Loading...
HomeMy WebLinkAbout2015-035 2016 Ad Valorem TaxesAN ORDINANCE ORDINANCE NO. 2015-035 fixing and levying the amount of ad valorem taxes necessary to balance estimated revenue with estimated expenditures for the 2016 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $18,076,032 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 2016 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 $18,076,032 for the following purposes: General Government Levy Operating Funds Firemens' Relief & Pension Fund Amount of tax levy for General Government Purposes Special Purpose Tax Levy Total Levy Amount (1) (1) $16,835,272 1,240,760 $18,076,032 0 $18,076,032 (1) Includes an additional $50,000 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, 2015. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 17, 2015. PASSED BY THE CITY COUNCIL, signed and approved this 17th day of November, 2015. ATTEST: s' v Micah Cawley, Mj yor Acting ' it Ierkt�:,- Publication Date: November`20;;:20:15' Effective Date: November 17, 2015 ITEM TITLE: SUBMITTED BY: SUMMARY EXPLANATION: Ordinance A—Declaring the City 101% of the amount levied in the Ordinance B—fixing and levying Yakima. '1111111 1, nun 11,1:1141r10 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 9. For Meeting of: November 17, 2015 Public hearing pertaining to Ad Valorem Taxes to be levied for collection in Fiscal Year 2016 Tony O'Rourke, City Manager Cindy Epperson, Director of Finance and Budget Council's intent to increase the City's 2015 regular property tax levy up to previous year, plus new construction, annexation, and refunds. the 2016 ad valorem property taxes and excess levy taxes for the City of These ordinances follow state law imposing a 1% increase in the property tax levy for 2016, plus new levies for construction and refunds, and are the basis on which the 2016 budget was developed and balanced. Because the 1% increase is greater than the inflation rate (Implicit Price Deflator or IPD), these ordinances require super -majority approval (i.e. 5-2). The attached memorandum discusses the importance of the property tax levy, and sets forth the "substantial need" to exceed the rate of inflation of 0.25%, and approve a modest 1% increase in the levy. The full 1% increase amounts to about $177,000, while the inflationary increase is about $44,000. So if Council does not approve the 1%, then General Government revenue would be reduced by $133,000. Since this budget is balanced with revenue exceeding expenditures of $31,000, Council could then choose to use beginning fund balance of approximately $102,000, or direct a corresponding reduction in expenditures. Resolution: Other (Specify): Memo, Exhibit I, Attachments 1-5 Contract: Start Date: Item Budgeted: Yes Funding Source/Fiscal Impact: Strategic Priority: Insurance Required? No Ordinance: X Contract Term: End Date: Amount: Public Trust and Accountability Mail to: Phone: APPROVED FOR SUBMITTAL: RECOMMENDATION: City Manager City Management is recommending that City Council conduct a public hearing on the 2016 property tax levy, and then pass ordinances. ATTACHMENTS: Description Upload Date D 2016 Ad Valbrem Mermrandum 11/10/2015 D Ordinance A Intent to Increase 2016 Property Mx 11/10/2015 D Ordinance E3 SeRling Ad Valorem Mx Levy 11/10/2015 D Exhibit 1 Property Tax Calcullatlion 11/10/2015 D Attachment 1 Ad Valle 11/10/2015 Type Cover Memo Ordinance Ordinance EEx hi bit EEx hi bit Memorandum Date: November 12, 2015 To: The Honorable Mayor and City Council From: Cindy Epperson, Director of Finance and Budget Re: 2016 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. Ordinance A and B will set the property tax levy for collection in 2016, 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. 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 0.25% from June 2014 to June 2015. Since this is less than the statutory 1%, our property tax increase is limited to a 0.25% increase. However, state law does allow the property tax to be levied at the 1% maximum, by a super -majority (i.e. 5-2) vote of Council declaring the existence of "substantial need" for the increase. The 2016 budget was developed assuming a 1% increase. 