HomeMy WebLinkAbout11/17/2015 09 2016 Ad Valorem Taxes - Public HearingBUSINESS OF THE CITY COUNCIL
YAKIMA, WASHINGTON
AGENDA STATEMENT
Item No. 9.
For Meeting of. November 17, 2015
ITEM TITLE: Public hearing pertaining to Ad Valorem Taxes to be levied for collection
in Fiscal Year
2016
SUBMITTED BY: Tony O'Rourke, City Manager
Cindy Epperson, Director of Finance and Budget
SUMMARY EXPLANATION:
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 —Bing and levying the 2016 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 2016, plus new levies
for construction and refunds, and are the basis on which the 2016 budget was developed and balanced.
Because the 1% increase is greater than the inflation rate (Implicit Price Deflator or IPD), these ordinances
require super - majority approval (i.e. 5 -2). The attached memorandum discusses the importance of the
property tax levy, and sets forth the "substantial need" to exceed the rate of inflation of 0.25 %, and approve a
modest 1% increase in the levy.
The full 1% increase amounts to about $177,000, while the inflationary increase is about $44,000. So if
Council does not approve the 1 %, then General Government revenue would be reduced by $133,000.
Since this budget is balanced with revenue exceeding expenditures of $31,000, Council could then choose to
use beginning fund balance of approximately $102,000, or direct a corresponding reduction in expenditures.
Resolution:
Other (Specify): Memo, Exhibit I, Attachments 1 -5
Contract:
Start Date:
Item Budgeted: Yes
Funding Source/Fiscal Impact:
Strategic Priority:
Insurance Required? No
Ordinance: X
Contract Term:
End Date:
Amount:
Public Trust and Accountability
Mail to:
Phone:
APPROVED FOR &aj, City Manager
SUBMITTAL:
City Management is recommending that City Council conduct a public hearing on the 2016 property tax levy,
and then pass ordinances.
ATTACHMENTS:
Description
D 2016 Ad Valcreirn IMerry.yairndUrrn
D Ors. lhnaince A lin�ein� k) Ilirnc reose 2016 IPro perty Tax
D Ordlhnaince IB Seffing Ad Vallore..irn Tax 11 evy
D Exlhilbi� 1 IPropearty Tax (.1011CM11ahon
D ARaclhiryein� 1 Ad Valcre.irn
Upload Date
Type
11/10/2015
Cbmar Memo
11/10/2015
Ordl Irma nce
11/10/2015
Ordl Irma nce
11/10/2015
Exlhilbi�
11/10/2015
Exlhilbi�
Memorandum
Date: November 12, 2015
To: The Honorable Mayor and City Council
From: Cindy Epperson, Director of Finance and Budget
Re: 2016 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 2016, 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. 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 0.25% from June 2014 to June 2015. Since this is
less than the statutory 1 %, our property tax increase is limited to a 0.25% increase. However,
state law does allow the property tax to be levied at the 1 % maximum, by a super- majority (i.e.
5 -2) vote of Council declaring the existence of "substantial need" for the increase. The 2016
budget was developed assuming a 1% increase.
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, 2015 or the City will receive no funding from this
source in 2016. The Commissioners have requested to receive this packet by November 20 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 2015 levels.
Because the limit factor is greater than the rate of inflation, this ordinance requires a super -
majority (i.e. a minimum affirmative vote of five members) to pass. It is required by RCW
84.55.120. This is legally necessary to increase the 2016 tax collections by any amount over
2015 levels.
Ordinance B fixes the tax levy for collection by the City in 2016. This ordinance would include
not only the regular tax but also special levy taxes for bond repayments. It should be noted that
all voted bond issues were paid in full in 2014, so the 2016 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, also requires a super- majority approval by City Council.
These ordinances are in substantially the same format as the prior year levy legislation, with the
exception of the additional declaration of substantial need in Ordinance A.
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 22 %; and all other revenue comprise the
remaining 28 %. (See Attachment 1 for a summary of General Government revenues.)
2015 General Government revenue is estimated to be $70.9 million, $3.5 million or 5.2% more
than 2014, primarily because of the contract with Union Gap that added $1.2 million.
