HomeMy WebLinkAbout11/19/2013 08 2014 Property Tax Levy and 2014 Ad Valorem TaxesBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No.
For Meeting of: 11/19/2013
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ITEM TITLE:
SUBMITTED BY:
SUMMARY EXPLANATION:
Public Hearing on Revenue Sources and Consideration of
Legislation pertaining to Ad Valorem Taxes to be levied for
collection in Fiscal Year 2014:
Ordinance A—Declaring the City Council's intent to increase
the City's 2014 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 2014 ad valorem
property taxes and excess levy taxes for the City of Yakima.
Tony O'Rourke, City Manager
Cindy Epperson, Director of Finance and Budget
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 2014, 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. (Note:
the initiative defines the rate of inflation as measured by the Implicit Price Deflator (IPD) for
consumer goods. For this year, the IPD increased by 1.3% from June 2012 to June 2013)
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, 2013 or the City will receive no funding from this
source in 2014. 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 2013 levels.
This ordinance requires a simple majority to pass. It is required by RCW 84.55.120. This is
legally necessary to increase the 2014 tax collections by any amount over 2013 levels.
Ordinance B fixes the tax levy for collection by the City in 2014. This ordinance includes not
only the regular tax but also special levy taxes for bond repayments. This ordinance complies
with RCW 35.33.135 and also requires a simple majority vote to pass.
These ordinances are in substantially the same format as the prior year levy legislation.
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 24%;
Utility Taxes as presented in the Preliminary Budget make up about 23%; and all other revenue
comprise the remaining 26%. (See Attachment 1 for a summary of General Government
revenues.)
As the "great recession" lingered, the City's General Government revenue remained flat. The
2008 actual revenue was $57.4 million, and the total hovered at that level for four years -2011
actual revenue was $57.6 million. Because of Council's desire to preserve and enhance public
safety, they approved a 6% increase in the utility tax rate for Wastewater, Water, Refuse and
Stormwater at the end of 2012. This was estimated to generate about $2.0 million in 2012. The
other significant event in 2012 is that sales tax increased by 7.2% over 2011 by the end of the
year. 2013 sales tax revenue is running 7.2% ahead of 2012 through ten months. (Note: The
last time Sales Tax improved over 7% year over year was in 1996.) These two factors resulted
in the 2012 revenue being $61.6 million, a full $4.0 million above the 2011 actual, and 2013
revenue is estimated to be $63.1 million, $1.5 million or 2.4% more than 2012. Going into 2014,
some revenues have been redirected into General Government because of reorganizations and
debt service being paid in full, so that revenues are forecast to grow by $3.1 million or 4.9%.
The proposed 1% increase in Property Tax is projected to be $170,000 in 2014.
The initial estimates from the County on the 2014 property tax levy included a growth rate for
new construction that is 0.8%, which approximates the budget estimate.
Property Tax Discussion
The total 2014 City of Yakima property tax levy includes the 101% levy, a levy for the last year
debt service on a voted bond issue for Fire capital improvements, and amounts for new
construction and prior year refunds. The 2014 budget currently includes an estimated revenue
of $17,085,000 for the regular levy, an increase of $285,000 (made up of an estimate of 1% for
the regular levy, and 0.7% for new construction) over the 2012 year-end estimate of
$16,800,000. The voted levy debt is budgeted to be $107,230, less than half of the 2013
budget, based on scheduled debt service for the 1995 voted Fire bond issue that will be paid in
full in 2014. The total operating tax rate for next year is estimated to be $3.113 per $1,000 of
Assessed Valuation (AV), up from the 2013 rate of $3.0895. (The statutory limit is $3.60 less
the Library levy, which is capped at 50 cents per $1,000. The estimate for the 2013 Library levy
is 47.8 cents per thousand) -- the bond rate is estimated to be $0.0193 per $1,000, cut from
$0.0541 in 2013. It should be noted that the amounts included in the budget differ from the levy
as shown in attached Exhibit 1 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 2013 paid $463.42 for the regular levy, and
$8.11 for the voted levy, for a total of $471.53. According to the preliminary valuation estimate
provided by the County Assessor, the underlying assessed value of all taxable property in the
City was virtually flat, so that the regular levy tax is estimated to be $466.95, and the voted levy
would be $2.90 for a total of $469.85—a slight decrease of ($1.68) in the total annual levy.
We believe the current request for the property tax levy is justified by the following conditions:
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 67% 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, coupled with
increases in fuel prices has affected consumption -- the 2014 gas tax estimate is still
below 2008 levels.
3. Property tax is also a key revenue source for the Parks and Recreation Division,
representing about 38% of all Parks revenue. Parks maintenance is supported entirely by
property taxes, while 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 2013,
the City is budgeting conservatively and estimating a reduction of up to 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 $84 below the average of comparable Washington
cities with populations of 45,000 to 125,000 in 2012, the most recent year this information
has been compiled. Yakima ranks 9th out of 12 cities in this group. Further, for these
same cities, Yakima's total per capita revenue collected from all taxes, fees and charges
is $1,548 or $694 less than the average of $2,242 and again ranks 9th out of the 12 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 25% (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 2014 property tax levy, which is the basis
on which the 2014 budget was developed.