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, 2015 or the City will receive no funding from this source in 2016. The Commissioners have requested to receive this packet by November 20 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 2015 levels. Because the limit factor is greater than the rate of inflation, this ordinance requires a super - majority (i.e. a minimum affirmative vote of five members) to pass. It is required by RCW 84.55.120. This is legally necessary to increase the 2016 tax collections by any amount over 2015 levels. Ordinance B fixes the tax levy for collection by the City in 2016. This ordinance would include not only the regular tax but also special levy taxes for bond repayments. It should be noted that all voted bond issues were paid in full in 2014, so the 2016 levy does not include a special bond levy. This ordinance complies with RCW 35.33.135 and in accordance with Article VII, Section 2 of the City Charter, also requires a super -majority approval by City Council. These ordinances are in substantially the same format as the prior year levy legislation, with the exception of the additional declaration of substantial need in Ordinance A. General Government Revenue Discussion In reviewing General Government 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 27% of the total. Property tax as proposed is about 23%; Utility Taxes as presented in the Preliminary Budget make up about 22%; and all other revenue comprise the remaining 28%. (See Attachment 1 for a summary of General Government revenues.) 2015 General Government revenue is estimated to be $70.9 million, $3.5 million or 5.2% more than 2014, primarily because of the contract with Union Gap that added $1.2 million. Additionally, the city experienced sales tax growth of about 4%; and was successful in obtaining a Firefighter hiring grant (SAFER) and an airport marketing grant. Going into 2016, Sales and utility tax revenues are projected to grow as a result of ongoing economic development in our community so that revenues are forecast to grow by $2.5 million or 3.5% from the 2015 estimate, (and $1.8 million or 2.6% from the 2015 Budget). The proposed 1% increase in Property Tax is projected to be $176,000 in 2016. The initial estimates from the County on the 2016 property tax levy included a growth rate for new construction that is 1.2% or $209,000, along with a refund levy of about $97,000 which approximates the budget estimate when added together. Property Tax Discussion The total 2016 City of Yakima property tax levy includes the 101% levy, and amounts for new construction and prior year refunds. The 2016 budget currently includes an estimated revenue of $18,026,000 for the regular levy, an increase of $439,000 over the 2015 year-end estimate of $17,587,000. There is no voted levy debt, since the 1995 voted Fire bond issue paid in full in 2014. The total operating tax rate for next year is estimated to be $3.111 per $1,000 of Assessed Valuation (AV), down from the 2015 rate of $3.1239. (The statutory limit is $3.60 less the Library levy, which is capped at 50 cents per $1,000. The estimate for the 2016 Library levy is 47.4 cents per thousand) 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 2015 paid $468.59 for the regular levy—this was the first year without a voted bond levy. (According to the preliminary valuation estimate provided by the County Assessor, the underlying assessed value of all taxable property in the City grew a little more than 1%). The regular levy tax is estimated to be $466.65, and there is no voted levy so there is a slight decrease of ($1.94) in the total annual levy. We believe the current request for the property tax levy is justified by the following conditions, which combine to indicate the City has a substantial need to increase the levy to the statutory maximum of 1%: 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 66% 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 created a "new normal" in consumption -- the 2016 gas tax estimate is about equal to 2007 levels. 3. Property tax is also a key revenue source for the Parks and Recreation Division, representing about 48% of all Parks revenue. Parks maintenance is supported entirely by property taxes, along with the funding of the new City Charter amendment to spend $750,000 on Parks capital project. 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 2016, the City is estimating a reduction of up to 2.3% 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 $84 below the average of comparable Washington cities with populations of 50,000 to 135,000 in 2014, the most recent year this information has been compiled. Yakima ranks 9th out of 11 cities in this group. Further, for these same cities, Yakima's total per capita revenue collected from all taxes, fees and charges is $1,561 or $582 less than the average of $2,143 and again ranks 9th out of the 11 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 24% (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 2016 property tax levy, which is the basis on which the 2016 budget was developed. If a super -majority does not approve "substantial need" to go to the 101%, then the ordinance will need to be modified for the increase to be 100.25%, and the requested amount will be reduced by $132,570 from $18,208,602 to $18,076,032. Since the General Government budget is virtually balanced, with revenues slightly exceeding expenditures by about $31,000, a reduction in property taxes of $132,000 would result in a budgeted use of about $100,000 of reserves, unless Council directs a reduction in expenditures. ORDINANCE B ORDINANCE NO. 2015 AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance estimated revenue with estimated expenditures for the 2016 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $18,208,602 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 2016 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 $18,208,602 for the following purposes: General Government Levy Operating Funds $16,967,842 Firemens' Relief & Pension Fund 1,240,760 Amount of tax levy for General Government Purposes (1) $18,208,602 Special Purpose Tax Levy 0 Total Levy Amount (1) $18,208,602 (1) Includes an additional $50,000 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, 2015. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 17, 2015. PASSED BY THE CITY COUNCIL, signed and approved this 17th day of November, 2015. ATTEST: Micah Cawley, Mayor City Clerk Publication Date: Effective Date: EXHIBIT I City of Yakima Property Tax Limitation Calculation Prior Year (2015) = Base 1% Increase Base 101% Valuation Increase --- 1.4% New Construction --- 1.2% State Assessed Value Tax Limit Before Annexations 2015 Tax 2016 Assessed Rate Levy Values Applied Dollars (Dollars in Thousands) $5,658,387.596 $3.1239 $17,676,090 $176,761 $17,852,851 $80,507.242 N/A $0 $66,900.554 $3.1239 $208,991 $3.1239 $0 $5,805,795.392 $3.1110 $18,061,842 Add for Annexation $0.000 $3.1110 $0 Limit for Subsequent Years $5,805,795.392 $3.1110 $18,061,842 Plus Refunds $96,760 Plus Contingency $50,000 Total -ordinance $18,208,602 State of Washington Constitutional Limit Assessed Valuation $5,805,795.392 $3.6000 $20,900,863 Less: Library Levy (Estimate) $0.4743 $2,753,689 2015 Levy for Collection in 2016 (Estimate) $3.1257 $18,147,175 C:\Program Files (x86)\neevia.com\docConverterPro\temp\NVDC\4F89CE2D-B609-42A9-A060- 11/10/20156:14 PM 6EC9393E8050\Yakima.6215.1.prop_tax calc_2016_Council.xlsx 27.3¢ Sales Tax ($20,011,900) GENERAL GOVERNMENT REVENUE (BASED ON 2016 BUDGET OF $73.4 MILLION) 22.2c Franchise & Utility Tax ($16,278,300) ATTACHMENT #1 6.4c 3.7c lntergovernment & Other State Shared Revenue Revenue ($4,707,037) ($2,746,450) Na ) 22.90 Property Tax ($16,785,600) 13.1c Licenses, Permits & Charges f/Services ($9,582,723) GENERAL GOVERNMENT RESOURCES THREE YEAR COMPARISON 4.4c Fines & Other Taxes ($3,242,110) 2015 2016 % of -- 2016 vs. 2015 -- 2014 Year -End Percent Projected 2016 Increase Percent Source Actual Estimate Change Revenue Total (Decrease) Change General Sales Tax $15,461,201 $16,010,000 3.5% $16,650,400 22.7% $ 640,400 4.0% Crim. Justice Sales Tax (1) 3,103,814 3,226,800 4.0% 3,361,500 4.5% 134,700 4.2% Property Tax 16,016,029 16,376,215 2.2% 16,785,600 22.9% 409,385 2.5% Utility & Franchise Taxes 15,848,483 15,821,650 (0.2%) 16,278,300 22.2% 456,650 2.9% Charges for Services 6,684,115 8,118,341 21.5% 8,666,253 11.8% 547,912 6.7% State Shared Revenue 2,648,633 2,914,000 10.0% 3,121,100 4.3% 207,100 7.1% Fines and Forfeitures 1,578,124 1,675,500 6.2% 1,707,110 2.3% 31,610 1.9% Other Taxes 1,453,227 1,467,550 1.0% 1,535,000 2.1% 67,450 4.6% Other Revenue 939,491 1,273,045 35.5% 1,296,450 1.8% 23,405 1.8% Transfers from other Funds 1,413,706 1,426,035 0.9% 1,450,000 2.0% 23,965 1.7% Other Intergovernmental 1,370,523 1,667,463 21.7% 1,585,937 2.2% (81,526) (4.9%) Licenses and Permits 865,334 894,000 3.3% 916,470 1.2% 22,470 2.5% Total Revenue 67,382,678 70,870,599 5.2% 73,354,120 100.0% 2,483,521 3.5% Beginning Fund Balance 10,885,034 9,412,400 (13.5%) 8,925,128 (487,272) (5.2%) Total Resources $78,267,712 $80,282,999 2.6% $82,279,248 $1,996,249 2.5% (1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for capital needs. 2016 PROPOSED GENERAL PROPERTY TAX LEVY — BY FUNCTION General Fund $9,656,000 53.6% Fire & Police Pension $2,378,260 13.2% Parks $2,659,400 14.8% Streets $3,332,700 18.5% ATTACHMENT #2 2015 2015 2016 2015 Est. 2014 Amended Year -End Projected vs. 2016 Actual Budget Estimated Revenue Budget General $ 11,037,490 $ 10,504,600 $ 10,530,230 $10,793,500 2.5% Parks & Recreation 1,875,098 2,661,290 2,667,785 2,659,400 (0.3%) Street & Traffic 3,103,441 3,170,500 3,178,200 3,332,700 4.9% Sub -Total General Government 16,016,029 16,336,390 16,376,215 16,785,600 2.5% Fire Pension 1,192,883 1,207,500 1,210,500 1,240,760 2.5% Total $ 17,208,912 $ 17,543,890 $ 17,586,715 $18,026,360 2.5% 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. $450 $400 $350 $300 $250 $200 $150 $100 $50 $0 2014 PER CAPITA PROPERTY TAXES Comparable Cities between 50,000 and 135,000 in Population (Rounded to the closest dollar) Yakima's per capita property tax is $188, which is $84 less than the average city per capita of $272 $152 $170 $188 eNNNyy»uU/i"""': $213 $250 '',111,11111111111111.1',',. $286 uuuq�i6ijwrgjwpu fj'p $309 $329 $362 $362 ��� iiwry�o�iirr�r uRy f $373 Kennewick Kent Yakima Auburn Marysville Bellevue Richland Kirkland Renton Redmond Everett PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE 2015 BUDGET YEAR 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% General Parks Streets Fire Pension Fund ® % Property Tax 0 % Other Revenue ATTACHMENT #3 ATTACHMENT #4 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 1/3 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 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). $3,500 $3,000 $2,500 $2,000 $1,500 - $1,000 $500 2014 PER CAPITA TOTAL REVENUES Comparable Cities between 50,000 and 135,000 in Population (Rounded to the closest dollar) Yakima's per capita total revenue is $1,561, which is $582 less than the average city per capita of $2,143 $1,181 $1,561 $1,350 Ammer Aloo $1,786 $1,892 $2,091 $2,098 $2,326 $3,021 $3,056 $3,212 Kennewick Marysville Yakima Kent Aubum Kirkland Renton Everett Bellevue Redmond Richland 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 2015 property taxes were allocated between these governmental entities.) Yakima School District 0.38c 0,404000,000,0000. 2015 PROPERTY TAX DISTRIBUTION State of Washington Schools 0.18t Library .04c 0004, i$0140 TA, 1.22123565 City of Yakima .24c Yakima County .14¢ EMS .02c City of Yakima Property Tax — In 2015, a typical City resident pays approximately $12.70 per thousand of assessed value on property taxes. Only $3.12, or about 24.5%, 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.