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HomeMy WebLinkAbout11/04/2024 08.D. Public hearing and Ordinances pertaining to Ad Valorem Taxes (property tax) to be levied for collection in fiscal year 2025 if::.1: i4 r111-:. e+ i 00 i 7—:.-1 0 l'-'.Yf.1 '4,t ,`OR`OAA`. ___ BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 8.D. For Meeting of: November 4, 2024 ITEM TITLE: Public hearing and Ordinances pertaining to Ad Valorem Taxes (property tax) to be levied for collection in fiscal year 2025 SUBMITTED BY: *Viren Mayani, Director of Finance and Budget Kimberly Domine, Financial Services Manager SUMMARY EXPLANATION: This item includes two separate Ordinances that support a significant portion of the General Fund. Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2024 levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2025 tax collections by any amount over 2024 levels. Staff recommends that the Council approve a 1.0% increase in the property tax levy, which is the maximum increase allowed. Based on last year's General Fund base levy, the increase will be $216,418.84. Authorization of this increase requires a simple majority vote of the City Council. Ordinance B fixes the maximum tax levy for collection by the City in 2025. This Ordinance complies with RCW 35.33.135 and in accordance with Article VII, Section 2 of the City Charter, requires a super- majority approval (i.e. a minimum affirmative vote of five members) by City Council. Staff recommends that the Council approve ad valorem taxes in the amount of$22,497,871.16, which is needed to fund the City's 2025 Biennial budget. Approving ad valorem taxes allows the County Assessor's Office to levy real and personal property taxes to the full extent allowed under State law. ITEM BUDGETED: N/A STRATEGIC PRIORITY 24-25: A Resilient Yakima RECOMMENDATION: Pass Ordinance A and Ordinance B. ATTACHMENTS: Memo-2025 Property Tax Levy.docx Ordinance A_2025 Memo-2025 Ad Valorem Taxes.docx Ordinance B_2025 Presentation attachments.pdf 2025 Ad Valorem Property Tax Presentation.pdf 116 City of Yakima Finance and Budget 3 129 North 2nd Street 04 :3f Yakima, WA 98901 yi (509) 575-6070 T www.yakimawa.gov TO: The Honorable Mayor and Member of City Council Victoria Baker, City Manager FROM: Viren Mayani, Director of Finance & Budget Kimberly Domine, Financial Services Manager DATE: 11/04/2024 SUBJECT: Property Tax Levy for 2025 Key Points • Property taxes make up the largest, single revenue source available to support essential City services. • State law allows the City to annually increase the property tax levy by no more than 1% or the rate of inflation calculated by the Implicit Price Deflator (IPD), whichever amount is less, for the City's General Fund property tax levy. • The IPD rate for 2025 levy calculations is 2.57 percent. • There is an inverse relationship between the levy rate and the allowed annual revenue increase. To the extent the assessed valuation of the City is increasing, the underlying rate will likely decrease per$1,000 in assessed valuation. • The 2025 budget forecasted that 2025 property taxes would increase by 1.0 percent. Strategic Plan Alignment The recommended 2025 biennial budget, which is substantially supported by the property tax levy, will advance multiple Strategic Plan goals and objectives. Present Situation On November 6, 2001, Washington voters approved Initiative 747 (1-747), which limits the allowable increase in the property tax levy to 1.0%, or the rate of inflation, whichever is less. The intent of the Initiative was reaffirmed by the Legislature in November 2007. The measure of inflation used under this law is the Implicit Price Deflator (IPD). The IPD inflation rate for 2025 levy calculations is 2.57%. Staff recommends that the City Council approve a 1.0% increase in the property tax levy, which is the maximum increase allowed. Based on last year's General Fund base levy of $21,641,883.52, the increase will be $216,418.84. Authorization of this increase requires a simple majority vote of the City Council. Staff estimates that the City's general fund base property tax levy rate in 2025 will be $1.83 per $1,000 of assessed value, compared to the actual 2024 general fund property tax levy rate of $1.86 per $1,000. The decrease in the property tax levy rate is attributed to assessed values in the City increasing by approximately 13.7% compared to the prior year. Because of the limit Page 1 of 3 117 on property tax increases, as discussed above, the property tax levy rate declines as the assessed value increases. The statutory cap for the City's levy rate is $3.307 per $1,000 of assessed value. Example