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HomeMy WebLinkAbout2012-046 2013 Ad Valorem TaxesORDINANCE NO. 2012 -46 AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance estimated revenue with estimated expenditures for the 2013 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $17,125,211 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 2013 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 $17,125,211 for the following purposes: General Government Levy Operating Funds $15,810,211 Firemens' Relief & Pension Fund 1,315,000 Amount of tax levy for General Government Purposes (1) $17,125,211 Special Purpose Tax Levy 293,000 Total Levy Amount (1) $17,418,211 (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, 2012. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 20, 2012. PASSED BY THE CITY COUNCIL, signed and approved this 20th day of November, 2012. AO.L r� ATTEST: oamn * r�. ��� , Micah Cawley, ayor `i -rw City Clerk * Si Publication Date: November`s Effective Date: November 20, BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. For Meeting of: November 20, 2012 ITEM TITLE: Public Hearing on Revenue Sources and Consideration of Legislation pertaining to Ad Valorem Taxes to be levied for collection in Fiscal 2013 Year: Ordinance A) Declaring the City Council's intent to increase the City's 2013 regular property tax levy up to 100% of the amount levied in the previous year, plus new construction and annexation.Ordinance B) fixing and levying the 2013 ad valorem property taxes and excess levy taxes for the City of Yakima. SUBMITTED BY: City Manager and the Finance Department CONTACT Tony O'Rourke, City Manager PERSON /TELEPHONE: Cindy Epperson, Director of Finance & Budget, 509.576.6771 SUMMARY EXPLANATION: Background State law requires several administrative and legal steps to establish the property tax levy. This agenda item includes two (2) separate ordinances. Ordinance A and B will set the property tax levy for collection in 2013, based on the limit of a 1 % increase (or the rate of inflation, whichever is less) over the prior year base levy, plus new levies for construction and annexation. (Note: RCW 84.55 defines the rate of inflation as measured by the Implicit Price Deflator (IPD) for consumer goods. For this year, the IPD increased by 1.3% from July 2011 to July 2012) 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, 2012 or the City will receive no funding from this source in 2013. The Commissioners have requested to receive this packet by November 21 so they can incorporate all of the requests into their required legislation Ordinance purposes are: Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2012 levels. This ordinance requires a simple majority to pass. It is required by RCW 84.55.120. This is legally necessary to increase the 2013 tax collections by any amount over 2012 levels. Ordinance B fixes the tax levy for collection by the City in 2013. 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 also requires a simple majority vote to pass. These ordinances are in substantially the same format as the prior year levy legislation. General Government Revenue Discussion In reviewing General Government revenue, there are 4 revenues that each make up approximately one fourth of the totali.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 26% of the total. Property tax as proposed is about 25 %; Utility Taxes as presented in the Preliminary Budget make up about 23 %; and all other revenue comprise the remaining 26 %. (See Attachment 1 for a summary of General Government revenues.) As the "great recession" lingered, the City's General Government revenue has remained flat. The 2008 actual revenue was $57.4 million, and the total hovered at that level for four years2011 actual revenue was $57.6 million. Because of Council's desire to preserve and enhance public safety, they approved a 6% increase in the utility tax rate for Wastewater, Water, Refuse and Stormwater at the end of 2012. This was estimated to generate about $2.0 million in 2012. The other significant event in 2012 is a 5% increase in sales tax through September, (growing to 6% through October). These 2 factors resulted in the 2012 revenue being estimated at $60.5 million, which is $2.9 million above the 2011 actual. Because there is still uncertainty in the national economy, (i.e. the pending "fiscal cliff', sluggish