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HomeMy WebLinkAbout11/01/2022 09. Public hearing and ordinances pertaining to Ad Valorem Taxes to be levied for collection in Fiscal Year 20231 ITEM TITLE: SUBMITTED BY: BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. 9. For Meeting of: November 1, 2022 Public hearing and ordinances pertaining to Ad Valorem Taxes to be levied for collection in Fiscal Year 2023 Bob Harrison, City Manager Jennifer Ferrer -Santa Ines, Director of Finance and Budget SUMMARY EXPLANATION: This agenda item includes two (2) separate Ordinances. Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2022 levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2023 tax collections by any amount over 2022 levels. Ordinance B fixes the maximum tax levy for collection by the City in 2023. This Ordinance complies with RCW 35.33.135 and in accordance with Article VI I, Section 2 of the City Charter, requires a super -majority approval (i.e. a minimum affirmative vote of five members) by City Council. ITEM BUDGETED: Yes STRATEGIC PRIORITY: Public Trust and Accountability APPROVED FOR SUBMITTAL BY THE CITY MANAGER RECOMMENDATION: Pass Ordinances. ATTACHMENTS: Description p Ordinance A 0 Ordinance B p Memo Upload Date 10/ 19/2022 10/ 19/2022 10/19/2022 Type Cover Memo Ordinance Coker Memo 2 ORDINANCE A AN ORDINANCE ORDINANCE NO. 2022- relating to the annual property tax levy; declaring the City Council's intent to increase the City's 2023 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 1, 2022, 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 2023 current expense budget, and the total proposed property tax levy amount pertaining to 2023 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 6.457%; 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 1, 2022 and, 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 3 ORDINANCE A WHEREAS, the maximum levy rate the City of Yakima can levy is $3.10/$1,000 assessed valuation (AV) plus $0.225/$1,000 AV specifically for Firemen's Relief and Pension Fund and will not change as a result of this ordinance; and WHEREAS, property tax is a tax based on ownership of a piece of real estate. A "levied property tax" is generally a tax imposed on property owners, based on the value of their property and the municipal government's needs; and WHEREAS, the city levy rate has decreased from $3.10/$1,000 AV to $2.34/$1,000 AV in 2022 and staff is projecting the levy rate for 2023 to be $1.98/$1,000 AV; and WHEREAS, in order to bring the current levy rate to the maximum allowed, a levy lid lift is required and the City of Yakima residents will need to approve such ballot measure; and WHEREAS, the amount of property tax levied for collection in 2022 was $20,600,919 for general government purposes; and WHEREAS, the discretionary increase in property tax levied attributable to the inflation factor for collection in 2023 shall be in the amount of $206,009, 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 2023 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 2023: A. A discretionary increase of $206,009, attributable to the inflation factor which is a percentage increase of 1.0% over the amount levied for collection in 2022; plus B. An estimated increase of $2,971 for recent annexations; plus C. An estimated increase of $335,185 for new construction and improvements to property; plus D. An estimated increase of $114,304 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, 2022. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 1, 2022. 4 ORDINANCE A PASSED BY THE CITY COUNCIL, signed and approved this 1st day of November, 2022. ATTEST: Janice Deccio, Mayor Sonya Claar Tee, City Clerk Publication Date: Effective Date: ORDINANCE B AN ORDINANCE ORDINANCE NO. 2022- fixing and levying the amount of ad valorem taxes necessary to discharge the expected expenses and obligations for the 2023 Budget for the City of Yakima. WHEREAS, the City Council finds that the total net amount of $21,759,389 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 2023 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 $21,759,389 for the following purposes: General Government Levy Operating Funds $20,959,389 Firemen's Relief & Pension Fund 800,000 Amount of tax levy for General Government Purposes (1) $21,759,389 Special Purpose Tax Levy 0 Total Levy Amount (1) $21,759,389 (1) Includes an additional $500,000 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, 2022. Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this ordinance shall take effect on November 1, 2022. PASSED BY THE CITY COUNCIL, signed and approved this 1st day of November, 2022. ATTEST: Janice Deccio, Mayor Sonya Claar Tee, City Clerk Publication Date: November 4, 2022 Effective Date November 1, 2022 6 FINANCE MEMORANDUM TO: The Honorable Mayor and Members of City Council Bob Harrison, City Manager FROM: Jennifer Ferrer -Santa Ines, Finance Director Kimberly Domine, Finance Division Manager DATE: November 1, 2022 RE: 2023 Property Tax Levy Staff respectfully recommends the approval of both Ordinances A and B, necessary to set the 2023 property tax levy. Council Action to be Taken Review and Approve Ordinance A and Ordinance B, attached. Background This agenda item includes two (2) separate ordinances, steps required by statute to establish the property tax levy. Property tax is a tax based on ownership of a piece of real estate. A "levied property tax" is a tax imposed on property owners, based on the value of their property and the municipal government's needs. Ordinances A and B will set the property tax levy for collection in 2023, 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, as confirmed by MRSC, the IPD increased to 6.457% which statutorily allows for an increase of 1% if city council determines there is substantial need. The 2023 budget was developed assuming a 1% increase in the overall levy. • Exhibit I is the County Assessor's communication of assessed valuation. • Exhibit II 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, 2022 or the City will receive no funding from this source in 2023. • Exhibit III is the County Treasurer's communication of prior year refunds. 7 FINANCE • Ordinance A identifies Council's intent to authorize an increase in the tax levy over 2022 levels. It is required by RCW 84.55.120. This is legally necessary to increase the 2023 tax collections by any amount over 2022 levels. • Ordinance B fixes the maximum tax levy for collection by the City in 2023. 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 majority plus one or five members) by City Council. Discussion — Valuation and Property Tax The maximum rate the City of Yakima can levy is $3.10/$1,000 assessed valuation (AV) plus $0.225/$1,000 AV specifically for Firemen's Relief and Pension Fund. According to RCW 84.55.0101, a city can levy up to 101% plus new construction, annexation, and refunds. In order to bring the current levy rate to the maximum allowed, a levy lid lift is required and the City of Yakima residents will need to approve this ballot measure. If the City were to levy the maximum rate (levy lid lift approved by City of Yakima residents), the estimated increase in property tax revenue would be an additional $13,000,000. The total 2023 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 $1.98 per $1,000 of Assessed Valuation (AV), a decrease of approximately $0.36 per thousand of Assessed Valuation. The current rate is $2.34 per $1,000 of Assessed Valuation (AV).