative 747, requires several administrative and legal steps to establish the property tax levy (Even though 1 -747 was recently ruled unconstitutional, the governor is recommending that local governments continue to operate under its rules until the legislature can meet to act on property tax levy limits) Your package includes two (2) separate ordinances Ordinance A and B will set the property tax levy for collection in 2008, based on the 1 -747 limit of a 1% increase over the prior year base levy, plus new levies for construction and annexation Exhibit I details these calculations CONTINUED Resolution Ordinances 2 Other (Specify) Exhibit I, Attachments 1 -5, Supplemental Information (to be distributed Friday) Funding Source APPROVED FOR SUBMITTAL. ��Ca� ►' City Manager STAFF RECOMMENDATION City Management is recommending that ordinances "A ", which declares Council's intent to increase the levy above the prior year levy, and "B ", which fixes the levy amount, be passed by the City Council. These ordinances follow state law imposing a 1% increase in the property tax levy for 2008 plus new levies for construction and annexation, consistent with the provisions of 1 -747, and are the basis on which the 2008 budget was developed and balanced BOARD /COMMISSION RECOMMENDATION COUNCIL ACTION 1 PnalIRll 2008 Property Tax Agenda Statement—Continued page 2 of 4 Ordinance purposes are. Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2007 levels This ordinance requires a simple majority to pass It is required by RCW 84 55 120 This is legally necessary to increase the 2008 tax collections by any amount over 2007 levels. Ordinance B fixes the tax levy for collection by the City in 2008 This ordinance includes not only the regular tax but also special levy taxes for bond repayments This ordinance complies with RCW 35 33 135 and requires a simple majority vote to pass. These ordinances are in the same format as the prior year levy legislation. General Government Revenue Discussion In reviewing General Govemment revenue, there are 4 revenues that each make up approximately one /fourth of the total —i e there are four "legs" that support General Government operations Sales Tax (including the City's allocation of both county -wide Criminal Justice sales taxes) represents about 29% of the total Property tax as proposed is about 23 %, Utility Taxes as presented in the Preliminary Budget make up about 20 %, and all other revenue comprise the remaining 28% (See Attachment 1 for a summary of General Govemment revenues ) Even though Yakima's economy has experienced growth in sales tax, spurred by construction and durable goods spending, the historical limit of growth in the property tax levy continues to dampen growth of General Government revenue, which is estimated to increase by 2 7% overall Major revenues are not growing as quickly as economic indices, or related expenditures The City estimates the cost to provide "General Govemment" programs and services will increase by just over 4% next year (about $2.4 million more than the 2007 "General Govemment" amended budget) Prices for fuel, construction materials (such as steel and concrete), utilities (such as electricity and phone service), and employee healthcare coverage are all expected to go up Other key cost drivers include labor contracts, state pension mandates, investments to enhance the City's criminal justice system, and jail rates (costs to house City inmates in the Yakima County Jail alone are anticipated to increase by nearly 13% in 2008). In response to these economic conditions, the City has exercised responsible budgetary restraint. City management has taken necessary cost reduction measures to maintain essential services Nearly $800,000 in 2007 expenses have eliminated from the 2008 budget, in order to bring the budget into an acceptable balance Overtime, temporary personnel and professional services expenditures will be significantly reduced. Training and travel budgets are being cut. Because "General Government" revenues in 2008 will not cover all of the cost increases, the City also expects to spend approximately $2 million from its reserves in order to balance the budget. Even though relying on reserves to pay for about 3 5% of next year's "General Government" expenses is within City budget guidelines, depleting the City's "savings account" at the same rate is not sustainable over the long term. Having one of the 4 major revenue sources limited to a rate below inflationary cost drivers is a major factor in the annual effort to balance the tax- supported budgets. 1 «N,aifRn 2008 Property Tax Agenda Statement — Continued page 3 of 4 Property Tax Discussion The total 2008 City of Yakima property tax levy includes the 101% levy, levies for voted bond issues, and amounts for annexations and new construction The budget currently includes an estimated revenue of $14,529,732 for the regular levy, an increase of $284,163 (made up of the 1% authorized increase of approximately $143,000, and an estimate of 1% for new construction) over the 2007 year- end estimate of $14,245,569 The voted levy debt is budgeted to be $294,000, the same as the 2007 budget, based on scheduled debt service for the 1995 voted Fire bond issue The total operating tax rate for next year is estimated to be $2.9182 per $1,000 of Assessed Valuation (AV), down from the 2007 rate of $3 1165 (The statutory limit is $3 60 Tess the Library levy, which is capped at 50 cents per $1,000 The estimate for the 2008 Library levy is 47 5 cents per thousand) -- the bond rate is estimated to be $0 0572 per $1,000, down from $0 0638 in 2007 It should be noted that the amounts included