HomeMy WebLinkAbout11/06/2018 08 2019 Property Tax Levy and Ad Valorem TaxesITEM TITLE:
SUBMITTED BY:
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
1
Item No. 8.
For Meeting of: November 6, 2018
Public hearing and ordinances pertaining to Ad Valorem Taxes to
be levied for collection in Fiscal Year
2019
Cliff Moore, City Manager
Ana Cortez, Assistant City Manager
Steve Groom, Budget & Finance Director
SUMMARY EXPLANATION:
Ordinance A—Declaring the City Council's intent to increase the City's 2019 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 2019 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 2019, and
requests approval of a 1% increase in the levy as allowed by state law and as included in the
2019 Preliminary Budget.
ITEM BUDGETED:
Yes
STRATEGIC PRIORITY: Public Trust and Accountability
APPROVED FOR
SUBMITTAL:
City Manager
STAFF RECOMMENDATION:
Conduct a public hearing on the 2019 property tax levy, and pass the ordinances.
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description
O Memo - Ad Valorem
D Exhibit 1
D Ord A
D Ord B
O Attachments
Upload Date
10/25/2018
10/25/2018
10/252018
10/25/2018
10/31/2018
Type
Cover Memo
Cover Memo
Co\,er Memo
Coyer Memo
Coker Memo
2
3
Memorandum
Date: November 6, 2018
To: The Honorable Mayor and City Council
Cliff Moore, City Manager
From: Steve Groom, Finance Director
Re: 2019 Property Tax Levy
Property tax is a critical funding component of General Government services. 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 2019 property tax levy.
Council Action to be Taken
Review and Approve Ordinance A and Ordinance B, attached.
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 2.169% from June 2017 to June 2018 which exceeds the
statutorily allowed increase of 1%. The 2019 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, 2018 or the City will receive no funding from this
source in 2019. The Commissioners have requested to receive this packet by November
20th so that 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 2018
levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2019 tax
collections by any amount over 2018 levels.
• Ordinance B fixes the maximum tax levy for collection by the City in 2019. 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.
Discussion — Valuation and Property Tax
The total 2019 City of Yakima proposed property tax levy includes the 101% levy, and amounts
for new construction and prior year refunds. The total operating tax rate for next year is
estimated to be $2.78 per $1,000 of Assessed Valuation (AV), a decrease of approximately 20.9
4
cents per thousand of Assessed Valuation. The 2018 rate was $2.99. 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 2019.
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 10.37%, and the total
Revenue increased 2.6%, including new construction and State assessments, so the implicit tax
rate decreased from $2.99 to $2.78. A home with an assessed value of $100,000 in 2018 was
assessed $2.99 for the regular levy. That home, if its value increased by the countywide
average would be valued at $110,371 and would be assessed $2.78 in 2019, an increase of
$7.83 or approximately 2.6%. If the assessed value remained at $100,000, the property tax
assessment decrease to $278.47, a decrease of $20.95 or 7.0%.
The 1% increase in Property Tax, excluding new construction and State -assessed value
increases, is projected to generate about $187,000 in additional revenue in 2019. The initial
estimates from the County on the 2019 property tax levy included an additional growth rate for
new construction that is 1.6% or $295,000, along with a refund levy of $256,219. These
estimates, found on Exhibit I, have been included in the 2019 Budget projection.
