“how to forecast property tax revenues” -- webinar

“How to Forecast Property Tax Revenues” -- webinar 2:00 – 3:30 p.m. PT, Thursday, October 25, 2012

CSMFO Coaching Program

*** Advance registration required for this no-charge webinar: https://www1.gotomeeting.com/register/131236384 Panel topics: 1. What are the keys to forecasting property tax revenues accurately? 2. What factors do you need to consider in estimating the distribution of property tax revenues? 3. How can you work with your Auditor Controller successfully to prepare your forecasts? 4. What do you do if you have questions about the accuracy of your receipts? Presenters: • Paula Cone, Principal and head of HdL’s property tax services • Barbara Godwin, Property Tax Manager, San Luis Obispo County, and editor of the

CA Property Tax Managers Reference Manual • Drew Corbett, Assistant Finance Director, City of Sunnyvale Audience: finance professionals We’ll be using webinar tools (including real-time questions and live polling) to make this a great opportunity for audience interaction. Are you a member of CSMFO and want to earn CPE credit for participation in the webinar? Note the requirements at registration. 1. Register in advance for the webinar: There is no charge for participating in the webinars, but each requires advance registration. *** Advance registration required for this no-charge webinar: https://www1.gotomeeting.com/register/131236384 2. Connect with the webinar and audio: Use your logon information from the email confirmation you receive via email from GoToWebinar. We recommend the telephone option dial-in number provided by GoToWebinar for sound quality. Depending upon your internet connection, VOIP option for audio (computer speakers) can have delays or sound quality issues. 3. Ask questions:

https://www1.gotomeeting.com/register/131236384

https://www1.gotomeeting.com/register/131236384

You may submit questions anonymously via email to [email protected] in advance or via the webinar during the panel discussion. As moderator for the session, Don Maruska will pose the questions. 4. Presenters’ presentation materials: We post these with the agenda at “Live Audio & Archives” tab of www.csmfo.org/coaching. The PPT will be available about 2 hours before the webinar. After a webinar occurs, a digital recording along with the PowerPoint materials and results of the polling questions will be available within 24 hours at the "Live Audio & Archives" tab of www.csmfo.org/coaching. Post-Webinar Group Discussions Many agencies are organizing groups to participate in the webinars (live or recorded) and discuss the topics among themselves after the webinars. Some are summarizing their discussions and distributing them to managers throughout their organizations. Use the CSMFO Coaching Program as an effective way to enhance professional development in your agency. Here are some discussion starters for this session. a. How accurate has our agency been in forecasting property tax revenues? b. Where would improved accuracy be especially useful? c. How can we work with our Auditor Controller to prepare more effective estimates? d. What can we apply from the webinar to enhance our success? MORE RESOURCES--See the "Coaching Corner" at www.csmfo.org/coaching for valuable resources to boost your career. These include a Financial Management Skills Inventory, Resource Matrix, Coaches Gallery of 24 volunteer CSMFO Coaches willing to help you on a one-to-one basis, and an archive of digital recordings and materials from past webinars. Enjoy the resources and support to thrive as a local government finance professional.

Don Maruska, Master Certified Coach Director, CSMFO Coaching Program See "Coaching Corner" at www.csmfo.org/coaching

mailto:[email protected]

http://www.csmfo.org/coaching




Paula Cone, President, HdL Coren and Cone

After spending 24 years in municipal government in finance and city management, Mrs. Cone completed the development of the first cost-effective and accurate program for identifying, monitoring, auditing and correcting property tax misallocations. She oversees the company's property tax management and auditing division which is also responsible for verifying and correcting jurisdictional and boundary errors, budget projections and client interface. Ms. Cone earned her Bachelor's degree from California State University at Long Beach. She is former Parks and Recreation Director and Assistant City Manager of the City of Lawndale.

Barbara Godwin, editor of the CA Property Tax Managers Reference Manual and Property Tax Manager, San Luis Obispo County

Barbara Godwin has been the Property Tax Manager of the San Luis Obispo County Auditor-Controller’s Office for the last seven years. The Property Tax Division is responsible for the calculation of tax rates and property tax bills, changing or reissuing tax bills due to roll revisions, issuing refunds, in addition to calculating revenue estimates, administering redevelopment revenues, reconciling, and distributing all property tax collections.

