Tax increase, budget cuts likely as Council attempts to address shortfall
(Posted: 3 p.m., June 28, 2010)
Facing a $506,000 deficit in the Wastewater Fund and a proposed spending plan for the General Fund that is $240,000 higher than anticipated revenue, the Liberty Hill City Council has some difficult choices to make in the coming weeks as it develops a budget for the 2010-2011 fiscal year.
During a budget workshop June 25, the Council got its first look at next year's projected revenues from ad valorem taxes, sales taxes, and various fees, in addition to a list of proposed expenditures. While the numbers are likely to change some in the coming weeks, the challenge facing city leaders is to either find additional sources of revenue or eliminate some expenditures.
In order to cover a $506,000 deficit in the Wastewater Fund, the Council is considering raising the tax rate for Maintenance and Operations (debt service) by $0.0459 per $100 property valuation. If adopted, the increase would mean a city resident who owns a $100,000 home would pay an additional $46 in property taxes.
Mayor Pro Tem Charles Canady said the Council was warned by a financial adviser that "if we didn't have buildout (of the sewer) on the highway, we would have to increase the ad valorem rate. But, we can raise the debt service (tax) rate to whatever we want without a rollback."
With anticipated expenditures from the General Fund totaling $1.2 million and revenues estimated at just over $1 million, the Council started the arduous process Friday of sifting through proposed expenditures looking for items that could be eliminated. Carol TenEyck, a local accountant who is working with the City to prepare its budget, said about $240,000 in expenditures needs to be eliminated.
But even with the cuts, the Council may also consider a tax increase for general operations. To avoid a rollback, the ad valorem rate for the General Fund can be increased by only $0.01 per $100 property valuation, said Mrs. TenEyck. She said the additional one cent would increase revenue by about $15,000.
"Now is the time to get the red pen out and start slashing," she said.
Mrs. TenEyck said she thought the budget for professional fees should be reduced, particularly in the areas of legal, engineering and audit services. The proposed budget includes $64,000 for legal fees, $48,000 for engineering services, and $14,000 for an annual audit. The budget for legal fees is $24,000 more than what has been spent so far this year and may be higher in anticipation of the upcoming transfer of the Liberty Hill Water Supply Corp. assets to the City of Liberty Hill. The City currently has contracts with Russell & Rodriguez L.L.P.
of Georgetown for legal services, Steger Bizzell
of Georgetown for engineering services, and Michael Warner & Associates P.C.
of Burnet for auditing services.
The proposed budget for City Hall staff salaries (other than police) is $29,500 less in the coming fiscal year -- down from $111,500 budgeted in 2009 -- presumably due to the resignation in February of longtime City Secretary Kathy Clark who was earning more than current administrative staff. In addition to City Hall staff, police and Municipal Court employees are budgeted to receive a 5 percent pay increase.
Canady suggested the City could save money by turning the job of Building Inspector into an "on-call" position. The position, which is currently held by Pete McKinney, was intended to fund itself with monies generated by permitting fees and fines from code violations, he said. But in the current fiscal year, only $29,500 in fees have been generated compared to McKinney's $42,000 salary and benefits package.
"This year, we (the City) will lose money on him," added Mrs. TenEyck. Canady said the City lost money on the position last year as well.
"It (the job) was supposed to be pretty much of a wash," said Councilman Jack Harkrider. "When we hired him, we showed the income would more than pay for him, and I think it will at some point."
"If he (McKinney) wants to do it on call, that's fine," Canady said.
Mayor Michele "Mike" Murphy questioned whether McKinney had every opportunity to generate income in light of a report he prepared last month indicating that Canady had directed permit fees be waived in two cases.
The report, which will be reviewed and discussed by the Council at its regular meeting at 6 p.m. today, June 28, states the City lost $46,381.29 in permitting fees after Canady reportedly directed that fees be waived for Williamson County Emergency Services District #4 and San Gabriels Crossing. (Stay Tuned for more on this story.)
"He (McKinney) could make more money that way (on call)," said Mrs. TenEyck. "If the economy kicks back, there will be a lot of inspections. This is a common way smaller cities do it."
