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Impact of Budget and Property Tax Legislation from Iowa SF 634 Copyrighted July 15, 2019 City of Dubuque Action Items # 2. ITEM TITLE: Impactof Budgetand PropertyTaxLegislationfrom lowa Senate File 634 SUMMARY: Director of Finance and Budget Jennifer Larson will give a presentation on the impact that Senate File 634 will have on the City of Dubuque's budget. SUGGESTED DISPOSITION: Suggested Disposition: Receive and File; Presentation ATTACHMENTS: Description Type MVM Memo City Manager Memo Staff Memo Staff Memo SF634 PowerPoint Supporting Documentation Dubuque THE CITY OF � DT T� rF{, 11-AmericaCit' U L Masterpiece on the Mississippi � � � �� ZOW•2012•2013•20V TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Presentation — Senate File 634 DATE: July 8, 2019 During the 2019 Legislative Session, Senate File 634 was passed and signed into law. Director of Finance and Budget Jennifer Larson will give a presentation on the impact that Senate File 634 will have on the budget. v Mic ael C. Van Milligen MCVM:jml Attachment cc: Crenna Brumwell, City Attorney Teri Goodmann, Assistant City Manager Jennifer Larson, Director of Finance and Budget Dubuque THE CITY OF � D�L E uVAnefbqtl �I.II �,� Master iece on the Mississi i �om-zmazois P PP zoi�+zoi9 TO: Michael C. Van Milligen, City Manager FROM: Jennifer Larson, Director of Finance and Budget SUBJECT: Impact of lowa Senate File 634 — Budget and Property Tax Legislation DATE: July 8, 2019 INTRODUCTION The purpose of this memorandum is to provide information on the impact of lowa Senate File 634, which passed the Senate on April 24, 2019 and the House on April 25, 2019. BACKGROUND The lowa Legislature began reviewing the budget process and the property tax system in February 2019. The City of Dubuque was proactive and sent multiple letters to lowa Legislators regarding the proposed legislation and Assistant City Manager Teri Goodmann spent a significant amount of time in Des Moines advocating on the City of Dubuque's behalf opposing this legislative change. DISCUSSION A summary of the impact of lowa Senate File 634 is as follows: 1. Impacts the Fiscal Year 2021 budget process 2. Changes the budget certification due date from March 15 to March 31 3. Allows budget protests to be filed by citizens until April 10 instead of March 25 4. Requires a new resolution establishing maximum property tax dollars be adopted in a public hearing with proper notice prior to the distribution of the budget. a. Tax levies included in the calculation include Regular General, Transit, Tort Liability and Trust and Agency. b. Calculation also includes the utility replacement tax on electricity and gas providers. 5. Notice of Public Hearing must be not less than 10 days nor more than 20 days prior to the hearing. 6. Notice of Public Hearing must be published in newspaper, on City Website, and on City social media pages. 7. The resolution must include: a. Current fiscal year's property tax amount certified b. Effective tax rate calculated using current fiscal year's actual property taxes certified c. Sum of proposed maximum property tax dollars that may be certified for levy for the new budget year and the tax rate d. If the proposed maximum property tax dollars specified exceeds current fiscal year's actual property tax dollars certified, there must be a statement of the major reasons for the increase. 8. If the maximum property tax dollars for the budget year specified in the resolution exceeds 102°k of the sum of the current year's actual property taxes, the resolution requires two-thirds majority vote (5 votes) of City Council. 9. City Council may decrease but not increase the proposed maximum property tax dollar amount for inclusion in the resolution. 10.Approved Maximum Property Tax Resolution must be posted on the City's website. 11 . Requires assessors to use most recently issued state appraisal manual. A visual of the impact of Senate File 634 on the City of Dubuque is attached (attachment I). The biggest impact to the budget process is that the Maximum Property Tax Dollars Resolution would need to be set for public hearing at the January 20, 2020 City Council meeting and the public hearing would need to be held at the February 3, 2020 City Council meeting. If any significant budget changes occur after January 20, 2020, the maximum property tax dollars has been already been set and cannot be changed. In addition, based on the projections done during the Fiscal Year 2020 budget process, the maximum property tax dollars that would be requested in the resolution is projected to exceed the 102°k threshold of the taxes levied in Fiscal Year 2020. This would require a two-thirds majority vote (5 votes) of City Council. The recommended budget would not go to City Council until the February 17, 2020 City Council meeting (in previous years the recommended budget was presented at the first City Council meeting in February and now the