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

September 22nd, 2009
Kyle drops tax rate with loan re-fi

By LANCE DUNCAN
News Reporter

KYLE — After working out a way to restructure a portion of debt, Kyle officials shaved 6.5 cents off their proposed property tax rate for Fiscal Year 2010 and passed a $36 million budget at a tax rate of 42.4 cents per $100 of taxable value last week.

The city is restructuring a $14,911,978 loan taken from the Texas Department of Transportation (TxDOT) for the Kyle Parkway Interstate-35 overpass and nearby road improvements. The restructuring lowers Kyle’s debt service on the loan from $1.26 million to $415,313 in 2010. The restructuring would add $1.5 million to the city’s debt. Payments will gradually increase each year until settling in at $1.537 million in 2017.

Kyle City Councilmembers began budget deliberations contemplating a 49.6-cent tax rate, up from 37.31 on the FY 2009 budget. Included in the tax rate was 19 cents to pay for operations and 30.6 cents to tackle $73 million that’s been amassed in the last seven years for roads and other capital projects.

With the debt restructuring and an earlier cut to reduce a contingency fund for emergency medical services, the tax rate breaks down to 24.1 cents for debt service and 18.3 cents for operations.

Kyle residents speaking at last week’s council meeting say the city should maintain a cost-cutting mentality going into the immediate future. Former councilmember Todd Webster said the council should look at cutting other areas that are “wants rather than needs,” such as a forthcoming bond proposal for a $20 million recreation center.

“It’s bad politics and makes the city look bad if you’re raising taxes for road debt and then proposing a $20 million bond issue,” Webster said.

Webster said it’s smart to restructure the debt in order to minimize its short-term impact, adding that the economic development in Kyle that once was forecast to pay down the State Infrastructure Bank (SIB) loan has not yet taken place. Webster, who voted for the loan two years ago, said there was no expectation of the recession that has reached Central Texas.

“We made very conservative revenue estimates,” Webster said.

Kyle resident Lila Knight said that the council should take responsibility for the debt, instead of putting it off and adding more to it.

City officials said the restructuring will give Kyle time to grow economically once the recession fades and the city’s crown economic jewel of two million square feet of retail and a Seton Hospital at Kyle Parkway and I-35 starts producing revenue.

Councilmember Lucy Johnson said she was skeptical of the restructuring at first because of the additional $1.5 million in debt, the bulk of which would not be paid off until 2025.

Gary Kimball Specialized Public Finance, Inc., the city’s financial advisor, told councilmembers that the restructuring would give the city a better chance to pay off more debt later, once economy improves.

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