HomeMy WebLinkAboutAgenda Report - October 20, 1993 (66)CITY OF LODI
COUNCIL COMMUNICATION
AGENDA TITLE: ALTERNATIVE ':'AX APPORTIONMENT (TEETER)
MEETING DATE: October 20, 1993
PREPARED BY: Finance Director
RECOMMENDED ACTION: That the City Council adopt the attached Resolution to authorize the
San Joaquin County Auditor -Controller to apportion property tax revenues due the City of Lodi in
accordance with the provisions of the Teeter Plan.
BACKGROUND INFORMATION: On September 23, 1993, San Joaquin County notified all
local agencies in San Joaquin County that the County Board
of Supervisors would adopt an alternative property tax
apportionment method known as the "Teeter Plan" for those agencies wishing to participate in the Plan.
(See Tab A). On October 5, 1993, the County Board of Supervisors adopted the Teeter Plan at a
regularly scheduled meeting of the Board.
The County has requested from cities that wish to participate in the "Teeter Plan" a City Council
Resolution authorizing the San Joaquin County Auditor -Controller to apportion property tax revenues due
their City in accordance with the provisions of the Teeter Plan.
REASONS ADOPTING THE TEETER PLAN
The "Teeter Plan" results in the following benefits to the City of Lodi:
The City will receive 100% of the current secured tax levy in the current year instead of
95% as apportioned under the current plan. The remaining 5% is apportioned to the City
of Lodi as delinquent taxes are received over the next 5 years.
The administrative effort required to track property tax collection and distribution is
reduced.
The City will receive a zne-time catch distribution of property tax this year in the amount
of $482,000 which mitigates the impact of the State property tax "grab" over the last two
years.
REASON FOR NOT ADOPTiN ME TEETER PLAN
By supporting the "Teeter Plan" the City of Lodi forfeits the right to future tax penalties in the amount
of 1 1!2% per month of delinquent property taxes due the City. This is approximately $150,000 per year
based on current delinquencies.
APPROVED:
A
THOMAS A. PETERSON ,.cyt POW
City Manager
'v*ID
CONCLUSION
The alternative method of tax apportionment know as the "Teeter Plan" will give the City of Lodi a one-
time distribution of $482,000 in needed revenues to offset property losses due to State 'grabs' of the
City's property tax both this year and last year. For this, the City will forfeit future rights to tax
penalties on the unpaid property tax.
/ D•
ix�Flynn
Finance Director
N
Resolution No
RESOLUTION REQUESTING INCLUSION OF THIS CITY INTO
THE ALTERNATIVE NIEMOD OF PROPERTY TAX DISTRIBUTION
KNOWN AS THE TEETER PLAN
WHEREAS, State Law authorizes counties to adopt alternative procedures for the distribution of
property tax revenue, commonly known as the Teeter Plan; and
WHEREAS, the Revenue and Taxation Code Sections 4701 and 4717 allow for this alternative
method of property tax apportionment; and
WHEREAS, this City Council has determined that adoption of the Teeter Plan by the County of
San Joaquin and applicatioi. of the Teeter Pian to this City is beneficial;
NOW, THEREFORE, BE IT RESOLVED that upon approval of the Board of Supervisors of
the County of San Joaquin, the San Joaquin County Auditor -Controller is authorized to apportion property
tax revenues due this City according the provisions of the Teeter Plan.
Adopted by the City Council of the City of Lodi this 20th day of October 1993 by the following vote:
AYES: Council Members -
NOES: Council Members -
ABSENT: Council Members -
ABSTAIN: Council Members -
Jennifer M. Perrin
City Clerk
Off :e of the
County Admic!strator
aqi
COUNTY OF SAN JOAQUIN
Co,alhouse. Room 707
222 East Weber Avenue
S!ock'.on. Catifornia 95202-2778
(21,9) 458--3211
Sarre letter has been sent to.
• City Managers
Superintendent of Schools
Dear
September 23, 1993
• Redevelopment Agencies
• Special Districts not govemzetl br the County Board of Supervisors
%fterna>rtive %110hod 4 Tax Appurtionment (Teeter Plan)
Revenue and Taxation (R&T1 C)': Sections 47M through 4717 allow for an alternative method
of tax apportionment know:t as th, Teeter P{a;i. This method allows counties to apportion 100%
of current taxes lcvied (billed) to iaxing . ntit'c. aml eliminates the reed to apportion dr{inquent
taxes collected.
