Washoe County S p e c i a l p o i n t s o f i n t e r e s t : Property taxes were 5.3% lower than they were in the previous year Single Family Home permits were up 28.5% from last year Consolidated Taxes grew by 2.6% in FY 11/12 Average unemployment was still high at 12.3% Quarterly Revenue and Economic Review Y e a r E n d ( 2 0 1 1 / 2 0 1 2 ) This quarterly update focuses on the top two revenue sources for Washoe County Property Tax and Consolidated Taxes, and the economic indicators that have the highest potential impact on these revenue sources. Property Taxes The total General Fund property tax revenue received for FY 11/12 was 5.3% lower than the amount collected in the previous year. The $139.9 million in revenue was only 0.5% lower than the budgeted amount of $140.7 million. O c t o b e r 1 9, 2 0 1 2 Economic indicators that impact property taxes include: Median single family sales price Housing inventory Single family residential (SFR) building permits I n s i d e t h i s i s s u e : Notice of defaults Property Taxes 2 Median Home Prices 2 Housing Inventory 2 Building Permits 3 Notice of Defaults 3 Consolidated Taxes 4 Taxable Sales 4 Consumer Price Index 5 Employment 5 Occupancy Rates 6 Consolidated Taxes C-Tax revenue for FY 11/12 totaled almost $71 million. This is 2.6% more than was collected in FY 10/11 and almost 1.8 million above the budgeted amount of $69 million. $100 $80 $60 $40 $20 $- Consolidated Tax Revenue (in Millions of Dollars) $91.17 $76.79 $68.51 $69.33 $70.99 FY 07/08 FY08/09 FY 09/10 FY 10/11 FY 11/12 Economic indicators that impact consolidated taxes include: Taxable Sales Consumer Price Index (CPI) Employment & unemployment Hotel occupancy rates
P a g e 2 Property Tax Revenue Washoe County received $139.9 million in general fund property tax revenue in FY 11/12. This is 5.3% lower than FY 10/11, but only $758,000 less, or 0.5% than budgeted. Some economic indicators that affect property tax revenue are detailed in the following pages. General Fund Property Taxes FY 11/12 Actual $39,747,652 $32,430,953 $61,298,607 $6,437,211 $139,914,423 FY 10/11 Actual $41,098,398 $34,557,165 $65,328,418 $9,779,268 $147,763,249 % Change Y-O-Y -3.3% -6.2% -6.2% -5.0% -5.3% Due to the billing cycle, most property taxes are collected by the 3rd quarter. % of General Fund Property Taxes Realized by Quarter FY 11/12 Actual 28.3% 23.1% 43.6% 4.6% 99.5% FY 10/11 Actual 27.9% 23.5% 44.4% 4.6% 100.4% % Change Y-O-Y 1.2% -1.8% -1.8% -0.6% -0.9% Median Single Family Home Prices Sales prices have a direct impact on taxable values, which in turn help determine property taxes. In the 2nd quarter, when most assessments are completed, the decrease in median value was 12.2%. However, during the last quarter of the fiscal year, Washoe County saw an increase in the median home price (both quarter-over-quarter and year-over-year). Washoe County Median Single Family Home Prices FY 11/12 $158,750 $155,000 $150,000 $165,400 $157,288 FY 10/11 $180,000 $176,500 $166,000 $157,000 $169,875 The National Association of REALTORS describes a balanced market as between 5 and 7 months supply of inventory. % Change Y-O-Y -11.8% -12.2% -9.6% 5.4% -7.4% Housing Inventory Part of the increase in housing prices may be due to the decline in housing inventory, which has dropped by almost 30% year-over-year. Washoe County Supply of Housing Inventory (in months) FY 11/12 6.4 5.9 5.3 4.7 5.6 FY 10/11 8.4 8.0 8.1 7.1 7.9 % Change Y-O-Y -24.1% -27.0% -34.8% -34.0% -29.8% W a s h o e C o u n t y
Y e a r E n d ( 2 0 1 1 / 2 0 1 2 ) P a g e 3 Single Family Residential (SFR) Building Permits Three to six months after SFR building permits are issued, these new properties help replenish the housing inventory in the County. In general, the more permits issued, the healthier the housing market is. However, if there are too many properties on the market, prices (and therefore taxable values) could decline. Building permits for SFR units are on the rise in Washoe County, possibly due to an increased demand for housing and a diminishing inventory. In the 4th quarter alone, they were up almost 82% from the 4th quarter in the previous year. Year-overyear, permits were up 28.5%. Currently, supply is lower than it has been in years and builders are trying to capitalize on the shortage of supply. In the 4th quarter alone [SFR permits] were up 82% from the 4th quarter in the previous year. Single Family Residential Permits FY 11/12 Actual 138 126 111 220 595 FY 10/11 Actual 122 85 135 121 463 % Change Y-O-Y 13.1% 48.2% -17.8% 81.8% 28.5% Notice of Defaults Notice of defaults were down 68.6% from FY 10/11 to FY 11/12. Much of this reduction may be due to the impact of AB 284 which went into effect on October 1, 2011. AB 284 changed Nevada foreclosure law by adding stricter requirements for the foreclosure process. However, notices have been on the rise lately as banks become better at navigating the new law. An increase in notice of defaults usually foretells an increase in inventory of distressed properties within 1 to 6 months, and an increase in distressed properties can put downward pressure on housing prices. Notice of Defaults FY 11/12 Actual 1,682 56 137 220 2,095 FY 10/11 Actual 2,085 1,719 1,588 1,281 6,673 % Change Y-O-Y -19.3% -96.7% -91.4% -82.8% -68.6%
