San Marcos Mercury | Local News from San Marcos and Hays County, Texas

July 30th, 2008
Kyle staff proposes 26-percent tax rate increase

By BILL PETERSON
Editor at Large

KYLE – For the last 11 years straight, Kyle has dropped its property tax rate every year, all the way down from 53.36 cents per $100 of taxable value in Fiscal Year 1997 to 27.07 cents in FY 2008.

During the last five years, Kyle has borrowed $60 million, addressing six-fold growth since 2000 with a variety of public works. Among the new amenities are a half-dozen road projects, such as Kyle Parkway, Kyle Crossing, the expansion of Kohler’s Crossing, the expansion of SH 150, road improvements around the burgeoning Seton Hospital development and a streetscaping on Center Street. The city also has built a municipal swimming pool, a new city hall and a new fire station.

So, the city has cut its property tax rate almost in half during the last 11 years while borrowing $60 million for improvements to accommodate a population that’s up to nearly 30,000.

How does it add up?

It adds up to a proposed 26.3 percent property tax rate increase on the city’s preliminary budget for FY 2009, presented by City Manager Tom Mattis Tuesday night to the Kyle City Council. The increase would raise the city’s property tax rate to 35 cents.

Primed for sticker shock in recent meetings, councilmembers raised no immediate objections. Councilmembers will debate the budget and tax-rate proposals during a series of meeting, workshops and public hearings over the next six weeks. The council is scheduled to adopt a budget and tax rate on Sept. 16.

Looming in the background is an Aug. 9 special election to fill a seat left vacant by Mike Moore’s retirement from the council in April. The race is contested between Ron Barrera, Chad Benninghoff, Lucy Johnson and Robert Straub. If one of the hopefuls wins a majority on Aug. 9, that new councilmember will debut in September, just in time for the budget vote.

Mattis proposed a total budget of $33.3 million, of which more than half ($17.5 million) involves the expenditure of debt already issued and service on that debt. Much of the debt expenditure is going towards road improvements to facilitate the Seton project.

Of that $33.3 million, the smaller portion ($15.8 million) is the operating budget, which faces growth pressures of its own.

Among those pressures is the Kyle Police Department, which stands to add ten patrol officers and two sergeants under the new budget. Five officers and one sergeant are already approved by the city, but they haven’t yet been hired because the city is transitioning to civil service rules. Another five officers and one sergeant are new on the FY 2009 budget.

The police department, which stands to grow from 19 sworn officers to more than 30 under the budget, will account for 36 percent of the city’s $8.5 million administrative budget.

“Simply put, the city is in the service business,” Mattis told the council. “… We’re at an historical time and we continue to hear the demand for more services from our citizens.”

That in mind, Mattis asked the council for an additional 26.5 full-time equivalent employees, including the police officers. The increase would take the city’s employment roll up to 156.5 full-time equivalents, about three times its 55 employees as of 2003.

Mattis also proposed a four- percent cost-of-living increase for city employees, based on a 4.14 percent increase in the Consumer Price Index (CPI) during the last eight months.

Not included in the FY 2009 budget are big-ticket amenities discussed in high profile during recent months, including a proposed recreational center ($18-20 million), a new police station ($4-5 million) and a new library ($4-5 million). All those projects are on the city’s five-year capital improvement program for consideration in future budgets. Also not included is $11 million Kyle would use to partner with Hays County in an initiative to convert Interstate-35 access roads through the city to one-way traffic an re-route a portion of SH 150.

The proposed tax rate calls for 20 cents on the debt service side, up from 15.07 cents on the present rate. The operations side of the tax rate calls for 15 cents, up from 12 cents on the present budget.

Mattis said the city staff contemplated a 39.71 cents tax rate, of which 24.71 cents would go to debt service. However, the staff is recommending instead that the city apply interest earnings on unused debt to defray debt service, which lowers the proposal to 35 cents.

While acknowledging that a tax rate increase stands to be a jolt, Mattis said Kyle’s proposed rate still is lower than the rate in other comparable cities Kyle uses to target its various rates and wages. Mattis said the group of eight comparable cities – including San Marcos, Georgetown, Schertz and Universal City – average a tax rate of 47.35 in FY 2008, leaving Kyle’s new proposal 26 percent beneath that average.

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5 thoughts on “Kyle staff proposes 26-percent tax rate increase

  1. When city leaders brag about all the growth they have brought to their city they don’t also say that tax increases will follow. More growth means more expense, and the benefits of growth never pay for the higher expenses. It’s one of those vicious circles that never ends – until the city becomes “built out” – at which point decline begins.

  2. In FY 1997, Kyle had a population of about 2,500 and the city property tax rate was 53.36 cents per $100 of taxable value. Today, Kyle is approaching 30,000 citizens and, even with the proposed increase, the tax rate would be 35 cents — more than 18 cents lower than 1997. So, I’m not sure growth inevitably raises property tax rates. More likely — and I’m not strong on these details — economies of scale kick in and the city’s per capita costs for services actually decrease with growth.

