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HomeMy WebLinkAbout2020.10.05 Council Remote Workshop PacketRemote Workshop Meeting AGENDA PASCO CITY COUNCIL 7:00 p.m. October 5, 2020 Page 1. REMOTE WORKSHOP INSTRUCTIONS: (a) The Pasco City Council Workshops are broadcast live on PSC-TV Channel 191 on Charter/Spectrum Cable in Pasco and Richland and streamed at www.pasco-wa.gov/psctvlive and on the City’s Facebook page at www.facebook.com/cityofPasco. Call-in information to GoToWebinar for "listen-only" mode is: (213) 929-4212 and use access code 555-318-622. 2. CALL TO ORDER: 3. ROLL CALL: (a) Pledge of Allegiance 4. ITEMS FOR DISCUSSION: 2 - 38 (a) 2021 Ad Valorem Tax Levy and General Fund Revenue Review 5. ADJOURNMENT: Page 1 of 38 AGENDA REPORT FOR: City Council September 30, 2020 TO: Dave Zabell, City Manager Remote Workshop Meeting: 10/5/20 FROM: Richa Sigdel, Director Finance SUBJECT: 2021 Ad Valorem Tax Levy and General Fund Revenue Review I. REFERENCE(S): Exhibit A General Fund Revenue Overview 2021 Property Tax Presentation II. ACTION REQUESTED OF COUNCIL / STAFF RECOMMENDATIONS: Discussion III. FISCAL IMPACT: Sets the City share of the Property Tax rate. The impact to the General Fund is dependent on the option selected. 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 $1,000 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 public hearing and vote separate from the budget and is the primary focus of this 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 Page 2 of 38 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 2021 by as much as 1% over 2020. 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 2021 tax calculation is 0.602%. As final tax levy data has yet to be issued by the Franklin Coun ty 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. Council reviews other General Fund revenues that complement the revenues received from property taxes. V. DISCUSSION: CITY PROPERTY TAX LEVY OPTIONS FOR 2021 For 2021, the Franklin County Assessor has provided a preliminary City assessed valuation of $6,685,121,095, which will be used as the basis to calculate the 2021 property taxes. This amount includes new construction of $214,829,300 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 $398,312 over the 2020 levy amount. The proposed increase is derived mostly from an increase in assessed valuation due to new construction in 2020. This option forgoes the statutorily allowed 0.602% increase in the City property tax levy, an increase of $66,554, and instead would bank the capacity 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 2021 by $0.093 Page 3 of 38 from the $1.808 per $1,000 of assessed valuation in 2020 to $1.715 in 2021. Option B depicts the amount the City would collect if the Council chose to adopt the statutorily allowed 0.602% increase, plus an estimated increase due to new construction and annexation in 2020. This alternative would decrease the levy rate for 2021 by $0.083 per $1,000 of assessed valuation from the $1.808 per $1,000 of assessed valuation in 2020 to $1.725 in 2021. The 2021-2022 proposed budget was prepared using an estimated property tax levy of $11,240,022 (for 2021). This amount is lower than the estimated tax levy to account for 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 the Animal Control Shelter. Whereas in 2020, the Council chose to bank the tax levy capacity for future needs. STATUTORY DEADLINE FOR PROPERTY TAX DETERMINATION Finally, 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. RECOMMENDATION In consideration of the above noted factors and conditions, staff will be recommending that the Council select Option A; forgoing the statutorily allowed 0.602% increase in the City's property tax levy and instead banking that capacity for potential use in the future. Page 4 of 38 OPTION A - RecommendedOPTION B2020 Levy $11,064,358 $11,064,358 $11,064,358Implict Price Deflator (IPD) $66,554Increase in State Utility AV (Estimate) $10,000 $10,000New construction $388,312 $388,312Total Levy Amount$11,064,358 $11,462,670 $11,529,224Tax Levy Rate 1.808 1.715 1.725Rate Change from Current 2020 Levy - (0.093) (0.083) Cost per $1,000 on a $300,000 AV Home $542 $514 $517Net Change ($28) ($25)2020 Comparison2020 General Rate 2020 Total Rate* Tax CollectionCity of Richland 2.301$ 2.491$ 19,202,179$ City of Kennewick 1.859$ 1.859$ 13,603,769$ City of Pasco 1.808$ 1.808$ 11,064,358$ *Includes voted bondsCost per $1,000 on a $300,000 AV HomeCity of Richland 747$ City of Kennewick 558$ City of Pasco 542$ General Fund Levy OptionsCurrent 2020 Tax LevyNo Increase + New Construction (IPD) Increase + New Construction Page 5 of 38 Taxes 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Budget General Property Tax 16,316,052 21,648,971 22,947,637 Retail Sales Tax 30,689,223 34,800,209 