in the budget differ from the levy as shown in attached Exhibit I because of the timing of collections In other words the budget is built on collection estimates of the levy State law was changed during the 2007 legislative session regarding the effective date of when annexations hit the property tax rolls. The 2008 budget was built with the assumption that the City would receive about $235,000 in County Road Tax related to the Occidental annexation statutorily restricted to be used for Street purposes However, the preliminary property tax calculations from the County Assessor's Office included slightly more than $300,000 from the Occidental Annexation in the basic property tax levy Therefore, the final budget will reflect an increase of $300,000 in the property tax account, and a decrease of $235,000 in the County Road Tax account, which will result in a net increase of $65,000 in the Street revenue budget. We believe the current request for the property tax levy is justified by the following conditions (1) The property tax is needed to help meet mandates and contractual obligations, principally Public Safety pensions /medical costs. Attachment 2 demonstrates the amount of property taxes dedicated to these areas (2) In the Street budget, property tax represents nearly 70% of all revenue in this budget. (see Attachment 3) Investing in maintaining and repaving the City streets has been a high Council priority for several years (3) Property tax is also a key revenue source for the Parks and Recreation Division, representing almost 45% of all Parks revenue Parks maintenance is supported entirely by property tax, while other programs such as the Senior Center and Aquatics are supported in part by the property tax. The cost to maintain and operate these facilities increases annually (Also see Attachment 3) (4) Again this year, the City is not expected to collect the full levy because of higher senior citizen exemptions, delinquent taxes and other uncollectible accounts. For the year 2008, the City is budgeting conservatively and estimating a reduction of up to 3% in actual collections from the authorized levy offset by a portion of delinquent taxes that are predicted to be collected (5) Yakima's per capita property tax ranks $66 below the average of comparable Washington cities with populations of 30,000 to 85,000 in 2005, the most recent year this information has been compiled. Yakima ranks 9th out of 12 cities in this group Further, for these same cities, Yakima's total per capita revenue collected from all taxes, fees and charges is $639 dollars less than the average and ranks 12th out of the 12 cities Our residents are currently taxed substantially Tess than other similar size cities (see Attachments 2 & 4) i var) 2008 Property Tax Agenda Statement — Continued page 4 of 4 (6) The City's current property tax levy represents only 25% (approximately 1/4) of the total property taxes paid by City residents The State, local School District levies and County government receive approximately 3/4 of all property taxes paid (See Attachment 5) (7) Finally, Public Safety continues to be Council's highest priority, and even with recent enhancements to the Criminal Justice program funded by a voted county sales tax and a gain in property taxes as a result of the City's annexation into the Library District, the Police Officers per thousand of population is 1 63 in 2008 —still 13 officers below the Western States Average of 1 8 officers per thousand. In conclusion, based upon the previous discussion, property tax is a vital component of General Government revenue Management/budget staff respectfully requests the passage of both Ordinances A and B to set the 2008 property tax levy, which is the basis on which the 2008 budget was developed. Note In response to Council's request, a packet of supplemental information on the latest impacts of the Supreme Court decision regarding the invalidation of Initiative 747 is being compiled, and will be submitted to Council Friday, November 16 EXHIBIT I City of Yakima Property Tax Limitation Calculation (Dollars in Thousands) 2007 Tax 2008 Assessed Rate Levy Values Applied Dollars Prior Year (2007) = Base $4,586,923.853 $3 1165 $14,294,953 1% Increase $142,950 Base 101% $14,437,903 Valuation Increase (8 %) $366,000 466 N/A $0 New Construction $80,540.276 $3 1165 $251,004 State Assessed Value $3 1165 $0 Tax Limit Before Annexations $5,033,464.595 $2.9182 $14,688,907 Add for Annexation $105,917 948 $2.9182 $309,090 Limit for Subsequent Years $5,139,382.543 $2.9182 $14,997,997 Plus Contingency (And Refunds) $150,000 Total- ordinance $15,147,997 State of Washington Constitutional Limit Assessed Valuation $5,139,382.543 $3.6000 $18,501,777 Less: Library Levy (Estimate) $0 475 $2,441,207 2007 Levy for Collection in 2008 (Estimate) $3 125 $16,060,570 cje 11/15/2007 Attachment #1 GENERAL GOVERNMENT REVENUE (BASED ON 2008 BUDGET OF $55 7 MILLION) 29.0' 19.7' 7.3' 4.2' Sales Tax Franchise & Intergovemment Sr Other Utility Tax State Shared Revenue Revenue ($16.2 Million) (x$1111.0 Million) ($4.1 Million) (2.3 Million) rr7 w 7; -; ; 'F' f 4 }' BL ''''''' `�. -. t ' 44, ' .3 ` - t ., r ItM -" S i ' j � Y q " tTH7 �[ltYYa) A T [P16RK SIA AI -K¢ G n >tiCniu T M6PoKA5 .r..rr -Y I`9 S , � "� ; i 1 . � a Z l �r ul t r . N� r o " 4 uti e ff , Lt 4 a fi I t w 3 1 �i ����,.,,� f v p.,�s��t�� !a � s � �r y � "'��'r�'� J �''�� �^ � ' � �° ' �A 3 ry y c a h ��'P h s » -' � q > �T' + -r` g 4 d i t ; ' . r t � 3 x-7t',�` i l t : f tj, � r �„ A R J, ? iJ � �Fa! f4.t s S o , d4 t 0. r.w F i� c . t$' °"it , 4 I 1 fg t•. -, i , sa i' its`° �' 1. x ! 