P a g e 4 Consolidated Taxes (C-Tax): The total C-Tax revenue for Washoe County during the 4th quarter was $18 million. This was 2.9%, or about $515,000 more than was collected in the 4th quarter of the previous year. Overall, C-Tax revenue was 2.4% higher than the previous year and 2.6% above the budgeted amount for FY 11/12. Some economic indicators that affect C-Tax are detailed in the following pages. Consolidated Taxes FY 11/12 Actual $17,837,800 $18,321,561 $16,812,886 $18,013,181 $70,985,427 Consolidated Tax is composed of sales tax, liquor tax, cigarette tax, real estate property transfer tax, and government services tax. FY 10/11 Actual $18,249,111 $17,920,411 $15,663,277 $17,498,033 $69,330,862 % Change Y-O-Y -2.3% 2.2% 7.3% 2.9% 2.4% The Jul-Sept amount for FY 10/11 includes an additional $184,957 for a prior year adjustment from the State. % of Consolidated Taxes Realized by Quarter FY 11/12 Actual 25.8% 26.5% 24.3% 26.0% 102.6% FY 10/11 Actual 27.6% 27.1% 23.7% 26.4% 104.7% % Change Y-O-Y -6.5% -2.2% 2.7% -1.5% -2.0% Washoe County Taxable Sales Washoe County taxable sales were up by 4.5% during FY 11/12 as compared to the previous fiscal year. While the 2nd quarter showed the strongest growth (year-overyear) at 8.5%, every quarter was stronger than the previous year. In total, taxable sales increased by almost $240 million in Washoe County from FY 10/11 to FY 11/12. Washoe County Taxable Sales (in millions) FY 11/12 $1,380 $1,484 $1,260 $1,398 $5,522 FY 10/11 $1,369 $1,368 $1,186 $1,360 $5,283 % Change Y-O-Y 0.8% 8.5% 6.3% 2.8% 4.5% W a s h o e C o u n t y
Y e a r E n d ( 2 0 1 1 / 2 0 1 2 ) P a g e 5 Consumer Price Index (CPI) The Western Urban CPI increased at a rate of 1.9% during FY 11/12. In comparison, this increase was 3.1% during FY 10/11. In general, an increase in CPI increases the price people pay for goods and services and thereby has a positive impact on taxable sales and C-Tax. However, if CPI increases too rapidly, it could have a negative effect on sales tax by pricing people out of the market for items they might have otherwise purchased. Percent Change in Western Urban CPI FY 11/12 0.5% -0.5% 1.7% 0.2% 1.9% FY 10/11 0.1% 0.3% 2.0% 0.7% 3.1% The Western Urban CPI increased at a rate of 1.9% during FY 11/12. Employment and Unemployment The number of people living in Washoe County who are employed has remained relatively flat over the last 2 years. The annual average of those employed only fell by 0.4%. During the same period, the unemployment rate in Washoe County fell by 6.5% from 13.2% to 12.3%. The 4th quarter change (year-over-year) was more dramatic as the unemployment rate for that period fell by 12.2%. One of the reasons that the employment rate remains relatively flat while the unemployment rate falls is because many people have exited the workforce due to: moving away, giving up on the job search, retirement, or other reasons. In addition, while the unemployment rate continues to decline, it is still historically high, which continues to put negative pressure on taxable sales and C-tax revenue. Employment in Washoe County FY 11/12 195,202 196,072 193,416 195,596 195,072 FY 10/11 197,888 196,598 193,500 195,164 195,787 % Change Y-O-Y -1.4% -0.3% 0.0% 0.2% -0.4% Washoe County Unemployment Rate FY 11/12 13.1% 12.3% 12.4% 11.5% 12.3% FY 10/11 12.9% 13.0% 13.7% 13.1% 13.2% % Change Y-O-Y 1.6% -5.4% -9.5% -12.2% -6.5%
Hotel Occupancy Rates Occupancy rates in Washoe County averaged 59.7% for FY 11/12. This was 0.8% below the average from the previous fiscal year of 60.2%. In fact, for all of FY 11/12, only the 1st quarter was above previous year rates (68.2% vs. 66.6%). Occupancy rates in Washoe County are an indicator of the number of visitors to the region. As can be seen from the data below, there was a downward trend in FY 11/12. This may have negative pressure on sales tax. Had occupancy rates increased, Washoe County could have been the beneficiary of even higher increases in sales tax collections. Washoe County Hotel Occupancy Rates FY 11/12 68.2% 54.6% 53.1% 62.9% 59.7% FY 10/11 66.6% 54.8% 56.3% 63.1% 60.2% % Change Y-O-Y 2.4% -0.3% -5.7% -0.3% -0.8% Data Sources Washoe County Finance Department Budget Division P.O. Box 11130 1001 E. 9th Street Reno, NV 89520 Phone: 775-328-2070 Fax: 775-328-2094 E-mail: arosen@washoecounty.us This report can be found on the web at www.washoecounty.us/ finance/ revenue_review.html General Fund Property & Consolidated Taxes Washoe County Finance Department Median Single Family Home Prices Washoe County Assessor Housing Inventory Reno-Sparks Association of Realtors Single Family Residential Building Permits Washoe County & the Cities of Reno and Sparks Notice of Defaults UNR Center for Regional Studies Washoe County Taxable Sales Nevada Department of Taxation Consumer Price Index Bureau of Labor Statistics Washoe County Employment and Unemployment Nevada Department of Employment, Training & Rehabilitation Washoe County Hotel Occupancy Rates Reno-Sparks Convention and Visitors Authority