Property Tax Update with Multi- Residential Property Data

Transcription

1 #IowaLeague2016 Property Tax Update with Multi- Residential Property Data Erin Mullenix Former League Research Director Handouts and presentations are available through the event app and at Revenues What Do Cities Do With Property Tax Revenues? Expenditures Levies & Trends Legislative Update New Multi-residential Class City Stories REVENUES 1

2 WHO PAYS AND RECEIVES PROPERTY TAXES? WHAT ARE THE MAJOR SOURCES OF STATE AND LOCAL TAX REVENUES? Distribution of Major State and Local Tax Sources Actual FY13 Motor Vehicle Fuel 3.7% Sales & Use 26.6% Property 38.1% Gambling/Other 2.4% Pers. Income & Inherit. 25.2% Corp., Bank, & Insurance 4.1% Data Source: Iowa Legislative Services Agency, 11/2014 CITY REVENUES BY FUND 2

3 CITY REVENUES BY CATEGORY CITY REVENUES BY CATEGORY CITY REVENUES BY CATEGORY 3

4 CITY REVENUES BY CATEGORY CITY REVENUES BY CATEGORY CITY REVENUES BY CATEGORY 4

5 GENERAL FUND LEVIES $8.10 General Fund Levy Unchanged since cities at $8.10 limit Emergency Levy (up to $0.27/$1,000 taxable value) 394 cities using levy (334 at limit) Emergency levy must be transferred to the General Fund before FYE Increasing trend GENERAL FUND LEVIES Each city has its own circumstances, use of general fund voted and non-voted levies Non-Voted Levies: Publically owned transit; aviation authority; contract for use of bridge; civic center; sanitary disposal project; levee improvement fund; liability, property & self insurance costs support of local emergency management commission Voted Levies: Instrumental groups, memorial building, symphony/orchestra, cultural and scientific facilities, county bridges, Mississippi or Missouri River bridge construction, aid to transit company, city emergency medical district, public library support, unified law enforcement SPECIAL REVENUE LEVIES Emergency Levy of $0.27/1,000 (if general fund is at $8.10/1,000) Police & Fire Retirement (funds toward 411 may also be budgeted from the general fund) FICA & IPERS (if general fund is at $8.10/1,000) Other Employee Benefits Levy (if general fund is at $8.10/1,000) SSMID (for applicable cities) 5

6 OTHER CITY REVENUES TIF Special Revenues Debt Service Levy Capital Projects Levy Proprietary Operations (municipal utilities, water) RUTF/LOST/Emergency Levy Charges for Fees/Proceeds of Debt TAX INCREMENT FINANCE 347 of 946 cities use TIF 6.4% of total taxable property valuation is from TIF increment (not discounting for increment returned) 54% of TIF increment is returned to all tax authorities This is roughly $10B in valuation or $380M in unused increment TAX INCREMENT FINANCE 1,413 TIF projects relate to the category of roads, bridges and utilities This accounts for roughly 45% of non-revenue producing projects 6

7 TAX INCREMENT FINANCE Many TIF districts will expire over the coming years, and valuations will return to all tax authorities. Of those established after 1995, 69% report a statutory end date. Up to $6.3B in increment valuation could return to all tax authorities over FY This is based on maximum increment, however, note that communities often return a percentage of increment annually. PROPERTY TAX IN IOWA / LOCAL GENERAL OPERATIONS PUBLIC SAFETY Police Fire EMS / Ambulance Flood Control Animal Control Jail Building Inspections 7