On August 11. 19Q3, the County Board Cu,,,:...;:,rs conceptually approved the imptementation
of tha Teeter Plan effective liccal ;car I V)1 )' Bla.,Lc:d on the preliminary bene5t analysis pte-
pared Jointly by the auditor-Con;r0i'ler. Collector, and the; County
Administrator. except for the sch:>>t 6-4 is ;_;. it is anticipated that this plan will provide suh.tan-
tial on: --time benefits for all local �axinr..nut . It % •ill also provide a consistent, predictalr'r cash
flow in future years.
According to R&T Code Section 4715. ar,y nor, that is deemed not to have the Count;• "li ..
sury as its l;gal depository rnu: t h.:ve i:ti r;tit:g hody adapt a resolution to he included in the
Teeter Plan. The County Auditor'.. Ofti: i.o st r:sxi ve your agency's approved resolution Ls soon
as possible to allow the San 3c:aquin C. _,..n!%. Boy tr1 : ,P Supervisors' ap proval by the October 15
deadline.
Ao informational :nesting : Carel r th,: "! .n ',ias been sc!iedulyd to he held at the fol-
lowing time and place:
Date: Thurulay, 310, 1993
'{ ime: 8:30 am.
Place: Shenff's:iudiionui,! post -It" brand fax transm,tr t memo 75'1 jjrory3rr . 3
Court,'tou.,c Ba,::nr_:;t —.. 1—.----�
222 E='XCher.A,.c�:ue 0
.'"'SNA t38t
Co.
Sttxltton. ,iifot:.i:: /�ti �.CO; �G�/t�.iTR—POJT.
Dept.
Fos Fa> r
'.t C76. 1957 1 mac. +1' co T 9==336795 F.02
Alternative Method of Tax yppc,' .,n.ncr+( .`t'.:;: Plian) September 23. 1993
Page 2
The following attachments are in.:ijde� h"r u•; ",;,vide you additional information regarding the r
Teeter Plan and its impacts to your agc:rey. These will he discussed in detail at Thursday's
meeting.
• Attachment A — Fact Slice;
• Attachmert B — Contpari,on of Reet:!ar vs. Teeter Allocation for 1988-89 to 1992-93
• Attachment C — Pro;ecte4 1993-94 Gncz nme Benefit
• Attachment D — Sample -'Opt-In" Resolution
We strongly urge your attendance as the Teeter l' sn may have significant short- and long-term
fiscal ;replications for your agency. If you hove ,4 questions before our scheduled meeting.
please do not hesitate to call me at 468-3211. cr�Brian Van Houten. Auditor-Controller, at
465-3925, or Tom Russell. Treasurer= rax t" ut:ec; ,r, at 468-2133.
Adrian Van Houten Thomas R. Russell {
Auditor-Controller Treasurer-Tax Collector
�Y,CK24
j
Mel Wingett 1
s
County Administrator
x
1vSGW:RSL
Attachments
#RSL09-05
7-7
Attachment A
County of San Joaquin
Aiternative Method of Tax Apportionment
The "Teeter" Plan
Background/Status
In 1949, the State Legislature adopted Revenoe and Taxation Code Section 4701 which
authorised the "Alternative Method of Property Tax Distribution." This alternative
method was proposed by the Contra Costa County Auditor -Controller whose last name '
was Teeter, and therefore, the method is se.-netimes referred to as the "Teeter" Plan. As
stated in Section 4701, "It is ... the object to this alternative procedure to accomplish a
si-znpl ration of the tax -levying and lax>--,Ipportioning process and an increased flexi-
bility in the use of available cash resow. 71 tis method has been used by Contra Costa
for over 40 years and is used in four .tncr I.,ntics iSolano, Siskiyou, El Dorado, and
Tuolumne). Nfanv counties are nov.- considering whether to convert to the Teeter Plan
because of the local property trx shift to schoo!c and the one-time property tax reduction
provision of SB 742.
The basic concept of the Teeter Plan is that ca -h taxing agency receives 1001%a of their cur-
rent secured tax levy. The amuu, (t pail! ea(.ii ; .'ar in excess of actual collections is funded
from a Tax Resources Fund. Monies coiledt.-d from delinquent secured taxes are then
added back to the Tax Resourccs Fund I�:li;;:.Tuent and redemption penalties are placed
in a Tax Loss Reserve Fun; . IVI-en the fvs> -: •c rand reaches four percent of all taxes and
assessments levied for the fisc :.l year,.- nv oss is then available tt-w the County General
Fund.
