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  City Manager's Status Report on Property Tax Revenue Issues in the City of Richmond
July 13, 2013

Mayor and Councilmembers:
The purpose of this email is to provide you with background information concerning the existing property tax revenue issues in the City of Richmond.  Specifically, I would like to provide you with some general information regarding Richmond’s FY 2013-14 assessed values, and what actions City staff members are taking to obtain more information on this critical financial issue.
As you know, early last week, we received information regarding assessed values for the 2013-14 property tax year, which is based on a January 1, 2013 lien date.  The critical part of this information was that the City of Richmond assessed values for FY 2013-14 show a decline of 14.62%.  This is in a backdrop of a countywide increase in assessed values of 3.45%, and with 14 of the 19 cities experiencing growth rates in excess of 5%.  Richmond was the only city in Contra Costa County to experience a decline in assessed values.
This assessed value information was received shortly after the City Council adopted a balanced budget for FY 2013-14 that included a modest 4.5% increase in property tax revenues (this would have been the third lowest increase in the County), representing an approximate $1.5 million increase over the level of property taxes in FY 2012-13.  The resulting difference from our estimate of property tax revenue (adopted by the Council) to the property tax revenue that would be generated as a result of the Assessor’s 2013-14 assessed value would represent an approximate $4.5 million reduction in revenue (note that this is less than our original estimate of a $6.1 million reduction).
In statements to the press, the County Assessor’s office indicated that Richmond's decline was the result of the change in the refinery's valuation due to the August 2012 fire.  However, it is far more complicated than that, as shown in the chart below:




Dollar change

%  change 2012 to 2013
















Richmond total
without Chevron






(Note that the above chart was prepared by WCCUSD Superintendent Bruce Harter.  WCCUSD is working cooperatively with the City of Richmond on this issue, as explained below.)
As shown in the above chart, even if one discounts the $1.1 billion reduction in assessed value for the Chevron refinery, there is still an 8.36% decline in assessed value for non-refinery property.  Also, it should be noted that assessed values within the former redevelopment area as reported by the Assessor’s office actually went up by 3.5%.
None of this really makes intuitive sense.  The Assessor’s office may be perfectly within the range of reasonableness in making their assessed value determinations, but we need substantially more information to understand that.  As I previously reported to you, we initiated a Public Records Act request to the County Assessor in an attempt to get clarity about what was happening with assessed values in Richmond.  While the Assessor’s office did respond promptly to our request for information (see the attached response), they indicated that much of the key information we were requesting is confidential under State law.  We do intend, as they suggested, to add clarity to the scope of information we are seeking and continue the information gathering process. (However, one would think that the Assessor’s attitude should be one of helping us understand instead of asking us to perform dental surgery to obtain information about their numbers.)
Meanwhile, the West Contra Costa Unified School District is also adversely affected by Richmond’s assessed value numbers, because of their property tax supported bond program.  We are working closely with them to do a complete analysis of the assessed value numbers.
To sum up to this point, we are still in a fact gathering stage of this process, and we believe that it is far too early to begin recommending budget adjustments in the range of a $4 million reduction.  Even if the Assessor’s numbers are correct and reasonable, there are questions that we need to get answered.  For example, if the assessed value reduction is due to the Chevron refinery fire, is this just a one year anomaly – will the assessed value for the refinery bounce right back for FY 2014-15?  If that is the case, it could make sense to spread this loss over a multi-year span – perhaps over the two-year scope our budget – rather than making a $4 million cut for FY 2013-14 only to add $4 million back in for the next year.  Also, if the real estate market is otherwise active and driving assessed values up, the City could see a large supplemental property tax allocation for FY 2013-14, or see the non-refinery related assessed values rise significantly in FY 2014-15.
I believe that financial stability is important for an organization, and wide revenue swings with wide service swings over multiple budget years do not serve the community well.  That is why staff intends to fully understand the scope and duration of this property tax problem before we bring budget recommendations to the Council.
That said, it is without question that we will need to bring to you a revised budget at some point in the near future.  From a timing perspective, based on the additional analysis that is still ahead of us, your consideration and action on a revised budget is likely to be one of your first orders of business following the August break – not before.  We will keep you informed if these plans and if this timetable needs to change.
Thank you for your patience.

Please feel free to contact me if you have any questions or require any additional information.


Bill Lindsay


Bill Lindsay
City Manager
City of Richmond
450 Civic Center Plaza
Richmond, California 94804
(510) 620-6512