5
EXHIBIT I
City of Yakima
Property Tax Limitation Calculation
2018 Tax 2019
Assessed Rate Levy
Value Applied Dollars
(Dollars in Thousands)
Prior Year (2018) = Base $ 6,241,111.833 $ 2.9942 $ 18,686,841
Implicit Price Deflator (IPD) - 2.169% Increase Max = 1% of Base 186,868
2019 Tax Rate @ 101% of Base $ 18,873,709
Valuation Increase - 8.7% 544,028.661 n/a n/a
New Construction - 1.6% 98,586.215 2.9942 295,182
State Assessed Value Increase - 2.9942 -
Tax Limit Before Annexations $ 6,883,726.709 2.7847 $ 19,168,891
Add for Annexation 4,681.000 2.7847 13,035
Limit for Subsequent Years $ 6,888,407.709 2.7847 19,181,926
Plus Refunds (Estimate) 256,219
Plus Contingency 100,000
Total Ordinance $ 19,538,145
Est. Change in rate per $1,000 of Assessed Value (~0.2095)
State of Washington Constitutional Limit
2018 Maximum
Assessed Maximum Levy
Value Rate Dollars
2018 Assessed Valuation $ 6,888,407.709 3.6000 $ 24,798,268
Less: Library Levy (Estimate) 0.5000 (3,444,204)
2018 Levy for Collection in 2019 (Estimate) $ 3.1000 $ 21,354,064
AN ORDINANCE
6
ORDINANCE A
ORDINANCE NO. 2018
relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2019 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 6, 2018,
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 2019 current expense budget, and the total
proposed property tax levy amount pertaining to 2019 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 2.169%;
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 6, 2018, 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 2018 was $18,686,841 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied attributable to the inflation
factor for collection in 2019 shall be in the amount of $186,868, 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 2019
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 2019:
A. A discretionary increase of $186,868, attributable to the inflation factor
which is a percentage increase of 1.0% over the amount levied for
collection in 2018; plus
B. An estimated increase of $13,035 for recent annexations; plus
C. An estimated increase of $295,182 for new construction and
improvements to property; plus
D. An estimated increase of $256,219 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, 2018.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 6, 2018.
PASSED BY THE CITY COUNCIL, signed and approved this 6th day of November, 2018.
ATTEST: Kathy Coffey, Mayor
City Clerk
Publication Date:
Effective Date:
AN ORDINANCE
8
ORDINANCE B
ORDINANCE NO. 2018
fixing and levying the amount of ad valorem taxes necessary to discharge
the expected expenses and obligations for the 2019 Budget for the City of
Yakima.
WHEREAS, the City Council finds that the total net amount of $19,538,145 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 $19,538,145 for the following purposes:
General Government Levy
Operating Funds $18,386,635
Firemen's Relief & Pension Fund 1,151,510
Amount of tax levy for General
Government Purposes (1) $19,538,145
Special Purpose Tax Levy 0
Total Levy Amount (1) $19,538,145
(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, 2018.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance
shall take effect on November 6, 2018.
PASSED BY THE CITY COUNCIL, signed and approved this 6th day of November, 2018.
ATTEST: Kathy Coffey, Mayor
City Clerk
Publication Date:
Effective Date:
General Government
9
ATTACHMENT #1
RESERVE BALANCES
GENERAL GOVERNMENT FUNDS
2018
2014 2015 2016 2017 Year End 2019
Actual Actual Actual Actual Estimate Projected Chng
Beginning Fund Balance $11,904,884 $10,432,250 $8,172,676 $9,102,708 $9,636,004 $10,728,872
Revenues 67,382,678 70,265,428 75,364,232 79,315,614 78,667,979 78,530,580 (0.2)%
Expenditures 68,855,312 72,525,002 74,434,200 78,782,318 77,575,111 78,280,453 0.9 %
Ending Fund Balance $10,432,250 $8,172,676 $9,102,708 $9,636,004 $10,728,872 $10,978,999 2.3 %
Reserve as a % of Expenditures
15.2% 11.3% 12.2% 12.2% 13.8% 14.0%
Note: 2017 Year -End Estimate shown net of LED project revenue and expenditure of $2,783,846.
The table above reflects the General Government 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
Government Fund balance dipped to a low of only 11.3% in 2015, but with careful budgeting and modest increases
in revenue, the fund balance is projected to increase to 13.8% 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.
