HomeMy WebLinkAbout11/06/2018 16 Recap of 2019 Preliminary Budget Sessions and Follow UpITEM TITLE:
SUBMITTED BY:
BUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
1
Item No. 16.
For Meeting of: November 6, 2018
Recap of the 2019 Preliminary Budget Sessions and Follow up
Ana Cortez, Assistant City Manager
Steve Groom, Finance and Budget Director
SUMMARY EXPLANATION:
The 2019 Budget presented two key challenges to the Council as the policy making body for the
City of Yakima:
1. Fill a $786,000 General Fund 2019 deficit.
2. Address an overall $3M shortfall including funds needed to sustain the City's Reserve at
16.7% of expenses.
3. In addition, during the sessions, we identified underfunding in our Workers Comp internal
fund.
After consideration of a number of measures, the Council adopted efficiencies in the form of cuts
and new revenues impacting the General Fund; based on these decisions and direction, here is
an update on the state of the 2019 budget:
1. $60,000 for community center capital improvements will be funded through REET 1- not
General Fund
2. $45,000 in events and other quality of life activities were eliminated from the 2019 General
Fund
3. $182,000 were eliminated from Council priorities, travel, training and miscellaneous items in
the General Fund
4. $664,000 were eliminated from salary savings in the General Fund
5. $465,000 is expected in new revenues from various utility taxes to the General Fund
On October 30, 2018, the Council voted to retain ownership of the Lion's pool. The proposed
Lion's pool closure is therefore, not included as a savings.
These Council directions produced a total of 1.4M relief to the General Fund. These changes
along with other administrative adjustments are reflected in the Updated 2019 Preliminary Budget
published on November 1, 2018 which will be formally presented to Council on November 6,
2018.
2
Per Council direction, these funds will cover the projected deficit and begin to rebuild the
Reserves; as mentioned, the Workers Comp Internal Fund has a 2019 deficit of $750,000.
Tentatively, staff allocated $380,000 into this fund. It is important to note that even with the 1.4M
relief this year, the City still needs to address Reserve levels in 2019.
QUESTIONS/ANSWERS
Through the four study sessions held to discuss the 2019 budget, Council requested the
following information from the Finance Department:
1. Levy Lid Lift analysis and information
2. Hotel Motel Tax analysis and information
3. Public Facilities District analysis and information
Additional information on the debt schedule and analysis will be provided on November 13, 2018.
There are two policies for Council consideration:
Policy 1 -Acceptance of Lodging Tax funded projects for 2019
Policy 3 -Acceptance of the Convention Center Capital Facility Plan 2019-2022
ITEM BUDGETED:
STRATEGIC PRIORITY: Public Trust and Accountability
APPROVED FOR
SUBMITTAL:
City Manager
STAFF RECOMMENDATION:
Staff seeks authorization from Council to leave $380,000 in the Workers Comp fund. Staff
recommends examination of the three policies indicated above.
BOARD/COMMITTEE RECOMMENDATION:
ATTACHMENTS:
Description Upload Date
0 finance presentation 10/31/2018
0 cc plan 10/31/2018
Type
Coker Memo
Coyer Memo
BUDGET STUDY SESSIONS
FOLLOW UP FROM FINANCE DEPARTMENT
FINANCE DEPARTMENT
1. LEVY LID LIFT— information for 2019
2. LODGING TAX
Policy #20: acceptance of projects PFD
3. Convention Center
• Policy #21: acceptance of Capital Facility Plan 2019-2022
4. Debt Schedule —information for 2019
will be presented November 13
COUNCIL VALUES
• Look for revenue opportunities in particular, those that do
not add a burden on the residents
• Respect for restricted uses: Lodging Tax + PFD
• Get on the same page on debt- we all know the same thing
• Sales taxes are important (1/3 of our revenue)
• Support investments in City -owned assets
• Council makes policy; staff provides information
LEVY LID LIFT
Property Tax Levy —Policy #5
Staff follow up to Council questions
THREE KEY QUESTIONS:
1. What Property Tax levy capacity is available?
2. What is the projected revenue?
3. 2019 Next Steps?