Resolution: Ordinance: X
Other (Specify): Exhibit I, Attachments 1-5
Contract: Contract Term:
Start Date: End Date:
Item Budgeted: Amount:
Funding Source/Fiscal
Impact:
Strategic Priority:
Insurance Required? No
Mail to:
Phone:
APPROVED FOR
RECOMMENDATION:
City Manager
City Management is recommending that City Council conduct a public hearing on the 2014
property tax levy, and then pass ordinances "A", which declares Council's intent to increase the
levy by 101% above the prior year levy, and "B", which fixes the levy amount. These
ordinances follow state law imposing a 1% increase in the property tax levy for 2014, plus new
levies for construction and refunds, and are the basis on which the 2014 budget was developed
and balanced.
ATTACHMENTS:
Description Upload Date Type
Ordinance A 11/12/2013 Ordinance
Ordinance B 11/12/2013 Ordinance
Exhibit 1 Property Tax Calculation 11/12/2013 Exhibi�
AN ORDINANCE
ORDINANCE A
ORDINANCE NO. 2013
relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2014 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 19, 2013,
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 2014 current expense budget, and the total
proposed property tax levy amount pertaining to 2014 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, the City Council, after the public hearing on November 19, 2013, 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, resulting from 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 2013 was $16,975,232 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied for collection in 2014 shall
be in the amount of $169,752, which is a percentage increase of one percent (1%) from the
previous year; and
WHEREAS, the non -discretionary increases in property tax levied for collection in 2014
can only be estimated due to the absence of final values to be provided by the Yakima County
Assessor, now, therefore,
cje/PDFConvert.3357.1.property-tax-ord_A_2014_1%-ce.docx 11/12/2013
ORDINANCE A
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
2014:
A. A discretionary increase of $169,752, which is a percentage increase of
one percent (1%) over the amount levied for collection in 2013; plus
B. An estimated increase of $0 for recent annexations; plus
C. An estimated increase of $148,642 for new construction and
improvements to property; plus
D. An estimated increase of $59,211 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, 2013.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 19, 2013.
PASSED BY THE CITY COUNCIL, signed and approved this 19th day of November,
2013.
ATTEST: Micah Cawley, Mayor
City Clerk
Publication Date:
Effective Date:
cje/PDFConvert.3357.1.property-tax-ord_A_2014_1%-ce.docx 11/12/2013
ORDINANCE B
ORDINANCE NO. 2013
AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance
estimated revenue with estimated expenditures for the 2014 Budget for
the City of Yakima.
WHEREAS, the City Council finds that the total net amount of $17,442,837 in revenue
must be raised by ad valorem taxes on real and personal property within the corporate limits of
the City of Yakima to balance estimated revenues and expenditures for the 2014 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 $17,442,837 for the following
purposes:
General Government Levy
Operating Funds $16,256,837
Firemens' Relief & Pension Fund 1,186,000
Amount of tax levy for General
Government Purposes (1) $17,442,837
Special Purpose Tax Levy 107,230
Total Levy Amount (1) $17,550,856
(1) Includes an additional $90,000 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, 2013.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 19, 2013.
PASSED BY THE CITY COUNCIL, signed and approved this 19th day of
November, 2013.
ATTEST: Micah Cawley, Mayor
City Clerk
Publication Date:
Effective Date:
PDFConvert.3359.1. ad-valorem-ord B 20141% ce.docx
City of Yakima
Property Tax Limitation Calculation
Prior Year (2013) = Base
1% Increase
Base 101%
Valuation Increase (.23%)
EXHIBIT I
2013 Tax 2014
Assessed Rate Levy
Values Applied Dollars
(Dollars in Thousands)
$5,494,497.093 $3.0895
$16,975,232
$169,752
$17,144,984
$12,741.826 N/A $0
New Construction (0.85%) $48,112.039 $3.0895 $148,642
State Assessed Value $3.0895 $0
Tax Limit Before Annexations $5,555,350.958 $3.1130 $17,293,626
Add for Annexation
$0.000 $3.1130 $0
Limit for Subsequent Years $5,555,350.958 $3.1130 $17,293,626
Plus Refunds $59,211
Plus Contingency $90,000
Total -ordinance $17,442,837
State of Washington Constitutional Limit
Assessed Valuation $5,555,350.958 $3.6000 $19,999,263
Less: Library Levy (Estimate) $0.478 $2,655,458
2013 Levy for Collection in 2014 (Estimate) $3.122 $17,343,805
cje 11/12/2013
26.9¢
Sales Tax
($17,790,000)
GENERAL GOVERNMENT REVENUE
(BASED ON 2014 BUDGET OF $66.1 MILLION)
1:1anv 14H;
IHIr, cCRT]EIt>.fl.il' I.KERE.1A G
24.0(r
Property Tax
($15,899,000)
23.2¢
Franchise &
Utility Tax
($15,332,500)
CK GCPOSITCD IN THE TAEASUI
A2212
ATTACHMENT #1
5.5¢ 4.3¢
Intergovernment & Other
State Shared Revenue Revenue
($3,604,600) ($2,875,500)
wras'
fitk
!3565 A
T
I ll
op7gx1M'.
