Adopt resolution setting Yolo County property tax rates for 2024-25. (No general fund impact) (Haynes/Au Young) (Est. Time 10 min)

California Government Code Section 92100 et. Seq. requires the Board of Supervisors to adopt tax rates to be levied on the secured and unsecured property tax roll on or before October 3rd of each year. Article XIIIA of the California Constitution limits the property tax rate for local agencies to 1% of assessed value. However, other tax rates may be levied for voter-approved indebtedness to generate the amounts necessary to fund the current debt service requirements.

Tax rates for bonded indebtedness are calculated by dividing the debt service payments by the assessed value of the property within the applicable jurisdiction. The calculated rates may be modified to reflect delinquencies, anticipated changes in the tax roll, anticipated changes in future debt service requirements, cash flow needs or other reserve requirements. These tax rates ensure that there will be sufficient funds to make the annual debt service payments on bonded indebtedness while complying with state laws.
 

2024-25 Tax Rates
The proposed tax rates for 2024-25, including tax rates for voter-approved bonds, are reflected in Exhibit A to the Resolution included as Attachment A.  For comparative purposes, Attachment B shows the tax rates that were levied in 2023-24 and the resulting change from the proposed 2024-25 tax rates.

The most significant change in tax rates is for the Washington Unified School District (WUSD) 2004 Election Bond, which is proposed to be levied at a rate of 0.058%, or $58 per $100,000 of assessed value.  In 2022-23, the Department of Financial Services made an error and did not levy a tax for the WUSD 2004 Bond, despite ongoing bond payments. As a result, a higher tax rate of 0.12%, or $120 per $100,000 of assessed value, was levied in 2023-24 in order to make up for the lack of a tax rate in the prior year and ensure sufficient funding to pay ongoing debt service requirements.  As expected, the tax rate for the WUSD 2004 Bond is now returning to normal levels, and is projected to remain at or less than the proposed 2024-25 rate for the remaining life of the bond.

Other notable changes in proposed tax rates are for the WUSD 2020 bond and for the Winters Joint Unified School District (Winters JUSD) 2020 Bond.  The proposed tax rate for the WUSD 2020 bond is 0.05% compared to 0.09% in 2023-24. When these bonds were issued in 2021, they included a Capitalized Interest Fund that was intended to partially offset the debt service payments over the first three years. However, the Capitalized Interest Fund was mistakenly applied in full against the first year’s debt payment, resulting in lower tax rates over the first two years. As a result, a higher tax rate was needed in 2023-24 to make up for the lower tax rates in the prior years.

The proposed tax rate for the Winters JUSD 2020 bond is 0.014% compared to 0.038% in 2023-24.  The Winters JUSD 2020 bond was structured with higher debt service payments in the first few years following issuance, which required higher tax rates. Debt service payments are scheduled to decline in 2024-25, allowing for a reduction in the tax rate. It is projected that the proposed tax rate will hold steady or decline further over the remaining life of the bond.

Internal Process Improvements
Over the past year, the Department of Financial Services has implemented a number of internal process improvements related to the calculation of tax rates for voter-approved bonds.  These improvements have been implemented to enhance internal controls, ensure a robust process for calculating tax rates, and to avoid future mistakes similar to those that led to the high tax rates for the Washington Unified School District bonds in 2023-24.  Improvements implemented include the following:

In addition, DFS continues to work on improving outreach and education on the property tax process, which is very complicated and highly regulated by state law.  One of the primary goals in this regard is to revamp the department’s website to make information on property taxes more accessible and useful. It is anticipated this will be completed by the end of the calendar year.
 

Update on Tax Assistance Programs
On October 24, 2023, in response to the hardships caused by the high tax rate levied in 2023-24 for the Washington Unified School District (WUSD) 2004 bond, the Board approved two tax assistance programs, the Tax Deferral Program and the New Buyer Tax Offset Program.  This section provides a status update on those programs.

The Tax Deferral Program allowed taxpayers who faced a financial hardship to defer payment on the 2023-24 WUSD 2004 Bond tax for up to one year. Applications to participate in this program were due by November 27, 2023.  In total, the County received 513 applications to participate in this program, of which 498 were approved.  Of the 498 taxpayers participating in this program, 93 have fully paid the WUSD 2004 Bond tax, while 405 remain outstanding.  These taxpayers have until December 10, 2024 to pay the outstanding taxes on the 2023-24 WUSD 2004 Bond tax. The Department of Financial Services will send reminder notifications to those taxpayers in advance of the due date.

The New Buyer Tax Offset Program was offered in recognition that taxpayers who purchased property withing the WUSD between July 1, 2022 and June 30, 2024 may be unfairly burdened by taxes that would have been at least partially the responsibility of the prior owner had the taxing error not occurred. Under this program, the County offset a portion of the 2023-24 WUSD 2004 Bond tax for taxpayers who purchased their property during this timeframe.  Applications to participate in this program were due July 31, 2024.  In total, the County received 282 applications to participate in this program, of which 231 were approved and five are still pending due to forthcoming supplemental tax bills.  Of the 231 applications that have been approved, 225 have received tax offsets totaling $75,099.81.  Offsets for the remaining six applicants are in final review and will be processed in the near future.

Overall, the tax assistance programs approved by the Board have been successfully implemented, and provided a valuable resource for taxpayers within the Washington Unified School District that faced a financial hardship as a result of the high tax rate on the 2004 Bond. The Department of Financial Services will provide a final report to the Board on the tax assistance programs once both programs have concluded.

The Department of Financial Services worked closely with the Yolo County Office of Education in capturing all the debt service requirements for the current year. The Department has further corroborated with various school districts within the county through providing an opportunity for the districts to give feedback for the estimated bond tax rates and changes or anticipated changed in debt structure.

The Department of Financial Services also collaborated with neighboring counties to receive and provide assessed values and tax rates for overlapping areas, and engaged the County's Division of Internal Audit to verify the accuracy of the 2024-25 tax rate calculations including tracing figures to source documents and obtaining a high-level understanding of the overall process.