1 - a I I 4 , a � ,t,,� i t \\ wa cvr, ro-c n i s � � R # �. Y �Yt . i t ' '�' - ✓x�aG s � ,.�i 7 `, .. ' i i ff L � :„.. 4 J'� r , ' - p i 'li i � f � t ; i ` tyke c+1 f s� ��IE * .11,1 �0F.41 - � ! r f - 'a' iy ._..., 'SBA.' i nio Y,� ^',t " `t e , ,..« 4 23.3 11 5.5' Property Tax Licenses, Permits Fines & ($13.0 Million) & Charges Other Taxes for Services ($3.1 Million) ($6.1 Million) 0% 25% 50% 75% 100% GENERAL GOVERNMENT RESOURCES THREE YEAR COMPARISON % OF 2008 vs. 2007 2006 2007 PERCENT 2008 2007 INCREASE PERCENT SOURCE ACTUAL ESTIMATE CHANGE BUDGET TOTAL (DECREASE) CHANGE General Sales Tax $12,698,230 $13,255,000 4 4% $13,652,000 24.5% $397,000 3.0% Criminal. Justice Sales Tax* 2,290,157 2,324,000 1.5% 2,514,000 4.5% 190,000 8.2% Property Tax 12,580,094 12,709,202 1.0% 12,978,002 23.3% 268,800 2.1% Franchise & Utility Taxes 10,662,519 10,716,000 0.5% 10,987,792 19.7% 271,792 2.5% Charges for Services 4,903,679 5,106,599 4.1% 5,246,518 9 4% 139,919 2.7% State Shared Revenue 2,664,433 3,016,740 13.2% 2,908,550 5.2% (108,190) (3.6 %) Fines and Forfeitures 1,309,431 1,373,400 4.9% 1,378,700 2.5% 5,300 0.4% Other Tax 1,964,259 1,655,800 (15.7 %) 1,726,200 3.1% 70,400 4.3% Other Revenue 1,235,017 1,308,364 5.9% 1,252,020 2.2% (56,344) (4.3 %) Transfers from other Funds 1,055,105 1,061,500 0.6% 1,115,000 1.9% 23,500 5.0% Other Intergovernmental 847,945 961,316 13.4% 1,163,368 2.1% 202,052 21.0% Licenses and Permits 741,492 820,500 10.7% 871,500 1.6% 51,000 6.2% TOTAL REVENUE $52,952,361 $54,308,421 2.6% $55,793,650 100.% $1,455,229 2.7% Beginning Fund Balance 6,375,430 6,935,112 8.8% 6,839,252 ($95,860) (1.4 %) TOTAL RESOURCES $59,327,791 $61,243,533 3.2% $62,632,902 $1,359,369 2.3% * Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non - general Governmental fund) for capital needs. (See section IV for details.) Attachment #2 The following graph depicts the 2008 budgeted allocation of the City's property tax revenues PROPERTY TAX ALLOCATION BY FUNCTION 2008 GENERAL LEVY PROPERTY TAX TOTAL — $14,529,732 Fire and Police o l � - y am Pensions N t ^ $2,953,680 1 $ I L Y � 20.3 ° /0 General Fund $5,855,850 w ,r sti ; 40.3% 1 >>� p i t4 L ' ` ; � i a[ 3 i F14. T '� i?'1� �. * y L' ' J 'F: �4 y * ir t � u p' 5 I"c a ' 4 , Parks t�•' + r 4'1" '' _ k_ $1,800,000 - * £ b t x.. 12.4`/0 qq s g n rl is d 5 R St R 1x ^� ,q1 e4} ;,10;! � �� lr:I Streets $3,920,202 27 0% 2008 PROPOSED GENERAL PROPERTY TAX LEVY 2007 2006 EST 2006 AMENDED 2007 2008 VS. ACTUAL BUDGET ESTIMATED BUDGET 2007 BUDGET General $5,865,893 $6,851,000 $6,851,000 $7,257,800 5.9% Library (1) 1,314,107 0 0 0 N/A Parks & Recreation 1,841,985 1,938,000 1,938,000 1,800,000 (7.1 %) Street & Traffic 3,314,344 3,920,202 3,920,202 3,920,202 0.0% SUB -TOTAL GENERAL GOVERNMENT 12,336,329 12,709,202 12,709,202 12,978,002 2.1% Fire Pension 1,498,895 1,536,367 1,536,367 1,551,730 1.0% TOTAL $13,835,224 $14,245,569 $14,245,569 $14,529,732 2.0% (1) Starting in 2007, the Library has its own levy Attachment #2 - Page 2 The City has compiled data from the State Auditor's Office that identifies per capita property tax for comparable cities throughout the State The following chart compares the City's per capita property tax income for 2005 (the last year information is available) It shows the City of Yakuna's property tax per capita is $157, which is $66 less than the average of all the comparable cities. Yakima ranks fourth lowest in tax per capita of the 12 comparable cities. 2005 PER CAPITA PROPERTY TAXES COMPARABLE CITIES BETWEEN 30,000 AND 55, IN P OPULATION (rounded to the closest dollar) $384 $400 - Yakima s per capita property tax is $157 which is $66 less '�n? �yx{ $350 $302 $309 'ft than the average city �'__ ¢&., ty per capita of $223 $281 , g t , }- .ate . ` i; t 9 i $300- $253 i ' 5,1. col ti c t i i ,' $230 :asi.,_.,¢_ fi l5j ,i iw,� $250- $209 { 7 r i , iZ # $ $157 $175 - ' i ! y ' .,a ",1 ' ' A' " +` � r z i $200 $ l a e i F ; ti I1 § T I ", $13o $13s 1 :-- l }gy t'i tai 1' , t ' i . il l ax . ` • i $150- $111 t t+ ' I 4 tj s. f -1 , �k, �,t t $ � , k `l t a . Ixti, ; ``&,.. 1 t Y 4 :. I I fj `�) #. ,, ' °N f �l '. t `` -- y 1 }; d { V 'd,.,�3 L!if, I $100 . ; a �: .� t pr * ?, t t „ k r � 7�a'Mt ;'��` �' ?� zr � � S'+ � Y G z k l� 1 i '?�l� � i " s I d ,. w 1 a r , r 1 : if`" t 'hi Ittl ? ta,.t g 3, w i� " U t ; t 'f, �`t { 1 1 , 0. -. 1 r r�f e � .4 $50- '.1 -�,+' 1 t I 1 z r $ 3 �1 ', (t . yr eR 1 �' su' ti y i ; y "w Sri, _ ��:��' j . W . t.4Mi S� . �' Ne h 4 . ,. DwY c '7 ( i s y r i ' ; {{rt t � Pasco Walla Kennewick Yakima Bellingham Olympia Richland Kirkland Auburn Kent Redmond Renton Walla Attachment #3 PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE 2008 BUDGET YEAR 100% 7 Y /� jj � j 7t /ivy 80% -�- x, t 4 / A: 1,w,: 47 i !! r �� f 96% .,fi : 30% s -; - 20% - 10% 16 % + Y "- � - .i."4:1,__ • General Fund Parks Streets Fire Pension 0 % Property Tax 0 % Other Revenue Attachment #4 The largest revenue source for the General Government Funds is sales tax. Yakima is in the lowest third of per capita sales tax compared with similar cities in the State. However, Yakima is also in the lower 1/3 of rankings in all other revenue comparisons per capita and is the lowest out of the twelve cities compared in combined per capita revenue Yakuna's $1,139 per capita taxes is $639 below the average of $1,778 based on 2005 actual data, as demonstrated in the chart below The most important conclusion from this analysis is that the City of Yakima has a very limited revenue/ tax base compared with most cities of its size in the state, and yet provides similar or enhanced services and programs to its citizens 2005 PER CAPITA TOTAL REVENUES* COMPARABLE CITIES BETWEEN 30,000 AND 85,000 IN POPULATION (rounded to the closest dollar) $3,000- $2,573 Yakima s per capita total revenue is $1,139, which is $639 52,175 - -_, $2,500- less than the average city per capita of $1,778 52,081 $2.145 $2,145 ei+;� $1,870 ff a. 4.61 $1,797 a: ml .z 1 Y , MI z f• y t. $2,000- $1,651 , ,5� 5 4 � +'� li a r��,. t' $1,422 �.. I'!