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  9.C.       
Meeting Date: 06/15/2021  
From: Rick Tadder, Management Services Director

TITLE:
Public Hearing: Fiscal Year 2021-2022 Budget and Property Tax Levy
STAFF RECOMMENDED ACTION:
1) Open the public hearing
2) Receive citizen input
3) Close the public hearing
4) Convene Special Meeting
Executive Summary:
This public hearing is being held to comply with law. Arizona budget laws require a public hearing on the proposed final budget and property tax levy, A.R.S. Section 42-17104.
Financial Impact:
Upon adopting the final Fiscal Year (FY) 2021-2022 Budget, the City may commit and spend funds for community needs as described in the budget.  The budget is funded through numerous revenue sources, including property tax.

The FY 2020-2021 primary property tax levy was $6,952,496. The City is proposing a flat levy on the existing property.  The total levy related to new construction is $86,167 for a total levy of $7,038,663 in FY 2021-2022. The primary property tax rate to support this levy is 0.7189 per $100 of net assessed valuation (a decrease from the prior fiscal year).

The City is proposing a secondary property tax levy of $7,739,745 on existing properties, plus a levy of $96,229 on new construction, for a total secondary property tax levy in FY2021-2022 of $7,835,974.  The proposed secondary property tax rate is 0.8000 per $100 of net assessed valuation (same as the prior fiscal year).
Policy Impact:
The FY 2021-2022 Budget is the financial plan of the City for the upcoming fiscal year.
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
The adoption of the Annual Budget and Financial Plan provides direction and financial resources to support the Key Community Priorities, Regional Plan and Team Flagstaff Strategic Plans.
Has There Been Previous Council Decision on This:
  • December Budget Retreat December 17, 2020
  • February Budget Retreat on February 1, 2021
  • Council Budget Work Session on April 22, 2021 and April 23, 2021
  • Tentative Budget Adoption on June 1, 2021
Options and Alternatives:
1. Conduct the public hearing; or,
2. Delay the public hearing
Background/History:
Budget adoption:
The budget was presented for tentative adoption on June 1, 2021. The tentative adoption established the maximum appropriation for the City for the FY 2021-2022 budget year. The budget legal schedules were published in the Arizona Daily Sun on June 3, 2021, and June 10, 2021.

Property tax levy:
Primary property taxes are accumulated in the General Fund and pay for general services which include but are not limited to public safety, parks and recreation, other public work services, and general administrative and management functions within the City.

Secondary property taxes support debt service payments on numerous city capital projects including the Aquaplex, fire stations, open space, street/utility projects, forest restoration, the core services facility, and courthouse.

The current and proposed property tax rates are shown in the "Expanded Financial Consideration" section below.

Truth in Taxation legislation:
Every year, the Truth in Taxation legislation requires that the county assessor, on or before February 10, transmit to each city and town an estimate of the total net assessed valuation of the city, including new property added to the tax roll. If the proposed primary tax levy amount, excluding amounts attributable to new construction, is greater than the levy amount in the previous year, the City must go through the Truth in Taxation procedures. It is important to note that it is the levy amount and not the rate which triggers the Truth in Taxation procedure. The City of Flagstaff has not triggered the Truth in Taxation notification and hearing for FY 2021-2022 and no additional notifications are required.
Key Considerations:
The adoption of the tentative budget set forth into motion a legally mandated time sequence of actions of which the Council must adhere to adopt a final budget and to levy property taxes. If this time sequence is not met as required by statute, the tentative budget adoption, the final budget adoption, the property tax levy actions, and related publications must be started over. The final budget adoption must occur after a public hearing and Council must convene into a Special Meeting to adopt the final budget. The budget must be adopted by the third week of July. The County will adopt the property tax levy the first week of August. The key dates in the process have been presented as part of the action summary.
 
June 1, 2021    Tentative adoption of the budget by Council
June 15, 2021  Proposed budget and property tax levy public hearing
June 15, 2021  Final budget adoption (In a Special meeting)
June 15, 2021  First reading property tax ordinance
July 6, 2021     Final reading and adoption of the property tax ordinance
Expanded Financial Considerations:
The City has proposed a flat primary property tax levy in FY 2021-2022 of $7,083,663.  The maximum allowable primary property revenue under state law for FY 2021-2022 is $7,322,717. The primary property tax rate will decrease from $0.7510 in FY 2020-2021 to $0.7186 in FY 2021-2022 due to a total valuation of all existing properties which are increasing 4.5%.  Five years of historical data is shown below:
 
Property Tax Rates FY 2017-2018 FY 2018-2019 FY 2019-2020 FY 2020-2021
FY 2021-2022
Proposed
Primary  0.8233 0.8334 0.7933 0.7510 0.7186
Secondary 0.8366 0.8366 0.8366 0.8000 0.8000
Total  1.6599 1.6700 1.6299 1.5510 1.5186

The final budget adoption allows the City to commit and expend resources as determined to be needed through the FY 2021-2022 budget process. There have been no changes in the final budget recommended for adoption from that presented as the tentative budget.  The recommended City of Flagstaff appropriation for FY 2021-2022 is $XXX,XXX,XXX.

Community Benefits and Considerations:
The budget process has allowed for public participation which is vital for the City Council in determining the current year goals and objectives. The budget translates Key Community Goals and Objectives into a fiscal plan. Timely budget adoption allows the City to commit expenditures as related to the FY 2021-2022 Budget as needed for ongoing operational consistency to the citizenry. The FY 2021-2022 Budget is balanced.
Community Involvement:
Inform/Involve: This is the public hearing in the budget adoption process and it is open to public comment on the property tax levy and the final budget adoption. Budget legal schedules were published in the June 3, 2021, and June 10, 2021, Arizona Daily Sun to allow for additional community review. In addition, the legal and other budget schedules were made available at City Hall, at both Flagstaff Public Libraries, and on the official city website. The final opportunity for community involvement for budget adoption is at this public meeting. The final opportunity for public input on the tax levy will be at the July 6, 2021, Council Meeting.
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