Additionally, the city experienced sales tax growth of about 4 %; and was successful in obtaining
a Firefighter hiring grant (SAFER) and an airport marketing grant. Going into 2016, Sales and
utility tax revenues are projected to grow as a result of ongoing economic development in our
community so that revenues are forecast to grow by $2.5 million or 3.5% from the 2015
estimate, (and $1.8 million or 2.6% from the 2015 Budget).
The proposed 1% increase in Property Tax is projected to be $176,000 in 2016. The initial
estimates from the County on the 2016 property tax levy included a growth rate for new
construction that is 1.2% or $209,000, along with a refund levy of about $97,000 which
approximates the budget estimate when added together.
Property Tax Discussion
The total 2016 City of Yakima property tax levy includes the 101 % levy, and amounts for new
construction and prior year refunds. The 2016 budget currently includes an estimated revenue
of $18,026,000 for the regular levy, an increase of $439,000 over the 2015 year -end estimate of
$17,587,000. There is no voted levy debt, since the 1995 voted Fire bond issue paid in full in
2014. The total operating tax rate for next year is estimated to be $3.111 per $1,000 of
Assessed Valuation (AV), down from the 2015 rate of $3.1239. (The statutory limit is $3.60 less
the Library levy, which is capped at 50 cents per $1,000. The estimate for the 2016 Library levy
is 47.4 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 2015 paid $468.59 for the regular levy —this was
the first year without a voted bond levy. (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 more than 1 %). The regular levy tax is estimated to be $466.65, and there is
no voted levy so there is a slight decrease of ($1.94) in the total annual levy.
We believe the current request for the property tax levy is justified by the following conditions,
which combine to indicate the City has a substantial need to increase the levy to the statutory
maximum of 1%:
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 66% 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 created a
"new normal" in consumption -- the 2016 gas tax estimate is about equal to 2007
levels.
3. Property tax is also a key revenue source for the Parks and Recreation Division,
representing about 48% of all Parks revenue. Parks maintenance is supported entirely
by property taxes, along with the funding of the new City Charter amendment to spend
$750,000 on Parks capital project. 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 2016,
the City is estimating a reduction of up to 2.3% 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 50,000 to 135,000 in 2014, the most recent year
this information has been compiled. Yakima ranks 9th out of 11 cities in this
group. Further, for these same cities, Yakima's total per capita revenue collected from
all taxes, fees and charges is $1,561 or $582 less than the average of $2,143 and again
ranks 9th out of the 11 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 24% (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 2016 property tax levy, which is the basis
on which the 2016 budget was developed. If a super- majority does not approve "substantial
need" to go to the 101 %, then the ordinance will need to be modified for the increase to be
100.25 %, and the requested amount will be reduced by $132,570 from $18,208,602 to
$18,076,032. Since the General Government budget is virtually balanced, with revenues
slightly exceeding expenditures by about $31,000, a reduction in property taxes of $132,000
would result in a budgeted use of about $100,000 of reserves, unless Council directs a
reduction in expenditures.
ORDINANCE A
ORDINANCE NO. 2015
AN ORDINANCE relating to the annual property tax levy; declaring the City Council's intent
to increase the City's 2016 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 17, 2015,
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 2016 current expense budget, and the total
proposed property tax levy amount pertaining to 2016 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, 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 person 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 0.25 %;
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 super- majority
vote; and
WHEREAS, the City Council, after the public hearing on November 17, 2015, 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 above the rate of inflation,
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
ORDINANCE A
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 2015 was $17,676,090 for
general government purposes; and
WHEREAS, the discretionary increase in property tax levied attributable to the inflation
factor for collection in 2016 shall be in the amount of $44,190, which is a percentage increase of
one quarter of one percent (0.25 %) from the previous year; and
WHEREAS, the discretionary increase in property tax levied attributable to substantial
need for collection in 2016 shall be in the amount of $132,571, which is a percentage increase
of three - quarters of one percent (0.75 %) from the previous year; and
WHEREAS, these discretionary increases in property tax levied for collection in 2016
combine to be in the amount of $176,761, 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 2015
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
2016:
A. A discretionary increase of $44,190, attributable to the inflation factor
which is a percentage increase of one quarter of one percent (0.25 %)
