PRELIMINARY BUDGET PRESENTATION CITY COUNCIL WORK SESSION TONY PUENTE - DIRECTOR OF FINANCE JUNE 19, 2018
OBJECTIVE General Fund Projection Assumptions & Preliminary Forecast Overview of Preliminary Supplemental Funding Requests Over 65 and Disabled Tax Limitation (Freeze) Discuss Homestead Exemption Options for Consideration 2
GENERAL FUND PROJECTION ASSUMPTIONS Assessed Value Increases FY 2018/19 – 10.0% (assumes new value is 3% of total value) • FY 2019/20 and beyond – Assumes effective tax rate each year plus new value. • Total Effective Tax Rate Tax rate set as a rough estimate of effective tax rate of $0.610738 (2.7 cents below current rate of $0.637856) • Staff reviewing Truth-In-Taxation calculation on effective tax rate and will provide the City Council additional details during • the August 2 nd Budget Workshop. Tax Year 2018 is the first year impact of the Over 65 & Disabled Tax Limitation (Freeze). Sales Tax FY 2018/19 – 5% above revised estimate for FY 2017/18 ($39.2 million vs $36.2 million) • FY 2019/20 and beyond – 5% in Year 2; 4% in Year 3; and 3% in Years 4 & 5 • Franchise Fees All growth in franchise fee revenue and an additional $622,000 transferred annually to the Street Improvement Fund • 3 (based on 10 year plan to transfer all franchise fees to street improvement)
PRELIMINARY GENERAL FUND FORECAST (PROPERTY TAXES AT EFFECTIVE TAX RATE) Amended Current Preliminary Year 2 Year 3 Year 4 Year 5 Budget Estimate Budget Projected Projected Projected Projected 2017-18 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Beginning Fund Balance $ 31,770,772 $ 31,770,772 $ 31,582,129 $ 31,903,527 $ 32,250,511 $ 33,053,676 $ 33,440,580 Property Tax $ 44,460,191 $ 44,460,191 $ 45,824,128 $ 47,416,268 $ 49,302,133 $ 51,548,343 $ 54,240,825 Sales Tax $ 36,181,384 $ 39,202,935 $ 41,163,082 $ 43,221,236 $ 44,950,085 $ 46,298,588 $ 47,687,546 Other Revenues $ 39,078,797 $ 39,307,459 $ 40,379,208 $ 40,403,151 $ 40,550,689 $ 40,746,978 $ 40,831,455 Total Revenues $ 119,720,372 $ 122,970,585 $ 127,366,418 $ 131,040,655 $ 134,802,907 $ 138,593,909 $ 142,759,826 Base Expenditures $ 119,687,991 $ 118,273,937 $ 126,295,020 $ 129,193,671 $ 131,749,742 $ 135,207,005 $ 138,495,760 New Recurring Expenses $ - $ - $ 750,000 $ 1,500,000 $ 2,250,000 $ 3,000,000 $ 3,750,000 New One-Time Expenses $ 4,885,291 $ 4,885,291 $ - $ - $ - $ - $ - Total Expenditures $ 124,573,282 $ 123,159,228 $ 127,045,020 $ 130,693,671 $ 133,999,742 $ 138,207,005 $ 142,245,760 Ending Fund Balance $ 26,917,862 $ 31,582,129 $ 31,903,527 $ 32,250,511 $ 33,053,676 $ 33,440,580 $ 33,954,646 $ (4,852,910) $ (188,643) $ 321,398 $ 346,984 $ 803,165 $ 386,904 $ 514,066 Change in Fund Balance Fund Balance as % of Expend. 21.6% 25.6% 25.1% 24.7% 24.7% 24.2% 23.9% 4
PRELIMINARY SUPPLEMENTAL FUNDING REQUESTS Supplemental Requests are requests for funding of capital and operational expenses. Currently, the requests total $47,294,648 Capital - $41,256,000 • Recurring Operational Expenses - $3,467,867 • One-Time Operational Expenses - $2,570,781 • The final detailed list of supplementals based on priority and funding options, will be discussed with Council in July/August. 5
