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HomeMy WebLinkAbout2019.10.28 Council Special Meeting PacketSpecial Meeting AGENDA PASCO CITY COUNCIL 7:00 p.m. October 28, 2019 Page 1. CALL TO ORDER: 2. ROLL CALL: (a) Pledge of Allegiance 3. HEARINGS AND COUNCIL ACTION ON ORDINANCES AND RESOLUTIONS RELATING THERETO: 2 - 24 (a) 2020 Ad Valorem Tax Levy CONDUCT PUBLIC HEARING MOTION: I move to adopt Ordinance No. 4466, providing for an increase in the regular property taxes of the City for levy in 2019 and collection in the 2020 tax year; preserving levy capacity for future years; and providing for related matters and, further, authorize publication by summary only. 4. ADJOURNMENT: Page 1 of 24 AGENDA REPORT FOR: City Council October 15, 2019 TO: Dave Zabell, City Manager Special Meeting: 10/28/19 FROM: Richa Sigdel, Director Finance SUBJECT: 2020 Ad Valorem Tax Levy I. REFERENCE(S): 2020 Property Tax Levy Ordinance Exhibit A General Fund Revenue Overview 2020 Property Tax Presentation II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: CONDUCT PUBLIC HEARING MOTION: I move to adopt Ordinance No. ________, providing for an increase in the regular property taxes of the City for levy in 2019 and collection in the 2020 tax year; preserving levy capacity for future years; and providing for related matters and, further, authorize publication by summary only. III. FISCAL IMPACT: No impact to 2019-2020 Biennial Budget. IV. HISTORY AND FACTS BRIEF: As part of the annual budget process, per RCW 84.55.120, cities are required to conduct a public hearing on General Fund revenue sources for the coming year's budget, including possible increases in Property Tax revenues. Following the revenue hearing, Council may choose to pass an ordinance at the same meeting authorizing the Property Tax Levy for the ensuing year, consistent with statutory limitations. State statue limits the Property Tax rate the City can levy to $3.60 per $1,00 0 of assessed valuation. Other General Fund revenue includes sales tax, fees and charges, utility taxes, fines and forfeitures, and transfers. Property Tax, however, requires a Page 2 of 24 public hearing and vote separate from the budget and is the primary focus of th is narrative. Revenues generated through the City Property Tax Levy represent a major source of funding for essential government services such as Police, Fire, Parks, Community Development, Finance, Administration, as well as a significant portion of streets and other services deemed necessary by the Council through the budget process. In 2001, the voters approved Initiative 747 (I-747) limiting the amount taxing districts could increase the total Property Tax Levy over the previous year by the lesser of 1% or the Implicit Price Deflator (IPD) without voter approval. In November 2007, that initiative was challenged and ruled unconstitutional by the Washington State Supreme Court; the Court's ruling returned the limit to the lesser of 6% or IPD. The Legislature subsequently placed into law those limits suggested by I-747. The current legal limit is the lesser of 1% or IPD, meaning that the City could increase the total property tax levy for 2020 by as much as 1% over 2019. The IPD differs significantly from a regional Consumer Price Index (CPI) in that, unlike the CPI, the IPD is not based on a fixed basket of goods and services in a region. The IPD basket spans the nation and is based on changes from year to year with people's consumption and investment patterns. The IPD figure for the 2020 tax calculation is 1.0%. As final tax levy data has yet to be issued by the Franklin County Assessor’s Office, including information on any increases to State-assessed utilities, the calculations provided herein are estimates. Furthermore, because the Assessor’s Office is not allowed to set the levy to exceed what is shown in the City’s budget, the information provided for both the