over the amount levied for collection in 2015; plus
B. A discretionary increase of $132,571, attributable to the declaration of
substantial need, which is a percentage increase of three - quarters of one
percent (0.75 %) over the amount levied for collection in 2015; plus
B. An estimated increase of $0 for recent annexations; plus
C. An estimated increase of $208,991 for new construction and
improvements to property; plus
D. An estimated increase of $96,760 for a refund levy; plus
E. An increase authorized by state law for state - assessed property values.
ORDINANCE A
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, 2015.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 17, 2015.
PASSED BY THE CITY COUNCIL, signed and approved this 17th day of November,
2015.
ATTEST:
City Clerk
Publication Date:
Effective Date:
Micah Cawley, Mayor
ORDINANCE B
ORDINANCE NO. 2015
AN ORDINANCE fixing and levying the amount of ad valorem taxes necessary to balance
estimated revenue with estimated expenditures for the 2016 Budget for
the City of Yakima.
WHEREAS, the City Council finds that the total net amount of $18,208,602 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 2016 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 $18,208,602 for the following
purposes:
General Government Levy
Operating Funds $16,967,842
Firemens' Relief & Pension Fund 1,240,760
Amount of tax levy for General
Government Purposes (1) $18,208,602
Special Purpose Tax Levy 0
Total Levy Amount (1) $18,208,602
(1) Includes an additional $50,000 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, 2015.
Section 3. Pursuant to Article VI, Section 2 of the Yakima City Charter, this
ordinance shall take effect on November 17, 2015.
PASSED BY THE CITY COUNCIL, signed and approved this 17th day of
November, 2015.
ATTEST:
City Clerk
Publication Date:
Effective Date:
Micah Cawley, Mayor
City of Yakima
Property Tax Limitation Calculation
Prior Year (2015) = Base
1% Increase
Base 101%
Valuation Increase - - -1.4%
New Construction - -- 1.2%
State Assessed Value
Tax Limit Before Annexations
Add for Annexation
Limit for Subsequent Years
Plus Refunds
Plus Contingency
Total- ordinance
2015
Tax
Assessed
Rate
Values
Applied
(Dollars in Thousands)
$5,658,387.596
$3.1239
$80,507.242 N/A
$66,900.554 $3.1239
$3.1239
$5,805,795.392 $3.1110
$0.000 $3.1110
$5,805,795.392 $3.1110
State of Washington Constitutional Limit
Assessed Valuation $5,805,795.392 $3.6000
Less: Library Levy (Estimate) $0.4743
2015 Levy for Collection in 2016 (Estimate) $3.1257
2016
Levy
Dollars
$17,676,090
$176,761
$17,852,851
$0
$208,991
$0
$18,061,842
$0
$18,061,842
$96,760
$50,000
$18,208,602
$20,900,863
$2,753,689
$18,147,175
EXHIBIT I
C: \Program Files ( x86 ) \neevia.com \docConverterPro\ temp \NVDC \4F89CE2D- B609- 42A9 -A060-
11/10/20156:14 PM 6EC9393E8050 \Yaki ma. 6215.1. pro p_tax calc_2016_Council.xlsx
27.3¢
Sales Tax
($20,011,900)
_
M
Source
General Sales Tax
Crim. Justice Sales Tax (1)
Property Tax
Utility & Franchise Taxes
Charges for Services
State Shared Revenue
Fines and Forfeitures
Other Taxes
Other Revenue
Transfers from other Funds
Other Intergovernmental
Licenses and Permits
Total Revenue
Beginning Fund Balance
Total Resources
GENERAL GOVERNMENT REVENUE
