By Conrad Dudderar
As Yukon city leaders develop the 2021-22 annual budget, they will study ways to address needed infrastructure improvements.
Chris Gander of Bank of Oklahoma (BOK) Financial Services, the City of Yukon’s financial advisor, recently addressed city council members about the city’s debt service, general obligation bonds and sales tax revenue.
“We’re not talking about doing any kind of financing, we’re doing a ‘refresher’ on where you are as it relates to your debt,” Gander told council members at the April 20 meeting.
During a discussion about general obligation bonds, Ward 1 City Council Member Rick Cacini wondered when the City of Yukon last raised property taxes.
“I’m somewhat concerned about the infrastructure of Yukon,” Cacini said. “As you know, we have an older city. Water, sewer, the roads all need to be repaired. I’m trying to figure out, where’s that money going to come from?”
City of Yukon voters, at a Dec. 9, 2003 election, authorized $13 million in general obligation bonds. These bonds funded street, bridge and water/sewer system improvements.
The bonds are “backed by property tax,” Gander explained.
Yukon property owners pay their share of general obligation bonds based on their properties’ assessed values.
Since the $13 million in bonds were issued in 2004, the City of Yukon’s tax levy has been dropping.
That is because total debt service declines each year and the City of Yukon has had “nice, steady growth” in assessed property valuations over the past 10 years, Gander noted.
The City of Yukon’s gross assessed valuation was $211,915,945 for taxable year 2020, a 5.53% increase from $200,803,638 for tax year 2019. As a comparison, Yukon’s gross assessed valuation totaled $151,795,567 for tax year 2011.
A 2015 general obligation refunding bond refinanced outstanding 2004, 2005 and 2006 bonds for capital improvements.
This refunding bond, which originally was $6.885 million, has a $2.73M outstanding balance and is due to be paid off in 2026.
Unlike schools and counties, municipalities like Yukon are not allowed to implement a property tax levy for operational purposes.
“The only way you can put on a property tax is to actually authorize a bond issue,” Gander explained. “And through that bond issue, then you issue the bonds and that drives what the tax rate is.
“The cities that have a C.I.P. (capital improvement program) that’s tied to general obligation bonds generally issue bonds every year – in some amount – trying to maintain a levy (at a target tax rate).”
The City of Lawton, for example, has a dedicated levy for streets.
Nichols Hills, an affluent city with a small sales tax base, has for about 30 years been financing street projects this way.
PARKS OR STREETS?
The City of Yukon’s last bond election, to fund a sports park, was soundly defeated by voters four years ago.
“I think it was the biggest failure I’ve ever seen in my 20 years in the bond business,” Gander told council members.
Some 73% of Yukon voters in March 2017 voted against an $18 million sports park bond that would have built a Yukon sports complex at the corner of Frisco Road and Highway 66.
Gander acknowledged the defeat was due in part to “bad timing” because of other economic issues facing Yukon at the time.
Council Member Cacini believes most people want to see street and other infrastructure improvements.
“Many of them are elderly, and having no kids in the house, they’re not really concerned about parks,” Cacini reasoned. “But we have to serve the entire public.
“So, therefore, we have to have a plan that’s going to keep us level and have enough money coming in to take care of the infrastructure.”
Gander agreed that residents generally support street improvement projects.
“General obligation bonds are more difficult to pass because people are just sensitive about paying property tax,” he said. “Everybody is.”
Despite the last bond election defeat, Gander noted the City of Yukon had previous project-driven bonds that passed.
The City of Yukon’s largest single property taxpayer is Oklahoma Gas & Electric, which had a net assessed value of $4,423,007 in tax year 2020. Lowe’s Home Center is ranked 10th, totaling $922,321.
The City of Yukon’s local sales tax rate is 4%. Oklahoma’s state sales tax rate is 4.5% and Canadian County’s sales tax rate is .35%.
Gander provided council members with a list of the City of Yukon’s four sales tax ordinances between 1996 and 2006. All are permanent sales taxes:
- 1996 (0.75) – For capital improvements and equipment for the use and benefit of the City of Yukon.
- 2003 (0.75) – For competitive compensation/benefits for fire and police personnel and firefighting-related and police related equipment, and for competitive compensation and benefits for all other full-time city employees, additional full-time employees and equipment.
- 2003 (0.25) – To replenish and maintain the City of Yukon’s reserve account at a level equal to 25% of the previous year’s revenues.
- 2006 (0.25) – For capital improvements and equipment for the use and benefit of the City of Yukon.
Yukon’s 4% sales tax rate is “middle to lower as it relates to other cites on Interstate 40”, according to Gander.
As a comparison, other city sales tax rates are: Clinton (4.5%), El Reno (4%), Elk City (4.5%), Henryetta (4%), Midwest City (4.6%), Oklahoma City (4.125%), Sallisaw (4%), and Weatherford (4.5%).
Besides city and county sales taxes, a 2% excise tax is levied upon gross receipts from all sales taxable under the Oklahoma Sales Tax Code.
City of Yukon sales tax revenues for fiscal year 2020 totaled $22,852,850, a slight decrease from the FY19 total of $22,947,962.
Yukon had seen a 10.83% increase in sales tax revenues between FY17 ($20,674,980) and FY18 ($22,914,700).
As a comparison, the City of Yukon’s sales tax revenues totaled $15,872,694 for FY11 and $16,805,696 for FY12.
PAYING OFF DEBT
The Yukon Municipal Authority’s debt service for fiscal year ending June 2020 totaled $4,925,174.
This was the outstanding amount to be paid on 2012 and 2013 sales tax and utility system bonds, and 2015, 2017-19 sales tax revenue notes.
Debt service is projected to increase to $5,204,728 for FYE June 2021 with the addition of a 2020 sales tax revenue note.
The total debt payment is estimated at $5,280,629 for FYE June 2022 then is projected to stay in the $4.6M-$4.8M range through 2031, according to documents provided by the BOK financial advisor.
Two 2015 notes are due to be paid off in 2021 and ’22, and 2012 and 2013 bonds will retire in 2023.
The 2017 through 2020 notes will be paid off in 2032-33.
Original amounts and outstanding debt are:
- 2012 bonds ($6.5 million) – $1.395 million outstanding
- 2013 bonds ($8.5 million) – $1.82 million outstanding
- 2015A note ($9.52 million) – $3.39 million outstanding
- 2017 note ($10 million) – $9.86 million outstanding
- 2017B note ($5.84 million) – $5.7 million outstanding
- 2018 note ($5.675 million) – $5.575 million outstanding
- 2019 note ($9.54M) – $9.48M outstanding
- 2020 note ($9M) – $8.98M outstanding