estimated calculations and the rounded amount will be utilized for presentation in the budget. V. DISCUSSION: CITY PROPERTY TAX LEVY OPTIONS FOR 2020 For 2020, the Franklin County Assessor has provided a preliminary City assessed valuation of $6,051,973,736, which will be used as the basis to calculate the 2020 Property Taxes. This amount includes new construction of $199,557,200 and an estimated State-assessed utility of $10,000. Please refer to Exhibit A for a chart regarding the options below. Option A reflects an estimated increase of $397,024 over the 2019 levy amount. The proposed increase is derived mostly from an increase in assessed valuation due to new construction in 2019. This option forgoes the statutorily allowed 1.0% increase in the City Property Tax Levy, an increase of $106,673, and instead would bank the capacit y Page 3 of 24 for future needs. The effect of the new construction adds to the overall assessed valuation of the City, which in turn serves to reduce the levy rate for 2020 by $0.111 from the $1.939 per $1,000 of assessed valuation in 2019 to $1.828 in 2020. Option B depicts the amount the City would collect if the Council chose to adopt the statutorily allowed 1.0% increase, plus an estimated increase due to new construction and annexation in 2019. This alternative would decrease the levy rate for 2020 by $0.094 per $1,000 of assessed valuation from $1.939 in 2019 to $1.846 in 2020. The 2019-2020 Adopted Budget was prepared using an estimated property tax levy of $10,987,008. account to levy tax estimated for lower is amount This than delinquencies. Council has historically based Property Tax Levy decisions on current and future needs. In 2019, the Council chose to use tax levy capacity banked from prior years to fund major capital infrastructure investments like Fire Stations 83 and 84 and a Community Center. The 2019-2020 adopted budget assumes $10,987,008 as 2020 Property Tax revenue and Staff expects the City to meet the adopted budget revenue for the General Fund during the same year. STATUTORY DEADLINE FOR PROPERTY TAX DETERMINATION For the Franklin County Assessor to levy property taxes, the City is required to certify property tax levies with the County by November 30th of each year. Staff presented the options to the Council in detail, alongside the General Fund revenue overview. In cons aboveof ideration the -conditions, and factors noted Staff recommended that the Council select Option A; forgoing the statutorily allowed 1% increase in the City's Property Tax Levy and instead banking that capacity for potential use in the future. Page 4 of 24   -1-   ORDINANCE NO. ________ AN ORDINANCE of the City of Pasco, Washington, providing for an increase in the regular property taxes of the City for levy in 2019 and collection in the 2020 tax year; preserving levy capacity for future years; and providing for related matters. THE CITY COUNCIL OF THE CITY OF PASCO, WASHINGTON DO ORDAIN AS FOLLOWS: §1. Findings and Determinations. The City Council (the “City Council”) of the City of Pasco, Washington (the “City”), makes the following findings and determinations: (a) RCW 84.55.120(1) provides that the City Council must hold a public hearing on revenue sources for the following year’s current expense budget and that the hearing must include consideration of possible increases in property tax revenues and must be held prior to the time the City levies the taxes. (b) RCW 84.55.120(3) provides that the City may not authorize an increase in property tax revenue from the previous year except by adoption of a separate ordinance or resolution, pursuant to notice, specifically authorizing the increase in terms of both dollars and percentage. (c) Pursuant to proper notice, the City Council held a public hearing on October 28, 2019 (the “Hearing”), to consider the City’s 2020 current expense budget and its revenue sources, along with