calculation of City Property Tax: 2024 2025 Annual Property Property Estimated 2024 Rate Tax 2025 Rate Tax Increase Median House Value $257,600 $292,891 General Fund Levy Rate 1.86 $478.02 1.83 $534.36 Total Payable to The City of Yakima $478.02 $534.36 $56.34 Median House Value provided by Yakima County Assessor's Office Some citizens may qualify for tax relief or qualify for a deferral program.To find out more information about this, residents should contact the Yakima County Assessor's Office at 509-574-1100 or visit their website at https://www.yakimacounty.us/218/Assessors-Office In addition to the base levy, the City collects new property tax revenue based on the value of new construction added to the assessment rolls during the prior year. The revenue to the City is calculated using the assessed value of new construction multiplied by the prior year's levy rate. The value of new construction is still being finalized by the County Assessor's Office and includes the value of utility new construction provided to the County Assessor by the State. The most recent estimate from the County Assessor's Office indicates more than $126,035,118 of new construction,which translates into$233,829.45 of additional City property tax revenue. The City's ordinance states the percentage and dollar amount increase in the City's base property tax levy as required by RCW 84.55.120.The County Assessor will determine the levy amount for new construction based on their final calculations. Advantaae(s) Continued funding will be available from the City's primary revenue source to pay the cost of essential City services. Disadvantage(s) The 1.0% increase would potentially result in a slightly higher base property tax payment. Budaet Impact The 2025 Biennial Budget relies on a 1%annual increase in property tax. Prior Council Review 2025 Biennial Budget Study Session-October 01, 2024 2025 Biennial Budget Study Session- October 29, 2024 Page 2 of 3 118 Action Reauested On November 4, 2024, conduct the public hearing and pass ordinances. The Ordinances must be filed with the Yakima County Department of Assessment on or before November 15, 2024. Page 3 of 3 119 ORDINANCE A ORDINANCE NO. 2024- AN ORDINANCE relating to the annual property tax levy; declaring the City Council's intent to increase the City's 2025 regular levy up to 101% along with new construction, annexation, refunds 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 4, 2024, 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 2025 current expense budget, and the total proposed property tax levy amount pertaining to 2025 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, improvements to property, and 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, RCW 84.55.005 sets the limit factor for the increase in the regular property tax levy at the lesser of one hundred one percent or one hundred percent plus inflation, which is defined as the percentage change in the implicit price deflator (IPD) for personal consumption expenditures for the United States as published for the most recent twelve-month period by the bureau of economic analysis of the federal department of commerce by September 25th of the year before the taxes are payable; and WHEREAS, the applicable percentage change in the Implicit Price Deflator was 2.57%; and WHEREAS, RCW 84.55.0101 allows a taxing district to use a limit factor of one hundred one percent upon a finding of substantial need by the legislative authority by a majority vote; and WHEREAS, the City Council, after the public hearing on November 4, 2024 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, along with 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 1 120 ORDINANCE A WHEREAS, the maximum levy rate the City of Yakima can levy is $3.10/$1,000 assessed valuation (AV) plus $0.225/$1,000 AV specifically for Firemen's Relief and Pension Fund and will not change as a result of this ordinance; and WHEREAS, property tax is a tax based on ownership of a piece of real estate. A "levied property tax" is generally a tax imposed on property owners, based on the value of their property and the municipal government's needs; and WHEREAS, the city levy rate has decreased from $3.10/$1,000 AV to $1.86/$1,000 AV in 2024 and staff is projecting the levy rate for 2025 to be $1.83/$1,000 AV; and WHEREAS, in order to bring the current levy rate to the maximum allowed, a levy lid lift is required and the City of Yakima residents will need to approve such ballot measure; and WHEREAS, the amount of property tax levied for collection in 2024 was $21,641,883.52 for general government purposes; and WHEREAS, the discretionary