HomeMy WebLinkAbout11/15/2016 10 2017 Property Taxes and Ad Valorem TaxesITEM TITLE:
SUBMITTED BY:
SUMMARY EXPLANATION:
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDASTATEMENT
Item No. 10.
For Meeting of: November 15, 2016
Public hearing and ordinances pertaining to Ad Valorem Taxes to
be levied for collection in Fiscal Year
2017
Cliff Moore, City Manager
Cindy Epperson, Director of Finance and Budget
Ordinance A— Declaring the City Council's intent to increase the City's 2016 regular property tax
levy up to 101 % of the amount levied in the previous year, plus new construction, annexation, and
refunds.
Ordinance B— fixing and levying the 2017 ad valorem property taxes and excess levy taxes for
the City of Yakima.
These ordinances follow state law imposing a 1 % increase in the property tax levy for 2017, plus
new levies for construction and refunds, and are the basis on which the 2017 budget was
developed and balanced. Because the 1 % increase is greater than the inflation rate (Implicit Price
Deflator or I PD), 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 0.953 %, and approve a modest 1 % increase in the levy.
The full 1 % increase amounts to about $180,000, while the inflationary increase is about
$171,600. If Council does not approve the 1 %, then General Government revenue would be
reduced by $8,400. Council could choose to use beginning fund balance, or direct
a corresponding reduction in expenditures.
ITEM BUDGETED:
STRATEGIC PRIORITY:
Yes
Public Trust and Accountability
APPROVED FOR
SUBMITTAL: '°City Manager
STAFF RECOMMENDATION:
City Management is recommending that City Council conduct a public hearing on the 2017
property tax levy, and then pass ordinances.
BOARD /COMMITTEE RECOMMENDATION:
Upload Date
Type
111912016
Cmer Memo
1111012016
CDxer Menio
111912016
Cceer Memo
111912016
Co r Menio
111912016
Coxer Memo
Memorandum
Date: November 10, 2016
To: The Honorable Mayor and City Council
From: Cindy Epperson, Director of Finance and Budget
Re: 2017 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 2017, 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 0.953% from June 2015 to June 2016. Since this is
less than the statutory 1 %, our property tax increase is limited to a 0.953% 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 2017
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, 2016 or the City will receive no funding from this
source in 2017. 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 2016 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 2017 tax collections by any amount over
2016 levels.
Ordinance B fixes the tax levy for collection by the City in 2017. 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 2017 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.)
2016 General Government revenue is estimated to be $73.7 million, $3.4 million or 4.8% more
than 2015, due to a combination of sales tax growth of about $731,000 or 3.8 %; an increase in
state shared revenue of $530,000; and the sale of two Tiger Mart properties after their
environmental clean -up of $688,000. Going into 2017, Sales and utility tax revenues are
projected to grow as a result of ongoing economic development in our community and increases
in utility rates so that revenues are forecast to grow by $1.9 million or 2.6% from the 2016
estimate, (and $2.3 million or 3.1 % from the 2016 Budget).
The proposed 1% increase in Property Tax is projected to be about $180,000 in 2017. The initial
estimates from the County on the 2017 property tax levy included a growth rate for new
construction that is 1.2% or $223,000, along with a refund levy of about $38,000 which
approximates the budget estimate when added together.
Property Tax Discussion
The total 2017 City of Yakima property tax levy includes the 101 % levy, and amounts for new
construction and prior year refunds. The 2017 budget currently includes an estimated revenue
of $18,310,210 for the regular levy, an increase of $414,420 over the 2016 year -end estimate of
$17,895,790. 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), up slightly from the 2016 rate of $3.0879. (The statutory limit is $3.60
less the Library levy, which is capped at 50 cents per $1,000. The estimate for the 2017 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 2016 paid $463.19 for the regular levy.
(According to the preliminary valuation estimate provided by the County Assessor, the
underlying assessed value of all taxable property in the City grew slightly – about 0.2 %). The
regular levy tax for 2017 is estimated to be $466.76, and there is no voted levy so there is a
slight increase of $3.57 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 66.7% 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 2017 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 47% of all Parks revenue. Parks maintenance is supported entirely
by property taxes, which includes the funding of the City Charter amendment to spend
$750,000 annually on Parks capital projects. 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 2017,
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 $90 below the average of comparable
Washington cities with populations of 50,000 to 135,000 in 2015, 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 $1,510 or $813 less than the average of $2,323 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 2017 property tax levy, which is the basis
on which the 2017 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
100.953 %, and the requested amount will be reduced by $8,463 from $18,497,656 to
$18,489,193. Since the General Government budget is already projected to use reserves, a
reduction in property taxes of about $8,500 would result in a budgeted use of reserves, unless
Council directs a reduction in expenditures.
