Strategic Revenue & Expenditure Discussion Matt Leavitt, Summit County Finance Officer Michael Howard, Summit County Auditor Corrie Forsling, Summit County Treasurer

Strategic Revenue Discussion Define: Loss of Property Tax “Purchasing Power” Review: How Property Taxes are Calculated Describe: Property Tax History (How We Got Here) Recommend: Options

The Setting Vibrant community that the residents perceive is growing in population and building. Economy and workforce (and traffic) that are in reality growing. Budget expenditures have continuously grown over time to meet the needs/demands of the community AND rising costs due to inflation. A “minimal growth philosophy,” while desirable, has a direct impact on our ability to earn sufficient tax revenue to meet the needs of the community. PROBLEM = Property tax revenues are not sufficient to meet cost of inflation and fulfill community needs.

General Fund Municipal Fund Assess & Collect Fund Transient Room Tax Restaurant Tax Transient Room Tax General Fund RAP Tax Open Space Fund Landfill Enterprise Fund Fleet Lease Fund Transit District Service Area #8 Service Area #6

General Fund Municipal Fund Assess & Collect Fund Transient Room Tax Restaurant Tax Transient Room Tax General Fund RAP Tax Open Space Fund Landfill Enterprise Fund Fleet Lease Fund Transit District Service Area #8 Service Area #6

Overview of County Resources Of the twenty-one governmental funds, only three are generally considered “available for operations:” General fund Corrections, Public Health, Library, Ambulance Municipal services fund Public Works, Law Enforcement, Community Development and Planning Assessing & collecting fund Costs of assessing and collecting property taxes Elected officials cost allocated across operating funds.

Fund Balance History: General

Fund Balance History: Municipal

History of Resources Responsive to Changes in Economy “Economy-Based” revenues include sales & use taxes; fees; licenses & permits. Increase between 2015-2016 primarily due to curbside collection fee.

General Fund Budget History

Municipal Services Budget History

Property Tax Revenue History

Purchasing Power of Property Tax Revenues Property Taxes Operating Funds 2004 2016 % ∆ Per Year Gain/(Loss) of Purchasing Power General $ 7,769,204 11,028,910 3.2% (2,967,121) Municipal* 1,806,840 4,390,907 11.0% (1,181,291) Assess & Collect 2,004,287 3,153,312 4.4% (848,340) Combined 13,760,800 20,851,027 3.9% (4,996,752) *Municipal Services Fund held Truth in Taxation hearing 2013 Average CPI change from 2004 – 2016: 2.0%

Strategic Revenue Discussion Define the Problem: Loss of Property Tax “Purchasing Power” Review: How Property Taxes are Calculated Describe: Property Tax History (How We Got Here.) Recommend: Options

Property Taxes are Designed to: 1 Property Taxes are Designed to: 1. Maintain steady revenue levels for the taxing entity 2. Increase only due to New Growth 3. Ignore inflation unless adjusted through Truth-in-Taxation “The certified tax rate provides a taxing entity with the same amount of property tax revenue it received in the previous tax year plus any revenue generated by additional growth in its tax base.” --”Tax Rate Certification Standards of Practice,” Standard 10.2 Introduction and Overview, Utah State Tax Commission

Calculating Tax Rates Property Values Tax Rates Property Tax Revenue

Property Tax Rates: No Automatic Adjustment for inflation The current system for calculating property tax revenues does not include a factor to counter the effects of inflation. “Taxing entities are expected to raise rates and capture inflation every five to eight years.” Howard Stephenson, The Salt Lake Tribune, March 1, 2017, “Senate Panel Oks Property Tax Freeze to Fund Schools,” Benjamin Wood

Property Tax Rate History Municipal Fund truth in taxation was 51.3% increase in calculated revenues.

Strategic Revenue Discussion Define the Problem: Loss of Property Tax “Purchasing Power” Review: How Property Taxes are Calculated Describe: Property Tax History (How We Got Here.) Recommend: Options

Property Tax Revenues from New Growth Between 2007 – 2011, annual average revenues from new growth were $640 thousand in general fund and $92 thousand in municipal fund. Since 2012, general fund revenues from new growth averaged $219 thousand in the general fund and $79 thousand in the municipal services fund. A decrease of 67% and 14% respectively.

What New Growth Revenues Have Been Used For Between 2007 – 2011, increased contributions to Disaster Fund and Tax Stability Fund by 11% and 16%. These fund became essential during flooding in 2010 and recession period from 2010 – 2012. Since 2012, those “rainy day” funds have remained pretty much unchanged.