increase in property tax levied attributable to the inflation factor for collection in 2025 shall be in the amount of$216,418.84, which is a percentage increase of 1.0% from the previous year; and WHEREAS, the non-discretionary increases in property tax levied for collection in 2025 can only be estimated due to the absence of final values to be provided by the Yakima County Assessor, now, therefore, BE IT ORDAINED BY THE CITY OF YAKIMA: Section 1. The following increases in the regular property tax levy, over the amount of the previous year's levy, are hereby authorized to be cumulatively levied for collection in 2025: A. A discretionary increase of$216,418.84, attributable to the inflation factor which is a percentage increase of 1.0% over the amount levied for collection in 2024; plus B. An estimated increase of$12,787.28 for recent annexations; plus C. An estimated increase of$233,829.45 for new construction and improvements to property; plus D. An estimated increase of$292,952.08 for a refund levy; plus E. An increase authorized by state law for state-assessed property 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 15, 2024. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 4, 2024. 2 121 ORDINANCE A PASSED BY THE CITY COUNCIL, signed and approved this 4th day of November, 2024. ATTEST: Patricia Byers, Mayor Rosalinda Ibarra, City Clerk Publication Date: November 7, 2024 Effective Date: November 4, 2024 3 122 r:�,-;� Y� � City of Yakima Finance and Budget ; 129 North 2nd Street 04 :3f Yakima, WA 98901 ' . (509) 575-6070 GRPOk AT.:2--------- �fi �=- www.yakimawa.gov TO: The Honorable Mayor and Members of the City Council Victoria Baker, City Manager FROM: Viren Mayani, Director of Finance & Budget Kimberly Domine, Financial Services Manager DATE: 11/04/2024 SUBJECT: Ad Valorem Taxes for 2025 Key Points • Approving ad valorem taxes authorizes the County Assessor to levy real and personal property taxes. • City staff have estimated the City should approve ad valorem taxes for 2025 in the amount of $22,4967,781.16 in order to fund the 2025 Biennial budget. Strategic Plan Alignment A Resilient Yakima Present Situation Pursuant to RCW 35.33.135, the City Council must approve an ordinance to fix and authorize the Yakima County Assessor's Office to levy ad valorem taxes necessary to fund the City of Yakima's 2025 Biennial Budget. An ad valorem tax (Latin for"according to value") is defined as a tax based on the value of real estate or personal property. An ad valorem tax is typically imposed at the time of a transaction(s) (a sales tax or value-added tax (VAT)), but it may be imposed on an annual basis (real or personal property tax) or in connection with another significant event (i.e., inheritance tax). Staff currently estimates the 2025 real and personal property tax levy as $22,497,871.16, which includes a preliminary estimate of $12,787.28 in property tax revenue from annexation and $233,829.45 in property tax revenue from new construction. The property tax estimate from new construction will be updated based on the final valuation provided by the Assessor's Office. The estimate of property tax revenue does not include the change in value of state-assessed utility property. Both amounts will not be final until December 2024. City staff recommends that the City Council approve ad valorem taxes in the amount of $22,497,871.16, which is needed to fund the City's 2025 Biennial budget. Approving ad Page 1 of 2 123 valorem taxes of $22,497,871.16 allows the County Assessor's Office to levy real and personal property taxes to the full extent allowed under Washington State law. If the City Council authorizes the ad valorem tax amount too low, the County Assessor's Office will only be allowed to levy up to the amount authorized by the City Council. Staff recommends that the City Council approve ad valorem taxes in the amount of $22,497,871.16 for the 2025 real and personal property tax levy within the city limits of Yakima. This estimated revenue source is necessary to fund the 2025 Biennial Budget for the City of Yakima. Advantage(s) Ad valorem taxes provide continued funding from the City's primary revenue source, which is necessary to fund the 2025 Biennial Budget. Disadvantage(s) Ad valorem taxes increase: however, the increase is small, and the specific impact on a property owner is dependent on the change in their assessed value. Budget Impact The amount of the ad valorem tax ordinance is included in the 2025 Biennial Budget. Prior Council Review 2025 Biennial Budget Study Session-October 01, 2024 2025 Biennial Budget Study Session- October 29, 2024 Action Requested On November 4, 2024, conduct the public hearing and pass ordinances. The Ordinances must be filed with the Yakima County Department of Assessment on or before November 15, 2024. Page 2 of 2 124 ORDINANCE B ORDINANCE NO. 2024- AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to discharge the expected expenses and obligations for the 2025 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $22,497,871 in revenue must be raised by ad valorem taxes on real and personal property within the corporate limits of the City of Yakima to discharge the expected expenses and obligations for the 2025 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$22,497,871 for the following purposes: General Government Levy Operating Funds $21,647,871 Firemen's Relief& Pension Fund 850,000 Amount of tax levy for General Government Purposes (1) $22,497,871 Special Purpose Tax Levy 0 Total Levy Amount (1) $22,497,871 (1) Includes an additional $100,000 to provide for final adjustments in State assessed, refunds, new construction, and annexation values.) Section 2. The City Clerk is directed to transmit and file a certified copy of this ordinance with the Board of Yakima County Commissioners and the Yakima County Assessor on or before November 15, 2024. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 4, 2024. PASSED BY THE CITY COUNCIL, signed and approved this 4th day of November, 2024. ATTEST: Patricia Byers, Mayor Rosalinda Ibarra, City Clerk Publication Date: November 7, 2024 Effective Date: November 4, 2024 125 C 0 m C.) (0 0 x Co H N , If) It) O 00 CO 00 O \.O ‘.0ti 'cH n O i4 m a! 00 el 0 0 N 00 mot! Q CO 00 N 01 r-i N. ON (Ni O .o NZ 00 O cn CO e-i O N CO 00 1-1 in O N 5 y LC) O a+ ,_, co .0 CO co N 01 Cr o 00 0 }. .0 0 .0 d ?+ ed r-i 00 M c4 N d N O Lam� E ,� d\ co- .O In N O 1 N N O ��y N d K O O d' N a Q N N E N N N 4a -4 Q m - 0) ER ER H? ER ER EA ER ER Eft E9 EH EA EA ER EH 0 Co % ect 4 O O O O N g U O N O x Co I- T u�) Imo[) 10 N N N O O O 2 .� 00 00 00 00 co 00 N\CD .O aJ i--, � ,--; —1 r--i ,--, O y m O m 11 ...co O ..' as x O as � (B CO vl CD u EPJ a_ o � a N 0 in 1-4 k N o Cl) o . 05 alo rn o O O O ,S O N • N u aJ ..o N. N N 0 W N .O N O 0 �y P r, 0 L CD ii v co I_ N y > '--' --+ eN-+ © ,n > `-' O CO•Fb U red I— G)0.4 N O L aJ w CO .4-Y a) T aJ .�. i-, - d j U ca Co g E O N d .. 1 CO N 00 - N ,. 1 +, t� s-, O X a1 . O 0 O o v a, a, y+ COca U o ¢ c� O cr 4: VC c0 v �aJ Z �° aJ O v i"' 0 a) cn bbo u U N u cn O eci Cl) CU as O y Cn ' w G O O 0) '" dJ O i3 +H nE" y ) -O cn m O ¢ , O cm oZ < � O o a NCD d'i o o N N > H ,-a H C/) N N 126 District Name Yakima City Levy Calculations have changed in the last few years. To get to what you may request and how you should word your request we are supplying the below information. Current Tax Base* $12,086,015,627 *This includes estimated state assessed and personal property amounts. Current Levy Max Amount Calculations 2024 Max Lawful $21,603,240.44 Times 1.01 (if you certify a resolution adopting an increase) = $21,819,272.84 Additional Request Monies For NC = NC amount*last years certified Rate. $126,035,118 Times 1.85527217= $233,829.45 To calculate additional funds for annexations you take the above two numbers summed and multiply by what the current rate would be using the above estimated tax base minus the annexation amount. $7,003,900 Multiplied by Rate of: 1.8257 = $12,787.28 Final Before State Rate Limit: $22,065,889.57 Maximum Levy Request is lesser of above or Maximum Statutory Rate*Tax base. Maximum State Limit $42,685,281.76 Max Current Request Allowed $22,065,889.57 The Resolutions/Ordinances must reference a%increase over last years levy,and a$amount increase over last years levy. You must also certify a total budget request amount. The% increase over last year*does not*include added funds for New construction, State Assessed or Annexations. The budget request must include those as it certifies the total amount you request. You are still limited to the above Maximum Current Request Allowed. Previous Amount Levied $21,641,883.52 Funds for New Construction $233,829.45 Funds for Annexations $12,787.28 Starting Point $21,888,500.25 Plus 1%of Previous Amount($ increase) $216,418.84 Plus 1% of Previous Amount(total) $22,104,919.08 $increase over previous year if you take maximum: $216,418.84 % increase over previous if you take maximum: 1.0000% 10/15/2024 127 i Ai 9 #9 YAKIMA COUNTY TREASURER .Y,AK�M.