8 PUBLIC SAFETY Safety = great importance to citizens & economic growth in Iowa State law requires cities to provide law enforcement and fire protection Largest city expenditure (on average): Over $772M in FY15 (budgeted for cities combined) ILEA requirement Firefighters must have at least a minimum training/certification Workers compensation for injured volunteer firefighters at 140% average statewide weekly salary or employee s salary (whichever is greater ) Subsidizing some township levies for fire protection PUBLIC WORKS: LOCAL INFRASTRUCTURE Transportation 10-cent increase to support $ M statewide transportation funding shortfall (FY15, IDOT)* Local governments forced to issue debt to pay for infrastructure-related fixes Transportation infrastructure conditions declining in Iowa (*recent studies) Misc. Parking Street lighting Snow removal Sidewalks Trash collection and recycling PUBLIC WORKS: UTILITIES Some cities utilities are publicly-operated, while others are privately-operated Many federal and state requirements apply Drinking Water Wastewater and Stormwater Solid Waste Gas & Electric Telecom 8

9 ECONOMIC & COMMUNITY DEVELOPMENT Economic Development Tax Increment Finance Tax Abatement Housing and Urban Renewal Planning & Zoning Community Beautification CULTURE & RECREATION Local Attractions City Parks Recreation Programs Libraries Cemeteries Community Centers EXPENDITURES 9

10 CITY EXPENDITURES: ALL POPULATIONS CITY EXPENDITURES: POPULATION MATTERS CITY EXPENDITURES: POPULATION MATTERS 10

11 CITY EXPENDITURES: POPULATION MATTERS CITY EXPENDITURES: POPULATION MATTERS CITY EXPENDITURES: POPULATION MATTERS 11

12 CITY EXPENDITURES: CITY PROGRAMS REVIEW OF CITY EXPENDITURES Staffing, Wages and Benefits Large expense for most cities Pension costs (mostly cities control) Health insurance Normal Operating Daily expenses to run the city (electric/gas, supplies, telecommunications, maintenance, postage, etc.) REVIEW OF CITY EXPENDITURES Capital Improvements Generally defined as permanent/long-lasting items (buildings, roads, some equipment) Debt Service Municipal debt has risen recently tight budgets, low interest rates, and unfunded mandates/change 12

13 REVIEW OF CITY EXPENDITURES State Constitutional Debt Limit The State Constitution states that no city can exceed 5% of the value of taxable property in the city. Per Iowa Supreme Court, this provision applies only to debt payable from property taxes. The Iowa Legislature enacted a statute which allows the debt calculation against the 100% assessed valuation of property rather than taxable value (with rollback). And, the limit applies only to outstanding principal amounts of debt. (Utility revenue notes and bones do not count against the debt limit). REVIEW OF CITY EXPENDITURES Mandated City Costs (often outside city control) Examples: shortfalls in transportation funding water infrastructure upgrades continually changing EPA & DNR infrastructure requirements pension obligations public safety (training and township levies, workers compensation formula) rising personnel costs (healthcare, collective bargaining, continuation of group health insurance for early retirees) publication costs mandated commissions and boards tax-exempt property city audits delinquent utility charge liens others LEVY RATE ANALYSIS 13

14 LEVY RATE ANALYSIS CITY LEVY ANALYSIS CITY LEVY ANALYSIS 14

15 CITY LEVY ANALYSIS CITY LEVY ANALYSIS CITY LEVY ANALYSIS 15

16 CITY LEVY ANALYSIS CITY LEVY ANALYSIS CITY LEVY ANALYSIS 16

17 CITY LEVY ANALYSIS LEGISLATIVE ISSUES CITY PROPERTY TAXES IN IOWA In 2013, major legislative changes occurred related to local property taxes Residential growth cap Commercial, industrial and RR rollback (plus backfill with limit) New multi-residential property class Telecommunications 17

