Disagreement over the city’s budget, simmering since last fall’s 3-2 vote to cut the property tax rate by 1.97 percent, resurfaced at Tuesday’s Kerrville City Council meeting.
During her monthly report to the council, finance director Amy Dozier said due to “almost flat” sales tax collections, the city faces a potential $200,000 shortfall this year.
The city-based its fiscal 2018 budget on a 3.6 percent growth in sales tax collections, and Dozier said there has been a 0.3 percent increase so far.
Asked by Place 2 Councilman George Baroody how the city might offset the income shortfall, she said staffing vacancies
— especially in emergency medical services and the police department — may save up to $100,000. Also, big-ticket purchases scheduled for late in the budget year may be postponed.
For the second month in a row, Place 3 Councilwoman Mary Ellen Summerlin followed the financial report with criticism of last fall’s tax cut, which Baroody called for and she voted against.
The cut reduced the property tax rate to 55.14 cents per $100 valuation, the so-called “effective tax rate” that allows the city to collect the same amount in tax revenue as it did the previous year but does not take into consideration new properties on the tax roll or increases in property appraisals.
“I’d just like to point out that the reduction in the property tax rate last year has turned out to be ill-advised,” Summerlin said.
“We did that against the advice of the city manager, who has many decades of experience in city finance, at the instigation of a fairly new and inexperienced council member.
“I’d just like to point that out. It was not a good idea. We wouldn’t be in this shape if we hadn’t done that.”
At the March 27 council meeting, Summerlin made a similar remark after the financial report.
“I’m just remembering that symbolic tax cut we did to the property tax rate at budget time, and want to encourage all the citizens to take their great, big savings and go spend it so we can get it back in sales tax,” she said in March.
There was no response then, but Baroody on Tuesday defended the reasoning behind the tax cut.
“When we adjusted the projected sales tax up, it wasn’t to cover the effective rate, it was to cover those three items — the Life Pack, the Kerr County library fee that was lost and the water service fee — was it not?” He asked City Manager Mark McDaniel.
“That’s correct,” McDaniel said.
“We would have seen the shortfall whether we had the effective tax rate or not,” Baroody said. “We still would have been in the same shortfall problem, trying to solve it by looking at expenses we have to recoup, right?”
“I’m not sure we’re prepared to answer that right now,” replied McDaniel.
Baroody sent The Kerrville Daily Times an email Wednesday further addressing the issue.
“The budget proposed by the city manager had included a sales tax revenue projection higher than was ultimately adopted. In hindsight, by amending the budget and lowering the tax rate last fall, the council majority wisely sheltered the city general fund better against the volatile sales tax revenue than what was proposed,” Baroody wrote.
He added that because the city runs “a balanced budget, the increased property tax revenue would have been coupled with equal amounts of expense in the budget and thus not been available to balance against any unforeseen shortfall.”
During Tuesday’s meeting, Summerlin also said the numerous vacancies in the police and EMS ranks may be due to low salaries, and that the city is losing personnel to cities with better pay. She encouraged the council to look into the matter while preparing its 2019 budget.
The council unanimously approved a resolution asking the Texas Water Development Board to finance up to $5 million to fix a problem with the water supply system caused by trihalomethanes, a byproduct of the chlorination process.
The city is under a Texas Commission on Environmental Quality enforcement action regarding TTHMs. The council also unanimously approved a resolution expressing intent to reimburse with tax-exempt obligation proceeds costs incurred for the TTHM mitigation project and enlarging the Legion wastewater lift station.
The wastewater system in southeast Kerrville near the lift station is currently at capacity, and enlarging the Legion lift station is essential for opening up more development there.
The council approved a contract for $300,393 with Viking Construction Inc. of Georgetown for applying slurry seal as part of the regular street maintenance program.
Viking’s bid was the lower of two bids received for the project.
A list of streets to be sealed is posted in the 2018 street maintenance report on the city’s website, www.kerrvilletx.gov.