OVER 65 & DISABLED TAX LIMITATION (FREEZE) Preliminary Data as of June 8, 2018: Accounts = 7,146 (6,914 are Over 65 and 232 are Disabled) • Assessed Value before Exemptions = $1,675,480,669 • Taxable Value after Exemptions = $1,257,101,809 (equates to $8,018,499 in taxes) • Actual Tax Due to City = $7,284,851 (based on current tax rate of $0.637856). Equates to $1,142,083,954 in taxable value. • Difference between Taxable Value and Value of Actual Tax Due = $115,017,855 or $733,648 • Based on preliminary values, City anticipates receiving $7,284,851 from properties with tax freeze in FY 2018-19. 6
2017 ESTIMATED TAX LIMITATION IMPACT Number of Taxable Value Property Tax Tax Year (FY) Exemptions Value Net Taxable Reduction Reduction 2016 (FY 2016-17) 7,134 $ 209,247 $ 154,247 2017 (FY 2017-18) 7,504 $ 221,210 $ 166,210 Base Year of Freeze 2018 (FY 2018-19) 7,729 $ 225,634 $ 170,634 $ 33,199,197 $ 211,763 2019 (FY 2019-20) 7,961 $ 230,147 $ 175,147 $ 68,078,273 $ 434,241 2020 (FY 2020-21) 8,200 $ 234,750 $ 179,750 $ 104,722,230 $ 667,977 2021 (FY 2021-22) 8,446 $ 239,445 $ 184,445 $ 143,220,372 $ 913,540 2022 (FY 2022-23) 8,699 $ 244,234 $ 189,234 $ 183,666,520 $ 1,171,528 2023 (FY 2023-24) 8,960 $ 249,118 $ 194,118 $ 226,159,242 $ 1,442,570 2024 (FY 2024-25) 9,229 $ 254,101 $ 199,101 $ 270,802,097 $ 1,727,327 2025 (FY 2025-26) 9,506 $ 259,183 $ 204,183 $ 317,744,862 $ 2,026,755 2026 (FY 2026-27) 9,791 $ 264,366 $ 209,366 $ 367,104,733 $ 2,341,600 2027 (FY 2027-28) 10,085 $ 269,654 $ 214,654 $ 419,004,851 $ 2,672,648 Exemptions were increased at 3.0% per year and values at 2.0% per year to attempt to adjust for turnover factors. This analysis does not represent the maximum property tax impact. This figure can continue to change as a result of property values and will 7 likely increase after 2027.
2018 PRELIMINARY TAX LIMITATION IMPACT Freeze Average Average Value Loss Tax Loss Tax Year (FY) Accounts Assessed Taxable Above Freeze Above Freeze 2017 (FY 2017-18) Base Year of Freeze 2018 (FY 2018-19) 7,146 $ 234,464 $ 175,917 $ 115,017,855 $ 733,648 2019 (FY 2019-20) 7,360 $ 239,153 $ 179,435 $ 144,364,688 $ 920,839 2020 (FY 2020-21) 7,581 $ 243,936 $ 183,024 $ 175,902,279 $ 1,122,003 2021 (FY 2021-22) 7,809 $ 248,815 $ 186,684 $ 209,762,654 $ 1,337,984 2022 (FY 2022-23) 8,043 $ 253,792 $ 190,418 $ 246,085,155 $ 1,569,669 2023 (FY 2023-24) 8,284 $ 258,867 $ 194,226 $ 285,016,830 $ 1,817,997 2024 (FY 2024-25) 8,533 $ 264,045 $ 198,111 $ 326,712,841 $ 2,083,957 2025 (FY 2025-26) 8,789 $ 269,326 $ 202,073 $ 371,336,895 $ 2,368,595 2026 (FY 2026-27) 9,052 $ 274,712 $ 206,115 $ 419,061,698 $ 2,673,010 2027 (FY 2027-28) 9,324 $ 280,206 $ 210,237 $ 470,069,430 $ 2,998,366 Freeze account growth at 3.0% per year and values at 2.0% per year. Tax loss based on current tax rate of $0.637856. 8