recommended budget will be presented at the second City Council meeting in February). The public hearing on final budget adoption would be scheduled for the March 26, 2019 City Council meeting (in previous years lowa state law required budget adoption by March 15, 2019 and this legislative change extended the budget adoption deadline to March 31 , 2019). The due dates for departments for the Fiscal Year 2021 budget were already planned to be modified in order to accommodate additional capital improvement project meetings with departments and the City Manager. Capital projects will be due in late September and early October. Operating budgets will have similar due dates to the Fiscal Year 2020 budget process. Ahlers Cooney Attorneys prepared a budget approval process for lowa's Cities and Counties 12-step checklist (attachment II). Attachments cc: Department Manager Division Managers 2 City of Dubuque Attachment I Analysis of Senate File 634 � FY 2021 Budget and Fiscal Policy Guidelines to City Council 12/16/2019 Receive Final Valuations from County 12/31/2019 Set Public Hearing on Maximum Property Tax Levy Resolution 1/20/2020 Public Hearing on Maximum Property Tax Levy Resolution 2/3/2020 Recommended Budget to City Council 2/17/2020 Set Budget Adoption Public Hearing 3/9/2020 Public Hearing on BudgetAdoption 3/26/2020 RegularGeneralLevy(384.1) $ 8.10000 $ 20,590,550 Transit Levy (384.12(10)) $ 0.61307 $ 1,558,460 Tort Liability (384.12(17)) $ 0.13974 $ 355,216 Trust and Agency(384.6) $ 1.38492 $ 3,520,529 Total $ 10.2377 $ 26,024,755 Estimated FY 21 Valuations based on ResidentiallMulti-ResidentialllndustriallCommercial Reassessments Residential (+5%) $ 1,615,252,643 Commercial (+4%) $ 1,018,592,801 Multi-Residential (+17%) $ 152,332,611 Industrial (+6.96%) $ 141,467,611 RR Bridge $ 3,029,934 Other $ 634,617 Utilities $ 77,834,805 Less Veterans $ (4,520,732) Less Tax Increment(Same Increases As Above) $ (371,166,812) Total $ 2,633,457,478 Effective Tax Rate $ 9.8823525 Tax Revenue Equal to FY 20 $ 26,024,755 102% Tax Revenue $ 26,545,250 Effective Tax Rate for 102% $ 10.0799995 City of Dubuque FY21 Projected Tax Revenue Needed $ 26,976,835 Maximum Property Tax Dollars for Resolution 103.66% * Effective Tax Rate for 103.66% $ 10.2438848 *V1lould require two-thirds majority City Council vote (5 votes) Attachment II AHLERS COONEY AT T O R N E Y S Budget Approval Process for lowa's Cities and Counties 12-Step Checklist -- Effective FY 2020-2021 Senate File 634, coming out of the 2019 legislative session, makes changes to lowa city and county budgets and taxes for fiscal year 2020-2021 and later. In planning for fiscal year 2020-2021, lowa's cities and counties will need to follow these steps for their budget approval process: 1. Determine a maximum amount of taxes that the municipality will certify to be levied as property taxes from certain levies in the next fiscal N►HAT 15 NEW AND WHAT year (called the "total maximum property tax dollars"), and prepare a REMAINS UNCHANGED BY resolution that establishes that amount of "total maximum property tax SENATE FILE 634: dollars" for the next fiscal year. What is included in "total maximum propertv tax dollars"? - . . . Foe couNriEs: The resolution must set the total maximum property tax _ , _ , , . dollars that may be certified for levy for "general county services" and the total maximum property tax dollars that may be certified for � � � � levy for "rural county services." ' " ' ' ' ' ' ' . . . . • General county services is defined as including the sum of the � � � _ property tax dollars levied under section 331.423, subsection 1 .. . (basic), section 331.424, subsection 1 (supplemental), and those amounts for general county services under section 331.426 - . (additions to basic levies), but excluding additions approved at election under section 331.425. . -, . , . • Rural county services is defined as the sum of the property tax , , . _ , , , . , , . _ dollars levied under section 331.423, subsection 2 (basic), _ � _� � section 331.424, subsection 2 (supplemental), and those • . -. . amounts for rural county services under section 331.426 (additions to basic), but excluding additions approved at � election under section 331.425. FoR anEs: The "total maximum property tax dollars" includes taxes for city government purposes under section 384.1 (general fund levy), for the city's trust and agency fund for pensions under section 384.6, subsection 1, for the city's emergency fund under section 384.8, and for the levies authorized under certain subsections of section 384.12 (subsections 8 (certain bridges), 10 (maintenance of a municipal transit system or regional transit district), 11 (leases of buildings to be operated as civic centers), 12 (operating and maintaining a civic center), 13 (planning a sanitary disposal project), 17 (premiums for various insurance types), and 21 (support of a local emergency management commission)), but excludes additions approved at election under section 384.12, subsection 19. Fok eoTH couNnesarv�crnes: The maximum property tax dollars calculated and approved by resolution includes those amounts received by the municipality as replacement taxes under chapter 437A or 437B. 2. Set a time and place for a public hearing on the resolution. 