(BASED ON 2016 BUDGET OF $73.4 MILLION)
22.2Q
Franchise &
Utility Tax
($16,278,300)
ATTACHMENT #1
22.,2
,p
22.9Q
Property Tax
($16,785,600)
GENERAL GOVERNMENT RESOURCES
THREE YEAR COMPARISON
2014
Actual
$15,461,201
3,103,814
16,016,029
15,848,483
6,684,115
2,648,633
1,578,124
1,453,227
939,491
1,413,706
1,370,523
865,334
2015
Year-End
Estimate
$16,010,000
3,226,800
16,376,215
15,821,650
8,118,341
2,914,000
1,675,500
1,467,550
1,273,045
1,426,035
1,667,463
894,000
67,382,678 70,870,599
10,885,034 9,412,400
$78,267,712 $80,282,999
4.4q
Fines &
Other Taxes
($3,242,110)
% of -- 2016 vs. 2015 --
2016 Increase Percent
Total (Decrease) Change
22.7%
2016
Percent
Projected
Change
Revenue
3.5%
$16,650,400
4.0%
3,361,500
2.2%
16,785,600
(0.2 %)
16,278,300
21.5%
8,666,253
10.0%
3,121,100
6.2%
1,707,110
1.0%
1,535,000
35.5%
1,296,450
0.9%
1,450,000
21.7%
1,585,937
3.3%
916,470
5.2%
73,354,120
(13.5 %)
8,925,128
2.6%
$82,279,248
4.4q
Fines &
Other Taxes
($3,242,110)
% of -- 2016 vs. 2015 --
2016 Increase Percent
Total (Decrease) Change
22.7%
$ 640,400
4.0%
4.5%
134,700
4.2%
22.9%
409,385
2.5%
22.2%
456,650
2.9%
11.8%
547,912
6.7%
4.3%
207,100
7.1%
2.3%
31,610
1.9%
2.1%
67,450
4.6%
1.8%
23,405
1.8%
2.0%
23,965
1.7%
2.2%
(81,526)
(4.9 %)
1.2%
22,470
2.5%
100.0%
2,483,521
3.5%
(487,272)
(5.2 %)
$1,996,249
2.5%
(1) Some Criminal Justice sales tax is allocated to the Law and Justice capital fund (a non - general Governmental fund) for
capital needs.
2016 PROPOSED
GENERAL PROPERTY TAX LEVY — BY FUNCTION
General
Parks & Recreation
Street & Traffic
Sub -Total General Government
Fire Pension
Total
Parks
$2,659,400
14.8 %,
2014
Actual
2015
Amended
Budget
2015
Year -End
Estimated
2016
Projected
Revenue
$ 11,037,490
$ 10,504,600
$ 10,530,230
$10,793,500
1,875,098
2,661,290
2,667,785
2,659,400
3,103,441
3,170,500
3,178,200
3,332,700
16,016,029
16,336,390
16,376,215
16, 785,600
1,192,883
1,207,500
1,210,500
1,240, 760
$ 17,208,912
$ 17,543,890
$ 17,586,715
$18,026,360
ATTACHMENT #2
2015 Est.
vs. 2016
Budget
2.5%
(0.3 %)
4.9%
2.5%
2.5%
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
$400
$350
$300
$250
$200
$150
$100
$50
$0
2014 PER CAPITA PROPERTY TAXES
Comparable Cities between 50,000 and 135,000 in Population
(Rounded to the closest dollar)
Takima s per capita property taxis $156, which is $6 ess
Kennewick Kent Yakima Auburn Marysville Bellevue Richland Kirkland Renton Redmond Everett
PROPERTY TAX AS A PERCENTAGE OF TOTAL FUND REVENUE
2015 BUDGET YEAR
ATTACHMENT #3
O
O
j
j
j
j
o
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 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
$0
2014 PER CAPITA TOTAL REVENUES
Comparable Cities between 50,000 and 135,000 in Population
(Rounded to the closest dollar)
$3,212
Kennewick Marysville Yakima Kent Auburn Kirkland Renton Everett Bellevue Redmond Richland
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 2015 property taxes were allocated between these governmental entities.)
Yakima School District
0.38
2015 PROPERTY TAX DISTRIBUTION
State of Washington Schools Library
0.18 .04,�
k � i
City of Yakima
.24,�
w
0
Yakima County EMS
.14¢ .02,�
City of Yakima Property Tax — In 2015, a typical City resident pays approximately $12.70 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.