    Up the road in Buda, for example, you’ve got a town with one-fifth Kyle’s population, but its proposed operating budget is almost half of Kyle’s ($15.8 million for Kyle and $7.5 million for Buda), while the total budget is about one-fourth of Kyle’s ($33.3 million in Kyle and $9.1 million in Buda). We can argue about which town offers more and better services per capita. Just from eye-balling it, I’d say Kyle comes in at least slightly better, especially for kids, but I don’t have a great argument.

    I’m also not sure I’d accuse city leaders of “bragging” about growth “they’ve brought” to Kyle. The growth is entirely a function of the Austin housing market as ranchers sold their land to residential developers in the last ten years. The city has virtually no power to stop developers from building houses on property they own, and, what little power the city does have is under legal challenge from the Austin homebuilders association. The city, recognizing rapid growth as a “problem,” has tried to spin it as an “opportunity,” which is really about all it can do.

    In order to keep homeowner taxes down, the city has to develop a commercial tax base. But that suggests investment, which gets into borrowing. Of the $60 million Kyle has borrowed in the last five years, the broad majority has gone to road projects for the purpose of developing commercial activity.

    Kyle’s grand hope is that two million square feet of retail at Interstate-35 and Kyle Parkway, along with the coming Seton Hospital and its spinoffs, will generate enough commercial property value and sales tax revenue to keep homeowners taxes from spinning out of control. Unless or until that happens, Kyle will struggle to keep homeowners taxes from increasing.

    We can argue that Kyle didn’t have to borrow for commercial investment, but we also don’t want to imagine what could happen to school taxes in that event. Without commercial property to support rooftop increases, you’ve got a choice between over-crowded schools and tax increases to build new schools. Because of commercial development, Hays CISD has been able to issue $130 million in debt for new facilities in the last three years without tax rate increases while also waving off a proposed increase from a previous bond issue. And that’s with Kyle’s so-called “Golden Triangle” (Kyle Parkway, Kyle Crossing, Interstate-35) nowhere near fully developed.

    Property taxes are hard enough to pay already, but we can’t look at city taxes in a vacuum. The larger question is how Kyle’s debt influences the total tax bill.

  3. MY point is made when you look at larger cities nationwide. People move here because Austin has become unaffordable. Add a few more years and commuters to Austin will live even farther from Austin than Kyle. Kyle & Buda will become an ugly suburban sprawl. More long range commuters will demand transportation services. Commuter rail will cost a fortune (too bad we didn’t prepare for it 15 years ago) and taxes will continue to rise (just ask those Austinites). Buses will be sharing impossible (impassable) I35 gridlock with the cars. Encouraging growth & sprawl is a really stupid idea. But the business owners, developers, and realtors love it – and the rest of us will suffer in the end. Maybe we of average means deserve to suffer – we do nothing to slow it down. Business owners, developers, and realtors run for office and win. They put themselves in positions of influence. They make their own future.

  4. I certainly agree about sprawl, and we’ve inveighed against it here and in a predecessor publication, The Hays Highway (www.hayshighway.com). Spwrawl is easier and cheaper for developers to develop and, in effect, the rural types who inhabit tiny towns before they become big towns approve sprawl because they think residential developments with single-family homes on big lots without mixed uses will preserve (as close as possible) the rural life they’ve come to know. Instead, as we’re learning, that kind of development crowds roads and makes us excessively reliant on automobiles. We wind up with enormous traffic problems that worsen while fuel prices go through the roof, which also raises the transportation costs for everything, including, of course, food.

    We could drive less and live better with mixed uses. But the political will to insist on it doeesn’t seem to exist in Buda and Kyle. Benchmark (Plum Creek) had a devil of a time getting Kyle to play along ten years ago, and now they’re working on a very interesting mixed-use development on Kohler’s Crossing. But that’s one developer with one development.

    The county is working on development regulations that would “encourage” mixed uses, but county governments aren’t endowed by their creator (the State of Texas) with much leverage.

    We of average means (or worse) don’t deserve to suffer, but it’s easy enough to see why we don’t do enough to slow it down. We’re too busy trying to keep the bank from repossessing our pants. At the end of the day, we’re too beat to put in the time and effort to understand these issues, let alone act on them, so we escape.

    People don’t even vote. Think about that. They don’t even vote. Voting is easy. You get two weeks to drop in on City Hall, punch a couple buttons and you’re done. The whole thing takes about 12 seconds if you go to an early voting location, which is usually pretty empty. People don’t even do that much. You’ve got an Aug. 9 city council election in Kyle, an election that could swing a council majority one way or the other, setting the town’s policies, and I don’t believe anyone thinks the election will draw 500 voters. This is for a city-wide council election in a town of 30,000 people.

    As for the folks with the big means, it’s not really a spare-time thing to work the political system. It’s basically their job. Business elites work the politicians and the political system for their advantage. That’s why talk about “free markets” is such clap-trap. None of these elites want “free markets.” They want markets rigged for their benefit. It’s been like that since the beginning of time.

