flow of funding through local governments pwb southwest regional academy november 28, 2012 municipal...

Flow of Funding Through Local Governments

PWB Southwest Regional Academy

November 28, 2012

Municipal Budgeting and ManagementAugust 16,2012

Highlights and Objectives

How property taxes workHow property taxes can increase

when property values fallHow property taxes increases or

declining values can trigger prorationing

How prorationing worksJurisdicitonal collaboration to avoid

proratioining – Q & A

Property Tax Key Terms

Assessed Value (AV): value of property determined by the County Assessor or State

Department of Revenue, placed on the

assessment rolls for property tax purposes.

Assessment: charge against a property to

defray the cost of a public improvement presumed to benefit that property.

Levy: taxes, assessments and charges imposed to support governmental activities.

Levy Rate: property taxes to be paid expressed in terms of dollars per $1,000 of assessed value (e.g. $1.80/$1,000 A.V.) Also known as “millage rate.”

Property Taxes

Cities / counties have two main restrictions on property taxes: Levy rate and amount

Levy Rate Restrictions Cities: Maximum regular rate is $3.375 /

$1,000.Counties: Maximum regular rate is

$1.80 / $1,000 (general use) and $2.25 (roads), not to exceed $4.05 / $1,000.

RCW 84.52.043(The state may impose up to $3.60 /

$1,000.)

Property Taxes

Cities / counties have two main restrictions on property taxes: Levy rate and amount

Levy Amount Restrictions Often called the property tax lid, cities

and counties may not increase their regular levies by more than one percent over the prior year.

RCW 84.55.

Property Taxes

After the one percent requirement is met, there are other limits on total levies:

Other Levy Amount Restrictions The aggregate levies of all local

jurisdictions may not exceed $5.90 / $1000.RCW 84.52.43

Property tax imposed on any individual parcel may not exceed one percent of its value.

Property Tax “Lid”

Property tax levy is a function of the following formula:Assessed valuation/1,000 X tax rate =

tax levyTax levy increases are subject to

limitations:1% for jurisdictions under 10,000 in

population1% or implicit price deflator, whichever is

less, for populations greater than 10,000

2. A city, county, or state, also valued at $100k

1. One property, valued at $100k

3. CURRENT levy RATE:• City: $3.375 (maximum)• County: $1.80 (Maximum)• State: $3.60 (Maximum)

4. Levy AMOUNT = $3.375 x $100k =

$338 = Levy Amount

1997: Incorporation

New levy RATE = $3.375

$100K

1997: Incorporation

9August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt

1997: Max Legal Millage Rate $3.375$100 x $3.375 = $338 1997 Levy: Home 1

Jurisdiction-Wide: Individual Households:Levy Amount & RateLevy Amount & Rate

1998: 10% Increase in AV

10August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt


1998 Millage Rate $338 + 1% = $341 / $110 = $3.099$110 x $3.099 = $341 1998 Levy: Home 1


1999: New Construction

11August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt




$80 x $2.869 = $230 1999 Levy New Constr$200 x $2.869 = $574 1999 LEVY TOTAL


2007:Banner Year

12August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt




$80 x $2.869 = $230 1999 Levy New Constr$200 x $2.869 = $574 1999 LEVY TOTAL

2007 Millage Rate $574 + 8% = $621 / $300 = $2.071Eight years @ 1% per year $200 x $2.071 = $414 2007 Levy: Home 1

$100 x $2.071 = $207 2007 Levy: Home 2$300 x $2.071 = $621 2007 LEVY TOTAL


2009: Crash

13August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt


2007 Millage Rate $574 + 8% = $621 / $300 = $2.071$200 x $2.071 = $414 2007 Levy: Home 1$100 x $2.071 = $207 2007 Levy: Home 2$300 x $2.071 = $621 2007 LEVY TOTAL

2009 Millage Rate $621 + 2% = $634 / $190 = $3.336Two years @ 1% per year $140 x $3.336 = $467 2012 Levy: Home 1



Over the Limit

14August 2012‹#›

Old Levy Amt

+ 1% =

New Levy Amt

/

TOT AV

(1,000s)

=

New Millage Rate

Indv AV

(1,000s)

x

New Millage

Rate=

New Levy Amt





OR



Prorationing

“Statutory process for reducing local regular property tax levies, other than the state levy for K-12

education, IF the aggregate of those levies exceeds either the

aggregate $5.90 limit or the one per cent (1%) constitutional limit

in a specific tax code area.”

