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Home My WebLink AboutIR 10102 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 r Page 1 of 7 SUBJECT: SALES AND PROPERTY TAX REVIEW x rsra This informal report is provided in response to City Council's request for an overview of local sales and use taxes, including historic information about the types and rates and the process for making changes. Historic information regarding the City's property tax revenues is also included to provide a more complete picture of the City's two largest funding sources. This information will also be presented as part of the Transit Update. Overview of Legal Issues Related to Local Sales and Use Tax Under state law, local sales and use taxes are limited to a combined total of 2%, and the rate of each such tax must be approved by the voters. For the City of Fort Worth, the 2% local tax capacity is currently allocated as follows - 1% to the City for general revenue/general use purposes, 1/2% to the Fort Worth Crime Control and Prevention District (CCPD) for use in controlling and preventing crime in accordance with Chapter 363 of the Local Government Code, and 1/2% to the Fort Worth Transportation Authority (FWTA) to provide transit in accordance with Chapter 452 of the Transportation Code. The City general use tax and the CCPD tax are both classified as municipal taxes subject to Chapter 321 of the Tax Code, and each can be set in increments of one-eighth of one percent (1/8%). The sales and use tax for the FWTA is not considered a municipal tax, is subject to a different chapter of the Tax Code, and must be set in quarter-percent (1/4%) increments. Under the Elections Code, adjustments to tax rates are considered measures and are subject to the same schedules and deadlines as City bond elections. For the May 5, 2018 election, Friday February 16, 2018 is the last day on which an election can be ordered to change or reallocate local sales and use tax rates. If there were a desire to change the rates of any or all of the local sales and use taxes, the scope of the election and form of the ballot would depend on which taxes are at issue. A 2017 change in law allows the adjusting of tax rate capacity between the two municipal taxes to be considered/adjusted in a single ballot proposition. However, an adjustment to the rate for the FWTA would require a separate ballot proposition from the municipal taxes. Staff is developing a legislative analysis to determine the procedures that would be required and the roles of the other member cities in such an election. As an alternative to a vote on the sales and use tax for the FWTA, in a single ballot proposition, voters could simultaneously reduce the dedicated CCPD tax by an increment of 1/8% (to a rate of 3/8%, 1/4%, or 1/8%) and increase the City's general sales and use tax rate accordingly (to a rate of 1 and 1/8%, 1 and 1/4%, or 1 and 3/8%). City Council would then have the flexibility to program the resulting revenues to any lawfully allowed purpose, including transit, as part of the annual budget process. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 h�T�i7 Page 2 of 7 �i �i7 Y *a SUBJECT: SALES AND PROPERTY TAX REVIEW #qrF rn 10,?5 SALES TAX— 5-year History and Forecast Sales tax collections are a major revenue component. Economic conditions in FY2017 continue to show strength with the 12-month rolling average of sales tax collections achieving new record highs throughout much of the year. This trend is positioned to continue through FY2018 given that the Dallas-Fort Worth area was named one of the top retail construction markets in the 2016 calendar year and in 2017 it was noted that Dallas-Fort Worth leads the nation in industrial building construction, according to the business section of the Dallas Morning News. Current data suggests collection growth in retail and wholesale trade is driving the growth. Sales Tax Revenue—General Fund • During the 5-year period 2013 to 2017, the City of Fort Worth sales tax collection grew from $118.6M to $148M. This represents a 25% growth over the period and a 5-year annually average of 5.98% • Revenue from the City's one percent of the sales tax, exclusive of the one-half percent special use tax for the Crime Control and Prevention District (CCPD) Fund, is projected to equal $154,573,000 in FY18, an increase of$6,229,452 or 4.2% from the FY2017 actual revenue. • Revenue growth is projected at 4% annually for the period 2019 to 2023. During this five-year period, revenue is projected to grow by a cumulative 17%from $160.7M to $188M. • The 10-year average growth rate has been 4.3% and the 20-year average growth rate has been 4.9%. 