ORDINANCE NO. 2016-
AN ORDINANCE relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2017 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 (Ordinance A).
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 15, 2016,
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 2017 current expense budget, and the total
proposed property tax levy amount pertaining to 2017 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, 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 person 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 0.953 %;
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 super- majority
vote; and
WHEREAS, the City Council, after the public hearing on November 15, 2016, 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 above the rate of inflation,
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
WHEREAS, the amount of property tax levied for collection in 2016 was $18,006,395 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied attributable to the inflation
factor for collection in 2017 shall be in the amount of $171,601, which is a percentage increase of
0.953% from the previous year; and
WHEREAS, the discretionary increase in property tax levied attributable to substantial
need for collection in 2017 shall be in the amount of $8,463, which is a percentage increase of
0.047% from the previous year; and
WHEREAS, these discretionary increases in property tax levied for collection in 2017
combine to be in the amount of $180,064, which is a percentage increase of 1% from the
previous year; and
WHEREAS, the non - discretionary increases in property tax levied for collection in 2017
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 2017:
A. A discretionary increase of $171,601, attributable to the inflation factor
which is a percentage increase of 0.953% over the amount levied for
collection in 2016; plus
B. A discretionary increase of $8,463, attributable to the declaration of
substantial need, which is a percentage increase of 0.047% over the
amount levied for collection in 2016; plus
C. An estimated increase of $0 for recent annexations; plus
D. An estimated increase of $223,331 for new construction and improvements
to property; plus
E. An estimated increase of $37,866 for a refund levy; plus
F. 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 30, 2016.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 15, 2016.
PASSED BY THE CITY COUNCIL, signed and approved this 15th day of November,
2016.
ATTEST:
City Clerk
Publication Date: November 18, 2016
Kathy Coffey, Mayor
Effective Date: November 15, 2016
ORDINANCE B
ORDINANCE NO. 2016
AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to discharge
the expected expenses and obligations for the 2017 Budget for the City of
Yakima.
WHEREAS, the City Council finds that the total net amount of $18,497,656 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 2017 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 $18,497,656 for the following purposes:
General Government Levy
Operating Funds $17,256,896
Firemens' Relief & Pension Fund 1,240,760
Amount of tax levy for General
Government Purposes (1) $18,497,656
Special Purpose Tax Levy 0
Total Levy Amount (1) $18,497,656
(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, 2016.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 15, 2016.
PASSED BY THE CITY COUNCIL, signed and approved this 15th day of
November, 2016.
ATTEST:
City Clerk
Publication Date:
Effective Date:
Kathy Coffey, Mayor
City of Yakima
Property Tax Limitation Calculation
Prior Year (2016) = Base
IPD 0.953% Increase
Substantial need 0.047% Increase
Base 101%
Valuation Increase - -- 0.22%
New Construction - -- 1.24%
State Assessed Value
Tax Limit Before Annexations
Add for Annexation
Limit for Subsequent Years
Plus Refunds (estimate)
2016
Tax
Assessed
Rate
Values
Applied
(Dollars in Thousands)
$3.1117
$5,831,302.790
$3.0879
EXHIBIT I
2017
Levy
Dollars
$18,006,395
$171,601
$8,463
$18,186,459
$12,707.458 N/A $0
$72,324.696 $3.0879 $223,331
$3.0879 $0
$5,916,334.944