33,890,746 Utility Tax 18,274,879 21,680,677 22,584,924 Other Tax 2,543,719 1,747,750 1,722,780 Sub-Total Taxes 67,823,873 79,877,606 81,146,087 Fees & Charges General Government 6,580,680 7,283,756 7,022,743 Public Safety 3,151,421 3,486,411 3,384,632 Culture & Recreation 494,161 446,051 410,727 Economic Environment 3,992,239 4,085,000 4,272,511 Sub-Total Fees & Charges 14,218,501 15,301,218 15,090,613 Intergovernmental PUD Privilege Tax 1,358,200 1,365,000 1,198,267 Liquor Board Profits & Excise Tax 1,904,019 1,981,212 2,011,037 Grants 523,883 4,140,128 998,743 Other 58,852 45,000 55,400 Sub-Total Intergovernmental 3,844,954 7,531,339 4,263,447 Licenses & Permits Building Permit 2,948,409 3,199,999 3,684,978 Business License 692,285 1,395,540 1,376,709 Animal License 463,069 381,156 381,551 Other 43,498 53,843 43,000 Sub-Total Licenses & Permits 4,147,262 5,030,539 5,486,238 Fines & Forefeits Traffic 1,393,109 1,258,125 1,345,632 Non Traffic 234,667 784,348 1,115,602 Court 104,019 75,484 85,120 Sub-Total Fines & Forefeits 1,731,794 2,117,958 2,546,354 Other Sources Rent 657,534 555,582 639,900 Transfer in 474,333 369,200 455,200 Interest 507,182 572,778 410,000 Other 1,125,024 1,357,611 118,700 Sub-Total Other Sources 2,764,072 2,855,170 1,623,800 Total General Fund Revenue 94,530,456 112,713,830 110,156,539 Summary - General Fund Revenue Sources by Category 2% 21% 31% 21% 4% 0% 3% 6% 0% 1% 2% 1% 0% 0% 1% 3% 0% 1% 1% 0% 0% 0% 1% Page 6 of 38 July August Aug/Sep/Nov Nov/Dec Department Request Budget Hearing Budget Kickoff Capital Improvement Plan Analysis & Meetings Budget Adoption Biennial Budget NovemberSeptember Council Goals Assessed Valuation from Franklin County Ad Valorem Levy Hearing & General Fund Revenues October Page 7 of 38 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 2021 is 0.60152%. City needs to adopt resolution of substantial need in order to received full 1% increase as allowed by statute. •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 8 of 38 Assessed Valuation Trend Page 9 of 38 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 Stations •City banked statutorily allowed 1% in 2020. City currently has $139,041 in banked capacity. Page 10 of 38 OPTION A - Recommended OPTION B 2020 Levy $11,064,358 $11,064,358 $11,064,358 Implict Price Deflator (IPD)$66,554 Increase in State Utility AV (Estimate)$10,000 $10,000 New construction $388,312 $388,312 Total Levy Amount $11,064,358 $11,462,670 $11,529,224 Tax Levy Rate 1.808 1.715 1.725 Rate Change from Current 2020 Levy - (0.093) (0.083) Cost per $1,000 on a $300,000 AV Home $542 $514 $517 Net Change ($28)($25) General Fund Levy Options Current 2020 Tax Levy No Increase + New Construction (IPD) Increase + New Construction Page 11 of 38 Comparison (2020 Data) 2020 Comparison 2020 General Rate 2020 Total Rate*Tax Collection City of Richland 2.301$ 2.491$ 19,202,179$ City of Kennewick 1.859$ 1.859$ 13,603,769$ City of Pasco 1.808$ 1.808$ 11,064,358$ *Includes voted bonds Cost per $1,000 on a $300,000 AV Home City of Richland 747$ City of Kennewick 558$ City of Pasco 542$ Page 12 of 38 Property Tax Trend –Recommended Page 13 of 38 General Fund Revenue Sources -Taxes 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget Gener al Pr oper t y Tax 16, 316, 052 21, 648, 971 22, 947, 637 Ret ai l Sal es Tax 30, 689, 223 34, 800, 209 33, 890, 746 Utility Tax 18, 274, 879 21, 680, 677 22, 584, 924 Ot her Tax 2, 543, 719 1, 747, 750 1, 722, 780 Sub- Tot al Taxes 67, 823, 873 79, 877, 606 81, 146, 087 2% 21% 31% 21%Page 14 of 38 General Fund Revenue Sources – Property Tax 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Property Tax 16,316,052 21,648,971 22,947,637 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 Page 15 of 38 Where does your property tax go? SCHOOL DISTRICT, 37% STATE PROPERTY TAX, 29% CITY OF PASCO, 18% COUNTY, 12% PORT OF PASCO & OTHERS, 4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%Page 16 of 38 General Fund Revenue Sources – Sales Tax 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Sales Tax 30,689,223 34,800,209 33,890,746 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 Page 17 of 38 Sales Tax Rates Breakdown of Sal es Tax Rat e 2020 Rat es State 6. 5% Ci t y/ Count y ( 85%/ 15%)1. 0% Tr ansi t 0. 6% Publ i c Saf et y*0. 3% Cr i mi nal Just i ce**0. 1% Juveni l e Det ent i on 0. 