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9.A. |
| City Council Meeting - FINAL |
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| TITLE: |
Consideration and Adoption of Ordinance No. 2024-17: 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 2025. (Primary and secondary property tax levies for FY 2024-2025)
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| STAFF RECOMMENDED ACTION: |
- Read Ordinance No. 2024-17 by title only for the final time
- City Clerk reads Ordinance No. 2024-17 by title only (if approved above)
- Adopt Ordinance No. 2024-17
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| Executive Summary: |
| 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, 2024. |
| Financial Impact: |
The City is proposing a flat primary property tax levy of $7,159,207 on existing properties, plus a levy of $71,670 on new construction, for a total primary property tax levy in Fiscal Year (FY) 2024-2025 of $7,230,877. The primary property tax rate to support this levy is 0.6363 per $100 of assessed valuation (lower than the prior fiscal year). The proposed levy is less than the maximum allowable primary property tax levy allowed for FY 2024-2025, which is $7,983,170.
The City is proposing a secondary property tax levy of $9,001,046 on existing properties, plus a levy of $90,108 on new construction, for a total secondary property tax levy in FY 2023-2024 of $9,091,154. The proposed secondary property tax rate is 0.8000 per $100 of net assessed valuation (same as the prior fiscal year). |
| Policy Impact: |
| Adoption of the proposed property tax levies will generate revenues to help fund the community needs as identified in the FY 2024-2025 Final Budget and policies reflected therein. |
| Previous Council Decision or Community Discussion: |
- December Council Retreat on December 14, 2023
- February Budget Retreat on February 1, 2024 and February 2, 2024
- March Capital Improvement Budget Retreat on March 28, 2024
- Council Budget Retreat on April 25, 2024 and April 26, 2024
- Tentative Budget Adoption on June 4, 2024
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| Options and Alternatives to Recommended Action: |
1) Adopt the primary and secondary property tax rates as proposed.
2) Adopt lower primary and secondary property tax rates than proposed.
3) Adopt higher tax rates than proposed, however, this action may be barred by Truth in Taxation Notice publication deadlines or other legal considerations. |
| Background and History: |
Primary property tax revenues may be used for all purposes. Primary property tax levies are limited, per A.R.S. Section 42-17051. 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 2024-2025 is 10.0%. FY 2024-2025 proposed primary property tax levy is set at $7,230,877, which is less than the maximum allowable levy of $7,983,170.
Primary property tax levies are also subject to "Truth in Taxation" notice and hearing requirements, per A.R.S. Section 42-17107. On or before February 10 of each year, the county assessor must 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 FY2024-2025 primary tax levy amount did not trigger the "Truth in Taxation" procedures.
The City is budgeting primary property tax revenues of $7,146,000 in its FY 2024-2025 Budget. This budgeted amount is less than the levy amount because the City is allowing for approximately 1.0% in bad debt (taxes not able to be collected). The City anticipates an overall 0.7% increase in primary property tax revenues in FY 2024-2025, due to the increase from new construction (properties added to tax roll). Primary property tax revenues may be used for any general purpose use of the City government.
Secondary property tax revenues may only be used by cities and towns to retire the principal and interest or redemption charges on general obligation bonds issued to pay for capital projects. Secondary property tax levies are not limited. The City has budgeted a total of $9,091,154 in FY 2024-2025 secondary property tax, an approximate 5.3% increase over the FY 2023-2024 budget ($8,633,802). The increase is directly related to the increased assessed valuation (increase in property values) and new construction. Secondary property tax revenues are used to pay general obligation debt issued for City capital projects. Five years of historical data is shown below:
| Property Tax Rates |
FY 2020-2021 |
FY 2021-2022 |
FY 2022-2023 |
FY 2023-2024 |
FY 2024-2025
Proposed
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| Primary |
0.7510 |
0.7186 |
0.6954 |
0.6634 |
0.6363 |
| Secondary |
0.8000 |
0.8000 |
0.8000 |
0.8000 |
0.8000 |
| Total |
1.5510 |
1.5186 |
1.4954 |
1.4634 |
1.4363 |
Primary property taxes account for 7.9% of the General Fund revenues budgeted for FY 2024-2025. The adoption of the property tax levy is the final step in the entire budget approval process. |
| Connection to PBB Priorities and Objectives: |
| The adoption of the Annual Budget and Financial Plan provides direction and financial resources to support the Key Community Priorities and Objectives. The property tax adoption is part of the overall City budget adoption. |
| Connection to Regional Plan: |
| None |
| Connection to Carbon Neutrality Plan: |
| None |
| Connection to 10-Year Housing Plan: |
| None. |
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