Prorationing Key Terms

Junior Taxing District: all taxing districts other than “senior taxing districts,” including: Fire, Hospital, Library and Metropolitan Parks Districts, and Regional Fire Protection Service Authorities.

Senior Taxing Districts: State Schools, County, County Road District, City and Town.

Tax Code Area: A geographical area made up of a unique mix one or more taxing districts established for property calculating and collecting property taxes.

Prorationing Pecking Order - $5.90

1st Park & Rec Districts, Park & Rec Service Areas, Cultural, Arts, Stadiums & Convention Districts, City Transportation Authority

2ndFlood Control Zone Districts (less $0.25)3rd Hospital Districts, MPDs (less $0.25),

Cemetery Districts, all other districts not mentioned.

4th MPDs formed on or after 1/1/20025th Fire Districts (less $0.25), Regional Fire

Protection Service Authorities6th Fire Districts, Regional Fire Protection

Service Authorities, Library Districts, Hospital Districts, MPDs formed on or after 1/1/2002

Prorationing Pecking Order - $5.90

Last: County Current Expense, County Road, City

Notes:Flood Control & Fire Districts are eligible to protect levies up $.025. Protected capacity is outside the $5.90 limit. There are population and boundary requirements.

Levies not subject to the $5.90 limit are: State, Ports, PUD, EMS, Affordable Housing, Con Futures, County Ferry Districts, Criminal Justice, some MPDs, and voter approved levies such as excess property tax levies and local school special levies.

Prorationing: Example 1Now, for the math:

Example#1 the $5.90 aggregate limit

Priority* District Rate

Requested Rate

Prorated Levy Amt

Lost 7 County Current Expense $1.8000 $1.8000 $0.0000 7 Road District 2.2500 2.2500 0.0000 6 Rural Library 0.5000 0.5000 0.0000 6 Fire District –A- 0.5000 0.5000 0.0000 5 Fire District –A- 0.5000 0.3500 0.1500 6 Hospital District –B- 0.5000 0.5000 0.0000 3 Hospital District –B- 0.2500 0.0000 0.2500 3 Cemetery District 0.1125 0.0000 0.1125 Total $ 6.4125 $ 5.9000 $ 0.5125

*Higher priorities have better protection. Source: DOR Property Tax Levies – Operations Manual

Prorationing: Example 2Now, for the math:

Example #2 of the $5.90 aggregate limit Districts with the same statutory right in the same priority level

Priority1 District Rate

Requested

Step 1 Eliminate

(Priority 3) Unprotected

Levies

Levy Remaining Still $.50

over $5.90

Step 2 Prorate Priory 6 Districts2

7 County Current Expense $1.80 $1.80 $1.8000 7 City 3.10 3.10 3.1000

6 & 3 Hospital District 0.75 ($0.25) .50 0.3333 6 Rural Library 0.50 .50 0.3333

6 & 3 Metro Park 0.75 ($0.25) .50 0.3333 3 Cemetery District 0.10 ($0.10 .00 eliminated

Total $ 7.00 $ 6.40 $ 5.90 1Higher priorities have better protection. 2Step 2: Priority 7 Districts Levy Rate = $4.90; $1 remains for 3 Districts in Priority 6 - $1.00/3 = $.3333 for each District Source: DOR Property Tax Levies – Operations Manual

Prorationing:1% Constitutional Limit

A 1972 constitutional amendment that limits regular property taxes on an individual parcel of property without voter approval to 1% of

its true and fair market value.

Includes all taxing districts subject to the $5.90 limit AND State School levy, EMS, Affordable Housing, Criminal Justice, Ferry Districts, MPDs and Con Futures.

Does not apply to voter approved levies.

Applies directly to taxes paid by individual property owners.

Prorationing:1% Constitutional Limit

As with the $5.90 limitation, there is a priority order for prorationing based on the Constitutional Limit of 1%.

17 priorities are established in state law.

They are not the same as the $5.90 priorities.

See RCW 84.52.010

1% Constitutional Limit: the Math

Ask your County Assessor!!

Scenarios are dependent upon:Specific properties and property valuesTaxing District rates within each Tax

Code Area$5.90 proration calculationsVoter approved leviesStatutorily protected levies

Take-Aways

Property values matterCounty-wide, District assessments

Aggregate levies have limits:$5.90/$1,000 AV – (except protected)1% true and fair

District levies can be reduced as the result of actions taken by other Districts

Some levies can be protected by votersSome levies are statutorily protected

Thank you!

Questions?

Discussion

flow of funding through local governments pwb southwest regional academy november 28, 2012 municipal...

Documents