Ms. Godwin is a charter member of the California Property Tax Manager’s Tax Manual Committee and has been the editor of the manual for twelve years. The Property Tax Reference Manual is a comprehensive guide of the statutory procedures and responsibilities for County Auditors throughout the state. Prior to coming to San Luis Obispo County, Ms. Godwin was the Property Tax Manager in Santa Barbara County for thirteen years, with a combined total of twenty- nine years of county service.

Drew Corbett, Assistant Finance Director, City of Sunnyvale

Drew joined the City of Sunnyvale’s Department of Finance in 2005 as a budget analyst. He currently serves as the Assistant Director of Finance, overseeing the budget, accounting, payroll and accounts payable functions for the City. Prior to joining the City of Sunnyvale, Drew worked at the Intel Corporation in a variety of roles, including senior financial analyst and project manager. Drew also spent two years as an elementary school teacher as part of the Teach for America program.

Drew has a B.A. from the University of the South (Sewanee, TN) and an M.B.A. from the University of Wisconsin-Madison.

See the following link for the California Property Tax Managers Manual

http://www.co.sanmateo.ca.us/Attachments/controller/Files/property_tax_manual.pdf

http://www.co.sanmateo.ca.us/Attachments/controller/Files/property_tax_manual.pdf

How to Effectively Forecast Property Tax Revenues

Coaching Program October 25, 2012

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Coaching Program: 14th year as member benefit

Career Development Committee

Polling Question #1

How many people are participating at your location?

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Overview of Session 1. What are the keys to forecasting property tax revenues accurately? 2. What factors do you need to consider in estimating the distribution of property tax revenues? 3. How can you work with your Auditor Controller successfully to prepare your forecasts? 4. What do you do if you have questions about the accuracy of your receipts?

Paula Cone, President, HdL Coren & Cone Barbara Godwin, Property Tax Manager, San Luis Obispo

County and editor of the CA Property Tax Managers Reference Manual

Drew Corbett, Assistant Finance Director, City of Sunnyvale Don Maruska, Director, CSMFO Coaching Program …and polls and questions along the way.

Delivering Revenue, Insight and Efficiency to Local Government

Before Forecasting – A brief review of the Process 1. Property valuation and taxation timeline

2. Distribution of Revenue - AB-8 Factors

3. Apportionment of Pooled Revenue


1. Property Taxes From the Taxpayer to my City TIMELINE

• Properties are valued by the Assessor on January 1st annually.

Maximum of 2% CPI applied by assessors per Prop 13.

• Between January 1st and the close of the roll on June 30th, Prop 8 appeals and other corrections and adjustments are made by the Assessor.

• July 1st the property roll is transferred to the Auditor to have the

taxes extended and transmits the roll to the Tax Collector.

• The Tax Collector/Treasurer prints and mails the tax bills in September. Taxes are due on or before December 10th and April 10th.

• The Treasurer/Tax Collector receives the revenues and the Auditor/Controller apportions the receipts to all taxing jurisdictions

ASSESSOR AUDITOR/CONTROLLER TREASURER/TAX COLLECTOR


2. DISTRIBUTION OF REVENUE

Taxes are distributed based on whether a city or taxing entity is Teeter or Non-Teeter.

• Teeter cities receive 100% of the levy without regard for

delinquencies. Roughly 98% apportioned with a 2% true-up. No redemptions or delinquent payments are made

• For Non-Teeter Cities: Apportionment Factors are established

annually-City share of county total revenue levied per AB-8. • Each jurisdiction gets their share of all revenues collected

county-wide- per AB-8 - RTC §96.1 and §96.2. • This results in each city having the same delinquency factor

as only taxes received by the tax collector are apportioned.

Revenues are also distributed based on the secured and unsecured revenue proportions received countywide.

Polling Question #2

Is your city or taxing entity Teeter or non-Teeter?