consideration of possible increases in property tax revenues. (d) The City’s actual levy amount from the previous year was $10,667,334. (e) The City has a population that is greater than 10,000. (f) The City Council, after the Hearing and after duly considering all relevant evidence and testimony presented, determined that the City requires 0% in allowable increase in property tax revenue from the previous year, in addition to revenue resulting from the addition of new construction and improvements to property, newly constructed wind turbines, solar, biomass and geothermal facilities, if the facilities are not state assessed, any increase in the value of state-assessed property, any annexations that have occurred and any refunds made, in order to discharge the expected expenses and obligations of the City and in its best interest. §2. Property Tax Increase Authorized. An increase in the regular property tax levy of the City is authorized for the levy to be collected in the 2020 tax year. The dollar amount of the increase over the actual levy amount from the previous year is $0.00 (zero dollars), which is a percentage increase of 0% (zero percent) from the previous year. This increase is exclusive of additional revenue resulting from new construction, improvements to property, any increase in assessed value due to construction of wind turbine, solar, biomass and geothermal facilities, if the facilities are not state assessed, any increase in the value of state assessed property, any annexations that have occurred and any refunds made. Page 5 of 24   -2-   §3. Transmittal. The City Clerk is authorized and directed to transmit a certified copy of this ordinance to the Franklin County Assessor on or before November 30, 2018. §4. General Authorization and Ratification. The City Manager, the Finance Director of the City, the City Clerk and other appropriate officers of the City, and each of them acting alone, are authorized and directed to take any action and to execute any document as in their judgment may be necessary or desirable to effectuate the provisions of this ordinance. All prior actions in furtherance of and consistent with the terms of this ordinance are ratified and confirmed. §5. Effective Date. This Ordinance takes effect five (5) days after passage and publication. Adopted by the City Council of the City of Pasco this ___ day of ____________, 2019. _____________________________ Matt Watkins Mayor ATTEST: APPROVED AS TO FORM: _____________________________ ___________________________ Debra Barham Eric Ferguson City Clerk City Attorney   Page 6 of 24 OPTION A OPTION B2019 Levy $10,667,334 $10,667,334 $10,667,334Implict Price Deflator (IPD) $106,673Increase in State Utility AV (Estimate) $10,000 $10,000New Construction $387,024 $387,024Total Levy Amount$10,667,334 $11,064,358 $11,171,031Tax Levy Rate 1.939 1.828 1.846Rate Change from Current 2019 Levy- (0.111) (0.094) Cost per $1,000 on a $230,000 AV Home $446 $420 $425Net Change ($26) ($22)General Fund Levy OptionsCurrent 2019 Tax LevyNo Increase + New Construction 1.0 (IPD) Increase + New Construction Page 7 of 24 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget General Property Tax 10,561,963 10,606,963 10,987,008 10,987,008 Retail Sales Tax 15,352,183 15,500,000 15,771,026 15,771,026 Utility Tax 9,583,525 9,590,000 9,725,394 9,725,394 Other Tax 1,216,350 1,178,882 1,221,400 1,221,400 Sub-Total Taxes 36,714,021 36,875,845 37,704,828 37,704,828 Fees & Charges Administrative Charge Back 3,102,166 3,100,000 3,252,344 3,252,344 Engineering Services 1,500,000 1,500,000 1,500,000 1,500,000 Public Safety Services 1,347,089 1,374,000 1,373,239 1,373,239 Zoning, Plan Check & Sepa Fees 417,500 418,000 417,500 417,500 Other Misc Revenues 1,078,041 1,078,000 1,081,139 1,081,139 Municipal Court 174,000 150,000 174,000 174,000 Sub-Total Fees & Charges 7,618,796 7,620,000 7,798,222 7,798,222 Intergovernmental