HomeMy WebLinkAboutReg 2024-10-21 Item 6B.2 - Budget - 2025-2026 Biennial Budget: Property Tax and Levies 101COUNCIL AGENDA SYNOPSIS
nitiais
Meeting Date
Prepared by
Mayor's review
Council review
10/21/24
AB
ITEM INFORMATION
ITEM No.
6.B. (2)
STAFF SPONSOR: AARON BEMILLER
ORIGINAL AGENDA DATE: 10/21/24
AGENDA ITEM TITLE Overview of Levy & Rates
CATEGORY ® Discussion
Mt Date 10/21/24
❑ Motion
Mtg Date
❑ Resolution
Mtg Date
❑ Ordinance
Mtg Date
❑ Bid Award
Mtg Date
❑ Public Hearing
Mtg Date
❑ Other
Mtg Date
SPONSOR ❑ Council ❑ Mayor ❑ Admin Svcs ❑ DCD ® Finance ❑ Fire
❑ P&R ❑ Police ❑ PW
SPONSOR'S
SUMMARY
High-level presentation on property tax levy calculations, rules, & regulations.
REVIEWED BY
❑ Trans&Infrastructure Svcs ❑ Community Svcs/Safety ❑ Finance & Governance ❑ Planning & Community Dev.
❑ LTAC
DATE: N/A
❑ Arts Comm.
❑ Parks Comm. ❑ Planning Comm.
COMMITTEE CHAIR:
RECOMMENDATIONS:
SPONSOR/ADMIN. Finance Department
COMMIT"IEE Not heard in Committee
COST IMPACT / FUND SOURCE
EXPENDITURE REQUIRED
$N/A
AMOUNT BUDGETED APPROPRIATION REQUIRED
$N/A $N/A
Fund Source:
Comments:
MTG. DATE
RECORD OF COUNCIL ACTION
10/21/24
MTG. DATE
ATTACHMENTS
10/21/24
<--Presentation
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-id° CITY OF TUKWILA 2025-26
BuDGE
• DEVELOPMENT PROCESS
AIM
October 21, 2024 - City Council Meeting The City of opportunity, the community of choice.
Property Tax Levy (Ad Valorem Tax)
03
Touch Points
• Set a baseline understanding of property tax
levies and rules.
• 2025/26 Budget is submitted with a property tax
reduction from previous year.
• Council has a decision point on property tax
revenues.
• Public Hearing scheduled 10/28.
• Vote on Levy Ordinances scheduled for 11/4.
City of Tukwila 2025-26 Budget Development 2
Property Tax Limitations
Assessed Value & Levy Banked Capacity
& Statutory Maximum Rate
Limitations
& Statutory
Maximum
• State law limits growth property tax revenue
for a district to 1% or the Implicit Price
Deflator (IPD), whichever is less.
• IPD for 2025 is 2.57%.
• New construction, changes in state assessed
property, and refunds are not constrained to the
1% limitation (but cannot lift the levy rate above
statutory maximum).
City of Tukwila 2025-26 Budget Development _
Limitations
& Statutory
Maximum
• $3.60 — City Base Rate
• ($0.50) —Library District
• ($1.00) — RFA (with Fire Benefit Charge)
• $0.225 — Pre-LEOFF Firefighters Pension*
• $2.325 —Statutory Maximum
* LEOFF (Law Enforcement Officers & Fire
Fighters)
City of Tukwila 2025-26 Budget Development _
Limitations
& Statutory
Maximum
• Substantial Need: When the IPD is
less than 1.0%, a district can still levy
the full 1% by passing legislation of
"substantial need".
• Since 2016, the IPD has been
below 1% three times: 2016, 2017, &
2021.
City of Tukwila 2025-26 Budget Development
Levy Amount, AV, & Levy Rate
Property Tax is
based on a levy rate
per $1,000 of
Assessed Valuation
(AV) .
Levy rate = revenue /
AV x 1,000
The responsibility of determining AV rests with the County Assessor.
The Assessor must determine "as nearly as practical" the true and fair
value of the property, land, and improvements on the land.