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3. REVENUE SOURCES THAT ARE POOLED AND APPORTIONED PER AB-8

• SUPPLEMENTAL PAYMENTS – sales transactions or new

construction valued between tax years. These can be positive or negative

• ROLL CORRECTIONS – errors found or late enrollment of value throughout the county

• TAX PAYER REFUNDS – refunds due for overpayment of taxes often resulting from successful appeals lowering values. These reductions may encompass multiple years of declines hitting a single future tax year.

• REDEMPTIONS (DELINQUENCIES) are pooled in non-Teeter cities or taxing entities.


FORECASTING PROPERTY TAX REVENUE IN AN UNCERTAIN ECONOMIC CLIMATE

ELEMENTS TO CONSIDER IN FORECASTING PROPERTY TAX REVENUE

WHAT IS THE MAKE UP OF YOUR COMMUNITY?

HOW HAS THE ASSESSOR BEEN HANDLING VALUE REDUCTIONS? Does your assessor make resources available?

ARE THERE NUMEROUS COMMERCIAL AND INDUSTRIAL APPEALS AWAITING HEARING? Does the clerk of the board inform your City or agency of large pending appeals?

WHEN WILL THE ASSESSOR BEGIN TO RECAPTURE PROPOSITION 8 REDUCTIONS? 2014-15?

WHAT ABOUT POOLED REVENUE? – THE WILD CARD IN FORECASTING


• Some cities are established communities with a minimum of

new housing development while others are newer growing communities which saw huge residential and commercial development between 2003 and 2007.

• Some communities have large former redevelopment agencies still directing general fund revenues to enforceable obligations, while other cities have none.

• The mix of residential, commercial, and industrial properties can mean a difference in whether a city is expecting growth or declining values in any year from one use type or another.

• What is happening to sale prices in your city? Are they recovering or still in decline? Local board of realtors may help.

• There are only a handful of county assessors that provide timely resources to cities during the budgeting process.

• Ask your assessor if he/she has a projection for value changes in your

jurisdiction.

• Ask your assessor how aggressive the reductions are anticipated on successful appeals. Taxpayers won 76.6% of appeals heard in 2010 and a similar # in 2011. Successful appeal have reduced approximately 20% of the original values of applicants.

• Be prepared for assessor’s to respond that they are not equipped to provide data until after the close of the roll in late June which is too late to be useful in budget planning.

WHAT CAN YOU EXPECT FROM YOUR ASSESSOR?


• Proposition 8 requires assessors to review the market value of properties when the economic conditions result in property being worth less than the previous assessor’s enrolled value.

• Huge wave of Prop. 8 reductions impacted the 2008-09 through 2011-12 tax years when the real estate bubble burst and properties lost between 30% and 65% of their peak values. The largest hit counties were Merced, San Joaquin, Riverside, and San Bernardino.

While reviewed annually by the Assessor, recapturing will take time; as much as 10 years or more to recover even ½ of the original values depending on the creation of jobs, availability of funds for financing new home purchases and economic certainty.

PROPOSITION 8 REDUCTIONS


POOLED REVENUE IMPLICATIONS • Pooled revenue from supplemental assessments, tax payer refunds, roll

corrections, and prior year adjustments are the hardest elements to forecast.

• Each of these sources of funds are relatively unknown until billed and paid to the county.

• Each of these sources is a view to what is happening within the county as a whole and not to what is happening within your borders.

• The receipts will fluctuate from one fiscal year to the next depending on the number of homes transferred and at what price point, how many building permits are completed, the rate that successful appeals are granted or numbers of roll corrections implemented after the close of the roll.

• The annual certified report of values are received by your finance departments is a snapshot in time and changes every day.


CONSIDERATIONS IN DEVELOPING A FORECASTING MODEL CPI Adjustment approved for upcoming FY October-October CPI this will

be applied to properties not previously reduced per Prop 8 which have to be reviewed each year. – CPI is Tracking at 2% for 2013-14

Market value of properties sold between tax years for incremental value increase – Assessor’s office as a resource

Prop 8 reductions or when the economy rebounds in a region the potential recapturing of previously reduced values – Assessor’s office resource

Exposure of pending commercial and industrial appeals (pooled) Clerk of the Board of Supervisors or Assessor

Completed new construction submitted to county assessor prior to the end of the previous calendar year - Your local building official

Base year values of properties in the former RDA- constant no increase Successor Agency or historical data

Personal property on either the secured or unsecured tax roll which will depreciate and may decline unless replaced by new assets.

