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City Council Meeting - FINAL
Meeting Date: 06/20/2017  
Co-Submitter: Heidi Derryberry From: Brandi Suda, Finance Director

Public Hearing:"Truth in Taxation", FY 2017-2018 Budget and Property Tax Levy (combined)
1) Open the public hearing
2) Receive citizen input
3) Close the public hearing
4) Convene Special Meeting
Executive Summary:
This combined public hearing is being held to comply with law. Arizona "Truth in Taxation" laws require a public hearing on a proposed primary property tax increase, A.R.S. Section 42-17107.  Arizona budget laws require a public hearing on the proposed final budget and property tax levy, A.R.S. Section 42-17104.
Financial Impact:
Upon adopting the final FY 2017-2018 Budget, the City may commit and spend funds for community needs as described in the budget.  The budget is funded through numerous revenue sources, including property tax.

The FY 2016-2017 primary property tax levy was $5,707,179. The City is proposing a 7% increase or $404,044.  The seven percent increase is $399,452 on existing property and $4,592 on new construction.  The total levy related to new construction is $64,976 ($60,384 + $4,592), for a total levy of $6,171,607 in FY 2017-2018. The primary property tax rate to support this levy is $0.8233 per $100 of assessed valuation. The FY 2016-2017 secondary property tax rate was to generate revenues of $5,879,357.  The City is proposing to keep the same tax rate (also referred to as a "flat tax rate") for secondary property taxes for FY 2017-2018 for a total levy of $6,271,311 on existing properties and new construction.  The proposed secondary property tax rate is $0.8366 per $100 of assessed valuation (same as last FY).

The FY 2016-2017 secondary property tax rate was to generate revenues of $5,879,357.  The City is proposing to keep the same tax rate (also referred to as a "flat tax rate") for secondary property taxes for FY 2017-2018 for a total levy of $6,271,311 on existing properties and new construction.  The proposed secondary property tax rate is $0.8366 per $100 of assessed valuation (same as last FY).
Policy Impact:
The FY 2017-2018 Budget is the financial plan of the City for the upcoming fiscal year.
Connection to Council Goal, Regional Plan and/or TeamFlagstaff Strategic Plan:
Economic Development
Affordable Housing
Social Justice
Transportation and Other Public Infrastructure
Building and Zoning/Regional Plan
Climate Change
Water Conservation
Environmental and Natural Resources
Community Outreach
Town & Gown
Code Compliance
Has There Been Previous Council Decision on This:
  • January Budget Retreat on January 3, 2017
  • January Budget Retreat on January 5, 2017
  • January Budget Retreat on January 19, 2017
  • February Budget Retreat on February 15 & 16, 2017
  • Council Budget Work Session on April 26 & 27, 2017
  • Tentative Budget Adoption on June 6, 2017
Options and Alternatives:
1. Conduct the public hearing or,
2. Delay the public hearing
"Truth in Taxation" procedures:
The Arizona "Truth in Taxation" laws require that the county assessor, on or before February 10, transmit to each city and town an estimate of the total net assessed valuation of the city, including new property added to the tax roll. If the proposed primary tax levy amount, excluding amounts attributable to new construction, is greater than the levy amount in the previous year, the City must provide notice and a public hearing of the proposed increase, along with other taxation requirements. It is important to note that it is the levy amount and not the rate which triggers the Truth in Taxation procedures.

The City is following the "Truth in Taxation" procedures.  The City has published a notice in the Arizona Daily Sun on June 2, 2017 and June 11, 2017.  We have also issued a press release concerning the increase.  

Budget adoption:
The budget was presented for tentative adoption on June 6, 2017. The tentative adoption established the maximum appropriation for the City for the FY 2017-2018 budget year. The budget legal schedules were published in the Arizona Daily Sun on June 8, 2017 and June 15, 2017.

Property tax levy:
Primary property taxes are accumulated in the General Fund and pay for general services which include but are not limited to public safety, parks and recreation, other public work services, and general administrative and management functions within the City.

Secondary property taxes support debt service payments on numerous city capital projects including the Aquaplex, fire stations, open space, street/utility projects, forest restoration, and the future core services facility.

The current and proposed property tax rates are shown in the "Expanded Financial Consideration" section below.
Key Considerations:
The adoption of the tentative budget set forth into motion a legally mandated time sequence of actions of which the Council must adhere to adopt a final budget and to levy property taxes. If this time sequence is not met as required by statute, the tentative budget adoption, the final budget adoption, the property tax levy actions, and related publications must be started over. The final budget adoption must occur after a public hearing and Council must convene into a Special Meeting to adopt the final budget. The budget must be adopted by the third week of July. The County will adopt the property tax levy the first week of August. The key dates in the process have been presented as part of the action summary.
June 6, 2017    Tentative adoption of budget by Council
June 20,2017   Truth in Taxation, proposed budget and property tax levy public hearing
June 20, 2017  Final budget adoption (done in a Special meeting)
June 20, 2017  Primary property tax level approved by roll call vote
June 20, 2017  First reading property tax ordinance
July  5, 2017     Final reading and adoption of property tax ordinance
Expanded Financial Considerations:
The City's proposed primary property tax levy in FY 2017-2018 is less than the maximum that could be levied under state law.  The maximum allowable primary property revenue under state law for FY 2017-2018 is $6,495,442. Primary property tax rate will increase from $0.8121 in FY 2016-2017 to $0.8233 in FY 2017-2018 due to the 7% increase in the levy amount off set by total valuation of all existing properties which are increasing 5.5% Five years historical data is shown below:
Property Tax Rates FY 2013-2014 FY 2014-2015 FY 2015-2016 FY 2016-2017
FY 2017-2018
Primary $ 0.8429 0.8418 0.8234 0.8121 0.8233
Secondary 0.8366 0.8366 0.8366 0.8366 0.8366
Total $ 1.6795 1.6784 1.6600 1.6487 1.6599

The final budget adoption allows the City to commit and expend resources as determined to be needed through the FY2017-2018 budget process. There have been no changes in the final budget recommended for adoption from that presented as the tentative budget.  The recommended City of Flagstaff appropriation for FY2017-2018 is $302,019,628.

Community Benefits and Considerations:
The budget process has allowed for public participation which is vital for the City Council in determining the current year goals and objectives. The budget translates the community's goals and objectives as determined by City Council into fiscal reality. Timely budget adoption allows the City to commit expenditures as related to the FY 2017-2018 Budget as needed for ongoing operational consistency to the citizenry. The FY 2017-2018 Budget is balanced.
Community Involvement:
Inform/Involve: This is the public hearing in the budget adoption process and it is open to public comment on the property tax levy and the final budget adoption. Budget legal schedules were published in the June 8, 2017 and June 15, 2017 Arizona Daily Sun to allow for additional community review. In addition, the legal and other budget schedules were made available at City Hall, at both Flagstaff Public Libraries, and on the official city website. The final opportunity for community involvement for the budget adoption is at this public meeting.  The notice for a proposed changes to primary property tax was posted on the City website on April 7,2017. The Truth in Taxation notice was published in the Arizona Daily Sun on June 2, 2017 and June 11, 2017. The final opportunity for public input to the tax levy will be at the July 5, 2017 Council Meeting.

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