Flow of Funding Through Local Governments
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Flow of Funding Through Local Governments. PWB Southwest Regional Academy November 28, 2012 Municipal Budgeting and Management August 16,2012. How property taxes work How property taxes can increase when property values fall

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Flow of funding through local governments

Flow of Funding Through Local Governments

PWB Southwest Regional Academy

November 28, 2012

Municipal Budgeting and Management

August 16,2012


Highlights and objectives

How property taxes work

How property taxes can increase when property values fall

How property taxes increases or declining values can trigger prorationing

How prorationing works

Jurisdicitonal collaboration to avoid proratioining – Q & A

Highlights and Objectives


Property tax key terms

Assessed Value (AV): value of property determined bytheCountyAssessororStateDepartmentof Revenue, placedontheassessmentrollsforpropertytaxpurposes.

Assessment: chargeagainstapropertytodefraythe 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 Tax Key Terms


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


Property taxes1

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


Property taxes2

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 Taxes


Property tax lid

Property tax levy is a function of the following formula:

Assessed valuation/1,000 X tax rate = tax levy

Tax levy increases are subject to limitations:

1% for jurisdictions under 10,000 in population

1% or implicit price deflator, whichever is less, for populations greater than 10,000

Property Tax “Lid”


1997 incorporation

1997: Incorporation

$100K

1. One property, valued at $100k

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

  • 3. Current levy rate:

  • City: $3.375 (maximum)

  • County: $1.80 (Maximum)

  • State: $3.60 (Maximum)

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

$338 = Levy Amount

New levy rate = $3.375


1997 incorporation1

‹#›

1997: Incorporation


1998 10 increase in av

‹#›

1998: 10% Increase in AV


1999 new construction

‹#›

1999: New Construction


2007 banner year

‹#›

2007:Banner Year


2009 crash

‹#›

2009: Crash


Over the limit

‹#›

Over the Limit


Prorationing

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 Key Terms


Prorationing pecking order 5 90

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

2ndFlood Control Zone Districts (less $0.25)

3rdHospital Districts, MPDs (less $0.25), Cemetery Districts, all other districts not mentioned.

4thMPDs formed on or after 1/1/2002

5thFire Districts (less $0.25), Regional Fire Protection Service Authorities

6thFire Districts, Regional Fire Protection Service Authorities, Library Districts, Hospital Districts, MPDs formed on or after 1/1/2002

Prorationing Pecking Order - $5.90


Prorationing pecking order 5 901

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 Pecking Order - $5.90


Prorationing example 1

Prorationing: Example 1


Prorationing example 2

Prorationing: Example 2


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


Prorationing 1 constitutional limit1

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

Prorationing:1% Constitutional Limit


1 constitutional limit the math

Ask your County Assessor!!

Scenarios are dependent upon:

Specific properties and property values

Taxing District rates within each Tax Code Area

$5.90 proration calculations

Voter approved levies

Statutorily protected levies

1% Constitutional Limit: the Math


Take aways

Property values matter

County-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 voters

Some levies are statutorily protected

Take-Aways


Thank you

Questions?

Discussion

Thank you!


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