Values are taxed @ 1% --times your weighted share of the 1% levy.

Barbara Godwin Property Tax Manager

County of San Luis Obispo

Change in ownership Improvements...add a room, pool, etc. Damage or destruction due to a disaster or

calamity 2% (CCPI) annual indexing under Prop. 13 Reassessment to market value (Section 51

as modified by Proposition 8)

County Assessor – Prior Year Data and Current Trend Information

A/C Prior Year Revenue & Historic Trends

Board of Equalization & State Controller Reporting

DataQuick – Property Information Provider

RealtyTrac – Foreclosure Information

Property Transfer Tax - Based on selling price. $1.10 per $1,000 of Sales Price Unincorporated PTT - 100% to County Incorporated PTT - 50% to City & 50% to County

Approximately 1 year after an increase in property transfer tax….

Supplemental Tax Increases (Decreases)- Additional taxes are prorated for the affected period and billed at 1% of sales price over the A/V (or refunded if a decrease). Approximately 1 year after an increase in supplemental property tax...

Secured Tax Increases - New assessed values are permanently enrolled.

This graph shows how the indicators can be used to predict trends.

Note: RealtyTrac information is zip code driven and an inquiry could potentially bring in information from the unincorporated parcels within of the City’s zip code. Only use this data for identifying & projecting trends in your area.

RealtyTrac Presents Data In Various Formats

…And By Individual City or Community

Polling Question #3

Which of these resources do you tap to prepare estimates of property tax revenues?

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A/V Growth for 2007/08 2010/11 Countywide – General Fund 9.31% - 1.02% San Miguel Elem School 14.61% - 4.12% Templeton Unified School 10.29% - 0.48% Avila Beach Comm Svc Dist 31.06% 0.01% CSA 7, Zone B 58.36% -26.67%

SLO County Auditor provides countywide estimates that must be adjusted for the growth trends of each individual district. Historical growth percentages are provided in the Tax Rate Booklet posted on line.

2007-08 2010-11 4000005 Secured................. 9.5%.............. -1.1% 4000007 Unitary................... 4.7%.............. 1.8% 4000025 Unsecured............. 6.2%.............. -2.8% 4200075 Homeowners Ex….. 1.1%.............. -0.2% Combined Growth.................. 8.9%............. -1.1%

Property Taxes can also fluctuate considerably each fiscal year by roll type.

Secured Taxes ◦ Fiscal Roll Year of 7/1-6/30 ◦ Billed in 2 installments, due by 12/10 & 4/10

Unsecured Taxes ◦ Calendar Roll Year of 1/1-12/31 ◦ Billed in 1 installment, due by 8/31

Supplemental Taxes ◦ Fiscal Roll Year of 7/1-6/30 with ongoing, year

round billings driven by “Date of Event” ◦ Secured has 2 installments, Unsecured has only 1 ◦ Due dates are determine by the bill’s mailing date

Develop a good working relationship with your Auditor-Controller and Assessor.

See what is available on their websites. Ask for preliminary information as early as

possible even if they are only “a best guess”. Realize that not every county has the tools to do

everything you may want, such as in-depth analysis by geographic area.

Do as much research as possible on the historic trends for your agency so you better understand your unique situation and local market trends.

Utilize the CSMFO email forum to ask questions.

Polling Question #4

Given the volatility of factors driving property tax revenues, what attention is your agency giving to estimating?

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Projecting Property Tax Revenue Drew Corbett

City of Sunnyvale

City of Sunnyvale Overview City of approximately 142,000

Second largest city in Santa Clara County Full-service city

Significant technology sector presence Home to Yahoo!, Network Appliance, Juniper

Networks Property Tax is top General Fund revenue

source 32% of total

Polling Question #5

What percentage is property tax of your agency’s general fund revenue?