�a Ilene Thomson County Treasurer MEMORANDUM October 17, 2024 TO: Taxing Districts FROM: Ilene Thomson, Yakima County Treasurer Subject: Tax Year 2025 — Refund Levy— RCW 84.69.180 RCW 84.69.180 allows taxing districts other than the state to levy an annual refund levy to recover the tax dollars lost to the district for the purpose of: a. Funding refunds paid within the preceding twelve months, including interest, and b. Reimbursing the taxing district for taxes abated or cancelled, offset by any supplemental tax collected within the preceding twelve months. RCW 84.69.180 also gives a taxing district the authority to recover that portion of their levy which was reduced within the preceding twelve months due to tax record adjustments such as senior exemptions, DOR exemptions, government exemptions and others. We calculate the information from October 1st through September 30th of each year. By establishing this earlier date, each district will have the opportunity to discuss this levy with your Board of Directors prior to submitting your levy requests. We will be providing this information to the County Assessor who you would work with, as you do with all levies. In addition,we will continue to submit the calculation to the Board of County Commissioners. Listed below are the refund levy amounts calculated in accordance with RCW 84.69.180 for the period of 10/01/2023 through 09/30/2024, including interest paid. District Name Fund Name Amount City of Yakima Expense $292,952.08 If you have any questions or concerns, please contact our Accounting Division at 574-2780 or Treasacc�a co.yakima.wa.us. 128 North Second Street, Room 115 • PO Box 22530•Yakima, WA 98907-2530 Phone: 509-574-2800 • FAX: 509-574-2801 www.yaki macounty.us/treasurer 128 s :rma's , � tiM i r::. ‘ .,,,,. „i„t „.., ,_ . ..,,, 4 * - Ad Valorem Iro - 4k.4b PropertyTax P J064•• 0 .. y4libVilliMiassis... City Council Business Meeting November 4, 2024 129 Overview The purpose of the presentation is to provide a brief introduction to the ad valorem property tax for 2025 . 2025 roe axDisbursement $24 , 99U 2 Estimate Includes County EMS Levy Fire Pension 3% EMS 10% Streets Capital Charter - General Fund 10% 32% Parks Capital Charter 0% Debt 4% Dispatch 7% Parks Operating Streets Operating 15% 19% Pg. 3 • City Council Business Meeting • Ad Valorem Property Tax • November 4, 2024 131 2025 roe axDisbursement Estimate Excludes County EMS Levy Streets Capital Charter 11% Fire Pension 4% Parks Capital Charter 1% Debt General Fund 4% 36% Dispatch Streets Operating 21% Parks Operating 16% Pg. 4 • City Council Business Meeting • Ad Valorem Property Tax • November 4, 2024 132 Breakdown of The 2025 Estimated PropertyTax Calculation per Yakima County Assessor's Office Prior Year Highest Lawful Levy $ 21 ,641 ,883.52 Additional 1 % $ 216,418.84 Subtotal $ 21 ,858,302 .36 New Construction $ 233,829.45 Annexations $ 12 ,787.28 Administrative Refund $ 292 ,952 .08 Buffer for final adjustments in state refunds, new construction and annexation values. $ 100,000.00 2025 Estimated Property Tax $ 22 ,497,871 . 16 1 Estimate does not include the EMS levy of approximately $2,492,911 Pg. 5 • City Council Business Meeting • Ad Valorem Property Tax • November 4, 2024 133 `�`� _ 134 Distributed at the.t-$(p. 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Rrpooan Paxton: ad APPENDIX t 'DTC AND ITS BOOR ENTRY SYSTEM \Lfurin Date..Principal A..oeanw lorer.0 Rs..S'k1A,,Prknsod('I SIP Numbm sa l.atd F e, over Noweads of the Bond..111 be used 1a po.uk turfs w•t luau.,.tdu moire.<the Cm la..Mr,al<.patdals. ebabtlntnusp and Implovulf the Y.kmoa t out emhw t non. t nehod on a 0111,111 bass.cauw wnvaodwg obhpanws of is C 0 as de..ohed Lwow od.w,pay the sons of...name at the Bond. tee-PURPOSE"bees.The Rood.me.nbeeet rehnpwt plea to tlseu stated date,of mammy a.,k.snbnl Ion.,, So.DES(RIPTIIIN'tt MI BLONDS-- Redetsynw ,No,moo. bo . The Bud.:at loaned tat pese.al oblgan o..01 lilt t 11)payable Ian t<puto pwettx tax tem..of is t m and.o.h whet malt)at tilt,ny a.a.Mau hdh atadable F.a.hag a.au)a1 is 110110,ate uoauwlwp.the(try u ot.bl)Las pledged that n a,ll tote loan.molded b)ka avian the.nMmutwtul and.tew,u>Inrwatnan two,idea b)lax an1wn the assort of the,oat..nwlok w is annual pryer,tax NI)amrvtwt,.ult.ent.wpet a atilt ohm noose,of the h het that n. lea ndh,,ntabk to pa,when due the pn.aysl o1 and.merest on the Bond. The hdl tu1h.owed,.and resource.of the t In La, b<vt pkdped w a0W)lot to plot•µ pgvuml of to plmuµ.a1 at at.,tote,.,on is Bad, Tlse(.n has also ,halite! «,taw..k.us,term tem....oohed to to t to by the lhhuto kepooal Shiny.Iacdm,.Dion,and u.hotel motel tat atente.thaw./the payment at puwµat of and min.ou ehyble items at the 7120B Bond.a, de.nshed!.swot See-Set,.RI l l Ink I HE BONDS loons Its t m.amLann to 0o11.11atr,mwkday n.N.y<rt) s No. 11 wb/<s1 to-.awe.Iowaneah. Ste ITT)TANIS('ACTH(IRJT1' Plopary last and PROPERTY TA\ I IMII ATIP tSS Hat B.n.Jo n.a.ru.ntulr a deb u udefae8ss.of the State or any pohl..a1.uM0 hose thereof ailn numm the t to II.1 m lie.designated the:o:'IA Bad.a. .puhtsd tax-exempt oldhpna,. ohduu ho to mwq of Steno 2651b0')of to lmew,l ke,mue Code of Ivan a.onhnak.l Tho caoe fop. .. td...moon Ito µouch utaeweorh Its o of flu. Imam.Ilawt 1ea.f Ills ague.,!lute!tau eon~II,011an1 wbn wan..