2018 PRELIMINARY MARKET VALUES BY CATEGORY - $15,093,646,583 City of Denton Exempt Property, $1,121,983,032, Other, $70,513,316, 0.5% 7.4% Oil, Gas, and Other Improvements, $402,921,184, 2.7% Single Family Residence, $6,477,663,971, 42.9% Commercial/Industrial, $4,166,686,247, 27.6% Multifamily Residence, $1,973,621,508, 13.1% 9 Land, $880,257,325, 5.8%
3 YEAR HISTORY – ALL EXEMPTIONS 2016 2017 2018 Exemption Certified Certified Preliminary AB - Abatements $ 131,784,454 $ 59,456,376 $ 45,655,661 CHODO - Community Housing Development Organization 21,342,697 296,840 25,918,125 DP - Disabled Person 2,434,485 10,915,980 11,093,557 DPS - Disabled Person Surviving Spouse 10,000 50,000 - FR - Freeport 208,186,573 187,207,919 235,863,732 HS - Homestead 88,848,080 91,671,530 92,667,716 HT - Historical 4,736,286 4,986,834 5,389,776 OV65 - Over 65 Person 300,776,413 318,388,231 332,807,447 OV65S - Over 65 Person Surviving Spouse 26,611,649 27,086,616 25,833,269 PC - Pollution Control 17,907,977 4,272,985 16,325,045 PPV - Personal Property Vehicle 233,221 224,763 243,499 Sub-Total Local Exemptions 802,871,835 704,558,074 791,797,827 DV - Disabled Veteran 48,047,888 57,356,519 68,415,238 EX - Exempt Property 788,985,676 1,075,184,842 1,096,295,497 Sub-Total State Exemptions 837,033,564 1,132,541,361 1,164,710,735 Grand Total $ 1,639,905,399 $ 1,837,099,435 $ 1,956,508,562 10 Local - Exempted City Taxes $ 5,486,344 $ 4,494,066 $ 4,835,810 State - Exempted City Taxes $ 5,719,785 $ 7,223,983 $ 7,113,331 Total Exempted City Taxes $ 11,206,130 $ 11,718,049 $ 11,949,141
2017 CERTIFIED - LOCAL AND STATE EXEMPTIONS COMPARISON Local Exemptions State Exemptions T otal Denton $704,558,074 $1,132,541,361 $1,837,099,435 Lewisville $981,546,366 $431,602,303 $1,413,148,669 11
HOMESTEAD EXEMPTION Currently 0.5% of value or $5,000 whichever is greater Homes up to $1 million receive same exemption • Preliminary values as of 6/8/18 reflect: 19,123 single family homes with a homestead exemption (64%) • 29,654 total single family homes in the City • Exempted value equals $92,667,716 or approximately $565,957 in revenue to City. • Preliminary average taxable home value is $234,007 Denton Central Appraisal District (DCAD) encompasses 42 cities 12 16 cities have a homestead exemption and those range from 0.5%;$5,000 ($1M) to 20%;$10,000 ($50K) •
HOMESTEAD EXEMPTION City HS Over 65/DP Freeze 2017 Tax Rate Carrollton Y – 20% or $5,000 $60,000/$60,000 N $0.599700 The Colony N $10,000/$10,000 N $0.665000 Denton Y – 0.5% or $5,000 $50,000/$50,000 Y $0.637856 Flower Mound N $100,000/$100,000 N $0.439000 Highland Village N $75,000/$75,000 N $0.568020 Lewisville N $60,000/$20,000 Y $0.436086 Roanoke Y – 20% or $10,000 $40,000/$4,500 Y $0.375120 Coppell Y – 5% or $5,000 $75,000/$75,000 N $0.579500 Trophy Club N $35,000/$0 Y $0.451442 Plano Y – 20% or $5,000 $40,000/$40,000 Y $0.468600 13 Frisco Y – 7.5% or $5,000 $80,000/$80,000 N $0.446600
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