CAWCD 2011-2012P t TProperty Taxes
Finance, Audit & Power CommitteeCommitteeMay 19, 2011
Ted CookeAssistant General Manager,Finance & Information Technology
AgendaAgenda
CAWCD Property Tax Authorities
Property Valuations
General Ad Valorem Tax General Ad Valorem Tax
“Water Storage” Tax
CAWCD Property Taxes
Authorized under A.R.S. Title 48, Chapter 22
CAWCD Property Taxes
Authorized under A.R.S. Title 48, Chapter 22 “Multi-County Water Conservation Districts”
Two taxes authorized:• General Ad Valorem Tax not to exceed 10 cents per
$100 of assessed valuation$• Tax “for Water Storage” not to exceed 4 cents per $100
of assessed valuation
CAWCD property taxes are levied on the Full CAWCD property taxes are levied on the Full Cash Value (FCV) or “secondary valuation”
General Ad Valorem Property Tax
General Ad Valorem Tax may be used for any
General Ad Valorem Property Tax
y yauthorized purpose except as a pledge towards repayment of revenue bonds• U h i l d d ti f• Uses have included creation of reserves,
Operations & Maintenance, Repayment and capital expenditures
Historical General Ad Valorem Tax rates:1987-1988 through 1999-2000 10 cents2000 2001 th h 2002 2003 9 t2000-2001 through 2002-2003 9 cents2003-2004 through 2006-2007 8 cents2007-2008 through 2010-2011 6 cents2007 2008 through 2010 2011 6 cents
Uses of General Ad Valorem Property Tax
POWER &BASIN FUND REPAYMENT
p y
CAPITAL
REVENUESREPAYMENT
CAPITALCHARGES OM&R
RESERVES
PROPERTYTAXES &
INTEREST*
CAPITALWATER
DELIVERY CAPITALDELIVERYCHARGES
*includes other miscellaneous revenues
Property Valuations
Property valuations used for tax purposes have
Property Valuations
Property valuations used for tax purposes have an implicit 2-year lag between the time of the valuation and the collection of the tax• Taxes collected in 2011-2012 will be based on valuations
published in March 2010• Valuations published in March 2010 are based on• Valuations published in March 2010 are based on
property values established during 2009
Property Tax TimelineProperty Tax TimelineTwo-Year Time Lag
Jun Dec DecDecMar Jun Oct MarSepJun2009
Dec2009
Dec2011
Dec2010
2011-2012 Tax Year assessed
valuation
Mar2010
Jun2011
2011-2012Tax Year Rates Set
Oct 2011
Mar2012
Sep2009
Market Valuations
2nd Half2011-2012
Tax Payment Due
valuation published
(based on 2009market values)
1st Half2011-2012
Tax Payment Due
Determined
2011 Calendar Year
Property Valuations
Property valuations increased significantly
Property Valuations
Property valuations increased significantly between 2004 and 2006
Valuations have declined significantly since theng y The “boom-bust” cycle in property values has
been about 6-7 yearsy• Values are expected to “bottom” in 2011 at about 2004
levels• Expected “bottom” for tax purposes will be 2013-2014
tax year
Property Valuations
Value of one cent of tax collection to CAWCD:
Property Valuations
Value of one cent of tax collection to CAWCD:• $4.5 million in 2006-2007• $7.1 million in 2008-2009 and 2009-2010
$• $6.2 million in 2010-2011• $4.9 million in 2011-2012• $4.3 million in 2013-2014 (expected “bottom”)$ ( p )• Not expected to be back to $7 million until at least 2018-2019
At a rate of 6 cents, CAP Ad Valorem tax on a $ $ $$100,000 home is $6.00 per year; tax on a $200,000 home is $12.00 per year
Property ValuationsProperty Valuations
75
80180Impact of Property Valuations on CAP General Ad Valorem Tax Levy
60
65
70160
07 =
100
%)
45
50
55
120
140
$ M
illio
ns
cent
Val
uatio
n (2
006/
0
30
35
40
100
Perc
6 cents (pro forma)
2580
Tax Year (Year Tax Collected)
8 cents 6 cents
2009 Forecast (left axis) 2010 Forecast (left axis)
2011 Forecast (left axis) CAP General Ad Valorem Tax Levy (right axis)
General Ad Valorem Property Tax
What was reported last year:
General Ad Valorem Property Tax
What was reported last year:• At a tax rate of 6 cents, in the short term (2011-2016)
the General Ad Valorem Tax will be completely d b th t f A Fi d OM&R d th Aconsumed by the cost of Ag Fixed OM&R and the Ag
Incentive Program• General Fund Reserves in the short term will be
maintained through receipt of ARC revenues and interest income
Ag Settlement Pool Cost ForecastAg Settlement Pool Cost ForecastSlide presented in May 2010
2 0 2.8 2.8 2.4 3.0
39.4
33.5 29.7
29.3 30.5 32.5 34.7 35
40
45
3.6 4.4 2.2 2.0 2.8 3.0 29.7
20
25
30
$ M
illio
n
27.6 27.6 29.2 30.4 31.2 32.4 33.2
5
10
15
02010 2011 2012 2013 2014 2015 2016
Ag Fixed OM&R Ag Energy SO2 Credits 6¢ ad valorem tax
General Ad Valorem Property Tax
The current situation:
General Ad Valorem Property Tax
The current situation:• At the current rate (6 cents), property tax revenues
through 2016 will decline an additional $17 million from l t ’ f tlast year’s forecast