11.4¢
Licenses, Permits
& Charges
for Services
($7,527,067)
GENERAL GOVERNMENT RESOURCES
THREE YEAR COMPARISON
47r
Fines &
Other Taxes
($3,106,751)
%of --2014 vs. 2013--
2012 2013 Percent 2014 2014 Increase Percent
Source Actual Estimate Change Budget Total (Decrease) Change
General Sales Tax $13,494,843 $14,100,000 4.5% $14,820,000 22.4% $720,000 5.1%
Crim. Justice Sales Tax(1) 2,497,008 2,747,000 10.0% 2,970,000 4.5% 223,000 8.1%
Property Tax 15,334,939 15,608,000 1.8% 15,899,000 24.0% 291,000 1.9%
Franchise & Utility Taxes 14,429,011 14,555,000 0.9% 15,332,500 23.2% 777,500 5.3%
Charges for Services 5,664,903 6,103,481 7.7% 7,007,789 10.6% 904,308 14.8%
State Shared Revenue 3,071,218 2,774,115 (9.7%) 2,918,800 4.4% 144,685 5.2%
Fines and Forfeitures 1,512,477 1,613,000 6.6% 1,670,000 2.5% 57,000 3.5%
Other Taxes 1,386,797 1,416,900 2.2% 1,420,500 2.1% 3,600 0.3%
Other Revenue 636,158 605,018 (4.9%) 614,278 0.9% 9,260 1.5%
Transfers from other Funds 1,511,458 1,390,000 (8.0%) 1,360,000 2.1% (30,000) (2.2%)
Other Intergovernmental 1,149,151 1,378,804 20.0% 1,353,851 2.0% (24,953) (1.8%)
Licenses and Permits 892,282 780,000 (12.6%) 769,200 1.2% (10,800) (1.4%)
Total Revenue $61,580,245 $63,071,318 2.4% $66,135,918 100.0% $3,064,600 4.9%
Beginning Fund Balance 9,948,220 10,908,094 9.6% 11,083,227 175,132 1.6%
Total Resources $71,528,465 $73,979,412 3.4% $77,219,145 $3,239,732 4.4%
(1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for
capital needs.
General Fund
$9,834,675
57.6%
2014 PROPOSED
GENERAL PROPERTY TAX LEVY — BY FUNCTION
Fire & Police
Pension
$2,529,325
14.8%
Parks
$1,649,000
9.7%
Streets
$3,072,000
18.0%
ATTACHMENT #2
2013 2013 Est.
2012 Amended 2013 2014 vs. 2014
Actual Budget Estimated Budget Budget
General $9,935,939 $10,016,000 $10,125,000 $11,178,000 10.4%
Parks & Recreation 1,683,000 1,457,000 1,812,000 1,649,000 (9.0%)
Street & Traffic 3,716,000 3,856,000 3,671,000 3,072,000 (16.3%)
Sub -Total General Government 15,334,939 15,329,000 15,608,000 15,899,000 1.9%
Fire Pension 1,315,000 1,315,000 1,192,000 1,186,000 (0.5%)
Total $16,649,939 $16,644,000 $16,800,000 $17,085,000 1.7%
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, and includes comparisons of comparable Washington State cities with population
between 45,000 and 125,000.
$450
$400
$350
$300
$250
$200
$150
$100
$50
2012 PER CAPITA PROPERTY TAXES
Comparable Cities between 45,000 and 125,000 in Population
(Rounded to the closest dollar)
Yakima's per capita property tax is $170, which is $84 less
than the average city per capita of $254
$146
$109
$166 $170
1 ri
$250
II$210
1
$263
$289
$304
$356
$375
$404
Pasco Kennewick Kent Yakima Auburn Marysville Kirkland Richland Bellevue Renton Everett Redmond
PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE
2014 BUDGET YEAR
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
20%
38%
General Fund Parks
94%
Streets Fire Pension
• % Property Tax • % 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 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 12 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 -
2012 PER CAPITA TOTAL REVENUES
Comparable Cities between 45,000 and 125,000 in Population
(Rounded to the closest dollar)
Yakima's per capita total revenue is $1,548, which is $694
less than the average city per capita of $2,242
$1,270 $1,306 $1,389
1
1
$1,548
$1,751
1
$1,930 $2,002
$2,314
$2,596
$3,347 $3,356
$4,099
Pasco Kennewick Marysville Yakima Kent Kirkland Auburn Renton Everett 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 2013 property taxes were allocated between these governmental entities.)
2013 PROPERTY TAX DISTRIBUTION
Yakima School District
0.37
i y Dl ti W.
iES it &rrnERE HAS nrcn G[POSITED IMTI
T11EITM giAia
State of Washington Schools
0.19
Library
.04e
'RE TREASU RYCIF
A 122123565 A
City of Yakima
.25e
Yakima County EMS
.13e .02e
City of Yakima Property Tax - In 2013, a typical City resident pays approximately $12.92 per
thousand of assessed value on property taxes. Only $3.12, or about 24.5%, 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.