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HomeMy WebLinkAbout15-084 qJWN i r . ,,, r vpi I dU r,dii Vi ( ki!f i ta w f'pr li iii n 17 kli i ra l ' N 00/040141400, P G , / iliiri '! r / ,( w ' d / r , lr4 . A., 00 �� Vii/ 00100,4410,* g4''". J � ili i 040100,41,00100,15,00 M� /� ��� $�' 110''' da d� I I 9w ,� ,,„01AAAd tza7�;'61,oHIP, +t ,�n I ,b1,.',.�r7� ,,l )0,,,d ,�10� ,), tit der , /,o ndi, d(,r alilif,P9 ,imh�,.,),rr ;),,14/,L./l� �`r Resolution No. 15-084 •ESOLUTION OF THE BOARD OF SUPERVISORS OF THE COUNTY +0;F BUTTE ADOPTING THE BUTTE COUNTY ALTERNATIVE METHOD OF DIST I;UTION OF TAX LEVIES POLICY WHEREAS, on October 12, 1993 the Board of Supervisors adopted Resolution No. 93-156 which established the Alternative Method of Distribution of Tax Levies, commonly known as the Teeter Plan (so named after Desmond Teeter, the Contra Costa County Auditor who developed it in 1949), as the method of property tax apportionment used in the County; and WHEREAS, under the Teeter Plan the County shall apportion 100% of defaulted secured and supplemental property taxes, allowable assessments, and/or utility revenues to local agencies within the County, rather than the actual tax collected; and WHEREAS,the Teeter Plan provides the local taxing agencies stable and reliable property tax revenues; and WHEREAS, the Teeter Plan increases County revenues due to the penalties and interest received upon payment of the delinquent tax bills; and WHEREAS, the County's Auditor-Controller, Chief Administrative Officer and Treasurer/Tax Collector, in compliance with Revenue and Taxation Code §4701 et seq, the County Tax Collectors' Reference Manual issued by the State Controller, and the Accounting Standards and Procedures for Counties issued by the State Controller, have developed a policy on the management of the Teeter Plan including, but not limited to, the management of the Tax Resources Fund and Tax Loss Reserve Fund NOW, THEREFORE, BE IT RESOLVED that the Board of Supervisors of the County of Butte, State of California hereby adopts the Teeter Plan Policy as set forth in Exhibit "A" attached hereto, to become effective as of June 30, 2015. PASSED AND ADOPTED by the Butte County Board of Supervisors this 9th day of June 2015 by the following vote: AYES: Supervisors Connelly, Kirk, Wahl, Lambert and Chair Teeter NOES: None ABSENT: None ABSTAIN: None � Nl\ <\ ,w ,.. . .„ Th DOUG TEETER, Chair Butte County Board of Supervisors ATTEST: 6 ----a-ma' e,---- B.: Paul Hah , Chief Administrative Officer and Clerk of he Board of Supervisors Butte County Administration Exhibit A Teeter Plan Policy Effective Date: 6/30/2015 Version 1.0 I . Approval Date: 06/09/2015 Last Revision Date: 11111111plo.t1(011111.cotititylliii CALIFORNIA . PURPOSE To establish a policy related to the management of the Alternative Method of Distribution of Tax Levies, known as the Teeter Plan, including meeting the requirements of applicable State law, accounting guidance, fiscal transparency and prudent financial planning. The Alternative Method of Distribution of Tax Levies is commonly referred to as the Teeter Plan, named after the Contra Costa Auditor, Desmond Teeter, who developed it in 1949. The Teeter Plan allows the County to allocate 100% of billed assessments, secured, utility and/or supplemental property tax revenues to jurisdictions within the County. The County advances the revenue to local agencies and retains the eventual delinquent tax payments along with the related penalties and interest. This plan provides local agencies with more consistent and predictable revenues and, over the long term, increases County revenues due to the penalties and interest received on the delinquent bills. POLICY SCOPE This policy applies to all aspects of the Teeter Plan as carried out by the Auditor- Controller, Treasurer-Tax Collector and Chief Administrative Officer including, but not limited to, the management of the Tax Resource Fund and Tax Loss Reserve Fund, as well as the transactions between these two Funds and the County General Fund. POLICY A. Compliance with State Law and Guidance The County shall adhere to Revenue and Taxation Code related to the alternative procedure for the distribution of property tax levies, specifically, Revenue and Taxation Code §4701 et seq, the County Tax Collectors' Reference Manual issued by the State Controller, and the Accounting Standards and Procedures for Counties issued by the State Controller. B. Tax Resource Fund The Tax Resource Fund shall be used to control the tax charge receivable, collections and distributions, also referred to as the buyout. The balance in the Tax Resource Fund is used to pay taxing entities the difference between tax revenues received and tax revenues due. The Tax Resource Fund shall receive payments for prior secured collections, and redemption collections, including penalties and interest earned on apportioned taxes, to fund the buyout. When the annual buyout is smaller than the annual receipts, the General Fund shall receive the excess funds. When the annual buyout is larger than the annual receipts, funds shall be transferred from the Tax Loss Reserve Fund so long as the balance in the Tax Loss Reserve Fund meets the minimum requirements of Revenue and Taxation Code §4701 et seq and this policy. If the buyout were to be larger than both the receipts in the Tax Resource Fund and the balances available for transfer from the Tax Loss Reserve Fund, the County is responsible for making up the difference using other resources. C. Tax Loss Reserve Fund The Tax Loss Reserve Fund is required for any