• The “upside down” situation with Ag delivery costs is temporary, since the Ag pool will be reduced from p y, g p400,000 acre-feet to 300,000 acre-feet in 2017
Ag Settlement Pool Cost ForecastAg Settlement Pool Cost ForecastAg Pool reduced from 400,000 a-f
to 300,000 a-f in 2017
4.5 2.2 1.8 1.4 2.6 2.6 33.6
35.1 30
35
40
32 4 33 2
4.5 1.9 28.6
26.7 26.4 27.6 30.3
20
25
$ M
illio
n
27.6 29.2 30.4 31.2 32.4 33.225.8
5
10
15
02011 2012 2013 2014 2015 2016 2017
Axis TitleAg Fixed OM&R Ag Energy ad valorem tax @ 6¢
General Ad Valorem Property Tax
The current situation:
General Ad Valorem Property Tax
The current situation:• Staff expects improvements in other areas to offset the
property tax decline:• 2010 Strategic Reserve ending balance is $8 million higher due
to favorable capital spending and basin fund activity• Interest earnings are improving due to higher reserve levels and
hi h i t t i ldhigher investment yields
• Current projections indicate that Strategic Reserves will be able to be maintained at or above target levels through 2016 without increasing taxes
• Pressure on property tax revenues is expected to be relieved somewhat in 2017 when Ag Pool is reducedrelieved somewhat in 2017 when Ag Pool is reduced
General Ad Valorem Property Tax
CAP Reserve Trend AnalysisGeneral Fund Strategic Reserves
General Ad Valorem Property Tax
350
400
General Fund Strategic Reserves
$214 $233 $227 $231 $225 $219
$206 $216 250
300
s
$166
$177
100
150
200
$Mill
ion
0
50
100
General Ad Valorem Property Tax
The current situation:
General Ad Valorem Property Tax
• No immediate tax increase is required since reserves are expected to remain at Board-established target levels
• Current projections indicate that no tax increase isCurrent projections indicate that no tax increase is anticipated to be needed prior to improvements in the sources and uses of tax• Reduction in Ag Settlement Pool and commensurate costsReduction in Ag Settlement Pool and commensurate costs• Uptick in property values
Staff recommendation: maintain ad valorem tax rate at 6 cents
Caveat (same as last year) – any new subsidy or reserve will require a new revenue sourcereserve will require a new revenue source
“Water Storage” Property Tax
The current tax was authorized beginning in
Water Storage Property Tax
The current tax was authorized beginning in 1996 and sunsets in 2016• A previous tax was collected to fund State
Demonstration Recharge Projects (1991-1996)
CAWCD must levy only a single “Water Storage” t t th h t th di t i ttax rate throughout the district
Historical “Water Storage” Tax rates:1996 1997 th h 2010 2011 4 t1996-1997 through 2010-2011 4 cents
“Water Storage” Property Tax
The statute requires CAWCD, by Board
Water Storage Property Tax
The statute requires CAWCD, by Board resolution, to determine how much, if any, of the “Water Storage” tax levy is to be reserved for repayment or OM&R
The remainder (if any) is to be deposited with the State Treasurer in the Arizona Water Banking Fund
“Water Storage” Property Tax
All “Water Storage” taxes collected through the
Water Storage Property Tax
g g2002-2003 tax year were deposited in the Arizona Water Banking FundB i i i 2003 2004 h B d d ll Beginning in 2003-2004, the Board reserved all “Water Storage” tax collections for OM&R, and has continued to use those tax proceeds for thehas continued to use those tax proceeds for the same purpose (M&I firming)
This approach allowed CAWCD to retain and protect “Water Storage” tax proceeds in its own account
“Water Storage” Property Tax
There is a dilemma presented by the single “Water
“Water Storage” Property Tax
There is a dilemma presented by the single Water Storage” tax rate and the differences in firming needs and revenues available among the three
ticounties• All of the “Water Storage” tax collected in Pima and
Pinal counties is needed to help meet M&I firming needsPinal counties is needed to help meet M&I firming needs and, by itself, will not be sufficient to do so
• The “Water Storage” tax collected in Maricopa County d th d f M&I fi i d h lt d iexceeds the need for M&I firming and has resulted in a
substantial unused balance
“Water Storage” Property Tax
A concept has been presented for further discussion that
Water Storage Property Tax
p pwould allow some flexibility (under existing law and with no new taxes) in the use of AWBA withdrawal fees and water storage tax collected by CAWCD to fulfill both M&Iwater storage tax collected by CAWCD to fulfill both M&I firming goals and Indian firming obligations
“Water Storage” Property Tax
Staff Recommendations:
Water Storage Property Tax
Staff Recommendations:• Maintain the “Water Storage” tax rate at 4 cents per
$100 of assessed valuation• Continue the practice of reserving the “Water Storage”
tax to defray annual operations, maintenance and replacement costsp
Questions???Questions???