Washington State has a budget -based system of property taxation. The
three components are: levy amount, assessed value, and levy rate.
Within legal limitations, as part of the budget process, Council adopts
the amount of property tax revenue needed to fund the budget.
Year 1
• As assessed values increase
(more than 1%), the rate
decreases. The same is true that
as assessed values decrease, the
levy rate increases.
Hypothetical Model
Year 2 Year 3 Year 4 Year 5
Assessed Value $ 1, 000, 000, 000 $ 1, 300, 000, 000 $ 1, 600, 000, 000 $ 1, 500, 000, 000 $ 1, 700, 000, 000
District Revenue $ 110001000 $ 110101000 $ 11020400 $ 11030,301 $ 110401604
Calculated Levy Rate $ 1.00 $ 0.78 $ 0.64 $ 0.69 $ 0.61
City of Tukwila 2025-26 Budget Development
Voter Approved
Excess Levy for
Collections in 2025
In 2016 & 2019 the voters
approved an excess levy to
pay debt service (principal
and interest payments) on
bonds issued to fund land
purchases and construction of
the Justice Center and two
Fire Stations. The total
collections for 2025 is
$4,931,725.
• Excess levy is not constrained by
the 1% limitation. The amount
collected is equal to the principal
and interest payment on debt.
Excess Levy 2025
A.V. $ 9, 561, 329, 345
Debt Service 4,931,725
Rate
0.51758
City of Tukwila 2025-26 Budget Development
9
Banked
Capacity
Available to cities that are levying less than their
maximum allowable levy (and less than their
statutory maximum levy).
Allows for "banking" the unused capacity for use at
some future date.
When the banked capacity is levied, the district is
not constrained by the 1 % limitation.
Decision to bank capacity, and then levy it at a future
date, does not require voter approval.
Does not require separate Ordinance from the
annual property tax Ordinance to bank or use at a
future date.
Banked
Capacity
• The example below does not include legally
allowed add-ons.
Maximum Levy Change
Year Allowable Levy Actual Levy Percentage Banked Capacity
Baseline (Current) 1,000,000 1,000,000 N/A
1 1,0101000 900,000 -10.00% 110,000
2 1,0201100 909,000 1.0% 111,100
3 1,030,301 918,000 1.0% 112,301
4 1,040,604 927,000 1.0% 113,604
5 1,051,010 1,020,000 10.0% 31,010
City of Tukwila 2025-26 Budget Development _
•
w Levy Collections —City Levies Only
(estimate)
Property Value
$ 500,000 $ 600,000 $ 700,000 $ 800,000
Regular Levy Rate
1.25497 1.25497
1.25497 1.25497
An n u a l Tax Collected $ 627 $ 753 $ 878 $ 1,004
Excess Levy Rate
0.51758 0.51758
0.51758 0.51758
Tax Collected $ 259 $ 311 $ 362 $ 414
Total City Levy $ 886 $ 1,064 $ 1,241 $ 1,418
City of Tukwila 2025-26 Budget Development 12
City Regular Levy Comparative —Tax Savings
from Banking Capacity (estimate)
Property Value
$ 500,000 $ 600,000 $ 700,000 $ 800,000
Regular Levy Rate
1.25497 1.25497
1.25497 1.25497
Annual Tax Collected
$
627 $ 753 $
878 $ 1,004
Regular Levy No Ban k
1.90382 1.90382
1.90382 1.90382
Annual Tax Collected
$
952 $ 1,142 $
1,333 $ 1,523
Saving from banking
$
324 $ 389 $
454 $ 519
01
co
City of Tukwila 2025-26 Budget Development 13
6)
O
Total Property Tax (estimate)
Tukwila School District,
34.6%
Emergency Medical
Service, 2.2%
Port of Seattle, 1.0%
Flood Control, 0.7%
KC Library, 2.8%
Other, 3.1%
City of Tukwila, 17.5%
Washington State, 24.8%
King County, 13.2%
City of Tukwila 2025-26 Budget Development 14
cn
WrapUp/Q&A
City of Tukwila 2025-26 Budget Development 15