Currently, the County Auditor-C,an1,r(-,.1L,r apportions secured taxes as coliected. Since
collectlon5v are normally 951/) to'1! o o its,,; t:'.rare is always a portion of secured taxes
that become dvIinquent. When these delii%quent taxes are paid, taxes and }penalties are
apportioned to the taxing ager„<<s. If th, t_ire never paid and the property is sold by
the County taxing agencies, includ(ny tr1+• C . , .•.lit at least rive Years to receive their
share of secured taxes.
Conversion to the'reetcr Plan rt- 3uirt.: ;LE r,.:e� to forego their distribution of delinquent
penalties and redemption Ycn<„tie;, :..:rrc::t,, 1-1 /2"/, per month, on delinquent taxes
which they now receive under _i;e : o+r. e!1,:i0:1,:a fregu!arl apportionment method. How-
ever, they would receive !CV: c,: theii ti ;ax levy each year, with the delinquent
and redemption penalties rove:I.ng tc. tilt, Tr. •. Less Reserve Fund.
To convert to the Teeter Plan, ,,n jo.-i juin ::c+.(a,;y �.•ould be required to buy out the
existing delinquent taxes owed N e +.i; to>_:n. 6ency. It is estimated that the buy --out of
all delincuent taxes, direct assess^lcrts ti:.: :;.;ing Mello Roos), and penalties, atjure 30,
1993 to be approximately $29. :;ilii ^,.
Pagi• 1 of 2
Revenue and Taxation Code c:°ttiro •i? r# .,litres that five percent of the buy-out
amount, excluding the port;c..; rerra:n� n:; <<ecial assessment, be deposited into the
Tax Loss Reserve Fund.
Potential Benefits:
P. ii4
The Teeter Plan offers the taxing agcy! San Joaquin County the following benefits:
s Provides a one-time ivrrease in prciperty tax revenues to all taxing agencies.
> Simplifies the propErt% tax revenue e, t -oration and allocation process for the
agencies and the Audi'or-Owtroller
> Stabilizes property tax %-wenw.- for all re:.:hient agencies.
Fisc Implications:
The Teeter Plan has a dIred etfcct un r.-igc•ncy that receives a share of San Joaquin
County's secured property taus or l• c- a ectal assessments on the tax roll. All taxing
agencies converted to the Teeter Plan wc• ald tLceive 95% of the delinquent property
taxes plus 95% of prior years' deiinquen! ami redemption penalties and 100% of current
year levy. Additionally, agencies, except ychoolis, Would also benefit because the County
would be buying out delingcuent taxi: s at property tax distribution factors not affected by
the property tax shifts for 1993-94.
For the County General Fund, t!:a oiic- t;n:e increase in property taxes would be approx-
imately S.G 8 million. This $f.` I:: 11;• .i i :,ii be used to finance the required reserves to
implement the Teeter Plan.:� a iiti;in:iil�, SS 742 ,1993) allows counties converting to the
Teeter Plan a one-tirne prvpe:r.: Sh"It :eductiu^ for the excess property tax revenue that
schools receive in 1993-94 due wIh. n'
ro:ecsion. This one-time "credit" for the County
is estimated to be approximate :v 510.6 ,r,Abo. .
Steps to Implementation:
> San Joaquin County tic,r.ra ef 5i:i,c:n-;:•ors must adopt a resolution converting to
the Teeter Plan by Octow-?r 15, 1 1'.
> Any taxing agency that :s not to have the County Treasury as its legal
depository must have its gov;--rn.ng `,;:Jv adopt a "opt -in" resolution to be
included in the Teeter i'l.:n
>
Any modifications to t?•,: pr. �j-: -.1 .,,x :::location system must be implemented
Prim to the first proper' taA ,?j-.:.,N� ; inDecember 1993.
;'.-i2 of
Il
Attachment B
I
N
O
O
Un o u, o in o
N
Vi in Ali to L; (!3
%@10leA PV
O
Co
I
Co
Co
r
County of San Joaquin
Conversion to Teeter Plan - Financial Analysis
Projected 1993-94 Secured & Delingent Property Tax Allocation
Ently
Conventional Allocation Method (Regular)
Currant
Sawed DeMnquent Total
t96% 01 C'wwV JA" 92-43 4.„ , Allocath'wl
A=005%, B C=A.D
County General Fund
41,755.116
4776.418
46,531.534
Road D,sW.ts
2,529,400
151.628
2681,117
Cifufuy Utxdry
1,73S.271
102.337
1,h41.f07
Canlotary DsC,cl;
139,922
10,099
150,022
:kan,tx;+U,ev,cls
31,30
2,349
3_.°:;.