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The Basics – Revenue Components

July – December: Monitor monthly AV information from County Meet quarterly with County

Assessor’s Office, Treasurer-Controller, Tax Collector Receive CCPI

January – April: Develop projections

Update current year projection Develop short- and long-term forecasts

Projection Timeline

Update current year projection Year-to-date remittances Information from Treasurer-Controller

Provides estimate for all Property Tax sources Estimates roll corrections impacting totals

Collaborative effort between cities and County

Sets baseline for future years’ projections

Setting the Baseline

Focus on largest sources Secured, VLF in lieu, Unsecured, Supplemental

Consider the following factors: Current Assessor’s AV growth (or decline) estimate

Factoring in CCPI Mix of residential vs. non-residential Economic conditions Pending appeals valuation

Projecting Future Revenue

Current Assessor’s AV estimates are valuable starting point

CAWF (2013-2014 roll in progress) $23.06B

CTR (2012-2013 roll with roll corrections) $22.59B

Roll (2012-2013 at roll close without any changes) $22.55B

Change (to the 2012-2013 roll due to corrections) $0.4B

Percent change (to the 2012-2013 roll due to corrections) 0.15%

Growth (2013-2014 roll growth since 2012-2013 roll close) $0.5B

Percent growth (2013-2014 roll growth since 2012-2013 roll close) 2.25%


Separate residential vs. non-residential Different trends Different factors impacting valuations Different timing of changes to assessment roll


Current AV Distribution

$4

$6

$8

$10

$12

$14

$16

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Bill

ions

Residential Non-Residential

Residential vs. Non-Residential

Residential Stable historical AV growth High % of pre-Prop 13 properties Desirable high school district Prop 8 adjustments more timely

Non-residential Historical AV growth but more volatile

Quick rebounds from drops in AV Lag in assessment appeals

Residential vs. Non-Residential

General economic indicators Unemployment, GDP growth, consumer confidence

Local economic conditions Foreclosures, commercial vacancies, development

activity, business conditions May impact segments differently Need to consider conditions beyond jurisdiction

Supplemental Tax

Economic Conditions

Understanding potential exposure important Total valuation of pending appeals Appeal years

Past appeals = County pool Reduced valuation = City responsibility

Historical success rate Use with caution; recent recession may reset baseline

Most difficult to incorporate into projections

Pending Assessment Appeals

Sunnyvale projects for 20 years Methodology past years 3 or 4 more broad

Utilize long-term historical AV growth Still segregate commercial and residential

Do not attempt to project future downturns Instead temper growth projections

Utilize for planning purposes

Other Considerations

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Resources and Feedback

Go to “Live Audio & Archives” tab for recordings of the webinars, PDFs of PPTs, polling results, and other professional development resources.

www.csmfo.org/coaching

Please complete the follow up survey.


Polling Question #6

How was the webinar of value to you?

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Post-Webinar Discussion Questions

a.How accurate has our agency been in forecasting property tax revenues?

b.Where would improved accuracy be especially useful?

c. How can we work with our Auditor Controller to prepare more effective estimates?

d.What can we apply from the webinar to enhance our success?

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Contacts for Today’s Session Paula Cone, Principal and head of HdL’s property tax

services, [email protected]

Barbara Godwin, Property Tax Manager, San Luis Obispo County and editor of the CA Property Tax Managers Reference Manual, [email protected]

Drew Corbett, Assistant Finance Director, City of Sunnyvale, [email protected] Don Maruska, Director, CSMFO Coaching Program [email protected]





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Upcoming session Answering Your Questions about

Pension Reform – expert panel CSMFO Coaching Program 2:00 – 3:30 p.m., PT, Thursday, November 15 a. Dial : 206-402-0100 Caller PIN: 876422# (standard telephone call charges

apply) OR b. Use the online broadcast provided through the sponsorship of Granicus – go

to www.csmfo.org/coaching and click on “Live Audio & Archives” to find the session.

Note: This will be a teleconference, which does not require advance registration. Further

details will be distributed on the CSMFO members email list and posted at “Live Audio & Archives” tab of www.csmfo.org/coaching.

Polling Results from “How to Forecast Property Tax” – webinar

October 25, 2012

141 locations; 236 participants in live audience

27% 2 - 5

“how to forecast property tax revenues” -- webinar

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