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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.