Citxf
Ft -G-C _
43,952,754
9.605,619
1769.838
55,328211
8,796,677
2,662,621
i.a.h r,t,
`a"a1,ir11
3b,4:2
597.3:14
1,830 612
3,457.150
2f11.1ti0
:'.;25.:fir;
V. :u
,Sn
146.51(,
•..•^.4c
159.596
19.575
33.1.1:
4,1:•1
75.9
12,: tvc ?St,
4190.
11,701
Tracy
2,972,353
219,821
3.202.174
Hipm Murli SOW01
40,939
2,704
43,643
:,;h(cp Storm Drarnago
176,512
5.606
92.116
,j NOp Strobl Upting
9.214
600
9,814
Lathrop Water District
47,032
2.1184
49.917
Fire Districts
7,487.91S
354.795
7.842,714
Flood Control Districts
616.711
48.544
665,355
t.ioting Districts
9.x..211
7,654
102.866
Marntonance Districts
214,921
19,966
234,889
Wsqui!o Abate Uts7)ci
1,387,633
94.676
1,462,510
Reclalmoon Distracts
362,176
26.821
388,997
Sanitary Districts
53,082
4,395
57,477
l,oclr0((md ComnluNty Service
52.670
3,921
56,592
lya:.1 Conservation Di.trlcts
400,107
26,523
426,630
Niyacon Disbicts
1,517,311
112.037
1 629,349
Stockton MottoTransit
408,629
40,113
448,741
C Ainty Senvica Arwili
91,099
6,197
97,895
Fiedevoloprtwnt Agwows
5,970,031
342,727
6,312,758
Tort" Plan AWcaUon Method
43,439
14.5'_',7
34,8 VA
Currbrit
unapprobonotl
7t,.953
10^,0••t,
Socured
Dellnquorll
Taxes Collected
Total
1993-94
%foci%d C.4v4")
(96%cl Ahi1
tin Jin.-iLM90 1
Albeabotl
['fait]
D
E
F
GaD4F.4F
Ft -G-C _
43,952,754
9.605,619
1769.838
55,328211
8,796,677
2,662,621
397,101
72.411
3,132,133
451,016
1,830 612
406,900
72.416
2,310,127
469 5^P
1�7.%67
18,835
3,474
159.596
19.575
33.1.1:
4,1:•1
75.9
:H,^13
4190.
301 tion
43,439
14.5'_',7
34,8 VA
W.4'Q
7t,.953
10^,0••t,
771.,W
3.604 f3'
!163.61:'.
70.5IP
4,iir'',�97
4e,' .4)b
1,86:014
31,0,1.%0
S5, 31:
Q.791
7,0S 7.05,
279.300
2,Ue1.411
3!9.6135
IS.E73,'JO
3,12u,7UP2
502,397
92,571
3.723,760
^.11,566
43.094
5,617
1,000
49,111
6.068
91,066
11,701
2,063
104,849
12,731
9,699
1,222
217
11,138
1,324
49,507
6.153
1,095
56,755
6,639
7.882,016
966,710
176,825
9,027,551
1,184,841
649.169
83,525
15,5'9x)
743,084
82,729
100,22
13,286
2,451
115.959
'3,093
226,235
28,99?.
5,381
260,609
25,720
1,4FA,8?7
180,755
34,3.40
1,682,013
199,503
Df
381,238
41,053
7,543
429.634
40,837
.:t
55,876
7,516
1,392
64,784
7,306
n
55,443
7,116
1,320
63,879
7,267
J`
421,165
51,289
9,253
481,107
55.078
1,597,169
207,787
38,372
1,843.328
213,960
430,135
$5.832
10.401
496,383
47,627
96,525
22,734
4,111
123,371
25,475
r'+
6,284.243
687,854
107,884
7.079,981
757,223
uOp:r rlltll 23, 1993 freea'4d 8y Sir Ca yAwIcii-co r ast
i
,N
Attachment D
Resolution of the City Council of
Resolution 93—
Resolution Requesting Inclusion of this City into
The AIternative Method of Property Tax Distribution
Known As The Teeter Plan
WHEREAS. State Law authorizes counties to adopt an alternstive procedure for the distri-
bution of property tax revenue. commonly known as the Teeter Plan; and
WHEREAS, Revenue and i-u-Ya:inn Code S:ctions 4701 through 4717 allow for this alter-
native method of property tax aP1 r-rtirr.-nant; and
YHEREAS, this City Ct-.vncil has dUenr,'ncd that adoption of the Teeter Paan by the
County of San Joaquin and application of the T,axcr Plan to this City would be beneficial;
NOW. THEREFORE. BF IT RE=SOLNTT; that L; an the approval of the Board of Supeni-
cors of the County of San Joaquin, the S: n Joa:juia County Auditor --Controller is authorized to
apportion prupe:ty tax revenues ,a:e this ("ay ac..o-ding to the provisions of the Teter Plan.