Revenues State & County 801,000 820,000 808,000 825,000 Liquor Board Profits 600,494 600,500 604,949 604,949 Liquor Excise Tax 378,253 389,000 397,516 397,516 Federal Direct Grants 504,164 504,000 373,464 373,464 Criminal Justice 104,499 104,000 110,129 110,129 Other 27,700 27,700 27,700 27,700 Sub-Total Intergovernmental Revenues 2,416,110 2,445,200 2,321,758 2,338,758 Licenses & Permits Business Licenses 636,000 680,000 636,000 700,000 Building Permits 1,350,000 1,470,000 1,350,000 1,400,000 Animal Licenses 222,000 220,000 222,000 222,000 Other 21,500 23,000 21,500 24,000 Sub-Total Licenses & Permits 2,229,500 2,393,000 2,229,500 2,346,000 Fines & Forefeits Traffic & Non Traffic Penalty 800,000 740,000 800,000 900,000 Other 105,600 107,650 105,600 105,600 Sub-Total Fines & Forefeits 905,600 847,650 905,600 1,005,600 Other Sources Bond Proceeds 17,250,000 17,250,000 - - Rent 319,350 320,000 320,550 320,550 Transfer in 227,600 228,600 227,600 227,600 Interest 200,000 263,000 210,000 310,000 Other* 72,750 830,500 73,150 73,150 Sub-Total Other Sources 18,069,700 18,892,100 831,300 931,300 Total General Fund Revenue 67,953,727 69,073,795 51,791,208 52,124,708 Revenue Excluding Bond Proceeds 50,703,727 51,823,795 51,791,208 52,124,708 *Other category includes $645K revenue from sale of assets. Summary - General Fund Revenue Sources by Category 2% 19% 30% 21% 0% 1% 2% 3% 3% 6% 0% 0% 1% 1% 1% 2% 0% 0% 3% 1% 0% 2% 0% 0% 0% 1% 0% Page 8 of 24 10/18/2019 1 2019 Mid Biennium Adjustment2019 Mid Biennium Adjustment Property Tax Levy and General Fund Revenue Ad Valorem Tax •Under state law, no local government may increase its property tax levy more than 1% in a given year, and local governments with a population of 10,000 or more are limited to the lesser of 1% or the rate of inflation (Implicit Price Deflator) •Implicit Price Deflator (IPD) for 2019 is 1.396% •IPD is an economic metric that accounts for inflation by converting output measured at current prices into constant-dollar GDP. This specific deflator shows how much a change in the base year's GDP relies upon changes in the price level Page 9 of 24 10/18/2019 2 Assessed Valuation Trend Banked Capacity • Banked capacity is accrued when local governments forego yearly increases to property taxes • If no current need, City has historically banked its levy capacity for future purposes • City used all of its banked capacity in 2019 to fund major infrastructure investments like relocation of Fire Station Page 10 of 24 10/18/2019 3 OPTION A OPTION B 2019 Levy $10,667,334 $10,667,334 $10,667,334 Implict Price Deflator (IPD) $106,673 Increase in State Utility AV (Estimate) $10,000 $10,000 New construction $387,024 $387,024 Total Levy Amount $10,667,334 $11,064,358 $11,171,031 Tax Levy Rate 1.939 1.828 1.846 Rate Change from Current 2019 Levy - (0.111) (0.094) Cost per $1,000 on a $230,000 AV Home $446 $420 $425 Net Change ($26) ($22) General Fund Levy Options Current 2019 Tax Levy No Increase + New Construction 1.0 (IPD) Increase + New Construction Comparison (2019 Data) General Rate Total Rate* Tax Collection City of Richland 2.436$ 2.721$ 18,921,267$ City of Kennewick 1.989$ 1.989$ 13,190,307$ City of Pasco 1.939$ 1.939$ 10,667,334$ *Includes voted bonds Cost per $1,000 on a $230,000 AV Home City of Richland 560$ City of Kennewick 458$ City of Pasco 446$ Page 11 of 24 10/18/2019 4 Property Tax Trend – Option A Property Tax Trend – Option B Page 12 of 24 10/18/2019 5 General Fund Revenue Sources 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget General Property Tax 10,561,963 10,606,963 10,987,008 10,987,008 Retail Sales Tax 15,352,183 15,500,000 15,771,026 15,771,026 Utility Tax 9,583,525 9,590,000 9,725,394 9,725,394 Other Tax 1,216,350 1,178,882 1,221,400 1,221,400 Sub-Total Taxes 36,714,021 36,875,845 37,704,828 37,704,828 2% 19% 30% 21% General Fund Revenue Sources – Property Tax Page 13 of 24 