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HomeMy WebLinkAboutItem 11b - Fiscal Year 2018-19 Tax Levies on General Obligation Bonds DATE: August 7, 2018 TO: Honorable Mayor and City Council FROM: Hue C. Quach, Administrative Services Director Shannon Huang, Financial Services Manager/City Treasurer SUBJECT: RESOLUTION NO. 7229 DETERMINING THE AMOUNT OF REVENUE TO BE RAISED FROM PROPERTY TAXES FOR FISCAL YEAR 201 8-19 TO PAY FOR THE DEBT SERVICE ON THE 2011 AND 2012 GENERAL OBLIGATION BONDS Recommendation: Adopt SUMMARY The City has two General Obligation Bonds supported by voter approved levies. The Series 2011 issuance was to fund the building of a grade separation at the intersection of Santa Anita Avenue and the Gold Line right-of-way alignment; the General Obligation Bonds Series 2012 are refunding bonds, replacing the Series 2001 General Obligation Bonds, which were used to finance the construction of the City’s police station. Annually, the City Council is required to adopt a resolution to establish the supplemental taxes collected to make debt service payments for the outstanding General Obligation Bonds. The rates established for Fiscal Year 2018-19 are estimated to generate tax revenue of $582,200 and $408,100 for the 2011 and 2012 General Obligation Bonds, respectively, and will be paid directly by property owners as part of their annual property tax bills. It is recommended that the City Council adopt Resolution No. 7229 determining the amount of revenue to be raised from property taxes for Fiscal Year 201 8-19 to pay for the debt service on the 2011 and 2012 General Obligation Bonds. BACKGROUND The issuance of Series 2001 General Obligation Bonds was approved in a special election held on November 2, 1999; the Series 2011 issuance was approved by the voters in the April 11, 2006, election. More than two-thirds of the votes cast were in favor of the agreed indebtedness with the principal and interest payable from taxes Resolution No. 7229 Fiscal Year 18-19 Tax Levies On General Obligation Bonds August 7, 2018 Page 2 of 3 levied upon taxable property within the City. Both the 2011 and 2012 Bonds are payable entirely by ad valorem property taxes levied on behalf of the City and collected by Los Angeles County. In 2012, the bond market provided an opportunity to refinance the Series 2001 General Obligation Bonds. General Obligation Bonds Series 2012 were issued on November 6, 2012 solely for the refunding of the Series 2001, providing savings of approximately $1 million for taxpayers over the life of the bonds. Each year, a resolution must be adopted by the City Council to determine the amount of revenue required to be raised from property taxes to pay for the debt service on the General Obligation Bonds. This information is the basis for establishing tax rates, which are forwarded to Los Angeles County and will be applied to properties within the City’s boundaries. DISCUSSION A separate schedule (Exhibit “A”) illustrating the calculation of the tax rate is attached to provide detail of the debt service payments, the assessed valuations, beginning balances, estimated expenditures, and the proposed tax rate for Fiscal Year 2018-19. The levy rate for Series 2011 General Obligation Bonds is 0.003507%, in comparison to 0. 0.003627% last year, and the tax rate for the Series 2012 General Obligation Bonds is 0.002458% versus 0.002543% for the prior year. The reduction in the tax rates is due to the 5.90% increase in the City’s property assessed value. For example, a home valued at $750,000 would pay $26.30 in taxes for the 2011 Series Bonds and $18.44 for the 2012 Series Bonds as part of their annual prop erty tax payments. The FY 2018-19 debt service payments for the Series 2011 General Obligation Bond totals $593,800, of which $335,000 represents Principal and $258,800 is Interest. For the Series 2012 General Obligation Bond, the total amount due in FY 2018-19 is $416,100, including $280,000 for Principal and $136,100 for Interest. FISCAL IMPACT No General Fund costs are incurred through this action. The rates established for Fiscal Year 2018-19 are estimated to generate tax revenue of $582,200 and $408,100 for the 2011 and 2012 General Obligation Bonds , respectively, and will be paid directly by property owners as part of their annual property tax bills. These tax revenues will be Resolution No. 7229 Fiscal Year 18-19 Tax Levies On General Obligation Bonds August 7, 2018 Page 3 of 3 added to each bond fund’s existing fund balances for debt service payments occurring in Fiscal Year 2018-19. RECOMMENDATION It is recommended that the City Council adopt Resolution No. 7229 determining the amount of revenue to be raised from property taxes for Fiscal Year 2018-19 to pay for the debt service on the 2011 and 2012 General Obligation Bonds. Attachments: Exhibit “A” – Calculation of Tax Rate Resolution No. 7229 Exhibit “A” Calculation of Tax Rate General Obligation Bonds Balance Available (1) 7-01-18 2018-19 Assessed valuations Estimated Tax Revenue Debt Service (2) % Tax Rates 2018-19 (3) Series 2011 $480,200 $16,602,075,687 $582,200 $593,800 0.003507% Series 2012 $358,800 $16,602,075,687 $408,100 $416,100 0.002458% (1) Excess fund balance is included to ensure that positive cash balance is available for the debt service payments on August 1, 2018. (2) Per debt service schedule below. (3) For comparison, the levy rate from last year was 0.003627% and 0.002543% for Series 2011 and 2012 General Obligation Bonds, and their first year levy rates were 0.006621% and 0.009657% in 2011 and 2001, respectively. DEBT SERVICE PAYMENT SCHEDULE: 2011 G.O. Bond 2012 G.O. Bond Principal $335,000 $280,000 Interest $258,800 $136,100 Total $593,800 $416,100