HomeMy WebLinkAbout11/18/2014 09 2015 Ad Valorem and Property Tax LevyBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. 9.
For Meeting of: November 18, 2014
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ITEM TITLE:
SUBMITTED BY:
SUMMARY EXPLANATION:
Public Hearing pertaining to Ad Valorem Taxes to be levied
for collection in Fiscal Year 2015
Tony O'Rourke, City Manager
Cindy Epperson, Director of Finance and Budget
Ordinance A—Declaring the City Council's intent to increase the City's 2015 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 2015 ad valorem property taxes and excess levy taxes for
the City of Yakima.
These ordinances follow state law imposing a 1% increase in the property tax levy for 2015,
plus new levies for construction and refunds, and are the basis on which the 2015 budget was
developed and balanced.
Resolution: Ordinance: X
Other (Specify): Memo, Exhibit I, Attachments 1-5
Contract Term:
End Date:
Amount:
Contract:
Start Date:
Item Budgeted: Yes
Funding Source/Fiscal
Impact:
Strategic Priority:
Insurance Required? No
Mail to:
Phone:
Public Trust and Accountability
APPROVED FOR
SUBMITTAL:
RECOMMENDATION:
City Manager
City Management is recommending that City Council conduct a public hearing on the 2015
property tax levy, and then pass ordinances.
ATTACHMENTS:
Description Upload Date Type
2015 Ad Valorem Memorandum 11/13/2014 Cover Merno
Ordinance A 2015 Property Tax 11/13/2014 Ordinance
Ordinance B 2015 Ad Valorem 11/13/2014 Ordinance
Exhibit 1 Property Tax Calculation 11/13/2014 Exhbt
Attachment 1 Ad Valorem 11/13/2014 Exhbt
Memorandum
Date: November 12, 2014
To: The Honorable Mayor and City Council
From: Cindy Epperson, Director of Finance and Budget
Re: 2015 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. Ordinance A and B will set the property tax
levy for collection in 2015, 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 1.59% from June 2013 to June 2014)
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, 2014 or the City will receive no funding from this
source in 2015. 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 2014 levels.
This ordinance requires a simple majority to pass. It is required by RCW 84.55.120. This is
legally necessary to increase the 2015 tax collections by any amount over 2014 levels.
Ordinance B fixes the tax levy for collection by the City in 2015. This ordinance includes not
only the regular tax but also special levy taxes for bond repayments. It should be noted that all
voted bond issues are paid in full in 2014, so the 2015 levy does not include a special bond
levy. This ordinance complies with RCW 35.33.135 and in accordance with Article VII, Section
2 of the City Charter, requires a super -majority (i.e. a minimum affirmative vote of five members)
of the City Council.
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 23%; Utility Taxes
as presented in the Preliminary Budget make up about 24%; and all other revenue comprise the
remaining 26%. (See Attachment 1 for a summary of General Government revenues.)
2014 General Government revenue is estimated to be $67.4 million, $3.8 million or 6.1% more
than 2013, primarily because of good sales tax growth of about 6%, and the redirection of Cable
TV utility tax from debt service on the Law and Justice facility into General Fund to help pay for
the street charter amendment. Going into 2015, Sales and utility tax revenues are projected to
grow as a result of ongoing economic development in our community; and the Fire Department
was successful in obtaining a Firefighter hiring grant (SAFER), and one time revenue from the
sale of property is budgeted, so that revenues are forecast to grow by $3.1 million or 4.6%.
The proposed 1% increase in Property Tax is projected to be $172,000 in 2015. The initial
estimates from the County on the 2015 property tax levy included a growth rate for new
construction that is 1.5%, which approximates the budget estimate.