•e..en..1 w twdutp of u.Wuwd tenet out deentoo The Bands.net oft,I viva.1 W root-rood tt 'rood, JNrr nwe a .-'obit,to tor of the nypo,nIr e{n,.10000,. ,n Pa h wet.L✓w( •ny LIP Stolfle�arP'a molls r Bwd('amser to'he('nil an.crr rm elm..adnwn, /r s nyn•n:-n.: r,. Bad,..ell be a,o,Ld.l.la,*Inv.a Vat..Tat Vew tatduw{Ir tlshu',isr,ol 1,1(oi 10 rho B.o..l Rrpr,nar •v..,. DR'tnFa',.imo.ands..',arta,Tnw,1nwaoho.,.(ytd:I:0:0tdm ArIn.,,an.. PIPER S SANDLER IDPACIFICA Mood"P"I'1020 LAW GROUP 2 History of Property Taxes in Washington State Overview Washington has evolved to become less dependent on property taxes (and more dependent on excise taxes, and use taxes and B&O taxes). Two types of property taxes — regular and excess property taxes City's regular property taxes are primary funding tool for City budget • Statutory limitations, initiatives (Referendum 47 (lesser of inflation or 106%), 1-722 (102%), I- 747(101 %)) — Burien v. Kiga, 31 P.3d 659 (2001 ) — 2007 Legislature "reinstated" the 1-747 one percent property tax limit factor adopted by the voters • Decreasing reliance on property taxes; increasing reliance on excise taxes — Revenue Act of 1935 — In 1970 property taxes accounted for 86.5 percent of local tax revenues; by 2007 that percentage had declined to 57.8 percent. DOR Washington Tax History — Today heavily dependent on excise taxes — sales taxes and B&O taxes 0 PACIFICA 3 LAW GROUP Budget-based property tax levies Rates and Amounts. Washington taxing districts set property taxes through the budget process based on a budgeted dollar amount. This amount is subsequently converted into a levy rate per thousand of assessed value. There are legal limitations on both amount and rate. • Levy amount • Assessed value (AV) • Levy rate • Overlapping taxing districts CO PACIFICA 4 LAW GROUP Budget-based property tax levies To levy property taxes, the taxing district first budgets or estimates, as part of its annual budgeting process, the total amount of property tax revenue the district will seek for the upcoming year. • The taxing district certifies this budget or estimate to the county. The County Assessor (the "Assessor") determines the rate for the levy by dividing the taxing district's certified total levy amount by the assessed value of all taxable property within the taxing district's boundaries. • The Assessor then calculates each property owner's tax liability for the levy by multiplying the rate by the value of the parcels belonging to the taxpayer, and sets forth each taxpayer's liability on a "tax roll." • As part of this process, the Assessor must confirm that the district's levy complies with constitutional and statutory limitations, reducing or eliminating levies as required by law. Lastly, the Assessor conveys the tax roll to the County Treasurer, who collects the levy on the taxing district's behalf. 0 PACIFICA LAW GROUP 5 Uniformity The State Constitution requires that taxing districts levy all property taxes at a uniform rate upon the same class of property within the taxing district's territorial limitations • All real estate constitutes a single class. — As a result, all taxes imposed by a taxing district must be the same for properties with an equivalent fair market value. — An exception applies for agricultural, timber, and open space land, which assessors value based on current use rather than fair market value. • The State Constitution exempts property of the United States, the State, counties, school districts and other local governments from taxation, and authorizes the State Legislature to exempt additional property. • The Legislature has enacted exemptions for tribal properties, nonprofit schools and colleges, hospitals, and churches, among others, subject to conditions. 