Q: What is a "Levy Lid Lift"
A: The difference between
1. what the City is currently levying, and
2. what the City could levy with voter approval
Q: How is "senior" defined?
• 61 and under
• Income < 40K
• Lives in parcel
Actual
Property Tax Capacity
Demystifying the math
Value x Tax Rate
Tax Revenue
(from Assessor) max $3.10 Total Levy
2018 $6,241,111,833 x $ 2.99 = $ 18, 686, 825
1% * 19,181, 909 2.6%
10.37%
2019 $ 6, 888, 407, 709 x 2.78 = $ 19,181, 909
$ 6,888,407,709 x $ 0.32 = $ 2,172,155
* plus new construction and State increase (per Assessor)
7
Property Tax Capacity
$68,884 for every 1 -cent change in Property Tax rate
Value x
$ 6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
6, 888, 407, 709
0.05
0.10
0.15
0.20
0.25
0.30
0.31
Tax Rate
$ 2.78
2.83
2.88
2.93
2.98
3.03
3.08
3.09
Tax Revenue
$ 19,181, 909
19, 526, 329
19,870,750
20, 215,170
20,559,591
20, 904, 011
21, 248,431
21,317 315
Difference
344,420
688,841
110331261
1,377,682
1,722,102
2,066,522
2,135, 406
Questions for council:
Given the fund balance and the current tax rate, is there
interest in pursuing a Levy Lid Lift?
If so, at what level, from 1 cent to 32 cents?
If so, when?
Questions?
LODGING TAX
Lodging Tax in the RCW
• Lodging tax can only be spent on
Tourism -related:
• Facilities,
• Events, and
• Expansion of a facility that brings tourism to the community
• Restricted
• Authority: RCW 67.28-1816
Lodging Tax Rate in the RCW
Lodging Tax is 11.2% of hotel rate in Yakima:
• To State
• To City
RCW 67.28.180
• TO City
RCW 67.28.181(1)
6.2%
2.0%+ 1%
RCW 67.28.240
2.0%
Incoming Lodging Tax Where We Use
HoieVMotel Tax Rates: 170
Total 2% Local Total 1% Local 2% State Credit Tourist
Option Option Received Promotion
Received Received Operations*
Su nDome
171 287 370
Capitol Debt Convention
Theatre Service- Center
Operations 1996 GO Capital
Bonds **
100%
1997 317,891 158,945 318,152 794,988 278,788 64,500 424,200 27,500 794,988
1998 313,739 156,869 313,407 784,015 292,639 70,510 420,865 784,014
1999 332,647 166,324 332,111 831,114 290,536 - 70, 510 1112,569 27,500 831,115
2000 355,160 177,580 356,640 889,379 345,098 70,510 446,271 27,500 889,379
2001 361,239 180,620 360, 710 902,569 354,408 - 75,810 41111, 852 27,500 902,570
2002 372,526 186,263 372,654 931,443 370,587 86,882 4116, 473 27,500 931,442
2003 364,145 182,073 364,169 910,387 349,267 88,620 445,000 27,500 910,387
2004 372,443 186,222 372,841 931,506 380,569 88,620 434,817 27,500 931,506
2005 373,252 186,626 373,252 933,130 437,297 - 90,620 405,213 - 933,130
2006 405,453 202,727 405,371 1,013,551 469,035 90,620 426,396 27,500 1,013,551
2007 457,102 228,551 457,103 1,142, 756 505,660 93,340 426,256 117,500 1,142, 756
2008 491,540 245,770 491,539 1,228,849 576,709 96,140 426,000 130,000 1,228,849
2009 470,052 235,026 470,059 1,175,137 495,576 93,108 442,000 144,453 1,175,137
2010 488,854 244,427 488,853 1,222,135 545,200 97,000 428,000 151,935 1,222,135
2011 492,246 246,123 492,246 1,230,615 545,200 - 97,000 428,000 160,415 1,230,615
2012 513,322 256,661 513,322 1,283,306 545,200 140,000 428,000 170,106 1,283,306
2013 533,920 266,960 533,920 1,334,800 570,000 140,000 428,000 196,800 1,334,800
2014 572,427 286,213 572,152 1,430,792 630,000 150,000 428,000 222,792 1,430,792
2015 595,717 297,858 595,719 1,489,294 651,000 75,000 175,000 428,000 160,294 1,489,294
2016 630,211 3 630,210 1,575,526 633,550 75,000 200,000 428,000 238,976 1,575,526
2017 658,848 329,424 659,462 1,647,735 660,000 75,000 205,570 428,000 279,165 1,647,735
2018 - -
23, 683, 027 23, 683, 027
The 1% from State, only or debt, 1997 - current
-I
C
V)m
V)
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WHAT ELSE CAN WE USE IT FOR?