18 82.50% 78.75% 75% 9/7/2016 CITY PROPERTY TAXES IN IOWA Multi-residential Property Classification (NEW) 8-year phase-in to meet residential property rollback percentage Tweaks made to administrative rulemaking on eligible property Impact! SF295 Timeline New Multi-residential property class created 90% Rollback on C, I, RR 86.25% Rollback on Multi-residential $125M Appropriation for Business Tax Credit (FY17+) 95% Rollback on C, I, RR Begin 3% Res. Growth Cap (FY15+) $50M Appropriation for Business Tax Credit 90% Rollback on C, I, RR $100M Appropriation for Business Tax Credit 90% Rollback on C, I, RR 82.50% Rollback on Multi-residential Multi-Residential Property Multi-Residential Rollback Phase-In 90.00% 86.25% 80.00% 70.00% 71.25% 67.50% 63.75% 60.00% 50.00% 40.00% 30.00% 20.00% For FY 24 forward, the rollback will equal that of residential property 10.00% 0.00% FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 Note: those properties that have already legally converted to the residential property class are not expected to be re-classed as multi-residential. Example: Condos re-classed as residential 54 18

19 BACKFILL Roughly $50M Freeze Year Property Tax Model Analysis Statewide (all cities) Res, Com, Ind, Rail, and Multi-Res Totaled Est. Prior to SF 295 Total of Residential, Commercial, Industrial, Railroad, and Multi-Residential PREVIOUS LAW Assessment Fiscal City Total Date Year Tax Rate Taxes 100% Actual Taxable Growth 1/1/ $150,109,761,102 Unknown* 1/1/ $153,884,590,611 $101,661,693,678 $14.18 $1,441,562,816 1/1/ $164,184,793,407 $107,660,802,627 $14.18 $1,526,630, % 1/1/ $168,650,401,647 $113,039,634,558 $14.18 $1,602,902, % 1/1/ $180,753,441,069 $120,045,857,019 $14.18 $1,702,250, % 1/1/ $186,433,168,645 $126,413,259,551 $14.18 $1,792,540, % 1/1/ $201,461,415,430 $134,634,317,890 $14.18 $1,909,114, % 1/1/ $208,456,432,652 $142,020,740,876 $14.18 $2,013,854, % Statewide (all cities) Res, Com, Ind, Rail, and Multi-Res Totaled Est. Post SF 295 (Current) Total of Residential, Commercial, Industrial, Railroad, and Multi-Residential CURRENT LAW: SF295 Assessment Fiscal Proposed City Total Loss in Total Backfill Est. Date Year Taxable Tax Rate Taxes Tax Revenue 100% Actual Growth 1/1/ $150,109,761,102 Unknown $50,445,975 1/1/ $153,884,590,611 $97,339,607,283 $14.18 $1,380,275,631 ($72,859,207) $50,445,975 1/1/ $164,184,793,407 $102,399,915,956 $14.18 $1,452,030, % ($89,494,219) $50,445,975 1/1/ $168,650,401,647 $106,886,843,170 $14.18 $1,515,655, % ($105,251,822) $50,445,975 1/1/ $180,753,441,069 $112,750,891,351 $14.18 $1,598,807, % ($125,494,531) $50,445,975 1/1/ $186,433,168,645 $118,016,281,676 $14.18 $1,673,470, % ($144,782,641) $50,445,975 1/1/ $201,461,415,430 $124,836,481,011 $14.18 $1,770,181, % ($169,664,415) $50,445,975 1/1/ $208,456,432,652 $130,875,606,528 $14.18 $1,855,816, % ($195,981,114) $50,445,975 Multi-Residential Property Class Modeling Property Tax: Multi-residential Multi-Residential Property Treated at Former 100% Rollback (Statewide All Cities Totaled) Assessment Fiscal Growth Due To Growth Due To City MR Date Year New Revaluation Construction Tax Rate Taxes Rollback Taxable 100% Actual 1/1/ $4,549,578, % $4,549,578,044 $14.18 $64,513,017 1/1/ $4,663,317, % 2.25% % $4,663,317,495 $14.18 $66,125,842 1/1/ $4,943,116, % 2.50% % $4,943,116,545 $14.18 $70,093,393 1/1/ $5,079,052, % 2.50% % $5,079,052,250 $14.18 $72,020,961 1/1/ $5,409,190, % 2.50% % $5,409,190,646 $14.18 $76,702,323 1/1/ $5,579,580, % 2.90% % $5,579,580,151 $14.18 $79,118,447 1/1/ $5,978,520, % 2.90% % $5,978,520,132 $14.18 $84,775,415 1/1/ $6,166,843, % 2.90% % $6,166,843,516 $14.18 $87,445,841 Current Law (SF295) Multi-Residential Projection (Statewide All Cities Totaled) Assessment Fiscal Growth Due To Growth Due To City MR Difference in Date Year New Revaluation Construction Tax Rate Taxes Tax Revenue Rollback Taxable 100% Actual 1/1/ $4,549,578, % $3,924,011,063 $14.18 $55,642,477 ($8,870,540) 1/1/ $4,663,317, % $3,847,236,933 $14.18 $54,553,820 ($11,572,022) 0.25% 2.25% 1/1/ $4,943,116, % 2.50% 78.75% $3,892,704,279 $14.18 $55,198,547 ($14,894,846) 1/1/ $5,079,052, % 2.50% 75.00% $3,809,289,187 $14.18 $54,015,721 ($18,005,240) 1/1/ $5,409,190, % 2.50% 71.25% $3,854,048,335 $14.18 $54,650,405 ($22,051,918) 1/1/ $5,579,580, % 2.90% 67.50% $3,766,216,602 $14.18 $53,404,951 ($25,713,495) 1/1/ $5,978,520, % 2.90% 63.75% $3,811,306,584 $14.18 $54,044,327 ($30,731,088) 1/1/ $6,166,843, % 2.90% 56.61% $3,491,024,849 $14.18 $49,502,732 ($37,943,109) 19