Gross Domestic Product (GDP) growth, persistent unemployment, etc.), 2013 revenues are forecast to grow by $1.4 million or 2.4 %. The proposed 1 % increase in Property Tax is a major component in the slight growth of total revenues. Even with this modest increase in revenues, there continues to be pressure on expenditures, and the budget has absorbed increases in various categories such as property and liability insurance; state pension rates; negotiated settlements for police officers and firefighters; and employee healthcare coverage. In response to these economic conditions, the City has exercised responsible budgetary restraint over the past several years. In August, 2012 Council adopted a Five -Year Financial Plan which identifies long -term strategies to balance the General Government budget going forward. In this plan, property tax is estimated to grow about 2% annually, comprised of the 1 % statutory maximum increase and 1 % new construction. The initial estimates from the County on the 2013 property tax levy included a growth rate for new construction of 0.85% which approximates our original budget estimate, so we are not anticipating any change in this revenue source from the Preliminary Budget. Property Tax Discussion The total 2013 City of Yakima property tax levy includes the 101 % levy, levies for voted bond issues, and amounts for annexations and new construction. The 2013 budget currently includes an estimated revenue of $16,644,000 for the regular levy, an increase of $286,000 (made up of an estimate of 1 % for the regular levy, and 0.75% for new construction) over the 2012 year -end estimate of $16,358,000. The voted levy debt is budgeted to be $293,000, the same as the 2012 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 $3.0830 per $1,000 of Assessed Valuation (AV), up from the 2012 rate of $3.0559. (The statutory limit is $3.60 less the Library levy, which is capped at 50 cents per $1,000. The estimate for the 2013 Library levy is 49 cents per thousand) -- the bond rate is estimated to be $0.05321 per $1,000, slightly less from $0.05448 in 2012. 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. A home with an assessed value of $150,000 in 2012 paid $458.39 for the regular levy, and $7.98 for the voted levy, for a total of $466.37. According to the preliminary valuation estimate provided by the County Assessor, the underlying assessed value of all taxable property in the City was virtually flat, so that the regular levy tax would be $462.45, and the voted levy would be $7.98 for a total of $470.43a slight increase of $4.06 in the total annual levy. 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 about 71% 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. The other major revenue source in this fund is Gas Tax, which is based on a "per gallon" charge. The economic downturn, coupled with increases in fuel prices has affected consumption -- the 2013 gas tax estimate is still below 2008 levels. 3. Property tax is also a key revenue source for the Parks and Recreation Division, representing about 36% of all Parks revenue. Parks maintenance is supported entirely by property taxes, 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 senior citizen exemptions, delinquent taxes and other refunds for disputed values. For the year 2013, the City is budgeting conservatively and estimating a reduction of up to 4% 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 $101 below the average of comparable Washington cities with populations of 45,000 to 125,000 in 2011, 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 $660 less than the average and again ranks 9th out of the 12 cities. Our residents are currently taxed and /or charged substantially less than other similar size cities. (See Attachments 2 & 4). 