10/18/2019 6 Where does your property tax go? General Fund Revenue Sources – Sales Tax Page 14 of 24 10/18/2019 7 Sales Tax Rates Breakdown of Sales Tax Rate 2019 Rates State 6.5% City/County (85%/15%) 1.0% Transit 0.6% Public Safety* 0.3% Criminal Justice** 0.1% Juvenile Detention 0.1% Total 8.6% *RCW 82.14.450; 60% is retained by counties, remaining 40% is allocated to cities on a per capita basis **RCW 82.14.340; County receives 10% of tax proceeds; remaining 90% is distributed to cities and unincorporated areas based on population Where do Your  Sales Tax  Come From? Page 15 of 24 10/18/2019 8 General Fund Revenue Sources – Utility Tax General Fund Revenue Sources 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget Fees & Charges Administrative Charge Back 3,102,166 3,100,000 3,252,344 3,252,344 Engineering Services 1,500,000 1,500,000 1,500,000 1,500,000 Public Safety Services 1,347,089 1,374,000 1,373,239 1,373,239 Zoning, Plan Check & Sepa Fees 417,500 418,000 417,500 417,500 Other Misc Revenues 1,078,041 1,078,000 1,081,139 1,081,139 Municipal Court 174,000 150,000 174,000 174,000 Sub-Total Fees & Charges 7,618,796 7,620,000 7,798,222 7,798,222 0% 1% 2% 3% 3% 6% Page 16 of 24 10/18/2019 9 General Fund Revenue Sources – Administrative Services General Fund Revenue Sources – Engineering Services Page 17 of 24 10/18/2019 10 General Fund Revenue Sources – Public Safety Services General Fund Revenue Sources – Intergovernmental 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget Intergovernmental Revenues State & County 801,000 820,000 808,000 825,000 Liquor Board Profits 600,494 600,500 604,949 604,949 Liquor Excise Tax 378,253 389,000 397,516 397,516 Federal Direct Grants 504,164 504,000 373,464 373,464 Criminal Justice 104,499 104,000 110,129 110,129 Other 27,700 27,700 27,700 27,700 Sub-Total Intergovernmental Revenues 2,416,110 2,445,200 2,321,758 2,338,758 1% 1% 1% 2% 0% 0% Page 18 of 24 10/18/2019 11 General Fund Revenue Sources – Public Utility District (PUD) Privilege Tax General Fund Revenue Sources – Liquor Board Profits & Excise Tax Page 19 of 24 10/18/2019 12 General Fund Revenue Sources – Grants General Fund Revenue Sources – Licenses & Permits 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget Licenses & Permits Business Licenses 636,000 680,000 636,000 700,000 Building Permts 1,350,000 1,470,000 1,350,000 1,400,000 Animal Licenses 222,000 220,000 222,000 222,000 Other 21,500 23,000 21,500 24,000 Sub-Total Licenses & Permits 2,229,500 2,393,000 2,229,500 2,346,000 0% 0% 3% 1% Page 20 of 24 10/18/2019 13 General Fund Revenue Sources – Building Permit General Fund Revenue Sources – Business License Page 21 of 24 10/18/2019 14 General Fund Revenue Sources – Animal License General Fund Revenue Sources – Fines & Forfeits 2019 Proposed Budget 2019 Estimate 2020 Proposed Budget 2020 Proposed Amended Budget Fines & Forefeits Traffic & Non Traffic Penalty 800,000 740,000 800,000 900,000 Other 105,600 107,650 105,600 105,600 Sub-Total Fines & Forefeits 905,600 847,650 905,600 1,005,600 0% 2% Page 22 of 24 10/18/2019 15 General Fund Revenue Sources – Fines & Forfeits General Fund Revenue Sources *Other category includes $645K revenue from sale of assets. 2019 Adopted Budget 2019 Estimate 2020 Adopted Budget 2020 Proposed Amended Budget Other Sources Bond Proceeds 17,250,000 17,250,000 - - Rent 319,350 320,000 320,550 320,550 Transfer in 227,600 228,600 227,600 227,600 Interest 200,000 263,000 210,000 310,000 Other* 72,750 830,500 73,150 73,150 Sub-Total Other Sources 18,069,700 18,892,100 831,300 931,300 0% 0% 0% 1% 0% Page 23 of 24 10/18/2019 16 Summary •City’s assessed valuation has increased by 54% since 2016 •Staff recommends Council reserve 1% property tax levy for future purposes •The recommended option results in property tax rate of $1.828 per $1,000 Assessed Valuation •Review of major General Fund revenue sources Page 24 of 24