20 Est. Residential Rollback Percentage 9/7/2016 RECENT CHANGES 62% 61% 60% 59% 58% 57% 56% 55% 54% 53% 52% Residential Rollback Estimated Trends (FY17-24) *Note assumptions: estimates incorporated (including statewide evaluation growth and new construction rates) follow those used in League Property Tax Model, available online at *Noting coupling for Res/Ag 57.63% 57.05% 57.07% 55.63% 4% growth limitation 55.93% 58.99% 57.27% 3% growth limitation 58.25% 55.98% 60.68% 60.12% 58.92% 57.22% 55.50% 56.61% IMPACT/BURDEN Commonly known as commercial tax relief IMPACT/BURDEN 20

21 CITY PROPERTY TAXES IN IOWA: COUPLING/CONSUMABLES 2016 Issue: Coupling/Consumables HF 2433: Rescinded IDR rules to take effect 7/1/16 Expands the definitions of purchases that qualify under an existing sales tax exemption for manufacturing supplies and consumables Projected to reduce the LOST revenues to local governments by $3.6 million in 2017, increasing by $200,000 each year. ($2.5M less impact than under IDR rule). Effective March 21, 2016 CITY PROPERTY TAXES IN IOWA Resources to highlight: League Property Tax Model League Property Tax Tracking Project ISU Extension Fiscal Conditions Reports (Free+) Iowa Department of Management CITY STORIES 21

22 CITY STORIES Examples: Data-driven Decisions Strategic Planning / Prioritization of Limited Resources Budget Process Communication with City Council/Officials Valuable Information CITY STORIES One helpful way to explain to residents how the city spends local funds Does NOT represent total cost of providing services to residents CITY STORIES 22

23 CITY STORIES CITY STORIES Des Moines FY17 CITY STORIES Waterloo 23

24 CITY STORIES West Branch, Iowa CITY STORIES Washington, Iowa FY17 CITY STORIES Washington, Iowa FY17 24

25 LEAGUE RESOURCES PLUG Property Tax Model Property Tax Tracking Project Fiscal Conditions Report fall 2016 Surveys: Utility Rates, LOST, etc. Nuisance Abatement Manual Budget Workshops Series THANK YOU! Erin Mullenix Director of Data Driven Science Iowa State University 25