200,000,000 3-Year Average 5.71% 4.00°l0 4.00% 180,000,000 4.0095 a.00% 4.00% 160,000,000 7.13% 140,000,000 3.78% 6.2895 5.82% 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 h�T�i7 Page 3 of 7 �i �i7 Y *a SUBJECT: SALES AND PROPERTY TAX REVIEW #qrF rn 10'?5 Sales Tax Revenue—Crime Control and Prevention District The CCPD was first approved by the voters on March 4, 1995. Subsequent elections were held and approved by the voters on May 2000, February 2005, November 2009, and May 2014. The CCPD tax mirrors the general sales tax with the exception that it does not tax residential use of gas and electricity, although it could if approved by the board and governing body. The Comptroller has determined that the last renewal in 2014 had an effective date of October 1, 2015, which is when the district would have expired under the previous renewal. The district will continue for 5 years until the end of September 2020 unless renewed or dissolved earlier. Given that the CCPD will expire in the fall of 2020 for the current authorization, it is recommended that an election be held in May 2020 if the City Council desires to continue the CCPD. • During the 5-year period 2013 to 2017, the special use tax for the CCPD grew from $54.5 to $69.9M. This represents a 28% growth over the period and a 5-year annual average of 6.84%. • For FY2018, revenue from the one-half percent special use tax for the CCPD Fund, is projected to equal $73,915,912, an increase of$3,989,465 or 5.71% from the FY2017 actual revenue. • Revenue growth is projected at 4% annually for the period 2019 to 2023. During this five-year period revenue is projected to grow by a cumulative 17%from $76.8M to $89.9M. • The 10-year average growth rate was 4.6% and the 20-year average growth rate was 5.1%. 1D0,0D0,0o0 3-Year Average 6.35% 4.00% 90,ODO,OD0 4.00% 4.0035 80,ODO,ODO — s.71% 7.62% 70,0D0,0D0 8.05% 6.58% 60,000,OD0 - 50,0D0,0D0 40,000,0D0 - 30,0D0,OD0 20,0D0,0D0 - 10,0D0,0D0 - 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 FDRECAST ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 r Page 4 of 7 SUBJECT: SALES AND PROPERTY TAX REVIEW x rsra Sales Tax: 5-year History and Forecast for General Fund; Full History and 5-year Forecast for CCPD Year Fiscal Sales Tax Sales over Year General Tax Year TotalFund 1 Changes ' 1 Actual 1995 $51,337,880 $0 - $51,337,880 Actual 1996 $53,931,894 $19,557,990 - $73,489,884 Actual 1997 $57,845,380 $26,064,510 33.3% $83,909,890 Actual 1998 $63,637,537 $28,809,944 10.5% $92,447,481 Actual 1999 $66,936,632 $31,334,069 8.8% $98,270,701 Actual 2000 $72,174,145 $34,217,531 9.2% $106,391,676 Actual 2001 $73,050,386 $31,270,499 -8.6% $104,320,885 Actual 2002 $72,653,004 $33,521,406 7.2% $106,174,410 Actual 2003 $72,470,558 $33,181,335 -1.0% $105,651,893 Actual 2004 $75,831,756 $35,575,164 7.2% $111,406,920 Actual 2005 $83,082,295 $38,554,963 8.4% $121,637,258 Actual 2006 $92,050,918 $41,975,008 8.9% $134,025,926 Actual 2007 $98,247,082 $44,405,869 5.8% $142,652,951 Actual 2008 $105,416,703 $47,102,131 6.1% $152,518,834 Actual 2009 $99,362,096 $44,456,285 -5.6% $143,818,381 Actual 2010 $99,934,150 $43,138,973 -3.0% $143,073,123 Actual 2011 $105,582,575 $47,453,376 10.0% $153,035,951 Actual 2012 $110,971,117 $50,275,651 5.9% $161,246,768 Actual 2013 $118,646,424 $54,573,512 8.5% $173,219,936 Actual 2014 $125,547,039 $58,166,541 6.1% $183,713,580 Actual 2015 $130,298,916 $60,135,656 3.7% $190,434,572 Actual 2016 $138,475,263 $64,973,820 6.8% $203,449,083 Actual 2017 $148,343,548 $69,926,447 7.3% $218,269,995 Budget 2018 $154,573,000 $73,915,912 4.7% $228,488,912 Forecast 2019 $160,755,920 $76,872,548 4.0% $237,628,468 Forecast 2020 $167,186,157 $79,947,450 4.0% $247,133,607 Forecast 2021 $173,873,603 $83,145,348 4.0% $257,018,952 Forecast 2022 $180,828,547 $86,471,162 4.0% $267,299,710 Forecast 2023 $188,061,689 1 $89,930,009 4.0% $277,991,698 ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 r Page 5 of 7 SUBJECT: SALES AND PROPERTY TAX REVIEW x rsFa Property Tax— 5-year History and Forecast The City receives a significant portion of its revenues from property taxes assessed on real and personal property. As a result of the increase in a p p r a i s e d values as determined by the County Appraisal Districts, the City is projected to collect $27.8 million more in General Fund property tax revenue (which includes delinquent, penalty, and interest) in FY2018 than in FY2017. The increase in property tax revenue from FY2017 is primarily due to an 11.8% increase in the adjusted net taxable value for properties primarily within the Tarrant County Appraisal District for FY2018. The estimate of the FY2018 tax revenue is based on the certified roll provided by the central appraisal districts of Tarrant, Denton, Wise