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HomeMy WebLinkAbout08/17/1999 Adjourned Meeting • 67 CITY OF YAKIMA, WASHINGTON AUGUST 17, 1999 • ADJOURNED MEETING The City Council met in session on this date at 7:30 a.m., in the 2 Floor Training Room, at the Police Station /Legal Center, 200 South 3 Street, Yakima, Washington. Mayor John Puccinelli, presiding, Council Members Clarence Barnett, Henry Beauchamp, Lynn Buchanan, John Klingele, Mary Place, and Bernard .Sims were present. City Manager Zais, Assistant City Manager Rice; City Attorney Paolella; Director of Public Works Waarvick; Cindy Epperson, Financial Services Manager; Marketa George Oliver, Administrative Assistant to the City Manager; and Deputy City Clerk Skovald were also present. Presentation and Review of Property Tax, Collections, and Assessments with Yakima County Assessor and Treasurer Mayor Puccinelli welcomed everyone and called the meeting to order: City Manager Zais provided some background information about the property tax revenue distribution that the City of Yakima uses to operate and provide basic municipal services to public. He also provided information about the statutory limitations placed on how the property tax is levied. Mr. Zais described the impacts of Referendum 47 on tax resources available to the City, how the property tax levy is established, and how those funds are allocated to the General Fund, ' Streets, Parks, Fire and Police Pensions, and Intergovernmental Agencies such as the Library. Mr. Zais reported that at the end of 1998, as a result of special exemptions and other factors, tax collections dipped from what was expected. Dave Cook, Yakima County Assessor, explained that the Yakima County Department of Assessments is mandated to assess all real and personal property at 100% of its market value. This is done on an annual basis with a physical evaluation once every six years to check for characteristic changes. They use a computerized mass appraisal system that is currently being consolidated to improve the accuracy of assessments. The 1998 accuracy level on real property was 88.4 %; on personal property it was 94.5 %. The assessment is the basis from which all tax revenue is derived. The more accurate and equitable the assessments are, the broader the tax base is for taxing districts to levy against. I/ Mr. Cook reported that the State of Washington senior citizen /disabled person exemption is significantly impacting property tax allocations. This impact is growing on an annual basis. He described the guidelines to qualify for the exemption, which include the age of the property owner, their amount of income, and the use of the property as a main residence. Council Member Place verified that the income levels are the same for those with disabilities. Council Member Klingele verified how disabilities are defined as it relates to property tax exemption qualification. Mr. Cook reported that 68 AUGUST 17, 1999 STUDY SESSION countywide last year there were 6,770 participants eligible for the senior citizen /disabled person exemption. The exemption freezes the value of the home at its 1996 assessed level. Frozen values for 1998 amounted to approximately $270 million in Yakima County. The City of Yakima's portion is about 36.75% with 2,488 participants, equating to property that cannot be levied against in excess of $97 million. Mr. Cook noted that a lot of people older than the eligible age of 61 are applying for the exemption. Also, there is a three -year reachback provision, meaning the money that would have gone to the taxing districts is either credited or rebated to the property owner. Council Member Sims expressed concern about the significant impact to the assessment base equating to a 40% tax shift to other property owners within the taxing district. Jacob Tate, Property Data Coordinator for Yakima County, reported that another factor has impacted the tax base. Last year there was a major'change in how the senior citizen /disabled person exemption law works. The amount of income was changed allowing a higher amount to be exempt and also allowing an amount to be deducted from the property value, including all excess levies.. Discussion continued about the frozen property values and how that impacts the assessment base and decreases the revenue for the City of Yakima. Mr. Tate provided copies of information on levy limit factors and explained how the levy limits are calculated. He also entertained questions on how the annexation rate is determined, how assessed valuations are calculated to determine the post annexation rate, and how the senior citizen /disabled person exemption impacts the annexation rate. City Manager Zais pointed out that the City's property tax revenue calculations resulted in a net loss. He asked Mr. Cook to describe the dynamics involved in the tax shift. Mr. Cook indicated that he does not consider it as a dollar - for - dollar tax shift because the frozen values limit the amount of the levy. The total assessment base defines the levy amount, and if the assessment base declines year after year, there wouldn't be any capacity left to impose the levy. Council Member Klingele asked if the assessment is frozen or is the cap on it decreased. Mr. Cook explained that currently the way the law is applied, the assessed value would stay at the 1996 level. However, if the market value dips below that 1996 assessment, the greater amount of those two values is used. Whatever the assessed value was in 1996, as long as the property owner is in the program, that is the assessed value. The property owner has to reapply every four years, and the value would remain at the 1996 market value as long as the applicant is eligible. There was discussion about the senior citizen exemption from any excess levies as long as their income is below the $30,000 limit. Mr. Cook also reported that the State Legislature contemplated a realignment of the monetary limits on the senior exemption this year 2 69 AUGUST 17, 1999 STUDY SESSION to raise the income limit to $50,000. That did not go through, and he doesn't anticipate it happening in the near future. City Manager Zais asked how much did exemptions affect Yakima County's tax base. Mr. Tate noted that, actually, it was a dual -tax shift creating $300 million in lost valuation. That shift resulted from senior