} r r... * 1 f' , a. Aj' d ' L 3 Y , f ,� 1 , 2 `�• l u ' r;' I u4 ci t ' '; 0, 1 h j $1,500- $1,139 $1,151 $1,189 t t w c 1.t 3 ' 1 `� ? ,,,� e t, a rt „,{?, _ 4 i 0� a d (( '-..pi h tl Al t l a k a$ iti v � l • ....a..., � I._.. ._, t � +" - �pi .�' I � u '��' 1r'x S � 1 r4'. 1 �' �� : w, ;�; $1,000- 4.4','-';',.1 ty .: no "i ' J 1' �rh n c + l ,r'3 a 4t i : r ., J t ! t �j l. , t i I � ? 6 E .,tl h l P:11 6 3 ' 4 (41 , i tj 1 , M'I'6( 44 . llt�. M atat7� y �� '�' il G �i � �� r 1 , ,' t w a' 1 la i �Y t4 1 fP g S , ;I R' W { 3 1 m t §, 1 ' 1 F 0 A' , t pA t ' 1 � i 4: h . l l r l „ 3i ,,, lik) A f V L 1 i s . l 0,-F !�`� ., , S' RI qg $500 J fR '� 4 4 fii: a f 1 d i :. to ] V, •'1 i 6' e �t}v � '� S t " y 1 . 1 . } !1 t r y �i , � {p F � �r3; . e. ' ' i ,`,0 V ' max'! � } . -. 44 L ",lr, ' 1 i,x- di iq k i-G ! aF F 4'M 1ll h h' 't " d ,tt �` Zvi � ' h � , :11. 2 W l 4 9, 1, }fi ' 1 0.4 { .�'.4. u,� �1 „ � ,.Yri .-:7 s,.i H�'�' ..�..- �'�`.a1 �rl F��', A �+�t 1 Y s �„ Y�'.i .,. ��. _.fir•. Yakima Pasco Kennewick Walla Bellingham Kent Kirkland Olympia Auburn Renton Redmond Richland Walla ' Data compiled from the State Auditor's Local Government Comparative Statistics. Includes state and federal grants, taxes and charges for services, and excludes debt proceeds. Attachment #5 PROPERTY TAXES The total property taxes paid by property owners within the City of Yakima includes taxes levied by several governmental entities, the State, School Districts, Special County wide voted levies and the City's general and special voter approved levies. The percentage of the total property taxes levied by, and allocated to, each individual governmental entity will change slightly from year to year. The City's portion is generally under 30% of the total amount collected. (Refer to the following graph and chart for how the 2007 property taxes were allocated between these governmental entities.) 2007 PROPERTY TAX DISTRIBUTION Yakima School District City of Yakima Library .37` .25° 04' + a r t { 4 $ t`1:Y;sc f' ; w* 11 ■■ ATTktRfi4A$( 3 FANCCS4 O C4? iTa7;YO FK�7: .. . l "'�9 . i ' p.`1 F � , , ',,fiFF Fet y - z . , f , . A ' 212 ; 5 'sf , { l i „ ' 4 r.gili t J s `41111 N t It ' fi i 4 I C 6 u � i 1 4> XrDi= i '✓�{:�.'r " v.A=7az i i. v ‘trig,! l ? 4. Si Hags* , 1 F 4 1 . �.. 1 , _1 it 1 o 4 i � - d^ S`f t .` 1mY— !r .. K ' �.'+' r � y,,Y7` ,. � � ' �' � �r � � � e � �` t � t f' + i:' �i+ ?r � tV ' s, v r s t ! P. kt q : { � '� s S / &�,�..�� xa � � � � '� ✓7� � y � � i .�'�F �, „� 1r � `� e t# ,t't �' ,I x., e ' i i yqn. {4 a, '4t v P t . W. p r! r i$ t S Y Y f y r a i' } , 0` +d+ f?r ?> i t D a v . `, r a I ,. h ; I £ t .i _ r r ,U �L.uta ttva ' t K , , 11',,,. b +"'" tt ! + a k''',0 tk ✓ite: w. ! R .t+ n '° is t, �� k f 4,- y t i a )4ii i - ' � "M_ a '� ^ � 1,46.- ,, ,. +co "`4 E„ I`1 4 �' yf I � +.cc� k 1 r# a�� V - t -Ip ' I R . 24 � � t/ t R ) • - - , CU L rK ti .4 : a , 4 i ' , t rJ 5 i.r:S. di% ' A ., eYSE`Y4i' ! 15!'''‘ c nr n rat ;P" N.z.. ; State of Washington Schools Yakima County EMS 18' 14' .02' 1 1 1 I 0% 25% 50% 75% 100% CITY OF YAKIMA PROPERTY TAX - In 2007, a typical City resident pays approximately $12.61 per thousand of assessed value on property taxes. Only $3 18, or about 25.3% goes to the City, with the balance divided between the County, schools, and other special districts. DESCRIPTION OF HOW PROPERTY TAXES ARE LEVIED — The following explanation is included to help the reader understand how property taxes are assessed to the individual property owners. To aid in this explanation three commonly used terms must be understood, they are Property Tax Levy, Property Tax Rate and Assessed Value. Property Tax Levy - is the total amount of money that is authorized to be collected. Assessed Value - is the total value, as determined by the County Assessor's Office, of all property within the City Property Tax Rate - is the property tax amount that will be applied to every $1,000 of assessed value; the rate is determined by simply dividing the levy amount by the total assessed value amount and dividing that number by 1000 Attachment #5 - Page 2 In other words, an increase in assessed value does not affect the total amount levied or collected by the governmental entity Nor does it automatically affect the amount the property owner must pay The dollar amount of the levy is restricted by law — the assessed value is simply the means to allocate the total dollars among the property owners. A change m one property owner's assessed value will affect his /her property tax bill only if the change is significant enough to change that property owner's percentage of the -total assessed value of all property within the taxing districts. (Example: if the amount of property tax levied does not change from one year to the next, and every property owner's assessed value goes up 3 %, there will be no change in the property tax owed by any of the property owners. This is due to the fact that everyone's assessed value increase by the same amount, therefore, every property owner's percentage of the total tax levy remained the same.) PROPERTY TAX CODE AREA #334 (YAKIMA SCHOOLS) - CONSOLIDATED LEVY AND RATES 2006 ASSESSED VALUATION - 2007 TAX YEAR AMOUNT PERCENT 2006 2007 OF PROPERTY TAX LEVY RATE LEVY LEVY CITY LEVY General Fund 1.504 $6,900,394 Parks Sr Recreation 0.423 $1,938,000 Street & Traffic Operations 0.855 $3,920,202 Firemen's Relief & Pension 0.335 $1,536,367 Total Operating Levy $3.117 $14,294,963 24.83% Total Bond Levy $0.065 $300,000 0.52% TOTAL CITY LEVY $3.181 $14,594,963 25.35% OTHER LEVIES School District #7 37.17% Operation & Maintenance $2.933 $13,278,497 Bond Redemption $1.794 $8,122,208 State Schools $2.254 $10,337,092 17.95% Library $0.484 $2,21Z778 3.85% Yakima County $1.578 $7,236,331 13.85% Yakima County Flood Control $0.092 $422,456 Juvenile Justice Bond $0.069 $315,122 EMS Levy $0.230 $1,056,369 1.83% TOTAL OTHER LEVIES $9 433 $42,985,853 74.65% TOTAL LEVY CODE #334 $12.614 $5Z580,816 100.00% MEMORANDUM TO The Honorable Mayor and City Council members FROM Dick Zais, City Manager Ray PaolaIla, City Attorney Rita DeBord, Finance Director Cindy Epperson, Financial Services Manager SUBJECT Property Tax Supplemental Information DATE November 16, 2007 On Thursday, November 8, 2007 the Washington State Supreme Court ruled that Initiative 747 (1 -747), which set the annual growth limit of the base property tax levy at 101% of the prior year levy, was unconstitutional At the November 13 Budget Review Meeting, Council directed staff to prepare a report on the ramifications of this ruling on the setting of the 2008 property tax levy for the City of Yakima. Because of this decision, the property tax levy calculation reverts to the pre- Initiative 747 limit, which is an increase of up to the Implicit Price Deflator (IPD —a cost of living index) by a simple majority vote of council, with up to a 6% increase over the prior year base levy authorized, if substantial need is determined by a super - majority vote of council There is also a possibility that the prior levies that were suppressed below the IPD because of the initiative can be accessed, up to the statutory maximum rate per thousand. Attached are the following documents • A memo by the City Attomey explaining the legal options /ramifications applicable to the 2008 levy; • Alternate calculations of the levy 1) increasing by 6 %, and 2) increasing to the statutory maximum rate per thousand of $3 10 per thousand, • A memo from Dave Cook, Yakima County Assessor, • The news bulletin from the Association of Washington Cities (AWC) on this issue, • An article from the Seattle Post- Intelligencer Should Council desire to declare a "substantial need" by super - majority for a property tax levy based on the pre - Initiative 747 limit of 106 %, they could choose to direct staff to bring back the appropriate ordinances, and determine a meeting time prior to November 30 to act on the property tax levy CITY OF YAKIMA LEGAL DEPARTMENT 200 South Third Street, Yakima, Washington 98901 (509) 575 -6030 Fax (509) 575 -6160 MEMORANDUM November 16, 2007 TO The Honorable Mayor and Members of the City Council Dick Zais, City Manager FROM Raymond L Paolella, City Attorney SUBJ Supreme Court Decision on Initiative 747 Property Tax Rules On November 8, the Washington Supreme Court ruled that Initiative 747 (1 -747) is unconstitutional 1 -747 was passed in 2001 limiting annual property tax levy increases to one percent. Since 2001, the City of Yakima along with Cities around the state have passed the annual real property tax levy with an increase of no more than one percent. The Supreme Court's decision invalidating 1 -747 takes effect on November 28 This will create a two -day window for Cities to finalize their 2008 tax levy based upon the state law in effect prior to 1 -747 The prior legal limit for tax levies was six percent. The statutory deadline for finalizing the tax levy is November 30 RCW 84 52 020 Governor Gregoire is strongly encouraging Cities to limit their property tax levy to one percent even though the law as of November 28 would allow up to a six percent tax levy In addition, the Association of Washington Cities reports that some Cities are considering passing an ordinance declaring a "future substantial need" to exceed the one percent levy as a contingency for possible future use of "bank levy capacity " Bank levy capacity refers to the increment of levy authority between the implicit price deflator (2 084 %) and the six percent overall limit under pre -I -747 statutory authority We will continue to update the City Council of any further developments in the law relating to the property tax levy as that information becomes available from the State Department of Revenue and Attorney General RLP /pm City of Yakima "What -If" Pre - Initiative 747 Options Property Tax Limitation Calculations (Dollars in Thousands) 2007 Tax 2008 Tax 2008 Assessed Rate Levy Rate Levy Values Applied Dollars Applied Dollars 6% Maximum With Banked Capacity (to Maximum rate - $3.10) 6.00% 7 40% Prior Year (2007) = Base $4,586,923.853 $3 1165 $14,294,953 $3.1165 $14,294,953 Increase $857,697 $1,057,827 New Base $15,152,650 $15,352,780 Valuation. Increase (8 %) $366,000 466 N/A $0 N/A $0 New Construction $80,540.276 $3 1165 $251,004 $3.1165 $251,004 State Assessed Value $3 1165 $0 $3 1165 $0 Tax Limit Before Annexations $5,033,464.595 $3 0602 $15,403,654 $3 1000 $15,603,784 Add for Annexation $105,917 948 $3.0602 $324,130 $3 1000 $328,346 Limit for Subsequent Years $5,139,382.543 $3.0602 $15,727,784 $3 1000 $15,932,130 Plus Contingency (And Refunds) $150,000 $150,000 Total- ordinance $15,877,784 $16,082,130 Levy request -101% $15,147,997 $15,147,997 Gain over 1% calculation $729,787 $934,133 State of Washington Constitutional Limit Assessed Valuation $5,139,382.543 $3.6000 $18,501,777 Less: Library Levy (Maximum) $0.500 $2,569,691 2007 Levy for Collection in 2008 (Estimate) $3 100 $15,932,086 cje 11/16/2007 T SERVICE - /� �� ` 1P -- g � � r } .v s Assessor o 82 E0 ® 0 Courthouse o Room 112 Yakima, WA 98901 a (509) 574-1] 00 `, CD f9 0 k hy Toll Free 800-572-7354 FAX (509) 574-1101 -. ; website www co yakima wa us /assessor L��o�e,ry �_ November 12, 2007 To All Taxing Districts From Dave Cook, Yakima County Assessor Subject 2008 Property Tax Levies and the I -747 Supreme Court Decision As all of you are probably aware, the Supreme Court's recent decision regarding the 101% property tax limitation provision defined in Initiative 747, that we have all operated under since its passage in 2001, was declared unconstitutional What this means for all of us, exactly, is still undeteiniined. The Department of Revenue Property Tax Division is currently working on this issue and is supposed to have guidelines published shortly The Attorney General's office is reviewing whether there are grounds for filing a request for reconsideration with the Supreme Court, which will automatically stay their initial determination. The Governor has stated on numerous occasions that she intends to ask the legislature to reinstitute the property tax cap in the upcoming session The Governor has specifically requested that NO districts raise their levies above 101% plus New Construction, Annexations, and increase in State Assessed Values pending possible reconsideration of the court's ruling or legislative action. 1 concur with the Governor and strongly urge you to follow her request and set your 2008 Property Tax budget requests acc As always, if my Property Data Coordinator, Jacob Tate, or I can be of any assistance to you to preparing your property tax budget resolutions or levy requests, please feel free to contact us Sincere y, - •4 ave Coo Yakima County Assessor ASSOCIATION OF WASHINGTON 1076 Franktin Street SE • Olympia, WA 98501 1346 C 1 1 1 E 5 360- 753 -4137 • Toll Frr 1-800-56? $981 - Fax: 360- 753 -0149 • insurance $ervkes Fax 360- 753 -0148 rtetie ^�A �. �' +ffrH, a � ,`� tab.. � 'Z �. 71+ $ .. � � ,.:. ; � f . n " �-�r Supreme Court rules on Initiative 747 and Initiative 960 passes Supreme Court Rules on Initiative 747 The Supreme Court ruled today that Initiative 747 is unconstitutional I -747 was passed in 2001, limiting annual property tax increases to one percent The court's opinion states that the initiative failed to accurately inform voters of the impact of the change, because the text of the law used in the initiative showed that the initiative reduced the general property tax levy from a limit of two percent to one percent However, in reality it reduced the limit from six percent (or IPD for cities and other districts over 10,000 population) to one percent 1 -722 implementing the two percent limit had been declared unconstitutional by the Supreme Court earlier that same year This court decision means that the law is back to what it had been prior to the passage of I -747 in 2001 - a 6% cap This issue will be the subject of debate during the next several weeks and the Legislature is very likely to address it early in the 2008 legislative session We realize many cities are in the process of adopting their budgets Cities should strongly consider the political and legal ramifications and use extreme caution if considering property tax increases above 1% Some in Olympia have already discussed requests for reconsideration by the Supreme Court which would delay the effective date of the decision Others are asking for the inclusion of a retroactive clause in a bill next year that would impact 2008 levies set in 2007 And the Governor is asking local governments not to increase their property taxes as a result of this decision - see below for a complete copy of her statement. Supreme Court Opinion Statement from Governor Gregoire on Overturn of I -747 I know that voters must be disappointed by the court decision to overturn I -747 As we know, voters approved I -747 by a wide margin in 2001 As Governor, I am asking the state, counties, cities and all other taxing districts to assure me that they will not increase property tax levies for their upcoming budgets as a result of the court decision In addition, I will be asking the Legislature, in January, to work with me to thoughtfully reinstate a property tax cap We heard loud and clear on Tuesday evening that voters are concerned about their tax burden I believe that it is http. / /www.magnetmail. net / actionsl email _ web _ version.cfm ?recipient_id =259 1166 &mes. 11/9/2007 R COUNCIL INFO ONLY ES rage G OT . our responsibility to move quickly, recognizing taxpayers' concerns and reinstating the will of the voters Initiative 960 passes November 6 General Election I -960 (concerning tax and fee increases imposed by state government) passed this week with 52% of the vote The initiative requires voter approval or two - thirds of both the Senate and House to increase taxes The initiative also expands the current legislative fiscal note process to include additional public notification when the Legislature considers tax bills, including voting records on proposals, and a 10 -year estimate of the costs of legislation for all versions of the proposed bills at each state of the legislative process The initiative also • requires legislative approval of state fee increases, and d requires an advisory vote during the next general election for all revenue increases approved by the Legislature that are not otherwise approved by the voters While the initiative does not directly impact cities, we anticipate significant secondary impacts given the constraints this initiative will place on the State Some have already questioned the constitutionality of this initiative and we