0 PACIFICA LAW GROUP 6 Maximum rates per thousand With certain exceptions, taxing districts have specific statutory maximum levy rates for regular property taxes. • "Regular" property taxes (compare to excess property taxes) • Most councilmanic or nonvoted • General maximum rate per thousand by type of taxing district • "Special" regular levies — Affordable housing — EMS levies — Conservation futures levies 0 PACIFICA LAW GROUP 7 Maximum rates per thousand • State $ 3.60 (per $1,000 market value) • County $ 1.80 or up to $2.475 under certain circumstances • Road $ 2.25 • Cities/towns $ 3.375/$3.60/$3.825 • Fire $ 1.50 • Library $ 0.50 • MPD $ 0.75 Many other examples 0 L AC lAW GROUPOUP 8 Regular Property Tax Annual Increase Limitations - Background Regular property taxes are also limited to how much (the total amount to be collected) the taxing district can levy one year to the next Limit on annual increases in the total dollar amount of the regular property tax levy • Taxing district with a population of over 10,000 may increase its total regular property tax amount by — 1% of the amount levied in the prior year or the rate of inflation, whichever is lower, plus — new construction and limited other additions • Impact is to restrict revenue growth year over year • Greater impact for jurisdictions that are dependent on regular property taxes, or if municipal costs are increasing at a greater rate • Limit is on the levy amount (total dollar amount levied); not levy rate (rate/$1 ,000 of assessed value) • 1 % cap is referred to as the "levy lid" 0 PACIFICA LAW GROUP 9 Regular Property Tax Levy - Levy Limit • "Limit factor" limits annual increases in the total dollar amount of regular property taxes to, basically, 1 % • Highest of the three most recent years plus an additional amount for — New construction/improvements — AV increases due to construction of certain wind turbine, solar, biomass, geothermal facilities — New exemption for tax increment financing — Exemptions related to State property tax increase post McCleary 0 PACIFICA LAW GROUP Overview of Bond Financing A Bond evidences an obligation to pay (e.g., a loan). For example, defined in Washington as follows: RCW 39.44.200(1 ); RCW 39.46.020(1 ) • "Bond" means any agreement, which may or may not be represented by a physical instrument, including notes, warrants, or certificates of indebtedness, that evidences an indebtedness of the state or a local government or a fund thereof, where the state or local government agrees to pay a specified amount of money, with or without interest, at a designated time or times. RCW 39.44.200(3) • "Type of bond" includes: (a) General obligation bonds, including councilmanic and voter-approved bonds; (b) revenue bonds; (c) local improvement district bonds; (d) special assessment bonds such as those issued by irrigation districts and diking districts; and (e) other classes of bonds. RCW 39.46.020(4) • "Obligation" means an agreement that evidences an indebtedness of the state or a local government or a fund thereof, other than a bond, and includes, but is not limited to, conditional sales contracts, lease obligations, and promissory notes. 0 PACIFICA LAW GROUP 11 Overview of Bond Financing May be issued as tax-exempt (for federal income tax purposes) • Interest paid to investor holding tax-exempt municipal bonds is excludable from taxable income • Subject to ongoing federal tax law requirements Subject to securities laws Common financing methods • Sale on public market via underwriter (negotiated or competitive sale) • Bank financing (private placement) • Seller/vendor/equipment financing • State loan programs to local governments — Local Option Capital Asset Lending (LOCAL) State borrowing program — Public Works Trust Fund, State Revolving Fund, Clean Renewable Energy Bond • Federal loan programs to local governments — USDA Rural Development — US EPA (Water Infrastructure Finance and Innovation Act (WIFIA)) loans — US DOT (Transportation Infrastructure Finance & Innovation Act (TIFIA)) loans 0 PACIFICA LAW GROUP 12 General Obligation Bonds Unlimited Tax General Obligation (UTGO) Limited Tax General Obligation (LTGO) ■ Supermajority (60%) voter approval ■ Councilmanic, non-voter approved ■ Validation requirement • Consumes LTGO debt capacity (within 2.5% of ■ Consumes UTGO debt capacity (2.5% of assessed assessed valuation for general purposes, but up 1.5% valuation for general city purposes) can be issued without a vote) ■ Only for capital purposes, not the replacement of • Any municipal purpose (generally) equipment • Paid from general fund or other legally available ■ Paid from excess property tax levy revenues ■ Outside of statutory or constitutional limits on regular • Pledge to levy regular (nonvoted) taxes as necessary property taxes to pay debt service within legal limits: ■ Levy set at rate required to pay debt service a Statutory rate per thousand ($3.60/$1 ,000 AV for cities, with exceptions) a 1% limit on annual increases in levy amount 0 PACIFICA LAW GROUP 13 Utility Revenue and Assessment Bonds Utility Revenue Bonds Assessment Bonds • Payable from generating assets (e.g., user