6. Finally, 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). In conclusion, property tax is a vital component of General Government revenue. Based upon the previous discussion, City management/budget staff respectfully requests the passage of both Ordinances A and B to set the 2013 property tax levy, which is the basis on which the 2013 budget was developed. Resolution Contract: Contract Term: Insurance Required? No Funding Source: APPROVED FOR SUBMITTAL: Ordinance X Mail to: Amount: Other Exhibit I, (specify) Attachments 1 -5 Expiration Date: Phone: City Manager STAFF RECOMMENDATION: City Management is recommending that City Council conduct a public hearing on the 2013 property tax levy, and then pass ordinances "A ", which declares Council's intent to increase the levy by 101 % above the prior year levy, and "B ", which fixes the levy amount. These ordinances follow state law imposing a 1 % increase in the property tax levy for 2013, plus new levies for construction and annexation, and are the basis on which the 2013 budget was developed and balanced. BOARD /COMMISSION RECOMMENDATION: ATTACHMENTS: Click to download ❑ Ordinance A ❑ Ordinance B ❑ Property Tax Limitation Calculation ❑. Attachment 1 -5 ORDINANCE A ORDINANCE NO. 2012 AN ORDINANCE relating to the annual property tax levy; declaring the City Council's intent to increase the City's 2013 regular levy up to 101% along with new construction, annexation and growth in state- assessed property values from the amount levied the previous year. WHEREAS, RCW 84.55.120 requires a taxing district that collects regular levies to hold a public hearing on revenue sources for the district's following year's current expense budget, including consideration of possible increases in property tax revenues; and WHEREAS, pursuant to RCW 84.55.120 and the City Charter, on November 20, 2012, upon due and proper legal notice, the Yakima City Council held a public hearing to consider the City's general government revenue sources for the 2013 current expense budget, and the total proposed property tax levy amount pertaining to 2013 revenues from real and personal property taxes; and WHEREAS, RCW 84.55.120 provides that no increase in property tax revenue, other than that resulting from the addition of new construction and improvements to property in any increase in the value of state - assessed property, may be authorized by a taxing district, except by adoption of a separate ordinance or resolution, pursuant to notice, specifically authorizing the increase in terms of both dollars and percentage; and WHEREAS, the City Council, after the public hearing on November 20, 2012, and after duly considering all relevant evidence and testimony presented, has determined that the City requires an increase in property tax revenue from the previous year, resulting from the addition of new construction and improvements to property and any increase in the value of state - assessed property, in order to discharge the expected expenses and obligations of the City, and as being necessary and in the best interests of the citizens of the City of Yakima; and WHEREAS, the amount of property tax levied for collection in 2012 was $16,667,323 for general government purposes; and WHEREAS, the discretionary increase in property tax levied for collection in 2013 shall be in the amount of $166,673, which is a percentage increase of one percent (1 %) from the previous year; and WHEREAS, the non - discretionary increases in property tax levied for collection in 2013 can only be estimated due to the absence of final values to be provided by the Yakima County Assessor, now, therefore, City of Yakima Property Tax Limitation Calculation Prior Year (2012) = Base 1% Increase Base 101% Valuation Increase (.1 %) New Construction (0.85 %) State Assessed Value Tax Limit Before Annexations Add for Annexation MMOO O M 2012 Tax 2013 Assessed Rate Levy Values Applied Dollars (Dollars in Thousands) $5,454,218.436 $3.0559 $16,667,323 $166,673 $16,833,996 $5,564.996 N/A $0 $46,210.513 $3.0559 $141,215 $3.0559 $0 $3.0830 $5,505,993.945 $16,975,211 $0.000 $3.0830 $0 Limit for Subsequent Years $5,505,993.945 $3.0830 Plus Contingency (And Refunds) Total- ordinance State of Washington Constitutional Limit Assessed Valuation $5,505,993.945 $3.6000 Less: Library Levy (Estimate) $0.490 2012 Levy for Collection in 2013 (Estimate) $3.110 $16,975,211 $150,000 $17,125,211 $19,821,578 $2,697,937 $17,123,641 cji� 11/13/2012 GENERAL GOVERNMENT REVENUE (BASED ON 2012 BUDGET OF $61.9 MILLION) 26.04 Sales Tax ($16,097,000) 23.3¢ Franchise & Utility Tax ($14,395,000) ATTACHMENT 41 6.4¢ 3.1c Intergovernment & Other State Shared Revenue Revenue ($3,945,605) ($1,918,650) Source General Sales Tax Crim. Justice Sales Tax(i) Property Tax Franchise & Utility Taxes Charges for Services State Shared Revenue Fines and Forfeitures Other Taxes Other Revenue Transfers from other Funds Other Intergovernmental Licenses and Permits Total Revenue Beginning Fund Balance Total Resources 