Consideration and Adoption of Ordinance No. 2019-15: An ordinance levying upon the assessed valuation of the property within the City of Flagstaff, Arizona, subject to taxation a certain sum upon each one hundred dollars ($100.00) of valuation sufficient to raise the amount estimated to be required in the Annual Budget, less the amount estimated to be received from other sources of revenue; providing funds for various bond redemptions, for the purpose of paying interest upon bonded indebtedness and providing funds for general municipal expenses, all for the Fiscal Year ending the 30th day of June, 2020.  (Primary and secondary property tax levies for FY 2019-2020)

The City Council is required to consider a motion to levy increased primary property taxes over the preceding year's tax levy, by roll call vote, per A.R.S. Section 42-17107

The City Council is required to fix and levy the amount to be raised from property taxation after the adoption of the final budget, per A.R.S. Section 42-17151.  The final budget is anticipated to be adopted on June 18, 2019.

The City is proposing a 2.0% increase in primary property tax levy ($133,675) for a total levy of $6,842,561 on existing properties, plus levy of $49,682 on new construction, for an overall total primary property tax levy in FY 2019-2020 of $6,892,243.  The primary property tax rate to support this levy is $0.7933 per $100 of assessed valuation. The proposed primary property tax levy equals the maximum allowable primary property tax levy for FY 2019-2020 of $6,892,243. 

The City is proposing a "flat" tax rate for secondary property taxes for FY 2019-2020 for a total levy of $7,268,436 on existing properties and new construction.  The proposed secondary property tax rate is $0.8366 per $100 of assessed valuation (same as last FY).

Adoption of the proposed property tax levies will generate revenues to help fund the community needs as identified in the FY 2019-2020 Final Budget and policies reflected therein.

Economic Development
Affordable Housing
Social Justice
Transportation and Other Public Infrastructure
Building and Zoning/Regional Plan
Climate Change
Water Conservation
Environmental and Natural Resources
Personnel
Community Outreach
Town & Gown
Code Compliance

• January Budget Retreat on January 9 and 16, 2019
• February Budget Retreat on February 7, 2019
• Council Budget Work Session on April 23 & 24, 2019
• Tentative Budget Adoption on June 4, 2019

1) Adopt the primary and secondary property tax rates as proposed.
2) Adopt the secondary property tax rate at something greater than proposed above.
3) Adopt primary and secondary property tax rates at something less than proposed.

Both the State Constitution and State law specify a property tax levy limitation system.  This system consists of two levies, a limited levy known as the primary property tax levy and an unlimited levy referred to as the secondary property tax levy.  The primary levy may be imposed for all purposes, while the secondary levy in cities and towns may only be used to retire the principal and interest or redemption charges on general obligation bonded indebtedness.

Every year, the "Truth in Taxation" legislation requires 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 follow the "Truth in Taxation" procedures. It is important to note that it is the levy amount and not the rate which triggers the "Truth in Taxation" procedures. The proposed 2.0% increase in the primary property tax levy does trigger "Truth in Taxation" requirements.

The City has the ability to increase the amount received from the primary property tax levy by a maximum of 2% each year excluding new construction. The maximum allowable increase for FY 2019-2020 is 2.0%.  FY 2019-2020 proposed primary property tax levy is set at the maximum allowable ($6,892,243).

The adoption of the property tax levy is the final step in the entire budget approval process.

The key dates for budget and property tax levy adoption have been determined and have been followed throughout this process.  The County adopts the property tax levy as proposed by the City on or about August 1, 2019.

The City is budgeting primary property tax revenues of  $6,785,000 in FY 2019-2020.  This budgeted amount is less than the levy amount, because the City is allowing for approximately 1.5% in bad debt (taxes not able to be collected). The City anticipates an overall 3% increase in primary property tax revenues in FY 2019-2020, due to the 2% increase in the primary property tax levy, plus a 1% increase due to new construction (properties added to tax roll).  Primary property tax revenues may be used for any general purpose use of the City government.  Statutorily, the maximum allowable primary property levy for FY 2019-2020 is $6,892,243 which is the amount being proposed.

The City has budgeted a total of $7,268,436 in FY 2019-2020 secondary property tax, an approximate 8% increase over the FY 2018-2019 budget ($6,733,265).  The increase is directly related to the increased assessed valuation (increase in property values) and new construction.   Secondary property tax funds general obligation debt and City general obligation debt is issued to manage within the levy.

Five years of historical data is shown below:

Property Tax Rates	FY 2015-2016	FY 2016-2017	FY 2017-2018	FY 2018-2019	FY 2019-2020 Proposed
Primary	$ 0.8234	0.8121	0.8233	0.8334	0.7933
Secondary	0.8366	0.8366	0.8366	0.8366	0.8366
Total	$ 1.6600	1.6487	1.6599	1.6700	1.6299

Primary property taxes account for 10% of the General Fund revenues budgeted for FY 2019-2020.

Primary property taxes help support a number of City services including public safety, parks and recreation, other public works services, and general administrative and management functions within the City.

Secondary property taxes support the debt service payment on numerous city capital projects including: Aquaplex, Fire Stations, Open Space, numerous street/utility projects, Forest Restoration, Core Services Facility and the future Courthouse.

Inform & Involve: The notice for proposed changes to primary property tax was posted on the City website on April 1, 2019. The "Truth in Taxation" notice was published in the Arizona Daily Sun on June 1, 2019, and June 9, 2019. Budget legal schedules were published in the June 7, 2019, and June 14, 2019, 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. A public hearing on June 18, 2019, for "Truth in Taxation", the final budget adoption and the property tax levy is open for public comment and allows citizens to provide input. The final opportunity for public input on the tax levy will be at the July 2, 2019, Council Meeting.