Property Tax Discussion
The total 2015 City of Yakima property tax levy includes the 101% levy, and amounts for new
construction and prior year refunds. The 2015 budget currently includes an estimated revenue
of $17,544,000 for the regular levy, an increase of $429,000 (made up of an estimate of 1% for
the regular levy, and 1.5% for new construction) over the 2014 year-end estimate of
$17,115,000. The voted levy debt is dropping to $ -0- from $107,230, since the 1995 voted Fire
bond issue paid in full in 2014. The total operating tax rate for next year is estimated to be
$3.122 per $1,000 of Assessed Valuation (AV), up from the 2014 rate of $3.1188. (The
statutory limit is $3.60 less the Library levy, which is capped at 50 cents per $1,000. The
estimate for the 2014 Library levy is 47.8 cents per thousand) It should be noted that the
amounts included in the budget differ from the levy as shown in attached Exhibit I 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 2014 paid $467.82 for the regular levy, and
$2.96 for the voted levy, for a total of $470.78. (According to the preliminary valuation estimate
provided by the County Assessor, the underlying assessed value of all taxable property in the
City grew a little less than 1%). The regular levy tax is estimated to be $468.33, and the voted
levy has been eliminated so there is a slight decrease of ($2.45) 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 2015 gas tax estimate is
about equal to 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 2014,
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 $71 below the average of comparable
Washington cities with populations of 50,000 to 135,000 in 2013, 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 $1,517 or $541 less than the average of $2,058 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 2015 property tax levy, which is the basis
on which the 2015 budget was developed.
AN ORDINANCE
ORDINANCE A
ORDINANCE NO. 2014
relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2015 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 18, 2014,
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 2015 current expense budget, and the total
proposed property tax levy amount pertaining to 2015 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 18, 2014, 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 2014 was $17,200,931 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied for collection in 2014 shall
be in the amount of $172,009, 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,
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 $172,009, which is a percentage increase of
one percent (1 %) over the amount levied for collection in 2014; plus
B. An estimated increase of $0 for recent annexations; plus
C. An estimated increase of $261,725 for new construction and
improvements to property; plus
D. An estimated increase of $53,787 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, 2014.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 18, 2014.
PASSED BY THE CITY COUNCIL, signed and approved this 19th day of November,
2013.
ATTEST: Micah Cawley, Mayor
City Clerk
Publication Date:
Effective Date:
ORDINANCE B
ORDINANCE NO. 2014
AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance
estimated revenue with estimated expenditures for the 2015 Budget for
the City of Yakima.
WHEREAS, the City Council finds that the total net amount of $17,738,452 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 2015 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 $17,738,452 for the following
purposes:
General Government Levy
Operating Funds $16,530,952
Firemens' Relief & Pension Fund 1,207,500
Amount of tax levy for General
Government Purposes (1) $17,738,452
Special Purpose Tax Levy 0
Total Levy Amount (1) $17,738,452
(1) Includes an additional $103,787 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, 2014.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 18, 2014.
PASSED BY THE CITY COUNCIL, signed and approved this 18th day of
November, 2014.
ATTEST: Micah Cawley, Mayor
City Clerk
Publication Date:
Effective Date:
City of Yakima
Property Tax Limitation Calculation
Prior Year (2014) = Base
1% Increase
Base 101%
Valuation Increase --- .9%
New Construction --- 1.5%
State Assessed Value
2014 Tax 2015
Assessed Rate Levy
Values Applied Dollars
(Dollars in Thousands)
$5,515,264.870 3.118800
EXH TR T1' I
$17,200,931
$172,009