3. Publish notice of the public hearing on the resolution in the newspaper(s) for official notices between 10 and 20 days prior to the public hearing. • Additionally, if the municipality has a website, then notice must be posted on the website, and if the municipality maintains social media accounts, then the notice (or a link to the notice) must be posted on each social media account by the day of publication in the newspaper(s). ! ! ! 1 1 M • The sum of the current fiscal yea�'s actual property taxes certified for levy under the identified levies • The "effective tax rate" as defined in the code for those levies • The proposed maximum property tax dollars that may be certified for levy for the budget year underthe identified levies • If the proposed maximum property tax dollars exceeds the current fiscal yea�'s actual property tax dollars certified, a statement of the major reasons for the increase. Counties must include the above-identified information for the general county service levies and the rural county service levies. 4. Hold a public hearing on the resolution, at which residents and property owners may present oral or written objections. 5. Following the public hearing, the governing body may decrease the proposed "maximum property tax dollars" amount but may not increase the amount. 6. Adopt the resolution. If the "total maximum propertv tax dollars" amount is sreaterthan 102%of the currentfiscal vear's actual propertv taxes from the identified levies, then the resolution must pass the governing body by a two-thirds majority of the full City Council or Board of Supervisors. 7. Set a time and place for a public hearing on the budget. 8. Publish notice of the public hearing on the budget in the newspaper(s) between 10 to 20 days prior to the public hearing, with an alternative notice option for cities with a population of two hundred or less. • The notice must include a summary of the proposed budget and a description of the procedure for protesting the budget. 9. Hold a public hearing on the budget. 10. Adopt the budget by resolution and certify taxes. 11. File copies of the following with the county auditor: (A) the resolution setting "maximum property tax dollars" and (B) proof of publication of the notice of public hearing on the budget. • If the municipality has an internet site, then in addition to filing the resolution with the auditor, the adopted resolution shall be posted and clearly identified on the municipality's internet site for public viewing within ten days of approval by the board and remain available on the internet site indefinitely. 12. Certify the budget to the county auditor by March 31st SENATE FILE 634 BUDGET & TAXES CHANGES Jennifer Larson , Director of Finance and Budget � C � � SENATE FILE c ange rom o 634 � Trust and Regular Transit Tort Liability Agency ( Insurance) ( Employee � Benefits - - � - - • � • � - ' • • - � � - - � _ . � - - � - - MAXIMUM PROPERTY TAX DOLLARS RESOLUTION • Resolution must include: • Current fiscal year's property tax amount certified • Effective tax rate calculated using current fiscal year's property taxes certified • Sum of proposed maximum property tax dollars for new budget year and tax rate • If proposed maximum property tax dollars exceeds current fiscal year's property taxes certified: • Statement of major reasons for the increase 4 x k : a�s �,„ a � ��' �° � .�, . .- . '� , �.,' ,� �� "yt�` : � m � E� - �f ��"z.: : '� �:.xa:'::. > .� b.�' �� '�CIMUM �T- PERTY TAX DOLLARS � � ALCULATION ,. . .,-w y. L� 5 � MAXIMUM �I PROPERTY TAX ,�;;,. 3�, 5. DOLLARS RESOLUTION � 6 � 1 • � . 1 . 1 � Budget Action Item Prior Revised Schedule Schedule Budget & Fiscal Policy Guidelines to City Council 12/16/2019 Unchanged Receive Final Valuations 12/31 /2019 Unchanged Set Public Hearing on Maximum Property Tax Levy Resolution N/A 1/20/2020 Public Hearing on Maximum Property Tax Levy Resolution N/A 2/3/2020 Recommended Budget to City Council 2/4/2020 2/17/2020 Set Public Hearing on BudgetAdoption 2/17/2020 3/9/2020 Public Hearing on BudgetAdoption 3/12/2020 3/26/2020 IMPACT TO ASSESSOR • Assessor shall use most recently issued State Appraisal Manual and valuing all classes of property in the state within two years of publication date of most recent manual • May require assessors to do a total revaluation • Change to new manual would require all new values on properties • There could be new items in the manual that were not previously priced out. Could create properties being treated differently until a complete reappraisal can be performed . 8 � � Dubuque THE CI1'Y Oi � D�� ul�Annoj 1 II 1 zom�zaa�zo�e Maeterpiece orr the Ivliesissfppi zov.zoi9