citizen property tax exemptions and from changes in their adjusted gross income from various factors impacting social security retirement benefits, interest on savings, interest on pensions, and changes in the rules pertaining to the capital gains tax. Cindy Epperson, Finance Services Manager, explained that the levy is calculated on the existing assessment base and is particularly impacted in March when the three -year reachback provision is utilized. The loss of revenue is the cumulative impact from small incremental changes that happen when exemptions are granted throughout the year. There was further discussion about how the total assessment base is impacted from the frozen valuations and the senior citizen exemption from excess levies, all of which must comply with the maximum statutory limit on the property tax levy of $3.60; the City of Yakima's is at $3.449. . Nancy Davidson, Yakima County Treasurer, described the tax balance and assessment certification process used to create the tax bills for every parcel in Yakima County. She described the format of the tax bill which is designed so the taxpayer clearly knows how much their taxes are. Ms. Davidson provided a copy of a flowchart showing the breakdown on how levies are allocated, the status of current tax collections, and the total amount of taxes collected for the year. There are two billing cycles for property tax in addition to the delinquent tax collection processes. Delinquent taxes are either placed as a lien against the property or the property is restrained. She noted that both real and personal property are taxed, and the rate of delinquencies is not very high. Ms. Davidson also directed attention to the dramatic increase in the number of senior citizen /disabled person exemptions and tax roll /tax record adjustments since 1996. Glenn Rice, Assistant City Manager, pointed out that property being eliminated from the tax rolls, for example when property is put in trust, is expensive and can greatly impact the assessment base. City Manager Zais referred to fair market value adjustments and asked how they translate into taxes. Mr. Tate noted that the levy or tax amount could only increase by the amount of the maximum statutory limit. That increase would be reflected within the whole district, but if the value of an individual property were to increase, then the property tax for that individual property would go up. Council Member Sims asked how a property owner could determine whether their assessment had increased or not. Mr. Tate explained that any changes in the assessment would be listed on the tax bill. Mayor Puccinelli directed attention to non - profit organization exemptions, such as churches and group homes, and inquired if the 3 70 AUGUST 17, 1999 STUDY SESSION rules applying to those exemptions have been changed. Mr. Tait noted that those properties are tax exempt and are considered similarly, as government property is exempt from property taxes or levies. Council Member Klingele asked what the senior citizen tax deferral program involves. Mr. Cook explained that is a totally different program allowing senior citizens to pay their property tax out of the equity of their property. City Manager Zais asked how current are the property tax assessments after the freeze that occurred a few years ago. Mr. Cook noted that all property is reassessed each year. He reported that the computerized bill assessment system is in the process of being converted and should be completed by the end of September. This conversion will provide a centralized information database that will be user friendly. Directing attention to personal property audits, Mr. Cook pointed out that the law requires both personal and real property assessments. He explained that personal property is anything that is used in a business and is a self- reporting action by businesses. There was additional discussion about the tax assessment allocation on personal property and whether the 94% goal is realistic. Council Member Sims directed attention to the real property category system of neighborhood characteristics. Mr. Tate reported that the neighborhood classification software program is currently under review. Mr. Cook further explained that the neighborhood classification software is primarily used during the annual property assessment process. It compares property values based on sales in the same neighborhood of like properties or new construction. Every sixth year an assessor comes out in person to revalue the property. There was extensive discussion about various circumstances and situations that could decrease property values, hence the total assessment base. Using charts to clarify her point, Cindy Epperson explained the property tax allocation function for the 1999 General Levy. City Manager Zais pointed out that the projected revenue has been reduced due* to anticipated property tax allocation reductions. Directing attention to the Per Capita Property Tax Chart, Council Member Place noted that more local Eastern Washington cities need to be included, such as Kennewick. She also requested information on how many cities did not go to the six - percent statutory limit and utilized the Implicit Price Deflator instead. Council Member Sims asked why the County's public online access dropped the search -by -name feature. Mr. Cook explained the feature was removed for security reasons. There was discussion about encroachment of private and personal information versus personal information accessibility as it relates to new technology already available in other regions. City Manager Zais directed Council's attention to the property tax distribution for Police and Fire Pensions. In the last ten years 4 • 71 AUGUST 17, 1999 STUDY SESSION there has been a dramatic increase in Police and Fire Pensions. He pointed out that in 20 years, the impact from pension increases would probably account for half of the property tax distribution. It was MOVED BY BUCHANAN, SECONDED BY PUCCINELLI, TO ADJOURN AT 8:58 A.M. The motion carried by unanimous voice v.te. READ AND CERTIFIED ACCURATE BY: i O„ � �" !' CIL MEMBER f DATE . :0-79 , ef/10 9/ COUNCIL ME BE' DATE ATTEST: Ar CITY CLERK JOHN PUC INELLI, MAYOR Minutes prepared by Deputy City Clerk Skovald. An audio and videotape of this meeting are available in the City Clerk's Office • • 1 • 5