Property Tax Revenues: New Growth

Property Tax Revenues: New Growth

General Government Budgets and Taxes 2005 – Brown’s Canyon Road 2009 – Quinn’s Health Building + road projects

Impact of Truth in Taxation on the Municipal Fund (2013) 2008 – Landmark Drive

Reduction of Property Tax Revenues as a Percentage of Total Total does not include Contributions from Other Funds

= Urgent Need for Property Tax Revenue Growth (Truth in Taxation) The Bottom Line… Increases in Programs & Services Growing Budgetary Needs Cost of Inflation & Loss of Property Tax Purchasing Power Dependence on new growth Most “reliable” revenue source, the foundation for building programs & services, has been eroded over time. = Urgent Need for Property Tax Revenue Growth (Truth in Taxation)

Strategic Revenue Discussion Define the Problem: Loss of Property Tax “Purchasing Power” Review: How Property Taxes are Calculated Describe: Property Tax History (How We Got Here.) Recommend: Options

Options & Impacts: An “ala carte” menu Do Nothing Revenues insufficient to support increases in labor cost and health costs No funds available for new initiatives (i.e. sustainability, mental health) Cuts necessary to major departments (possibly public safety and health departments, as determined by the Council) “Freeze” Property Tax Rates at Current Levels Project revenue increase of $529 thousand per year. Never recovering any lost purchasing power. Increase Property Tax Rates to Recover Lost Purchasing Power Reevaluate 5 years Look at ways to encourage new growth or new growth strategies

Projecting General Government Programs & Services: Null Option

“At-Risk” Programs Under Null Option General Fund: Municipal Fund: Corrections Law Enforcement Dispatch/Communications Public Works Public Health Library Sustainability Ambulance Any new program or expansion of services

Purchasing Power of Property Tax Revenues Property Taxes Operating Funds 2004 2016 % ∆ Per Year Gain/(Loss) of Purchasing Power General $ 7,769,204 11,028,910 3.2% (2,967,121) Municipal* 1,806,840 4,390,907 11.0% (1,181,291) Assess & Collect 2,004,287 3,153,312 4.4% (848,340) Combined 13,760,800 20,851,027 3.9% (4,996,752) *Municipal Services Fund held Truth in Taxation hearing 2013 Average CPI change from 2004 – 2016: 2.0%

Recovering Purchasing Power of Property Tax Revenues Property Taxes Operating Funds 2016 Purchasing Power Target 2016 Tax Rate Proposed Rate General $ 11,028,910 13,996,032 0.000726 0.000921 Municipal* 4,390,907 5,572,198 0.000572 Assess & Collect 3,153,312 4,001,652 0.000191 0.000263 Combined Revenues 18,573,130 23,569,882 $15.4 $19.5 Approximate 27% increase across funds. General fund additional revenue: $2.9 million Municipal fund additional revenue: $1.2 million

Entity Truth-in-Taxation History 2004 - 2016 Wasatch County - 2014, 2010, 2004 Morgan County - 2010, 2007, 2005 Washington County – 2010, 2008, 2007 Park City Fire District – 2010, 2008, 2004 Park City Municipal – 2010 Park City School District – 2004,2005, 2006, 2012, 2014 Summit County Municipal Fund – 2013 Summit County General Fund – longer than history

Impact On Average Taxable Values Residential Primary Fund 2016 Tax Rate Estimated Tax “Power” Rate Dollar Change General Fund 0.000726 $ 232.51 0.000921 294.96 62.45 Municipal Services Fund 0.000572 189.69 240.77 51.08 Average taxable value for: Residential Primary Residential Secondary Commercial General Fund $320,258 $654,304 $823,391 Municipal Services Fund $331,634 $465,236 $665,860 General fund = $19.50 annual increase for every $100k of taxable value. Municipal services fund = $15.40 annual increase for every $100k of taxable value.

Adjusting Property Tax Rates to Account for Loss of Purchasing Power

Change in TOTAL property taxes (estimated based on 2016 taxes charged by entity) Property taxes charged in 2016: County’s portion = 15% Adjusting for estimated increases: County’s portion = 15% Estimated changes based on discussions and open houses held by Park City and South Summit School Districts.

Recommendation: Increase Property Tax Rates to Account for Loss of Purchasing Power & Reevaluate Every 5 Years

Areas of Consideration after Property Tax increase Use Estimated Amount ($) Rebuild fund balances 600,000 Employee development and retention 1,020,000 Health insurance and benefits increases 1,100,000 Facility maintenance 250,000 Staffing requirements Road maintenance 750,000 Total 4,320,000 Facility maintenance includes approximately $100k for Health Fund’s portion of new Kamas Building

Average Length of Service for County Employees Year Avg LOS 2011 14.5 2012 13.6 2013 12.8 2014 12.2 2015 11 2016 9.9 Estimated cost of replacing a salaried employee are 6-9 months salary on average. Source: Society for Human Resource Management

Questions? …and Direction for County Auditor