fees, rates, • Infrastructure (e.g., road or utility improvements)with special connection charges) or general revenues benefit to property owners • Water, sewer, stormwater revenue bonds • Payable from assessments imposed against properties in a • Not subject to constitutional or statutory debt limitations designated local improvement district ("LID") or utility LID in ("special fund doctrine") respect of special benefits received by those properties from • Frequently include covenants to protect stream of revenue the construction of nearby or adjacent public improvements and protect bondholders • Special benefit is separate and apart from the general benefit accruing to the public at large • Special assessments are determined according to the value of the benefit received 0 PACIFICA 14 LAW GROUP Legal Framework — Federal Tax Law Internal Revenue Code and regulations govern: • How tax-exempt bond proceeds can be spent • Use of financed facility/assets — Limits the ability of the issuer to sell, lease or otherwise allow private use of the bond financed facility • The investment and arbitrage of bond proceeds • Records retention Set expectations at closing with key documents • Tax certificate(s) • Form 8038-G Monitor for changes • Post-issuance compliance policy • Private activity and use tracking 0 PACIFICA LAW GROUP 15 Legal Framework — Federal Securities Laws Although municipal bond issuers are exempt from the SEC's registration and filing requirements that apply to corporate issuers, all issuers are subject to the antifraud requirements that apply when issuers speak to the market • Antifraud Requirements — Rule 10(b)(5) — Section 17 • Application of Antifraud Requirements — 2020 SEC Staff Legal Bulletin • Primary Disclosure • Secondary Market Disclosure — Ongoing disclosure • Required Annual Filings and Event Filings — Voluntary Disclosure • On EMMA or other locations QPACIFICA LAW GROUP 16 W ra U r��_,_�.-_-_:,, ter-- .,_,..=„.���__,„. _ p p U7MTED STATES Ue AMERIC'A Naas le sn.uun awmrrt.0 wmm rwm.as a nor Lim ay Pura Cam•MS P'aa arr.naccprG ma man a rn11 me!la loateruna, tE••U Y.v u epv.mnnrza.®.o.ma.r. aW a as aaCwr.ey....m 3.“roc..a u. mavae oerrn..e mamma...,noosc Isaisson.ml or orwarat rum menu n.nam.a...am 3.ro ISm�4soma a.a gm.Cmg ly u+ma.gemYa Questions? ! (___ it t °RN Comments? STATE OF WASHINGTON CITY OF YAKIMA �I'. Contact Information: II! LIMITED TAX GENERAL OBLIGATION REFUNDING BOND,7,QZ9A • Deanna Gregory INTEREST RATE: MATURITY DATE: II 3.00% • DECEMBER I,2020 9 TK0 ;) — deanna.gregory@pacificalawgroup.com REGISTERED OWNER: CEDE&CO. ;I PRINCIPAL AMOUNT: FOUR HUNDRED FIFTY THOUSAND AND NO • Stacey Lewis 100/DOLLARS The City of Yakima,Washington(the"City"),hereby acknowledges itself to owe and for ' — s t a ce y.I ew i s @ p a c i f i ca l a wg r o u p.corn value received promises to pay to the Registered Owner identified above.or registered assigns. • on the Maturity Date identified above,the Principal Amount indicated above and to pay interest • thereon from April 21,2020.or the most recent date to which interest has been paid or duly • Alison B e n g e (federal tax law) provided for until payment of this bond at the Interest Rate set forth above, payable on December I.2020.and semiannually thereafter on the first days of each succeeding June and December.Both principal of and interest on this bond are payable in lawful money of the United i 611 < — alison.benge@pacificalawgroup.com States of America the fiscal agent of the State of Washington has been appointed by the City as the authenticating agent,paying agent and registrar for the bonds of this issue(the'Bond Registrar"). For so long as the bonds of this issue are held in fully immobilized form,payments of principal and interest thereon shall be made as provided in accordance with the operationalA.arrangements of The Depository Trust Company(" ")referred to in the Blanket Issuer Letter of Representations(the"Letter of Representations")from the City to Luc, < The bonds of this issue are issued under and inaccordance with the provisions of the �) Constitution and applicable statutes of the State of Washington and Ordinance No.2020-002 duly passed by the City Council on February 18.2020(the'Bond Ordinance"). Capitalized < terms used in this bond have the meanings given such terms in the Bond Ordinance. This bond shall not be valid or become obligatory for any purpose or be entitled to any security or benefit under the Bond Ordinance until the Certificate of Authentication hereon shag have been manually signed by or on behalf of the Bond Registrar or its duly designated agent. < F I'age 1..t 0 LAW GROU PACIIFICA1 17