and Parker Counties in July 2017. The assumed collection rate is 98.5%. Other factors affecting current property tax revenue are the exemptions authorized by the State and additional exemptions and freezes granted on a local option and approved by City Council. The most significant exemptions approved by the City Council are the general homestead exemption of 20% available to all residential homestead properties, an additional $40,000 homestead exemption granted to senior citizens, and the Freeport exemption for commercial goods to be exported from the state. When updating the five-year financial forecast and preparing the budget for City Council consideration, staff analyzed many of the factors impacting property tax revenue, including anticipated population growth, historical change in values for residential and commercial properties, current and projected permitting data, the impact of foreclosures, as well as exemptions and protests. Staff also evaluated the allocation of the levy amount, and resulting availability of revenue for operations and maintenance (O&M), as compared to the amount available to repay the City's debt. Adjusted Net Taxable Value • Over the past 5 years the Adjusted Net Taxable Value grew from $4313 in 2013 to $5413 in 2017. This represents a 26 percent growth over the 5-year period and a 5-year annually average of 5.36% • FY2018 Adjusted Net Taxable Value is $60.913, an increase of 11.79% from FY2017. • Value is projected to grow 4% annually from FY2019 to FY2023. During this five-year period the adjusted net taxable value is projected to grow by a cumulative 17%from $6313 to $7413. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 h�T�i7 Page 6 of 7 �i �i7 Y *a SUBJECT: SALES AND PROPERTY TAX REVIEW #qrF rn 10,?5 Property Values (Adjusted Net Taxable Value) 5-Yea r Average=5.36% Mill $84,QOD,4f14,400 3-Year Average 721% 777 $70,000,000,000 11.79% $60,000,000,000 9.86% 5.4244 $50,000,000,000 2.74% $44,004,400,000 $34,000,000,000 $24,400,000,040 $14,000,400.000 2013 2014 2415 2016 2017 2018 2014 2020 2021 2022 2023 Property Tax Revenue For FY2018, the City's combined property tax rate was lowered to $0.8050 per $100 of assessed valuation with an assumed 98.5 percent collection rate. Based on the 0&M levy rate of $0.6415 per $100 of assessed valuation, the General Fund portion of the property tax rate is expected to yield approximately $365.5 million in revenue for FY2018. The debt service levy rate of $0.1635 per $100 of assessed valuation is expected to yield approximately $93.2 million, which will allow the repayment of all current and proposed debt obligations. • During the 5-year period 2013 to 2017, the City of Fort Worth property tax revenue grew from $349.9M to $428M. This represents a 22% growth over the period and a 5-year annually average of 4.52% • Total FY2018 property tax revenue is projected to equal $458,698,581, an increase of $30,540,285 or 7.13% from the FY2017 actual revenue. • Revenue growth is projected at 4% annually from 2019 to 2023. During this five-year period revenue is projected to grow by a cumulative 17%from $477M to $558M. • The 10-year average growth rate was 4.0% and the 20-year average growth rate was 7.5%. ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 10102 To the Mayor and Members of the City Council January 30, 2018 h�T�i7 Page 7 of 7 �i �i7 Y *a SUBJECT: SALES AND PROPERTY TAX REVIEW #qrF rn 10 7'3 Property Tax Revenue $600,000,000 5-Year Average=4.52% _ar Average 5.59% iTT ??? $500,000,000 077 777 7.13% 6.83% $400,060,000 4.81% 3.92% $300,000,000 $200,000,000 $100,000,000 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 HISTORIC BUDGET FORECAST Property Tax: 5-year History Forecast •- •- M Actual 2013 $ 280,790,863 $ 69,200,079 $ 349,990,942 $43,087,160,976 Actual 2014 $ 283,962,390 $ 79,740,216 $ 363,702,606 $44,265,767,682 Actual 2015 $ 302,062,163 $ 80,311,959 $ 382,374,122 $47,075,949,924 Actual 2016 $ 316,828,700 $ 83,941,322 $400,770,022 $49,627,376,942 Actual 2017 $ 339,182,173 $ 88,976,123 $428,158,296 $ 54,520,574,865 Budget 2018 $ 365,534,335 $ 93,164,246 $458,698,581 $ 60,950,027,101 Forecast 2019 $ 380,155,708 $ 96,890,816 $477,046,524 $ 63,388,028,185 Forecast 2020 $ 395,361,937 $ 100,766,448 $496,128,385 $ 65,923,549,313 Forecast 2021 $411,176,414 $ 104,797,106 $ 515,973,521 $ 68,560,491,285 Forecast 2022 $427,623,471 $ 108,988,991 $ 536,612,461 $ 71,302,910,937 Forecast 2023 $444,728,410 $ 113,348,550 $ 558,076,960 $ 74,155,027,374 If you have any questions, contact Denis McElroy, City Attorney's Office, at 817-392-2758 or Lynda Johnson, Performance & Budget Director, at 817-392-6222. David Cooke City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS