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

August 5th, 2011
Proposed San Marcos budget wouldn’t raise taxes

smnews1by SEAN BATURA

San Marcos City council members are gearing up to approve the city’s fiscal year 2012 budget, which is proposed to be slightly larger than FY 2011 and calls for the same property tax rate. City staff propose a budget of $149.5 million, an increase of .59 percent, or $883,075, from the current fiscal year.

The city manager’s office proposes a FY 2012 general fund of $42.6 million that would constitute an increase of 2.4 percent from this fiscal year. Increases in compensation for police and other employees total $328,000 and $336,000, respectively, both of which constitute the majority of the increase proposed for the general fund. The next-largest increase proposed for FY 2012 is $157,000 in police overtime adjustments.

“We have actually reduced almost 1,000 hours of overtime…in the last two years,” said San Marcos Police Chief Howard Williams. “But that still doesn’t balance off the additional money and the additional requirements that fall outside my control. When the salaries go up, the overtime expense goes up.”

The city’s savings account, or reserves, are projected to have decreased this year by 9.2 percent, or $1,231,000. The city’s reserves are projected to increase during next fiscal year by two percent, or $246,000.

The city’s policy is to save at least $0.25 for every dollar it spends, and shoot for saving $0.33 for every dollar spent. The city’s reserves are proposed to be about $12,392,000 by the end of next fiscal year, which would constitute 30 percent of operating costs. City staff estimate reserves to be 33.4 percent of operating costs this year.

One of San Marcos City Manager Jim Nuse’s major recent policy decisions was to reduce the proportion of the property tax rate devoted to paying off debt. Nuse proposes that 56 percent of every tax dollar be used for debt next budget year, with a long-term target ratio of 50 percent. City staff said they can achieve this ratio by not borrowing as much money.

“We managed to defer about $43.4 million in new bond projects in 2011 and 2012,” said City of San Marcos Finance Director Steve Parker. “All we’re actually anticipating is about a $5-7 million bond issue in the electric utility this year.”

In FY 2009, 62 percent of every tax dollar was used to pay for debt. In FY 2010 and FY 2011, 60 percent of every tax dollar went to pay for debt. The proposal to use 56 percent of every tax dollar for debt would free-up $616,000 for other uses, Parker said.

City staff estimate the beginning unrestricted debt fund balance will be $4,008,967 for FY 2012. The beginning debt fund balance was $5,676,434 this fiscal year. The city’s total outstanding debt is $76,840,000, according to Parker. Total outstanding debt was $81,805,000 at the beginning of this fiscal year.

Another FY 2012 budget presentation is scheduled for Aug. 11 at 6 p.m. at City Hall, and a public hearing on the matter is scheduled for Sept. 6 at 7 p.m., same place.

In order to collect the same amount of property tax revenue next year as it will this year, the city would have to increase the property tax rate by $0.0039 per $100 of taxable valuation — which would yield about $120,000, according to Parker. By not increasing the ad valorem tax rate this fiscal year, the city made about $750,000 less than it did last year in property taxes, Parker said.

Parker said staff do not propose to increase the property tax rate because they do not want to increase the financial burden on residents who are already facing likely increases in water, wastewater, and drainage rates.

“We’re going to pick our battles,” Parker said.

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One thought on “Proposed San Marcos budget wouldn’t raise taxes

  1. FROM THE CITY OF SAN MARCOS:
     
    City Manager Jim Nuse presented a balanced $149.5 million budget for the 2012 fiscal year to the City Council Thursday with an effective reduction in property taxes, no electric rate increase, and small increases in water/ wastewater utility rates.
     
    The budget proposes $43.5 million for the General Fund,  $12.8 million for Debt Service,  $28.8 million for Water/Wastewater services; $51.8 million for the Electric Utility, and $12.6 million for special revenue, airport, CIP and other funds.
     