Sales Tax
27.7¢
$21,758,510
GENERAL GOVERNMENT REVENUE
(Based on 2019 Budget of $78.5 million)
Franchise & Utility Tax
24.2¢
$19,027,665
10
ATTACHMENT #2
Intgov"t & State Shared Other
5.90 3.30
$4,612,001 $2,628,088
Source
Property Tax
20.7¢
$16,238,389
GENERAL GOVER
Licenses, Permits
& Charges f/Services
13.4¢
$10,521,036
NMENT RESOURCES
THREE YEAR
2018
2017 Year -End
Actual Estimate
COMPARISON
General Sales Tax
Criminal Justice Sales Tax
Property Tax
Utility & Franchise Taxes
Charges for Services
State Shared Revenue
Fines and Forfeitures
Other Taxes
Transfers from other Funds
Licenses and Permits
Intergovernmental/Grants
Other Revenue
Total Revenue
Note:
$ 16,679,197
3,380,679
18,292,210
16,625,263
10,013,816
3,586,128
1,092,919
2,112,736
1,541,629
1,513,060
856,077
3,621,900
$ 17,909,281
3,474,838
16,522,009
17,861,365
11,131,298
3,585,009
1,000,808
1,831,280
1,774,452
1,513,060
945,000
1,119,580
79,315,614 78,667,980
°/0
2019
Projected
Change Revenue
7.4 % $ 18,173,950
2.8 % 3,584,560
16,238,389
7.4 % 19,027,665
11.2 % 9,581,186
- % 3,586,111
(8.4)% 1,025,890
(13.3)% 1,939,817
15.1 % 1,805,074
1,689,605
939,850
938,483
(9.7)%
K.
Fines &
Other Taxes
4.8e
$3,744,891
% of - 2019 vs. 2018 -
2017 Increase
Total (Decrease) Change
23.1% $ 264,669 1.5 %
4.6% 109,722 3.2 %
20.7% (283,620) (1.7)%
24.2% 1,166,300 6.5 %
12.2% (1,550,112) (13.9)%
4.6% 1,102
1.3% 25,082 2.5 %
2.5% 108,537 5.9 %
2.3% 30,622 1.7 %
2.2% 176,545 11.7 %
1.2% (5,150) (0.5)%
1.2% (181,097) (16.2)%
78,530,580 100.1% (137,400) (0.2)%
°/0
%
Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for
capital needs. 2017 Actual shown is inclusive of LED project revenue of $2,783,846.
11
ATTACHMENT #3
2019 PROPOSED
GENERAL PROPERTY TAX LEVY - BY FUNCTION
General Fund
$8,476,057
44.2%
Fire & Police Pension
$2,081,007
10.9%
Debt Service
$2,935,519
15.3`!:,
Parks
$2,560,000
13.4';4
Streets
$3,121,325
16.3%
2018 PROPOSED
GENERAL PROPERTY TAX LEVY - BY FUND
2018 2018 2019 2018 Est.
2017 Amended Year -End Projected vs. 2019
Fund Actual Budget Estimated Revenue Budget
General Fund $ 10,558,180 $ 10,900,969 $ 8,749,405 $ 8,476,057 (3.1)%
Parks & Recreation 2,583,260 2,822,565 2,564,746 2,560,000 (0.2)%
Street & Traffic 3,116,609 3,141,437 3,141,437 3,121,325 (0.6)%
Police Pension 815,405 927,497 929,497 929,497 —0/0
Fire Pension 1,218,756 1,136,924 1,136,924 1,151,510 1.3 %
Sub -Total General Government 18,292,210 18,929,392 16,522,009 16,238,389 (1.7)%
Debt Service 2,407,383 2,935,519 21.9 %
Total 18,292,210 18,929,392 18,929,392 19,173,908 1.3 %
Note: For 2018 Year -End Estimate and 2019 Projected budgets, a portion of the Property Tax was set up to go
directly into General Fund and Parks & Recreation Debt Service
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 2017, and includes comparisons of comparable
Washington State cities with population between 50,000 and 130,000.
5500
$401)
5300
$200
5100
$0
PROPERTY TAX
$157
Pasco Kennewick Kent Yakima
242 $248
$325 5341___
$261 $266
$390
$407
Renton Marys- Bellingham Auburn Richland Kirkland Everett Redmond
ville
Yakima's per capita property tax revenue is $197, which is $64 less than the average city per capita of $261.
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 2017 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).
$5,000
$4,000
$3,000
$2,000
$1,000
$0
TOTAL REVENUES
KennewiclMarvsville Pasco Yakima Kent Auburn Renton KirklandBellingham Everett Redmond Richland
Yakima's per capita total revenues are $1,644, which is $606 less than the average city per capita of $2,250.