P.W
Attachment D
Resolution of the Board of Directors of
Resolution 93—
Resolution Requesting Inclusion of this District into
The Alternative 1•iethod of Property Tax Distribution
Known As The Teeter Plan
WHEREAS, State Law authorizes coumie:i to adopt an alternative procedure for the distri-
butier. of property tax revenue, c:urmo:i!y known ss the Teeter Plan, and
WHEREAS, Revenue a:ut Taxcibor. Co f, Scetions 4701 through 4717 allow for this alter-
native method of property tax apportionment, and
WHEREAS, this Board yr Dirrct;,r,; hes determined that adoption of thc'recter Plan by
the County of San Joay.rin and app!icalWn of the "%eter Plan to this District would be beneficial:
NOW. HEREFORE. EE IT k`.SOLVED :hat upon the approval of the Boat of Supervi-
sors of the County of San Joaquin, the tis;, -,;:,;.mn County Auditor-Ccnt-oller is authorized to
apportion property tax revenues cue this Di;:r'.ct a, :ording to the provisions of the Teeter Plan,
8. INFORMATI Local Government Finan SB 742 (Senate Committer
on Bu lget and Fiscal Review). Teeter Plan. Signed by
Governor,
In 1993-94, many counties in the state will be implementing a different property tax
allocation procedure in 1993-94 known as the "Teeter Plan". First enacted in 1949, the
'eeter Plan" provides an alternative way to handle the allocation of revenues attributable
to delinquent property taxes. Counties may, but are not required to, use the Teeter Plan.
Prior to 1993-94, five counties (Contra Costa, El Dorado, Modoc, Siskiyou and Solano)
implemented the Teeter Plan. Counties may adopt the Teeter Plan, after a public hearing,
by resolution of the board of supervisors. The plan will thereafter remain in effect unless
(1) the board orders its discontinuance or (2) a petition is filed with the board by not less
than two-thirds of the participating revenue districts in the county for its discontinuance.
Signed by the Governor on July 19, 1993, SB 742 extends the date by which counties must
pass an ordinance enacting the Teeter Plan from July 15 to October 15 for the 1993-94 fiscal
year. In addition, SB 742 allows counties adopting the Teeter Plan for the first time this
year to reduce their 1993-94 property tax shift pursuant to SB 1135 by an amount equal to
the net property tax revenues received by school districts in 1993-94 attributable to tite
Teeter Plan.
Counties electing to operate under the Teeter Plan allocate property taxes to jurisdictions
based on the total amount of property taxes levied, not the amount collected. At the time
the county adopts the Teeter Plan, the county must forward to each local agency delinquent
property taxes from prior fiscal years. In each county that adopts the Teeter Plan for the
first time in 1993-94, the cities and all other taxing agencies will receive a lump sum
payment of all prior delinquencies.
For counties not operating under the Teeter Plan, interest and penalty is allocated to all
local agencies based on their pro rata share of the delinquent property tax. However, the
county does retain the penalty on delinquent property taxes if the delinquency is cleared up
within the same fiscal year. By adopting the 'Teeter Plat counties are allowed to retain the
interest and penalty on delinquent property taxes in exchange for advancing the full property
tax payment to other jurisdictions. Given the current spread between the rate at which
counties can borrow funds to finance the revenues they advance to other jurisdictions, and
the interest rate of 18% and the 10% penalty charged on delinquent taxes, some counties
believe they can profit from adoption of the Teeter Plan.
Other counties have estimated that except for the one-time reduction in their property tax
shift in 1993-94, allocating property taxes pursuant to the Teeter Plan is a revenue loss for
counties over the next ten years. In fact, the only significant change to the Teeter Plan in
B 742 is the one-time reduction in the property tax transfer. When evaluating the Teeter
Plan, cities must consider the property tax delinquency rate in their jurisdiction, the level
of recoverable delinquencies and their estimation of inflation and the cost of borrowing
money over the next ten to twenty years. (Referred to previously in Bulletin #28-1993.)
October 1, 1993