do expect legal challenges Initiative Measure 960 OFM summary of fiscal impacts For more information please contact Jim Justin (jimj@awcnet.org), Sheila Gall (sheilag @awcnet.org) or Alicia Seegers Martinelli (aliciam @awcnet org) If you wish to unsubscribe from this mailing, click here Association of Washington Cities 1076 Franklin Street SE, Olympia WA 98501 http. / /www.magnetmatl. net / actions /emal_web_ version.cfin ?recipient_id= 25912166 &mes 11/9/2007 Supreme Court Rules on 1 -747 Challenge The State Supreme Court today ruled that Initiative 747 property tax limit is unconstitutional Voters approved the measure in 2001 The potential impact of the changes is as yet undetermined Traditionally Supreme Court decisions have a 20 day delay before becoming effective Until the effective date is determined it is unknown what if any effect there would be on the state and local property tax levy for the 2008 budget period The Supreme Court has affirmed a lower court ruling that Initiative 747 is unconstitutional Initiative 747 limited taxing districts to 1 percent annual increases in property taxes, not counting taxes from new construction or voter - approved taxes Affirming means the high court agreed with the lower court's ruling The courts ruled that the text of Initiative 747 misled voters as to its impact on existing law This means that annual increases in taxes now will be governed by Referendum 47, which preceded 1 -747 Referendum 47 allows local taxing districts to increase taxes on existing properties by up to six percent annually Taxing districts cannot go back and collect more taxes back to 2002 as a result of that ruling The savings to property owners are permanent Some taxing districts will be able to recalculate their maximum levies as a result of the overturn of 1 -747 This means they can used what's called "banked capacity" to increase future levies by more than 6 percent a year This decision does not mean that property taxes will go up 6 percent in 2008 Many districts limited their increases to the rate of inflation under Referendum 47, which was in effect from 1998 through 2001 The 1 percent limit has had a significant moderating effect on property taxes despite recent large increases we've seen in assessed valuations recently Banked Capacity One question that we have received is what impact does this decision have on banked capacity and will local governments be able to increase property taxes by up to 30 percent in 2008? The 30 percent figure being quoted apparently refers to the fact that taxing districts with fewer than 10,000 residents were able to retain a "banked capacity" of up to five percent a year from 2002 through 2007, which is the difference between the 1 percent increase that was allowed under 1 -747 and the six percent they could impose under Referendum 47, which was in effect prior to 1 -747 and will be the law now that 1 -747 has been ruled unconstitutional However, these smaller districts total only 15 percent of total local regular levies and 6 3% of all levies The remaining 85 percent of local regular levies is levied by jurisdictions of more than 10,000 residents, whose banked capacity generally is limited to the difference between 1 percent and the Implicit Price Deflator (IPD) during the past six years Since the IPD was relatively low during this period, their maximum banked capacity would be about seven percent. In either case, this banked capacity is reduced or eliminated for districts that have had voter - approved levy lid lifts, such as many fire districts have done In addition, these districts cannot increase their maximum tax rates beyond those set in the state constitution, which has the practical effect of limiting how much they can increase taxes For example, if a county has a current rate of $1 73 per $1,000 assessed valuation, it can only increase its rate to the statutory maximum of $1 80 per $1,000, regardless of how much banked capacity it might have Revenue Impacts Property owners have saved an estimated $1 63 billion in property taxes since 2001 under 1 -747, and property taxes today are 6 6 percent lower than they would have been in the absence of the 1 percent limit. A $527 million reduction in 2007 alone is due to the cumulative effect of the limit. Taxes in 2007 are about 8 percent lower than they would have been in the absence of the limit. The Department estimates that state and local property taxes would increase by $58 5 million in 2008 if taxing districts were to resume increasing taxes by the same percentages they did prior to 1 -747, assuming the districts don't use any banked capacity they may have Next Steps Department staff are analyzing the potential impact of the decision on property tax levies by taxing districts We will be answering questions for county assessors and other local officials regarding the impact of the decision and will be providing them with additional guidance on the impact on 2008 taxes The Governor has asked that the state, counties, cities and all other taxing districts to not increase property tax levies for their upcoming budgets as a result of the court decision The Governor has also indicated that she will be asking the Legislature to work to reinstate the property tax cap The Attorney General's office is reviewing whether there are grounds for filing a reconsideration with the Supreme Court. The Department will be posting additional information on its website When we have more information available we will get back with you on what steps are being taken in regard to this decision . Property tax limit rejected Page 1 of 2 SEATTLE POST - INTELLIGENCER http. / /seattlepi