Council discusses tax hike at pre-budget planning workshop

GONZALES — Gonzales City Council met Tuesday afternoon for a pre-budget workshop, with the objective of doing some pre-budget planning and to have council discuss thoughts on city revenue streams.

City Manager Sean Lally has been working on the budget analysis on all enterprise funds and franchise agreements for about a month, at the request of Gonzales Mayor Connie Kacir.

Kacir said it is important that council use the workshop to look at billing models and keep an eye on efficiency, as well as looking for opportunities to increase revenue streams and identifying areas to curtail expenses. Lally said he has been working on the budget for about a month and he expects to have a rough draft of the budget in the next couple of weeks, to see exact revenue and expenditure numbers and where the city stands.

Lally also mentioned that his interest in the meeting was to discuss how the city has operated in the past and how to move forward from that to become fiscally responsible after years of negligence in revenue collections and fees for services.

Lally lead council directly into discussion on the city's effective tax rate and how it is calculated.

According to Lally, the city has a current valuation of $369,533,040 – representing the value of all taxable properties in the City of Gonzales.

The city's current effective tax rate is $.1769, or $176.90 per $100,000 valuation.

"At our current tax rate, that brings us tax revenue of $653,703.95," Lally said.

Lally said Gonzales County Appraisal District Chief Appraiser, John Liford has not certified his rolls yet – that will happen next month – so, in budget planning, the city has to use a 10 percent reduction in Liford's estimated $365,350,550 appraised value for the year.

"That is a decreased valuation, from where we were last year," Kacir pointed out. "Keep in mind we are bringing in less dollars based on that proposal."

Lally presented council with a scale of possible tax increases ranging from 22 cents to 27.5 cents.

"I took the current value, times the effective tax rate to get a tax revenue table," Lally said. "It ranges from $803,771 to $1,004,014."

Lally said the scale of annual cost to residents ranges from $43.10 per $100,000 valuation, to $98.10 per $100,000 valuation. He said monthly costs to residents ranges from $3.59 per $100,000 valuation, to $8.18 per $100,000 valuation.

"What I am trying to get from council is a feel for what makes you comfortable as a group, to: 1.) Allowing an increase of any kind; 2.) What that increase will be; and 3. for us as staff to be able to put that in our budget," Lally said.

Councilman Dist. 3 Bobby O'Neal said like anyone else he does not like taxes but in looking at what has happened over the past several years something has to change.

"We have gone down. We are not going to be able to maintain," O'Neal said. "[Taxes are] going to have to be increased."

O'Neal said when looking at the big picture of all the local taxing entities the city's rate is too low.

"The ISD is $1,050 per $100,000; the county is $567 per $100,000; the hospital is $280 per $100,000; and we are at $176.90 – and we provide infrastructure for the schools, the hospital and everyone else in town," Lally said. "So, you have to ask yourself: 'Are we doing due diligence by keeping the tax rate low?'"

Kacir said the average across Texas for a city property tax rate is 41 cents. She said Texas Municipal League advises that 40 percent of a municipality's budget should be derived from ad valorem taxes.

"That's how you operate a city and operate it well," Kacir said.

Kacir said the city is at about 10 percent.

According to Kacir, in the year 2000 the city's ad valorem tax rate was 33.3377 – just under 34 cents.

"We were very close to being average – 17 years ago." Kacir said. "We have continued to drop, thus has our level of services and our ability to take care of our infrastructure."

Kacir said the city has deferred maintenance and buying equipment for the jobs that need to be done.

Lally talked about Senate Bill 2 being a major factor in deciding how the city will raise taxes. He explained SB-2 is designed for tax relief to the three biggest cities in Texas and if passed would mandate roll-back elections, whereas right now a rollback only happens by request. Other provisions of SB-2 state that a city may only have a four percent increase annually.

"If you that kind of math, for us as a city we're going from 17.69 to about 18.02, which would represent a $41,000 increase to the city on our tax rolls," Lally said. “That's a year, then multiply four percent in perpetuity out, it would take us 50 years to get to a realistic level of taxation that is equitable to both the citizens and to the function of the city."

Lally said SB-2 passing looks probable.

"That puts an element of pressure on you the council because our hands effectively – in the 2018-19 fiscal year – will be tied if the bill passes," Lally said.

Kacir said it appears that this year will be the city's last opportunity to try to make a big change in the best interest of residents and be able to care for the city's infrastructure.

"If we only have one shot, we need to go for the big one," Councilman Dist. 2 Tommy Schurig said.

Kacir said an increase would not be a crippling or catastrophic event and the city could come out with $2 million in revenues and use half toward neglected infrastructure, equipment and deferred maintenance, then put residual income into retained earnings to start recapitalizing the city.

Kacir reminded council that if the city had retained earnings, rather than making transfers to fund operations the city would not have had to take out a $1.7 million bond for repairs at the hydroelectric dam.

"You can put all the plans in the world together but if you cannot fund it, it's not a plan," Lally said.

Council will be conducting budget workshops intermittently throughout the summer budgeting season.

The next regular meeting of Gonzales City Council is 6 p.m. Tuesday, July 11, at Gonzales Municipal Building, 820 St. Joseph Street, in council chambers.