$3.1117
$18,409,790
$0.000
$3.1117
$0
$5,916,334.944
$3.1117
$18,409,790
Plus Contingency
Total- ordinance
Est. Change in rate per $1,000 of Assessed Value $0.0238
State of Washington Constitutional Limit
Assessed Valuation $5,916,334.944 $3.6000
Less: Library Levy (Estimate) $0.4743
2015 Levy for Collection in 2016 (Estimate) $3.1257
$37,866
$50,000
$18,497,656
$21,298,806
$2,806,118
tit : =
27.1
Sales Tax
($20,519,080)
ATTACHMENT #1
GENERAL GOVERNMENT REVENUE
(BASED ON 2017 BUDGET OF $75.6 MILLION)
21.8¢
6.5¢
3.6¢
Franchise &
Intergovernment &
Other
Utility Tax
State Shared Revenue
Revenue
($16,507,100)
($4,898,728)
($2,742,270)
Source
General Sales Tax
Crim. Justice Sales Tax (1)
Property Tax
Utility & Franchise 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
22.6
Property Tax
($17,069,450)
14.0(r
4.4(r
Licenses, Permits
Fines &
& Charges f /Services
Other Taxes
($10,552,576)
($3,289,610)
GENERAL GOVERNMENT RESOURCES
THREE YEAR COMPARISON
2015
Actual
$15,770,269
3,260,050
16,444,895
15,689,913
8,242,444
2,873,947
1,589,895
1,557,541
936,511
1,449,559
1,578,128
872,276
70,265,428
9,412,400
$ 79,677,827
2016
Year -End
Estimate
$16,400,000
3,361,500
16,755,030
15,973,100
8,791,326
3,404,000
1,690,464
1,554,300
1,544,287
1,490,700
1,696,478
990,500
73,651,685
7,152,826
$80,804,511
% of -- 2017 vs. 2016 --
2017 Increase Percent
Total (Decrease) Change
22.7%
2017
Percent
Projected
Change
Revenue
4.0%
$17,023,200
3.1%
3,495,880
1.9%
17,069,450
1.8%
16,507,100
6.7%
9,571,576
18.4%
3,433,050
6.3%
1,721,110
(0.2 %)
1,568,500
64.9%
1,229,210
2.8%
1,513,060
7.5%
1,465,678
13.6%
981,000
4.8%
75,578,814
(24.0 %)
6,942,980
1.4%
$82,521,794
% of -- 2017 vs. 2016 --
2017 Increase Percent
Total (Decrease) Change
22.7%
$ 623,200
3.8%
4.5%
134,380
4.0%
22.6%
314,420
1.9%
21.8%
534,000
3.3%
12.7%
780,250
8.9%
4.5%
29,050
0.9%
2.3%
30,646
1.8%
2.1%
14,200
0.9%
1.6%
(315,077)
(20.4 %)
2.0%
22,360
1.5%
1.9%
(230,800)
(13.6 %)
1.3%
(9,500)
(1.0 %)
100.0%
1,927,129
2.6%
(209,846)
(2.9 %)
$1,717,283
2.1%
(1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non - general Governmental fund) for
capital needs.
2017 PROPOSED
GENERAL PROPERTY TAX LEVY — BY FUNCTION
Gen _�
9
Pension
....................
General
Parks & Recreation
Street & Traffic
Sub -Total General Government
Fire Pension
Total
■
°eets
80,100
.6`7.
2016 2017
Year -End Projected
Estimated Revenue
$ 10,660,930
2016
2015
Amended
Actual
Budget
$ 9,914,078
$ 10,660,930
2,956,085
2,659,400
3,574,732
3,332,700
16,444,895
16,653,030
1,182,452
1,240,760
■
°eets
80,100
.6`7.
2016 2017
Year -End Projected
Estimated Revenue
$ 10,660,930
$10,927,450
2,659,400
2,561,900
3,434,700
3,580,100
16,755,030
17,069,450
1,140,760
1,240,760
$ 17,627,347 $ 17,893,790 $ 17,895,790 $18,310,210
ATTACHMENT #2
2016 Est.
vs. 2017
Budget
2.5%
(3.7 %)
4.2%
1.9%
8.8%
2.3%
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
2015 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 $190, which is $90 less
Kennewick Kent Yakima Auburn Marysville Bellevue Richland Kirkland Renton Everett Redmond
PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE
2017 BUDGET YEAR
100.0%
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
'
20.0%
Qa
10.0%
a
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 third 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
$0
2015 PER CAPITA TOTAL REVENUES
Comparable Cities between 50,000 and 135,000 in Population
(Rounded to the closest dollar)
Kennewick Marysville Yakima Kent Auburn Kirkland Everett Renton Redmond Richland Bellevue
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 2016 property taxes were allocated between these governmental entities.)
Yakima School District
0.38c
2015 PROPERTY TAX DISTRIBUTION
State of Washington Schools Library
0.18c .04c
City of Yakima
Yakima County
EMS
.24c .14c .02c
City of Yakima Property Tax - In 2016, a typical City resident pays approximately $12.64 per
thousand of assessed value on property taxes. Only $3.09, or about 24.4 %, 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.