1. Convention Center expansion
• $12.5M - new construction for expansion (see cost in next slide)
• $3.5M- Refi (possible)
• Would be paid for by lodging tax
• Convention Center expansion is an eligible use
• Existing cash flows about the same or better
2. Other Tourism -related Facilities, Events, and Expansion strategies
Sundome
• The debt payment in REET jumped from 40K to 150K because more debt is
paid out of REET instead of GF
• Debt paid for 16K sqf expansion (north side), seating capacity increase to
7,100, locker rooms and second floor improvements
• We pay for Debt through REET- $150,000 in 2019
• We pay for operations through Lodging Tax- $75,000
• We help Central WA Fair in this manner:
• $22,900 in PD time (out of a total: $33,900 where $11,000 is reimbursed)
• $18,600 in Transit services (Free shuttle)
• $5,309 in FD stand by services including OT
• FD collected $4,075 in fire inspections fees
Amount Financed
Payoff all Current
Debt
Proceeds
Available for
Project
Interest
Rate
Term
(Years
Annual Debt
Service
Term
(Years
Annual Debt
Service
15, 000, 000
16, 000, 000
17, 000, 000
18, 000, 000
15, 000, 000
16, 000, 000
17, 000, 000
18, 000, 000
15, 000, 000
16,000,000
17, 000, 000
18, 000, 000
15, 000, 000
16, 000, 000
17, 000, 000
18, 000, 000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
3,500,000
11, 500, 000
12, 500, 000
13, 500, 000
14, 500, 000
11, 500, 000
12, 500, 000
13, 500, 000
14, 500, 000
11, 500, 000
12,500,000
13, 500, 000
14, 500, 000
11, 500, 000
12, 500, 000
13, 500, 000
14, 500, 000
3.0%
3.0%
3.0%
3.0%
3.3%
3.3%
3.3%
3.3%
3.7%
3.7%
3.7%
3.7%
4.0%
4.0%
4.0%
4.0%
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
25
857,150
914,294
971,437
1,028,581
885,819
944,874
1,003,929
1,062,983
924,842
986,498
1,048,154
1,109, 810
954,696
1,018,343
1,081,989
1,145, 636
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
30
761,803
812,590
863,377
914,163
791,482
844,247
897,013
949,778
831,982
887,448
942,913
998,379
863,039
920,575
978,111
1,035,647
How much
does it cost
to finance
the
Convention
Center
expansion?
17
LT DEBT How much do we pay?
$450,000
S400,000
5350,000
5300,000
8250,000
5200,000
$150,000
5100,000
550,000
so
City of Yakima
1996 GO TD Levy Bond Red Fund Debt
Payments
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Convention Center -related
$349,000 in 2019
(Historically: $430K)
18
Scenario #1 Status Quo
(If the Convention Center is not expanded)
Pro
• Debt ends Nov 2019
• $350K freed up for other uses
that are consistent with Lodging
Tax
Con
• Fewer additional lodging tax due
to lost hotel nights
• Fewer additional sales tax due to
less convention guests
• 18 clients have left due to
inadequate size (8.9M spending
loss)
• 12 clients may leave due to
capacity (4.8M impact)
Scenario #2
18,520 sqf Expansion
Pro
• Additional convention revenue
• Additional Lodging Tax
• Additional Sales tax
• Diversify economy
• Current Lodging Tax pays for $350K
in debt
• Potential improvements to hotels
• We own the land needed for
expansion
Con
• Obligates fund for 25-30 years
• If revenues fall short, GF has to
subsidize any gap
• Historically, Convention Center
has been self sustaining (no
burden on GF)
• Cost: $857K -1.1M (from current
sources)
Council & LTAC: Roles and Responsibilities
• City Council- Has decision making authority while Lodging Tax
Advisory Committee- provides input
• Spending authorized in budget- Council authorizes or rejects projects
• Once the budget is adopted, Council may notify the LTAC of any
changes in uses (projects). LTAC has 45 days to provide input.
• Council may amend 2019 budget any time.
• RCW 67.28.1816 requires all Lodging Tax recipients to provide the
Council information on use of the tax and to do annual report to Joint
Legislative Audit Review Committee.
RCW 67.28.1816
(b)(i) In a municipality with a population of five thousand or more, applicants
applying for use of revenues in this chapter must submit their applications and
estimates described under (a) of this subsection to the local lodging tax advisory
committee.
(ii) The local lodging tax advisory committee must select the candidates from
amongst the applicants applying for use of revenues in this chapter and provide a list of
such candidates and recommended amounts of funding to the municipality for final
determination. The municipality may choose only recipients from the list' of candidates
and recommended amounts provided by the local lodging tax advisory committee.
22
Lodging Tax Advisory Committee
Appointed by Council:
• Elected official: Mayor Kathy Coffey
• Representatives of businesses required to collect tax:
• Ledgestone Hotel — Sara Allen
• Hilton — Lisa Vallejo
• Oxford Inn —Sara Davila
• Vacancy
• Businesses authorized to be funded by tax
• Yakima Valley Tourism - John Cooper
• Capitol Theatre — Charlie Robin
• Convention Center — Angie Girard
• Sundome — Greg Lybeck
PUBLIC FACILITIES DISTRICT
WHAT? WHO? HOW MUCH?
PubIic facilities districts (PPDs) are municipal corporations
with independent taxing authority and are taxing districts
under the state constitution. There are two enabling statutes,
Ch. 36.100 RCW for counties and Ch. 35.57 RCW for cities,
towns, and contiguous groups of cities and towns. Ordinance
2002-36 -Creates a public facilities district revenue fund,
passed 06/2002
Both the .033% collected for the Convention Center and the
.025% collected for the Capitol Theatre are credits against the
sales tax that would otherwise be sent to the State. — not a
new tax; it is a credit.
• This district encompasses the cities of Yakima, Selah, and
Union Gap.
PFD- City Created to Manage Convention
Center
Resolution 2001-102 and Ordinance 2001-28 created it: Responsibilities- To govern the affairs of the Public Facilities District including;
approval of changes in the district's bylaws; oversee the general operation and structure of the district; interface with and advise the
Yakima City Council, City Manager and City Staff on operations of the District; interface with the hotel/motel owners and other
convention and tourism related businesses within the District. The District was established to lease and operate the Yakima Convention
Center. This allows for a portion of the sales taxes currently collected and sent to the state to be directed back to the PFD.
Membership:
1. Margaret Luera —term expires June 30, 2022- Council appointed
2. Ron Gamache — term expires June 30, 2019- Council appointed
3. Angie Girard — term expires June 30, 2020- Council appointed
4. Ryan Beckett — term expires June 30, 2021- Council appointed
5. David Hein! — term expires June 30, 2021- Council appointed
6. VACANT (Se la h rep) 2013
7. David Picatti (Union Gap rep) 2013
8. (Ex officio members: Kathy Coffey)
Members may be removed by ordinance for any reason. Per Ordinance 2001-028 section 11. Charter section 6.2: Board members shall
not be council members of the Cities either at the time of their appointment or at any time thereafter.
26
PFD DEBT- How much do we pay?
$1,200,000
S1,000,000
$800,000
S600, 000
$400,000
5200,000
2018 7019 2020 2021 7077 2073 2074 7025 7076 2077 2028 2029 70 30 20 31 20 32
Capitol Theatre -related
$500,000 through 2032
CC Related
$460,000 through 2026
Where is
the
money
going?
Public Facilities District History
2014-2018
CONVENTION CENTER FUNDING:
Revenue:
.033% Sales Tax Credit Revenue
Interest
Total Revenue
Expenditures:
Transfers to:
Convention Center Operations
Convention Center Debt Service
Convention Center Capital
Miscellaneous Board Expenses
Total increase to fund balance
2014
2015
2016
2017
Budget
2018
$ 796,002 $
750
831,341 $ 863,866 $ 890,415 $
750 750 750
925,000
750
796,752
832,091 $ 864,616
891.165
925,750
$ 70,000 $
455,000
100,000
11,991
145,000 $
462,220
110,000
21,510
100,000 $
457,720
155,000
11.972
100,000 $
463,213
155,000
11.838
100,000
463,213
155,000
15,000
636,991 $ 738,730 $ 724,692 $ 730,051 $ 733,213
59,760
93.36
9.924
61,114 $ 192,538
Public Facil
2014-2018
ies District History
CAPITOL THEATRE FUNDING:
Revenue:
Budget
2014 2015 2016 2017 2018
.025% Sales Tax Credit Revenue $ 602,640 $ 629,905 $ 654,332 $ 674,180 $ 700,750
Interest 500 500 500 500 500
Total Revenue $ 603,140 $ 630,405 $ 654,832 $ 674,680 $ 701,250
Expenditures:
Transfers to:
Capitol Theatre Operations
Capitol Theatre Debt Service
Capitol Theatre Capital
Miscellaneous Board Expenses
57,000 $
462,000
939
112,000 $
464,408
50,000
13.510
120,000 $
466,883
30,000
11,972
127,600 $
465,000
56,968
11,832
122,400
465,000
60,000
14.000
530,939 $ 639,918 $ 628,855 $ 661,400 $ 661,400
Total increase (decrease) to fund balance $ 72,201 $ (9,513) $ 25,977 $ 13,280 $ 39,850
What else?
• Can we create more PFD's? No, PFD is attached to a defined area, in
this case, the city.
• Can we create more projects in the PFD? It depends- Capitol Theatre
• Foundation documents include: PFD Charter, Bylaws, Interlocal
Agreement, Lease Agreement
Tourism Promotion Area
35.101.010- Definitions.
• (4) "Tourism promotion" means activities and expenditures desi ned to increase tourism and
convention business, including but not limited to advertising, pu Iicizing, or otherwise
distributing information for the purpose of attracting and welcoming tourists, and operating
tourism destination marketing organizations.
35.101.130. Legislative authority has sole discretion concerning use for tourism promotion—
Contracts for operation of area.
• (1) The legislative authority imposing the charge shall have sole discretion as to how the revenue
derived from the charge is to be used to promote tourism. However, the legislative authority may
appoint existing advisory boards or commissions to make recommendations as to its use, or the
legislative authority may create a new advisory board or commission for the -that- purpose.
• (2) The legislative authority may contract with tourism destination marketing organizations or
other similar organizations to administer the operation of the area, so long as the administration
complies with all applicable provisions of law, including this chapter, and with all county, city, or
town resolutions and ordinances, and with all regulations lawfully imposed by the state auditor or
other state agencies.
• $2.00 per room night for promotion only. RCW 35.101.040
32
Who? What?
• Ordinance 2011-21 establishes the Yakima Hotel and Motel
Commission.
• Members: Sara Allen, Sarah Davila (Baymont), Luis Gutierrez (Red
Lion), Lisa Vallejo, Sydney Taylor Pons (Best Western), Carmen
Mendez and Rand Elliott (Ex -officio)
• RCW 5.99.080 Expenditures from the account may only be used for
tourism promotion resulting in overnight stays in the tourism
promotion area lodging businesses.
WHO IS IN CHARGE?