1% Tot al 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 Page 18 of 38 Where do Your Sales Tax Come From? Retail Trade 53% Wholesale Trade 9% Construction 15% Manufacturing 5% Other 11% Accommodation and Food Services 7%Page 19 of 38 General Fund Revenue Sources – Utility Tax 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Utility Tax 18,274,879 21,680,677 22,584,924 - 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 Page 20 of 38 General Fund Revenue Sources –Fees & Charges 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget Fees & Charges Gener al Gover nment 6, 580, 680 7, 283, 756 7, 022, 743 Publ i c Saf et y 3, 151, 421 3, 486, 411 3, 384, 632 Cul t ur e & Recr eat i on 494, 161 446, 051 410, 727 Economi c Envi r onment 3, 992, 239 4, 085, 000 4, 272, 511 Sub- Tot al Fees & Char ges 14, 218, 501 15, 301, 218 15, 090, 613 4% 0% 3% 6%Page 21 of 38 General Fund Revenue Sources – General Government 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed General Government 6,580,680 7,283,756 7,022,743 - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 Page 22 of 38 General Fund Revenue Sources – Public Safety 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Public Safety 3,151,421 3,486,411 3,384,632 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Page 23 of 38 General Fund Revenue Sources – Economic Environment 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Economic Environment 3,992,239 4,085,000 4,272,511 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 Page 24 of 38 General Fund Revenue Sources – Culture & Recreation 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Culture & Recreation 494,161 446,051 410,727 - 100,000 200,000 300,000 400,000 500,000 600,000 Page 25 of 38 General Fund Revenue Sources –Intergovernmental 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget I nt er gover nment al PUD Pr i vi l ege Tax 1, 358, 200 1, 365, 000 1, 198, 267 Li quor Boar d Pr of i t s & Exci se Tax 1, 904, 019 1, 981, 212 2, 011, 037 Gr ant s 523, 883 4, 140, 128 998, 743 Ot her 58, 852 45, 000 55, 400 Sub- Tot al I nt er gover nment al 3, 844, 954 7, 531, 339 4, 263, 447 0% 1% 2% 1%Page 26 of 38 General Fund Revenue Sources – Public Utility District (PUD) Privilege Tax 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed PUD Privilege Tax 1,358,200 1,365,000 1,198,267 - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Page 27 of 38 General Fund Revenue Sources – Liquor Board Profits & Excise Tax 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Liquor Board Profits & Excise Tax 1,904,019 1,981,212 2,011,037 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Page 28 of 38 General Fund Revenue Sources – Grants 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Grants 523,883 4,140,128 998,743 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 Page 29 of 38 General Fund Revenue Sources –Licenses & Permits 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget Li censes & Permi t s Bui l di ng Per mi t 2, 948, 409 3, 199, 999 3, 684, 978 Busi ness Li cense 692, 285 1, 395, 540 1, 376, 709 Ani mal Li cense 463, 069 381, 156 381, 551 Ot her 43, 498 53, 843 43, 000 Sub- Tot al Li censes & Permi t s 4, 147, 262 5, 030, 539 5, 486, 238 0% 0% 1% 3%Page 30 of 38 General Fund Revenue Sources – Building Permit 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Building Permit 2,948,409 3,199,999 3,684,978 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 Page 31 of 38 General Fund Revenue Sources – Business License 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Business License 692,285 1,395,540 1,376,709 - 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Page 32 of 38 General Fund Revenue Sources – Animal License 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Animal License 463,069 381,156 381,551 - 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 500,000 Page 33 of 38 General Fund Revenue Sources –Fines & Forfeits 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget Fi nes & For ef ei t s Traffic 1, 393, 109 1, 258, 125 1, 345, 632 Non Tr af f i c 234, 667 784, 348 1, 115, 602 Cour t 104, 019 75, 484 85, 120 Sub- Tot al Fi nes & For ef ei t s 1, 731, 794 2, 117, 958 2, 546, 354 0% 1% 1%Page 34 of 38 General Fund Revenue Sources – Fines & Forfeits 2017-2018 Actual 2019-2020 Estimate 2021-2022 Proposed Fines & Forefeits 1,731,794 1,761,199 2,546,354 - 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 Page 35 of 38 General Fund Revenue Sources -Other 2017- 2018 Act ual 2019- 2020 Est i mat e 2021- 2022 Pr oposed Budget Ot her Sour ces Rent 657, 534 555, 582 639, 900 Tr ansf er i n 474, 333 369, 200 455, 200 I nt er est 507, 182 572, 778 410, 000 Ot her 1, 125, 024 1, 357, 611 118, 700 Sub- Tot al Ot her Sour ces 2, 764, 072 2, 855, 170 1, 623, 800 0% 0% 0% 1%Page 36 of 38 Summary City’s assessed valuation has increased by 70% since 2016 Staff recommends Council reserve 0.602% property tax levy for future purposes The recommended option results in property tax rate of $1.715 per $1,000 Assessed Valuation Review of major General Fund revenue sources –A draft of currently proposed. Expected to be revised if new economic information impacts projections between now and adoptionPage 37 of 38 Page 38 of 38