$17,372,940
$49,077.746 N/A $0
$83,918.593 $3.1188 $261,725
$3.1188 $0
Tax Limit Before Annexations $5,648,261.209 $3.1221 $17,634,665
Add for Annexation $0.000 $3.1221 $0
Limit for Subsequent Years $5,555,350.958 $3.1744 $17,634,665
Plus Contingency (And Refunds) $103,787
Total -ordinance $17,738,452
State of Washington Constitutional Limit
Assessed Valuation $5,648,261.209 $3.6000 $20,333,740
Less: Library Levy (Estimate) $0.478 $2,699,869
2014 Levy for Collection in 2015 (Estimate) $3.122 $17,633,871
GENERAL GOVERNMENT REVENUE
(BASED ON 2015 BUDGET OF $70.5 MILLION)
27.2c
Sales Tax
($'19,185,350)
24.0c
Franchise &
Utility Tax
($16,912,595)
ATTACHMENT #1
6.6c 3.7c
Intergovemment & Other
State Shared Revenue Revenue
($4,632,800) (92,613,778)
123E 65 A
(mitt
23.24
Property Tax
($16,336,390)
11.0c
Licenses, Permits
& Charges
for Services
($7,734,301)
4.4c
Fines &
Other Taxes
($3,074,110)
GENERAL GOVERNMENT RESOURCES
THREE YEAR COMPARISON
2014 2015 % of - 2015 vs. 2014 -
2013 Year -End Percent Projected 2015 Increase Percent
Source Actual Estimate Change Revenue Total (Decrease) Change
General Sales Tax 814,462,963 815,330,000 6.0% 815,980,000 22.7% 5650,000 4.2%
Cairn. Justice Sales Tax(1) 2,922,211 3,055,000 4.5% 3,205,350 4.5% 150,350 4.9%
Properly Tax 15,696,435 15,929,100 1.5% 16,336,390 23.2% 407,290 2.6%
Franchise & Utility Taxes 14,719,274 16,044,400 9.0% 16,912,595 24.0% 868,195 5.4%
Charges for Services 6,034,110 6,681,234 10.7% 6,876,401 9.S% 195,167 2.9%
State Shared Revenue 2,784,672 2,932,500 5.3% 2,920,280 4.1% (12,220) (0.4%)
Fines and Forfeitures 1,603,138 1,610,110 0.4% 1,645,110 2.3% 35,000 2.2%
Other Taxes 1,495,525 1,419,500 (5.1%) 1,429,000 2.0% 9,500 0.7%
Other Revenue 359,737 602,489 54.6% 1,108,778 1.6% 506,289 84.0%
Transfers from other Funds 1,327,759 1,428,000 7.5% 1,505,000 2.1% 77,000 5.4%
Other Intergovernmental 1,268,630 1,499,377 18.2% 1,712,520 2.4% 213,1.43 14.2%
Licenses and Permits 817,750 838,850 2.6% 857,900 1.2% 19,050 2.3%
Total Revenue 63,522,204 67,370,560 6.1% 70,489,324 100.0% 3,118,764 4.6%
Beginning Fund Balance 10,883,753 9,927,817 (8.8%) 9,916,093 (11,724) (0.1%)
Total Resources 874,405,957 877,298,377 3.9% 880,405,417 83,107,040 4.0%m
(1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non -general Governmental fund) for
capital needs.
2015 PROPOSED
GENERAL PROPERTY TAX LEVY - BY FUNCTION
Fire & Police
Pension
52,427, i0
13.8%
General Fund
$10,034,700
57.2%
Parks
S1,911,290
10.9%
Streets
$3,170,500
15.1%
ATTACHMENT #2
2014 2014 2015 2014 Est.
2013 Amended Year -End Projected vs. 2015
Actual Budget Estimated Revenue Budget
General 510,195,969 511,178,000 510,978,000 511,254,600 2.5%
Parks & Recreation 1,920,107 1,659,000 1,865,490 1,911,290 2.5%
Street & Traffic 3,580,360 3,087,000 3,085,610 3,170,500 2.8%
Sub -Total General Government 15,696,435 15,954,000 15,929,100 16,336,390 2.6%
Fire Pension 1,196,702 1,186,000 1,186,000 1,207,500 1.8%
Total 516,893,138 517,140,000 817,115,100 817,543,890 2.5%
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.
$450
$350
400
g
2013 PER CAPITA PROPERTY TAXES
Comparable Cities between 50,000 and 135,000 in Population
(Rounded to the closest dollar)
is 5186, which is $711mss $374
25'
$'156
rogonfir
$340
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SKI
Kent Yaloraba A churn M s 1
dal and P3rk1,en3 'Reit on Eyelet Ret mond
PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE
2014 BUDGET YEAR
General. Packs
Fund
Fare
Property Tax i!! %, 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).
2013 PER CAPITA TOTAL REVENUES
Comparable Cities between 50,000 and 135,000 in Population
(Rounded to the closest dollar)
Yakima' per capita total revenue is 1,517 which is 5541
less than the average city per capita of $2,053
1,576
$2,196
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mane
e t`a1tnta Kant
Auburn Kirkland Ever+lt S ecat'ac +1 vae Richt
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 2014 property taxes were allocated between these governmental entities.)
Yakima School District
0.36
2014 PROPERTY TAX DISTRIBUTION
State of Washington Schools
0.20
Library
04
sV
ICIIIMS .r 1.041,
12 565 A
Wren �,• . nOV a*
City of Yakima
.24r'
Yakima County
EMS
02C
City of Yakima Property Tax — In 2014, a typical City resident pays approximately $13.172 per
thousand of assessed value on property taxes. Only $3.13, or about 23.8%, 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.