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SR-203-001-03 (7) F:\FINANCE\ADMIN\Staff Reports\Library Bonds Tax Ovefride 04-05.doc Council Meeting: September 14, 2004 Santa Monica, CA TO: Mayor and City Council FROM: City Staff SUBJECT: Ordinance Setting the FY 2004/05 Tax Rate for the 1990 and 2002 Library General Obligation Bonds INTRODUCTION This report recommends that the City Council adopt the attached ordinance setting the FY 2004/05 tax rates fOf the 1990 and 2002 Library General Obligation Bonds. BACKGROUND On Apfil 10, 1990, the City issued $4.5 million in Genefal Obligation Bonds to acquire property adjacent to the Main Library to meet immediate parking needs and for future library expansion. On June 25, 1998, the City refunded a portion of the 1990 bonds at a lower interest rate resulting in a lower tax overfide rate assessed to local property owners. On August 27, 2002, the City issued $25 million in additional voter approved General Obligation bonds for construction, improvement, and femodeling of the Main Library and branch libraries. The annual debt service on all Library-related Genefal Obligation bonds is payable from annual overrides on the Property Tax levy. DISCUSSION Annually, the City sets the override fates for property taxes. From FY 1990/91 through FY2001/02 the tax override rate was set on the annual debt payment for the 1990 Library Bonds (refinanced in 1998). FY 2002/03 was the first year that tax rate included 1 the 2002 Library Bonds. The rate set for the FY2002/03 bonds was the same methodology as the 1990 bonds. However, due to a change in State law (Proposition 87) the 2002 Library Bonds require a different tax rate setting methodology to be used. As a result of the methodology used, the tax rate set for FY2002/03 was too high. The tax rate for FY2003/04 was correctly set. The County Tax Assessor has now provided the information necessary to calculate the over collection FY2002/03 which was $661,803. The Redevelopment Agency received the over collection and will pay that amount to the City which will be applied to the 2002 Library Bond payments for FY2004/05. The Finance Department has calculated the total property tax overrides for FY2004/05 to be $.003427 per $100 of assessed valuation for the 1990 Bonds (refinanced in 1998) and $.008072 per $100 of assessed valuation for the 2002 bonds. The 2002 bond payments are reduced by $.004289/$100, or 34.75%, to reflect the one-time credit from the RDA. Attachment 1 provides details of the tax rate calculation. BUDGET/FINANCIAL IMPACT There is no budget change resulting from adoption of the attached ordinance. The tax revenue generated from the Library bonds tax rates is already included in the FY2004/05 budget. 2 RECOMMENDATION It is recommended that the City Council introduce and adopt the attached ordinance setting the FY 2004/05 tax rates for all Library-related General Obligation bonds as follows: 1) $.003427 per $100 of assessed valuation for the 1990 Bonds (refinanced in 1998). 2) $.008072 per $100 of assessed valuation for the 2002 Bonds Prepared by: Steve Stark, Director of Finance Janet Shelton, Budget Manager David Carr, Principal Budget Analyst-Investments Attachments: Calculation of Tax Rate (Attached) Ordinance - See adopted Ordinance No. 2138 (CCS) 3 ATTACHMENT 1 CALCULATION OF TAX RATES Calculation of the FY 2004-05 property tax rates are as follows: 1998 Bonds $418,294 Net Requirements for FY 2004-05 (Debt Service less prior year adjustments) (11,940) Projected Unsecured Property Tax revenues for FY 2004-05" $406,354 Projected net debt service requirements to be financed by a levy on secured property for FY 2004-05 406.354 11,857,948,007 .... 1$100 =1,,~SitI'i\'<<t~7ia_~1;:'.iJ'~jl j'j!L~ .k. .,.", . . .i;iM!j'~E~it> ' ".t!JIf:,,,~:;,,,,,<:;:!,,,:jit FY 2002 Bonds Baseline $2,012,451 Net Requirements for FY 2004-05 (Debt Service less prior year adjustments) (107,817) Projected Unsecured Property Tax revenues for FY 2004-05" $1,904,634 Projected net debt service requirements to be financed by a levy on secured property for FY 2004-05 (661.803) FY 2002-03 overpayment to RDA to be reimbursed by RDA 1,242,831 Projected net debt service requirements to be financed by a levy on secured property for FY 2004-05 $1.242.831 $15,397,441,252 .... 1$100) =1.M.m!:I~II:1iBf.Wi'0\1~!iil !~"...,. i,'..~.' ,,:tcf'ft "~.,)<l'",, ,. .,' ._.~;:,..^,,;j\ih,1Jlw',,!\ .. Unsecured revenues are calculated applying the prior year secured tax rate to current year assessed valuation of unsecured property. .... Reflects total City secured assessed value for FY 2004-05 adjusted to reflect projected delinquent parcels. F:\RecordsAndElectionShare\Meetings\WWW\2004\20040914\2004091407 -D-2.x1s