    “The City of San Marcos is striving to achieve best practices in the 2012 budget,” said Nuse. “This is a conservative budget that holds the line on expenditures and property taxes, reduces transfers from the utility funds to the General Fund, and defers previously planned debt sales for General Fund and Water/ Wastewater capital projects totaling more than $43 million.”
     
    In January, the City Council set “Sound Finances” as its top strategic goal. Other key goals are Customer Friendly Processes, Big Picture Infrastructure, Maintaining and Protecting the San Marcos River, and Community Wellness/ Strengthening the Middle Class.
     
    The water/ wastewater rate increases are proposed to address revenue requirements and future water supplies after previously recommended rate increases were deferred over the last five years.

    Highlights of the 2012 budget include:
    · A total $149.5 million in expenditures, an increase of slightly over one-half of one percent above the 2011 budget.
    · A property tax rate of $0.5302/ $100 of value, below the effective rate of $0.5341.
    · No increase in electric rates.
    · Limiting debt issuance to $7 million for electric utility projects.
    · A proposed 6% increase in water rates and 3.5% increase in wastewater rates, costing the average household $1.94 more for water and $1.15 more for wastewater.
    · A proposed increase in the drainage fee ranging from $0.84 to $1.12 per month.
    · Mid-year compensation adjustments for non-Civil Service employees based on a market study and performance, and funding to implement Police and Fire Civil Service agreements based on a 2010 meet and confer agreement.
    · Achieving a 30% General Fund ending balance, satisfying the City Council’s savings goal.
    · Property values in San Marcos are up by 4.1% based on new construction and increases in the values of property to $2.7 billion.
    · Sales tax revenues are projected to be up by 2%
     
    The 2012 budget has been in preparation for several months, following the City Council’s adoption of a Budget Policy in May.
     
    “Staff spent many hours reviewing our Capital Improvement Program so that we could evaluate nearly $150 million in scheduled multi-year infrastructure projects,” Nuse said. “We have been able to reprioritize the planned projects, reallocate $40 million from existing accounts, and defer selling bonds for general fund and water/ wastewater projects. This will achieve a more relevant set of projects going forward and help us reduce the amount necessary for debt payments and allow for additional funding towards operational costs.”
     
    The 2012 budget dedicates 56% of property tax revenues to debt repayment and 44% for General Fund operations. In 2011 the split was 60.3% for debt retirement and 39.7% for operations and in 2010, 62% for debt and 38% for operations.
     
    The proposed budget also reduces the City owned utility transfers to the General Fund from 9% to 8.5%. “This is the first year of a four year plan to reduce the transfers by a half percent each year down to 7% in 2015,” Nuse explained. “Reducing the transfers will relieve some of the pressure on electric and water rates.”
     
    Since 2008 the Water /Wastewater Utility has had expenses exceeding revenues. The gap was filled by the use of fund balance. “That fund balance has been spent down and we now need to generate revenue to support the water/ wastewater systems,” Nuse said.
     
    The proposed budget is posted on the City’s website at http://www.sanmarcostx.gov. A second budget workshop is slated for Thursday, August 11 at 6 p.m. The City Council will hold a public hearing on the budget on September 6 with adoption slated on September 20.
     
    The City’s annual budget includes three major funds, plus several special funds:
    · The General Fund, which provides funding for Police, Fire, Community Services (parks, library, environmental health); Public Services (transportation, streets), Planning and Development, Capital Improvements, and Administration. Revenue is generated from sales taxes (46.5%), property taxes (14.8%), fees, fines and transfers.
    · The Electric Fund, which operates the community-owned retail power distribution system with revenue generated by electric rates.
    · The Water/ Wastewater Fund, which supplies superior ground and surface water and treats the community wastewater. Revenues come from monthly water and wastewater service to the community.
    · Special funds including Airport, Drainage Fund, Solid Waste Fund, Women, Infants and Children, Hotel-Motel Fund, Cemetery Fund and special grant funds.
     
    The City’s fiscal year runs from October 1, 2011 through September 30, 2012.

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