nwsource.com/local/338833_tax09 html Property tax limit rejected State high court action could mean higher levies Last updated November 8, 2007 9 40 p m PT By NEIL MODIE P -I REPORTER Tossing a potential grenade into the 2008 political scene, a divided state Supreme Court ruled Thursday that Initiative 747, a 2001 measure limiting property tax growth to 1 percent a year, is unconstitutional. State Attorney General Rob McKenna, whose office unsuccessfully defended I -747, said the 5 -4 decision means state and local governments "now have the authority to increase property tax levies by up to 6 percent a year " It was the third time the court has invalidated voter - approved, tax - limiting ballot propositions sponsored by for - profit initiative promoter Tim Eyman. Washington voters passed 1 -747 in 2001 with 58 percent approval But the Supreme Court upheld a 2006 decision by King County Superior Court Judge Mary Roberts, saying the initiative was improperly based on a law passed as Eyman's earlier Initiative 722, which already had been found unconstitutional As a result, the five - justice majority wrote, "the text of the initiative misled voters about the substantive impact of the initiative on existing law" by making the size of the fiscal impact appear to be less than it was. Republican legislative and political leaders, eyeing what for them could be a juicy campaign issue, immediately challenged Democratic Gov Chris Gregoire and the Democrat - controlled Legislature to reinstate I -747's 1 percent tax - increase limit. Failure to do so, they said, could lead to "massive property tax increases " "Now Governor Gregoire has a responsibility to reimplement the clear intent of I -747 and keep the 1 percent property tax lid voters approved," state Republican Party Chairman Luke Esser said in a statement. "Governor Gregoire must decide whether she'll side with taxpayers or with government." Gregoire issued a statement calling for "reinstating the will of the voters" and promising to ask the Legislature in January "to work with to thoughtfully reinstate a property tax cap " But she didn't say whether it should be as tight as 1 percent. Last year, after Roberts ruled 1 -747 unconstitutional, the governor declined to say what she thought the correct limit should be, but she implied that it should be higher than 1 percent but lower than the old 6 percent limit. In her statement, the governor called for a voluntary tax - increase moratorium, urging state and local government entities "to assure me that they will not increase property tax levies for their upcoming budgets as a result of the court decision." Most local governments are in the midst of preparing their 2008 tax and spending plans. http. / /seattlepi.nwsource com/pnnter2/ index. asp ?ploc =t& refer = http. / /seattlepi.nwsource c 11/14/2007 . Property tax limit rejected Page 2 of 2 Gregoire also acknowledged the message sent by the outcomes of several tax - related measures on Tuesday's general election ballot, including passage of a new Eyman initiative to make tax increases more difficult. "We heard loud and clear on Tuesday evening that voters are concerned about their tax burden," she said. Dino Rossi, her 2004 Republican election opponent who is challenging her again in 2008, called on the governor and the Legislature to "enact the will of the people into law " Rossi said "My opponent doesn't support the 1 percent property tax cap That is troubling, but not surprising, since she is after all the governor for the government who is more concerned about making people pay higher taxes than honoring the will of the voters." House Majority Leader Lynn Kessler, D- Hoquiam, said she thinks the Legislature should reinstate the 1 percent lid. Senate Minority Leader Mike Hewitt, R -Walla Walla, also called for reinstating I -747's cap, saying the effect of Thursday's ruling is that "the lid now dust jumped from 1 to 6 percent, opening the door to massive property tax increases." The Supreme Court agreed with Roberts' 2006 opinion that I -747 was unconstitutional because it purported to amend I -722 after the latter was declared unconstitutional in 2001 -- even though that ruling occurred after I -747 was drafted and filed, and dust two months before voters approved it. I -722 would have capped property tax increases at 2 percent. Roberts had said that with I -722 invalid at the time of the election on the later initiative, I -747 reduced the tax - increase limit to 1 percent from 6 percent, but that voters were incorrectly told they were amending I -722 to reduce the cap to 1 percent from 2 percent. That could cause a voter to think it would result in "a substantially different impact on the public coffers, as well as the perceived benefit to the individual voter's purse," the Supreme Court majority said in an opinion written by Justice Bobbe Bridge The four dissenters, in an opinion written by Justice Charles Johnson, disagreed, saying, "No reasonable argument can be sustained that voters were in any way misled or confused by the effect of I -747, which expressly and was specifically aimed at lowering the tax growth to 1 percent. "The majority seems to suggest that the voters are unable to think or read for themselves, when in fact our democratic process is based on the assumption that voters do in fact read and understand the impact of their votes " This report includes information from The Associated Press. P -I reporter Neil Modie can be reached at 206 - 448 -8321 or neilmodae @seattlepi.com. © 1998-2007 Seattle Post - Intelligencer http. / /seattlepi.nwsource com/pnnter2/ index. asp ?ploc =t& refer = http. / /seattlepi.nwsource c 11/14/2007