county that adopts the Teeter Plan and must be used to fund any losses the County experiences when tax defaulted properties are sold at auction. This occurs when a property sells at auction for less than the outstanding balance (total taxes plus penalties and interest) due. Revenue and Taxation Code §4701 et seq requires that the Tax Loss Reserve Fund maintain a balance of either 1% of assessed valuation or 25% of the total delinquent secured taxes for participating entities in the County to ensure there are funds available for any losses, which is subject to change annually by the Board of Supervisors. Butte County has opted to use the 1% of assessed value method. In addition to these mandated uses, Butte County has historically opted to use the Tax Loss Reserve Fund more broadly to fund tax related losses, including changes to prior year apportionments as a result of audits, lawsuits or similar issues. This practice protects the County General Fund from experiencing large, unpredictable revenue adjustments. In order to provide adequate reserves to protect the County from property tax related losses, the Tax Loss Reserve Fund shall maintain a balance of 1%-3% of assessed valuation as follows: i. At the end of each fiscal year, the Tax Loss Reserve Fund shall have a balance representing 3% of current assessed valuation unless: • The Tax Resource Fund did not have adequate funds to support the annual property tax buyout. In this case, available funds shall have been transferred from the Tax Loss Reserve Fund to the Tax Resource 2 Fund (leaving the required minimum reserve of 1% of assessed valuation) to cover the buyout; • There are not adequate funds available in the Tax Loss Reserve Fund to support a 3% reserve, but funds are available to meet the statutory requirement of a 1% reserve. ii. At the end of the fiscal year, any funds in excess of the reserve amount shall be transferred to the County General Fund. D. Taxes and Assessments subject to the Teeter Plan All defaulted secured taxes and assessments shall be part of the Teeter Plan per Resolution 93-156. Nuisance abatement, Communities Facilities Districts (Mello- Roos), 1915 Act Bonds, other direct charges, PACE tax assessments and other assessments are not included due to their discretionary nature or ineligibility in accordance with Revenue and Taxation Code §4701 et seq. E. Responsibilities The Auditor-Controller or designee, in collaboration with the Treasurer-Tax Collector or designee and Chief Administrative Officer or designee, shall submit a report annually to the Board of Supervisors regarding the operation of the Teeter Plan for the fiscal year, including the annual buyout and available resources to fund the buyout, funds transferred to the General Fund, levels of reserves held in the Tax Loss Reserve Fund and all uses of the Tax Loss Reserve Fund. BACKGROUND A. In California, property tax revenue is collected by counties and distributed (or apportioned) to the appropriate taxing jurisdictions that levy the taxes under one of two possible methods. i. Under the first method, the tax-levying entities receive the actual tax revenue collected in a particular year, which is typically less than the amount billed, and any delinquent taxes received in future years are then distributed to the tax-levying entities in the year during which they are received. ii. The second method of property tax apportionment is known as the Teeter Plan and is established in Revenue and Taxation Code §4701 et seq. The object of this alternative procedure is to simplify the tax-levying and tax- apportioning process and to increase flexibility in the use of available cash resources. Under the Teeter Plan, the County apportions delinquent secured property taxes to tax-levying entities at 100% of the defaulted secured taxes 3 and assessments billed rather than the actual monies collected. The jurisdictions, in turn, have more stable and reliable annual property tax revenues. The County then retains all future delinquent tax payments, including penalties and interest. This benefits the County because it ultimately receives a greater amount of revenue when compared to the first method. B. The Butte County Board of Supervisors adopted Resolution 93-156 on October 12, 1993, which established the Teeter Plan as the method of property tax apportionment used in the County. In order to implement the plan, the Tax Resource Fund and Tax Loss Reserve Fund were established. C. Since its adoption, the Teeter Plan has provided varying revenues to the General Fund; however, there had not been a formalization of the methodology for determining appropriate funding levels for the Tax Resource Fund and Tax Loss Reserve Fund. To meet the County's goals of maintaining appropriate levels of reserves and increased transparency for purposes and uses of Funds, development of a standard policy supported by prudent financial practices was necessary. D. An analysis of the time period from Fiscal Year 2002-2003 through Fiscal Year 2013- 2014 has demonstrated that the recommended best practice of maintaining funding levels above the statutory minimum of 1% is warranted, especially in consideration of the downturn in the economy during 2007-2010, which resulted in the need for substantial advances from the Tax Loss Reserve Fund to cover the Current Secured and Supplemental Tax Roll Buyouts for two years during that time period. Additionally, this analysis demonstrated that, had this policy been in place during the 2007-2010 economic downturn, the level of reserves recommended in this policy would have been adequate. 4