WS Materials 09-04-2012 - Laserfiche WebLink

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MEMO To: Dean Lotter, City Manager From: Dan Maiers, Finance Director Date: August 29, 2012 Re: Tax Levies and General Fund Property Tax Revenues During the July 24th City Council worksession on the 2013 Budget, overall trends of General Fund revenues were discussed. The graph of the "General Fund Revenues Ten Year Summary by Category by $" was discussed (graph attached). The following has been prepared to assist with an enhanced understanding of the specifics driving the General Fund's property tax revenue trend line. A. The Tax Levy doesn't necessarily equal General Fund Property tax revenues. There are a number of reasons that the General Fund property tax revenues will not equal the tax levy. The following are some examples: 1. Taxes levies are not paid by taxpayers on a timely basis (delinquencies). 2. Property values are appealed resulting in lower values after the County has spread the tax levy. These properties then pay less in property taxes than were originally levied upon that specific property. The difference in the amounts results in revenues which are permanently lost. 3. The total tax levy may have components included in addition to the general operating tax levy. Many communities have their debt service tax levy separate from their general operating levies. The specific debt service levy goes directly into the applicable debt service fund, not into the General Fund. 4. In prior years the State had a Market Value Homestead Credit program (MVHC). The State would reduce the City's portion of the homestead property taxes by this credit and then reimburse the City for those credits. The State Legislature reduced and eventually eliminated these reimbursements from their budget resulting in cities bearing the burden of the State cuts. Attached is a schedule comparing the general operating levy to the General Fund's tax revenues for the last ten years. B. Reasons driving the trend line of the General Fund's property tax revenues are crucial to interpreting the trend line. The following are some of the more significant reasons for increases in the tax levies and the General Fund's tax revenues: 1. 2003 —increased in anticipation of significant cuts to State aid revenues. 2. 2004—increased to replace the State's elimination of LGA to the City.