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HomeMy WebLinkAbout07 Ann Driggers - Preliminary AV 20174 and Property Tax Revenues 2018 AGENDA ITEM SUMMARY REGULAR MEETING DATE: April 11, 2017 AGENDA ITEM TITLE: Preliminary Assessed Values 2017 and Forecast Property Tax Revenues 2018 STAFF RESPONSIBLE: Ann Driggers, Finance Director Larry Fite, Chief Appraiser ISSUE STATEMENT: Review Pitkin County preliminary assessed values and property tax revenues for 2018 and potential impacts caused by a projected reduction in the Residential Assessment Rate (RAR). BACKGROUND: The valuation and assessment of all taxable real and personal property in Pitkin County is subject to the provisions of Colorado Revised Statutes. The Colorado Residential Assessment Rate (RAR) is 7.96% of actual value. The assessment rate for non-residential properties is 29%. Recently, the Division of Property Taxation indicated the statewide residential assessment rate will decrease from 7.96% to an estimated 6.56% in 2017. The final new RAR is expected to be known in mid to late April. This is a constitutionally required reduction under the Gallagher Amendment designed to maintain a constant relationship between the statewide share of residential taxable value and the statewide share of nonresidential taxable value. In general, the RAR drops when there is an increase in home values. This is the first decrease since 2003. LINK TO STRATEGIC PLAN: Property tax revenues provide funding for all core focus areas of the Strategic Plan, either directly or indirectly. KEY DISCUSSION ITEMS: Property tax revenues throughout the State of Colorado will be impacted by varying degrees. Assessed values for counties, municipalities and special districts will be determined by the unique mix of properties and economic forces specific to each. Within Pitkin County the impact of the RAR decrease will be different depending upon the play of the following factors of each taxing district: • District boundaries and the percentage of residential assessed value; • The state of the economy and corresponding trends in assessed value of the property within the district boundaries; • Limitations to revenue increases; • How limitations have been treated in prior years through application of mill levy credits. Additionally, every two years, the County Assessor revalues all properties in the County. The 2017 values are based on the market conditions as of June 30, 2015, and affect the County property tax revenues for 2018 and 2019. Preliminary valuations for 2017 in Pitkin County have recently been provided to the Finance Department by the Assessor's Office. Using the estimated RAR provided by the Division of Property Taxation, we are able get a general idea on property tax revenues for 2018. It is important to note these numbers presented our indicative of trends only and will change. The final RAR for 2017 will be confirmed at the end of April 2017, the assessed valuations will be certified August 2017 following the appeal process, and the amended certification of values will be issued in December 2017. Impacts on Pitkin County In Pitkin County residential property accounted for 70% of the total valuation in 2016. All things being the same, the total assessed valuation would decrease in response to the reduction in the RAR. However, as mentioned previously, 2017 is a re-evaluation year. The preliminary valuations show an increase in the actual value of residential properties of approximately 16%. Commercial properties account for 22% of the AV in 2016 and their valuation increased by approximately 21%. The total actual value of all property in Pitkin County increased from 2016 to 2017 by 16% based upon preliminary numbers. If the RAR remained at 7.96% in 2017 the AV (or taxable value)would increase by the same amount. Using the estimated RAR for 2017 of 6.56%the AV remains flat. At this point, it appears that any potential increase in AV caused by the re- evaluation, has been eaten by the estimated decrease in the RAR. The total property tax revenue that can be collected by the County is limited to growth and inflation per the Home Rule Charter, with the exception of the Open Space and Trails fund, for which voters removed this limitation. Further information needs to be received from the certification of assessed values, due in August, before the calculation of the mill levy can be performed. For the Open Space and Trails Fund the current indication is their property tax revenues will remain flat as a result of the reduction in RAR. The Ambulance District also has a fixed mill levy though different district boundaries from Pitkin County. Preliminary numbers show that similar to Pitkin County, their total value has increased by approximately 16% and the decrease in RAR removes the majority of that increase. Ambulance District property taxes are therefore forecast to be flat for 2018. Future Impacts Since the basis for the assessed valuations will not change in 2019 any changes in property tax revenue will be determined by the change in valuation from new construction less demolitions, or any changes in property classification in 2018. In 2020 revenues will be based upon the 2019 re- evaluations and may increase. BUDGETARY IMPACT: None in 2017. The potential impacts in future year's budgets is not fully determined at this time. RECOMMENDED BOCC ACTION: None at this time. Staff will present further information as it becomes available.