HomeMy WebLinkAbout11/07/2017 08 Annual Property Tax Levy and Ad Valorem Taxes - Public HearingBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDASTATEMENT
Item No. 8.
For Meeting of: November 7, 2017
ITEM TITLE: Public hearing and ordinances pertaining to Ad Valorem Taxes to
be levied for collection in Fiscal Year
2018
SUBMITTED BY: Cliff Moore, City Manager
Tara Lewis, Financial Services Manager
SUMMARY EXPLANATION:
Ordinance A—Declaring the City Council's intent to increase the City's 2018 regular property tax
levy up to 101 % of the amount levied in the previous year, plus new construction, annexations,
and refunds.
Ordinance B—Fixing and levying the 2018 ad valorem property taxes and excess levy taxes for
the City of Yakima.
The attached memorandum discusses the proposed Property Tax levy for collection in 2018, and
requests approval of a 1 % increase in the levy as allowed by state law and as included in the
2018 Preliminary Budget.
ITEM BUDGETED:
STRATEGIC PRIORITY:
Yes
Public Trust and Accountability
APPROVED FORV*
SUBMITTAL: City Manager
STAFF RECOMMENDATION:
Conduct a public hearing on the 2018 property tax levy, and pass the ordinances.
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description
D Memo regarding the 2018 Property Tax Levy
D Exhibit I - Property Tax Limitation Calculation
D Ordinance A
D Ordinance B
D Attachments 1-5
OAF
Upload Date
Type
10/25/2017
Omer Memo
10/25/2017
Cowr Memo
10/25/2017
Ordinance
10125/2017
Ordinance
10/25/2017
Backup Material
Memorandum
Date: November 7, 2017
To: The Honorable Mayor and City Council
Cliff Moore, City Manager
From: Tara Lewis, Financial Services Manager
Re: 2018 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. Ordinances A and B, described in further
detail below, will set the property tax levy for collection in 2018, based on the limit of a 1%
increase 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 1.553% from June 2016 to June 2017 which
exceeds the statutorily allowed increase of 1%. The 2018 budget was developed assuming a
1% increase in the overall levy.
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, 2017 or the City will receive no funding from this
source in 2018. The Commissioners have requested to receive this packet by November 20th
so they can incorporate all of the requests into their required legislation.
Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2017
levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2018 tax
collections by any amount over 2017 levels.
Ordinance B fixes the maximum tax levy for collection by the City in 2018. 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.
General Government Revenue Discussion
General Government revenues fall into four categories that each comprise about a quarter of
the total. 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 23%; and all other revenue comprise the
remaining 27%. (See Attachment 2 for a summary of General Government revenues.)
2017 General Government revenue is estimated to be $79.5 million which is approximately $5.4
million or 7.3% more than 2016, due primarily to a large project to replace street lighting with
more efficient LED modules, moderate growth in the economy which has generated increased
sales tax growth and a year of extreme weather conditions which generated moderately
elevated levels of utility taxes. For 2018, general government revenues, when adjusted for the
one-time bond proceeds for the LED project in Streets and Traffic, are projected to grow by $1.9
million or 2.5% from the 2017 estimate.
The proposed 1% increase in Property Tax is projected to generate about $184,000 in
additional revenue in 2018. The initial estimates from the County on the 2018 property tax levy
included a growth rate for new construction that is 0.8% or $149,000, along with a refund levy of
about $26,000. These estimates have been included in the 2018 Budget projection.
Property Tax Discussion
The total 2018 City of Yakima proposed property tax levy includes the 101% levy, and amounts
for new construction and prior year refunds. The 2018 budget currently includes an estimated
revenue of $18,929,392 for the regular levy, an increase of $345,831 over the 2017 year-end
estimate of $18,583,561. The total operating tax rate for next year is estimated to be $2.9962
per $1,000 of Assessed Valuation (AV), a decrease of approximately 8.7 cents per thousand of
Assessed Valuation. The 2017 rate was $3.0830. It should be noted that the amount of the new
levy in Exhibit I is slightly different from the budgeted amount due to the timing of collections.
Some collections of prior year taxes are likely to occur in 2018.
A home with an assessed value of $100,000 in 2017 was assessed $308.30 for the regular levy.
That home, if its value increased by the countywide average would be valued at $103,900 and
would be assessed $311.31 in 2018, an increase of $3.01 or approximately 1 %. If the assessed
value remained at $100,000, the property tax assessment decrease to $299.62, a decrease of
$8.68 or 2.8%. According to the preliminary valuation estimate provided by the County
Assessor, the underlying assessed value of all taxable property in the City grew by
approximately 3.9%.
Property tax is a vital component of General Government revenue. Based upon the information
provided in this memo, City management/budget staff respectfully requests the passage of both
Ordinances A and B to set the 2018 property tax levy, which is a fundamental component of the
proposed 2018 Budget.
City of Yakima
Property Tax Limitation Calculation
Prior Year (2017) = Base
Implicit Price Deflator (IPD) - 1.553% Increase
2018 Tax Rate @ 101% of Base
Valuation Increase - 3.9%
New Construction -.8%
State Assessed Value
Tax Limit Before Annexations
Add for Annexation
Limit for Subsequent Years
Plus Refunds (Estimate)
Plus Contingency
Total Ordinance
Est. Change in rate per $1,000 of Assessed Value
2017 Tax
Assessed Rate
Value Applied
(Dollars in Thousands)
$ 5,957,828.341 $ 3.0830 $
Max = 1% of Base
5
EXHIBIT I
2018
Levy
Dollars
18,367,991
183,680
State of Washington Constitutional Limit
2017
Assessed Maximum
Value Rate
Maximum
Levy
Dollars
2017 Assessed Valuation $ 6,241,340.076 3.6000 $ 22,468,824
Less: Library Levy (Estimate) 0.4611 (2,877,882)
2017 Levy for Collection in 2018 (Estimate) $ 3.1389 $ 19,590,942
$
18,551,671
235,274.954
n/a
n/a
48,236.781
3.0830
148,714
-
3.0830
-
$ 6,241,340.076
2.9962 $
18,700,385
-
2.9962
-
$ 6,241,340.076
2.9962
18,700,385
25,519
100,000
$
18,825,904
State of Washington Constitutional Limit
2017
Assessed Maximum
Value Rate
Maximum
Levy
Dollars
2017 Assessed Valuation $ 6,241,340.076 3.6000 $ 22,468,824
Less: Library Levy (Estimate) 0.4611 (2,877,882)
2017 Levy for Collection in 2018 (Estimate) $ 3.1389 $ 19,590,942
ORDINANCE A
ORDINANCE NO. 2017
AN ORDINANCE relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2018 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 7, 2017,
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 2018 current expense budget, and the total
proposed property tax levy amount pertaining to 2018 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
and
WHEREAS, the applicable percentage change in the Implicit Price Deflator was 1.553%;
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 7, 2017, 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
7
ORDINANCE A
WHEREAS, the amount of property tax levied for collection in 2017 was $18,367,991 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied attributable to the inflation
factor for collection in 2018 shall be in the amount of $183,680, 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 2018
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 2018:
A. A discretionary increase of $183,680, attributable to the inflation factor
which is a percentage increase of 1.0% over the amount levied for
collection in 2017; plus
B. An estimated increase of $0 for recent annexations; plus
C. An estimated increase of $148,714 for new construction and
improvements to property; plus
D. An estimated increase of $25,519 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 30, 2017.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 7, 2017.
PASSED BY THE CITY COUNCIL, signed and approved this 7th day of November, 2017.
ATTEST:
City Clerk
Publication Date:
Effective Date:
Kathy Coffey, Mayor
8
ORDINANCE B
ORDINANCE NO. 2017
AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to discharge
the expected expenses and obligations for the 2018 Budget for the City of
Yakima.
WHEREAS, the City Council finds that the total net amount of $18,825,904 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 2018 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 $18,825,904 for the following purposes:
General Government Levy
Operating Funds $17,688,980
Firemen's Relief & Pension Fund 1,136,924
Amount of tax levy for General
Government Purposes (1) $18,825,904
Special Purpose Tax Levy 0
Total Levy Amount (1) $18,825,904
(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 30, 2017.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 7, 2017.
PASSED BY THE CITY COUNCIL, signed and approved this 7th day of November, 2017.
ATTEST:
City Clerk
Publication Date:
Effective Date:
Kathy Coffey, Mayor
RESERVE BALANCES
GENERAL GOVERNMENT FUNDS
General Government
2013
Actual
Beginning Fund Balance
$10,902,309
Revenues
63,522,204
Expenditures
63,539,479
Ending Fund Balance
$10,885,034
Reserve as a % of Expenditures 17.1%
9
ATTACHMENT #1
2017
2014 2015 2016 Year End 2018
Actual Actual Actual Estimate Projected Chng
$10,885,034 $9,412,400 $7,152,826 $7,933,127 $7,934,677
67,382,678 70,265,428 74,051,847 76,698,525 78,617,140 2.5%
68,855,312 72,525,002 73,271,546 76,696,975 78,022,587 1.7%
$9,412,400 $7,152,826 $7,933,127 $7,934,677 $8,529,230 7.5%
13.7% 9.9% 10.8% 10.3% 10.9%
Note: 2017 Year -End Estimate shown net of LED project revenue and expenditure of $2,783,846.
The table above reflects the General Fund balance as a percentage of expenditures. The target percentage
for an adequate operating reserve is a minimum two months expenses, or 16.7%. The General Fund
balance dipped to a low of only 9.9% in 2015, but with careful budgeting and modest increases in
revenue, the fund balance is projected to increase to 10.9% by the end of 2018. The 2018 revenue
projection includes the 1% property tax levy increase allowed by State law, plus additional amounts for
new construction and prior year refunds, as detailed in the attached memo.
GENERAL GOVERNMENT REVENUE
(Based on 2018 Budget of $78.6 million)
Sales Tax
Fines &
26.8¢
Other Taxes
$21,070,958
4.5e
$11,536,620
$3,541,896
3.3%
}NS I �_.. n•ao cc
;LPFUM
3,283,170
3,336,781
1.6%
3,426,346
Property Tax
16,793,571
r„'
roup
crwuc
jpWf1[N
:o a
IMau"
12356
5A
Property Tax
22.6e
$17,792,468
Franchise & Utility Tax
22.8e
$17,914,429
1
N
I
k
IN
ATTACHMENT #2
Intgov"t & State Shared
5.7e
$4,456,526
1
600=11 _1
?N[TR[AL Noor
PAW in 00A
A221 13565 A
TT
r+ u
I�
Pel 1
U Sy
w'.v,» nreMD.n. Kra
.
ig,�,o...lG�ac .w_
f q
Other
2.9e
$2,304,243
Licenses, Permits
Fines &
& Charges f/Services
Other Taxes
14.7e
4.5e
$11,536,620
$3,541,896
GENERAL GOVERNMENT RESOURCES
THREE YEAR COMPARISON
Source
2016
Actual
2017
Year -End
Estimate
%
Change
2018
Projected
Revenue
General Sales Tax
$ 16,588,736
$ 17,130,691
3.3%
$ 17,644,612
Criminal Justice Sales Tax
3,283,170
3,336,781
1.6%
3,426,346
Property Tax
16,793,571
17,377,367
3.5%
17,792,468
Utility & Franchise Taxes
16,059,061
16,968,054
5.7%
17,914,429
Charges for Services
9,740,369
10,433,146
7.1 %
10,701,918
State Shared Revenue
3,291,510
3,542,278
7.6%
3,692,807
Fines and Forfeitures
1,676,293
1,752,492
4.5%
1,790,632
Other Taxes
1,403,586
1,572,858
12.1 %
1,751,264
Transfers from other Funds
1,475,329
1,513,060
2.6%
1,513,060
Licenses and Permits
882,357
809,848
(6.9)%
834,702
Intergovernmental/Grants
1,039,448
1,062,905
2.3%
763,719
Other Revenue
1,818,417
3,982,890
119.0%
791,183
Total Revenue
74,051,847
79,482,370
7.3%
78,617,140
% of
2017
Total
- 2018 vs. 2017 -
Increase %
(Decrease) Change
22.4%
$ 513,921
3.0%
4.4%
89,565
2.7%
22.6%
415,101
2.4%
22.8%
946,375
5.6%
13.6%
268,772
2.6%
4.7%
150,529
4.2%
2.3%
38,140
2.2%
2.2%
178,406
11.3%
1.9%
-
- %
1.2%
24,854
3.1 %
1.0%
(309,186)
(29.1)%
1.0%
(3,191,707)
(80.1)%
100.1%
(865,230)
(1.1)%
Note: Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for
capital needs. 2017 Year -End Estimate shown is inclusive of LED project revenue of $2,783,846.
2018 PROPOSED
GENERAL PROPERTY TAX LEVY - BY FUNCTION
General Fund
$10,900,969
57.6%
Fire & Police Pension
$2,064,421
10.9%
Parks
52,822,565
14.9%
Is
$3,141,437
16.6%
2018 PROPOSED
GENERAL PROPERTY TAX LEVY - BY FUND
Fund
General Fund
Parks & Recreation
Street & Traffic
Sub -Total General Government
Fire Pension
Total
11
ATTACHMENT #3
2017 Est.
vs. 2018
Budget
4.0%
5.3%
(5.6)%
2.4%
(5.7)%
1.9%
2017
2017
2018
2016
Amended
Year -End
Projected
Actual
Budget
Estimated
Revenue
$ 10,901,717
$ 10,859,450
$ 11,369,235
$ 11,828,466
2,614,909
2,629,900
2,680,551
2,822,565
3,279,962
3,580,100
3,327,581
3,141,437
16,796,588
17,069,450
17,377,367
17,792,468
1,312,385
1,333,160
1,206,194
1,136,924
18,108,973
18,402,610
18,583,561
18,929,392
11
ATTACHMENT #3
2017 Est.
vs. 2018
Budget
4.0%
5.3%
(5.6)%
2.4%
(5.7)%
1.9%
12
ATTACHMENT #4
The graph below shows how the City of Yakima compares to other cities of somewhat similar population
relative to property tax, and shows that Yakima's property tax is below the state average. This data was
compiled from the State Auditor's Local Government Comparative Statistics for 2016, and includes
comparisons of comparable Washington State cities with population between 50,000 and 145,000.
$500
$400
$300
$200
$100
$0
PROPERTY TAX
Pasco Kennewick Kent Yakima Auburn Marysville Bellevue Richland Kirkland Renton Everett Redmond
Yakima's per capita property tax revenue is $193, which is $72 less than the average city per capita of $265
PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE
100.0%
80.0%
60.0%
fi
z�
40.0%
20.0%
0.0% to
General Fund Parks Streets Fire Pension
0 % Property Tax % Other Revenue
13
ATTACHMENT #5
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 1/4 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).
TOTAL REVENUES
$5,000
54,000$3,660
$3,156 $3,304 $3,378
$3,000
$2,158 $2,196 $2,283 $2,317
$2,000 I$1,482 $1,694
$1,311 $1,320
$1,000
$0
Pasco Kenn. Marysville Yakima Auburn Kirkland Renton Kent Everett Bellevue Richland Redmond
Yakima's per capita total revenues are $1,694, which is $661 less than the average city per capita of $2,355