    Meanwhile (ignoring the risk of blabbing on), I go back to the necessity of developing a commercial base in Buda and Kyle. Not just a retail base, but a base of bread-winner employment. It’s the best way to cut back on traffic and commuting, since it would diminish the necessity of driving into Austin every day just to pay the bills. I give Kyle credit for taking that seriously, although it is running the city into debt to stimulate that kind of activity and the return hasn’t yet presented itself.

    One other thing: It is interesting to note that there are very few business owners among the elected officials in Buda, Kyle or Hays County. Will Conley, a county commissioner, owns his car wash in San Marcos. Mike Gonzalez, the mayor of Kyle, is a realator. I’m not sure how active Liz Sumter (the county judge) or Karen Ford (a county commissioner) are with businesses, but the commissioners court is a full-time breadwinner job. And I think everyone else on the Buda and Kyle councils are working stiffs, many of whom work in mid-management or higher for public or quasi-public agencies.

    Anyway, thanks, Charles, for reading The Mercury and for kicking into the conversation.

  5. Bill, Charles,

    You both make excellent, well considered points. While I acknowledge the sprawl-related problems, which are real, necessary and difficult to address, I wouldn’t take it on face value that this proposed tax increase is necessary just because that is the excuse that is being given.

    Growth generates additional property and sales tax revenue and it does so without a need to increase the city’s property tax rate. The entire time I served on the city council, some of my former colleagues were constantly trying to pork up the staff, the police department, their pet projects, etc., (I certainly had projects that I wanted to address) and it seems pretty likely after reading this article and checking a bit, that this budget has become somewhat of a christmas tree for that stuff. Not being a part of the discussions this year, I can’t speak on any of this with certainty but there are some questions I would ask before accepting the excuses of debt service and growth.

    Do we really need two staff for the “proposed” recreation center, which has yet to been put up for a vote? In the past, authorized positions for things like this and the Police Department have gone unfilled but were still factored into the budget.

    Do we really need ten more police officers? What kind of revenue is the police department generating? What are the real crime stats other than the well-publicized spree on Center Street. Has anyone on the council made any other suggestions for improving public safety, such as improving lighting, security cameras, improving citizens education/diligence on crime prevention – those would be much cheaper than raising the police department budget from 25% to 36% of the city’s budget and could be just as effective.

    Can the library (which btw has mysteriously been switched back to a Certificate of Obligation so it won’t be subjected to vote) be additionally delayed so as to put off operating costs for another year?

    Just how much nickel and dime stuff is proposed – stuff like last year’s $50k video equipment for the council chamber? Those things add up. For all I know, the probably stuck that back in this year.

    Have they looked at fees for services? Many services that the city provides are subsidized by tax generated revenue. I know the pool operates at a deficit, what else doesn’t pay for itself that could be examined for efficiency? And, yes I know that the pool is a sacred cow at city hall, but at least examining its operations a little closer may offer an opportunity to consider the wisdom or lack of wisdom in expediting the proposed rec center.

    Oh, and what is the city’s fund balance? Did it go up last year? How much is it over the 25% minimum is it? If it’s higher than the minimum, would it really be that bad to use some of it to pay for one time expenditures addressing short term problems such as debt service issues while we wait for more sales tax revenue to be generated from the new businesses coming to town? Seriously, if we have a surplus in the fund balance, what is the justification for raising taxes to make debt payments that are supposed to be covered from the revenue generated from these projects?

    The infrastructure related debt service is complicated to sort through but a good number of those economic development related projects were paid for up front by the developers/businesses in lieu of a portion of future sales tax revenue. Some of the projects, like FM 1626 and the new bridges were bonded but relied upon conservative revenue projections as part of the justification. What is different about the circumstances and the math now that requires a tax increase? Those things are supposed to pay for themselves.

    If I had an actual copy of the budget, I suspect I could come up with many more questions. Nevertheless, I suspect that if the city held increases in its operating budget down to only what is absolutely and unquestionably necessary, than there may be enough in the budget to address debt service costs.

    Additionally, Kyle’s issues may be more related to timing than anything else. The economic development that is occuring should be sufficient to cover the longterm costs related to it. A lack of patience on the part of some our leaders combined with others who may just be irresponsible (ie., the “I just want more police officers because I think its either a popular idea that will get me votes or it will make their union, who supports me happier and stronger” crowd) may be part of the problem. Looking at the makeup of the city council, I’m waiting to see who is going to step up and make more than a cursory challenge to the assumptions that predicate the 26% tax increase.

    One last point – the city staff produces budgets that reflect the elected official’s priorities. Tom Mattis has often and quite correctly said that his job is to produce a budget that correctly identifies the costs that it takes to run the city but reflects the priorities and goals of the city council as well. It is the city council’s job to adjust those priorities if revenues don’t match up. Such adjustments shouldn’t automatically equate to a tax increase.

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