24.0 Property Tax ($15,329,000) 11.8¢ 4.8¢ Licenses, Permits Fines & & Charges Other Taxes for Services ($2,951,500) ($7,275,905) 13,897,000 GENERAL GOVERNMENT RESOURCES THREE YEAR COMPARISON 2011 2012 Percent 2013 Actual Estimate $12,590,563 $13,150,000 2,612,126 2,670,000 14,845,465 15,043,000 11,544,231 13,897,000 6,465,872 5,920,605 2,945,617 3,046,390 1,569,946 1,555,000 1,388,470 1,395,500 614,179 631,973 1,173,438 1,248,308 1,030,315 1,152,441 842,272 777,700 $57,622,494 $60,487,917 9,710,900 9,948,220 $67,333,394 $70,436,137 Change Budget 4.4% $13,350,000 2.2% 2,747,000 1.3% 15,329,000 204% 14,395,000 (8.4 %) 6,544,205 3.4% 2,693,900 (1.0 %) 1,555,000 0.5% 1,396,500 2.9% 628,650 64% 1,290,000 11.9% 1,251,705 (7.7 %) 731,700 5.0% $61,912,660 2.4% 9,944,261 4.6% $71,856,921 % of 2013 Total 21.6% 4.4% 24.8% 23.3% 10.6% 4.4% 2.5% 2.3% 1.0% 2.1% 2.0% 1.2% 100.0% - 2013 vs. 2012 - Increase Percent (Decrease) $200,000 77,000 286,000 498,000 623,600 (352,490) 0 1,000 (3,323) 41,692 99,264 (46,000) $1,424,743 (3,959) $1,420,784 Change 1.5% 2.9% 1.9% 3.6% 10.5% (11.6 %) 0.0% 0.1% (0.5 %) 3.3% 8.6% (5.9 %) 2.4% (0.0 %) 2.0% (1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non - general Governmental fund) for capital needs. General Fund $8,711,775 52.3% 2012 PROPOSED GENERAL PROPERTY TAX LEVY — BY FUNCTION Fire & Police Pension $2,612,225 Parks $1,457,000 8.8% •eets 53,000 .2% ATTACHMENT #2 2012 2012 Est. 2011 Amended 2012 2013 vs. 2013 Actual Budget Estimated Budget Budget General $9,595,175 $9,934,000 $9,934,000 $10,009,000 0.8% Parks & Recreation 1,725,983 1,578,000 1,608,000 1,457,000 (94%) Street & Traffic 3,524,307 3,456,000 3,501,000 3,863,000 10.3% Sub -Total General Government 14,845,465 14,968,000 15,043,000 15,329,000 1.9% Fire Pension 1,406,844 1,315,000 1,315,000 1,315,000 0.0% Total $16,252,309 $16,283,000 $16,358,000 $16,644,000 1.7% The graph below depicts how the City of Yakima compares to other cities of somewhat similar population relative to property tax. This comparison shows that Yakima's property tax is below the state average. This data was compiled from the State Auditor's Local Government Comparative Statistics, and includes comparisons of comparable Washington State cities with population between 45,000 and 125,000. $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 2011 PER CAPITA PROPERTY TAXES Comparable Cities between 45,000 and 125,000 in Population (Rounded to the closest dollar) $445 Pasco Kennewick Kent Yakima Auburn Marysville Richland Bellevue Renton Everett Redmond Kirkland PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE 2012 BUDGET YEAR 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% General Fund Parks Streets Fire Pension ® %Property Tax 0 %Other Revenue ATTACHMENT 93 ATTACHMENT #4 The largest revenue source for the General Government Funds is sales tax. Yakima has moved from the lower half to the upper of per capita sales tax compared with similar cities in the State. However, Yakima is in the lower 1/3 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 12 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). 2011 PER CAPITA TOTAL REVENUES Comparable Cities between 45,000 and 125,000 in Population (Rounded to the closest dollar) $3,280 $3,337 $3,500 Yakima's per capita total revenue is $1,525, which is $660 $2,960 less than the average city per capita of $2,185 $2'871 $3,000 $2,197 $2,311 $2,500 $2,031 $2,000 $1,691 $1,525 $1,324 $1,328 $1,368 $1,500 $1,000 $500 so Kennewick Pasco Marysville Yakima Kent Auburn Renton Everett Kirkland Bellevue Richland Redmond ATTACHMENT #5 Property Taxes The total property taxes paid by property owners within the City of Yakima include 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 graph and chart below for how the 2012 property taxes were allocated between these governmental entities.) 2012 PROPERTY TAX DISTRIBUTION Yakima School District State of Washington Schools 0.37 0.19 Library .04 City of Yakima Yakima County EMS .25¢ .13¢ .02¢ City of Yakima Property Tax — In 2012, a typical City resident pays approximately $12.61 per thousand of assessed value on property taxes. Only $3.11, or about 25.0 %, 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. ➢ 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 1,000. ➢ Assessed Value — is the total value, as determined by the County Assessor's Office, of all property within the City.