SUMMARY: RELATED REVENUES
2019 EXPECTED REVENUES
DETAIL
PFD
Other
LT
TPA
Convention Center Ops- 170
1
$ 100,000.00
$ 928,250.00
$ 670,000.00
CC- Capital Improvement- Expan- 310
2
$ 383,600.00
$ 500.00
$ 375,000.00
PFD CC- Ops- 172
3
$ 946,000.00
PFD- Debt Service - CC- 272
4
$ 459,'795.00
LT- LTG O BONDS/CC- 287
5
$ 353, 750.00
Capitol Theatre (Cable tax) Ops- 171
6
$ 144,400.00
$ 102,750.00
$ 205,570.00
CT- Construction- 322
9
$ 60,000.00
PFD CT- ops- 174
7
$ 711, 250.00
PFD -Debt Service -CT (less $100K
272
IRS rebate)
4
$ 571,130.00
TPA- Promotion Area/CC- 173
8
$ 690,350.00
Sundome- 170
1
$ 75,000.00
TOTAL
$ 3, 376,175.00
1, 031,5 .00
1,679, 320.00
$690,350.00
35
AGAIN: How do we pay for the debt if we
expand?
• We may need up to 1.1M
• $430,000 from LT
• $460,000 from PFD
• $250,00 from PFD
• =1.1M
Council Policy Direction
• POLICY #20- Capital Facilities Master Plan
• Convention Ccntcr Expansion?
• Other improvements
• POLICY #21- Acceptance of Lodging Tax funded projects for 2019 and
Request to review at Council meeting the JLARC report no later than
April each year.
40
18
YAKIMA CONVENTION CENTER
CAPITAL FACILITY PLAN 2019-2022
In the pasthree years, work has been done developing plans for improving and maintaining
the convention center. This Capital Facility Plan advances that. The expansion of the Yakima
Convention Center has been in planning stages since 2015 when a market study concluded
there was a need for additional space for the center to remain competitive. After the Public
Facilities District (PFD) considered various scenarios, a modest expansion (18,250 square foot)
was developed in the summer of 2018.
These ympn��m��U�|pmmk���������x�d�������
accounting for nearly $5 million in annual economic Ioss Add to that, the 18 conventions that
have left due to space and availability equals another $9 million lost in economic impact.
Two separate dedicated funding sources will be used to fund the Capital Facility Plan:
Public Facility District (PFD): In 2002 the City took the Iead in forming a PFD. By state Iaw these
PFD funds can only be used to build, maintain and/or operate the Convention Center. The PFD
financed the 2002/2003 expansion of the Yakima Convention Center by levying the sales tax
credit frorn the State of Washington. This revenue comes from state sales tax already being
paid by the buyers of goods Iocally. It was not a new or increased tax; it is a credit back from
the State.
Hotel/Motel Tax (HMT): This tax is imposed on hotels and motels and was used to finance the
1996/97 expansion. In November 2019, the bondsforthatexpansk»nmiUmatune.Pmaponing
the project could jeopardize the ability to renew those bonds with favorable rates, plus the loss
of the "double dip" additional lodging tax the City receives from the state enacted in 1997 for
the expansion. As a general rule, Bond Counsel has previously advised that the City continue to
pledge the Hotel/Motel tax revenue on any and all debt for the existing Convention Center to
assure continued collection of the tax.
In addition to the expansion, there are a variety of capital needs for the facility for the next four
years. Again, all are paid by the HMT and PFD dedicated revenues.
2019
Architectural predesign, technical consulting, design -development
and contract documents to "bid ready" status. $567200
Widen service hall & re -configure storage
Refinance existing PFD Bond
Upgrade & install AV in each meeting room
2020
$55,000
$3,500,
$120,000
$4,247,200
II
19
Upgrade existing carpet in building $288,800
Fire system upgrades $50,000
Bond for construction $12,500,000
$12,838,800
2021
Restroom upgrades in existing building
Replace wall finishes in existing building
2022
Re -Roofing original building & North addition
VIC Relocation
$110,000
$200.000
$310,000
$ 255,000
$280.000
$535,000
41