Police Chief Randy Williams said he would like the Council to adopt a pay scale for police officers that includes a 5 percent pay increase in 2010-2011, and a 3 percent pay increase in the years following. Currently, officers and all city employees come to the Council annually on the anniversary date of their employment and are reviewed for a pay raise. This year, everyone received a 5 percent pay increase. Under Williams' proposal, which will be placed on a future Council meeting agenda, officers would receive a smaller pay raise each year, but they would be able to project their career earnings -- an incentive to keep experienced officers in Liberty Hill.
Williams is also seeking $18,000 for mobile computers -- an expenditure he says is necessary to keep up with communication changes at the county level. In the coming months, Williamson County will begin dispatching police emergency calls through computers. Currently, officers are dispatched via police radio.
"I am under budget, but I can tell there's no money," Williams said. He said he would put aside a request to fund accident reconstruction software -- an item that will become essential when the Texas Department of Public Safety discontinues its courtesy of investigating vehicle crashes in Liberty Hill.
Williams brought an idea forward that could mean an additional $20,000-$24,000 in revenue for the City -- income he said would cover the costs of the computers.
He said he met recently with representatives of the property management company for the Stonewall Municipal Utility District who are interested in contracting with the City for police patrol services. The residential development, which is outside the city limits of Liberty Hill, currently depends on Williamson County deputies to respond to emergencies, but deputies rarely have time for preventive patrols. Williams said he would bring a proposal to the Council in the coming weeks.
Council member Liz Rundzieher suggested Williams could save additional money by discontinuing the practice of allowing officers to take home their patrol cars when they are off duty. She said the City could save money on gas and reduce the mileage on the patrol cars if officers would drive their personal vehicles to work.
In addition to documented research that shows the presence of parked police vehicles is a deterrent to crime, Williams said the vehicles are kept in better working condition when officers are held accountable for them. Additionally, he said in a smaller department where salaries are lower than neighboring agencies, a take-home car is considered an added benefit. Of the six full-time police officers, two live outside the Liberty Hill area, he said.
The proposed budget considered by the Council Friday did not include funding for the Shin Oak Fest, although $8,000 is budgeted under City Programs for children's gifts to be distributed at the 2010 Christmas Festival, as well as two city cleanup days.
Although the Council did not discuss Friday whether the Shin Oak Fest should be funded in 2010, last year, Council members allocated $35,000 for the three-day event that was held on Halloween weekend. Although the event was not predicted to make money for the City, many citizens and one local newspaper have been critical of the Council's decision to fund the event, which was organized by Canady's wife and Mrs. TenEyck. At a Council meeting in May -- seven months after the festival -- organizers called the event a success, however, the profit and loss schedule provided to the Council by Mrs. TenEyck did not resemble earlier versions provided to the Council or to Radio Free Liberty Hill
that showed the event went over budget. (See the Story
When Harkrider asked whether funds donated to the Shin Oak Fest could be used for other purposes in the coming fiscal year, Mrs. TenEyck said as much as $4,500 was earmarked by donors to be used for Christmas gifts. She said the current balance in the Shin Oak Fest banking account was about $12,000.
The Municipal Court, which is funded mostly by court fines, projected fine revenues at $150,000 for the new fiscal year. Although $175,000 was projected for the current year, the budget report provided to the Council Friday shows only $104,000 has been collected to date.
With sales tax revenue down by 3.14 percent from this time last year, the City's proposed budget will be partly dependent upon an estimated $245,000 in income from the tax. The Council budgeted sales tax revenue at $280,000 in 2009 anticipating the opening of Sonic Drive In and other businesses that they hoped would make a significant difference. The hoped-for businesses did not materialize and some businesses closed their doors. As a result, so far this year, the City has received only $167,641 in sales tax payments.
Williamson County reports a preliminary assessment of taxable value at $109 million, which at the current tax rates ($0.20 for debt service and $0.0916 for General Fund) would generate about $99,844 in revenue. City officials expect the assessment to change throughout the budget process as the Appraisal District continues to resolve appeals by local property owners.
Budget documents provided to the Council showed the City with a beginning cash balance for the 2010-2011 fiscal year of only $10,000, but the money may not actually be there as the City struggles to get through the last quarter of the 2009 fiscal year. Current cash reserves total $38,337 and the City is likely to use that before the new budget takes effect in October.
During the Council's meeting June 14, Canady said the City is "barely meeting payroll as it is." Department heads were notified in recent weeks that they should refrain from spending money on non-essential items, even though the items may have been funded in the current year's budget. On June 14, Canady told the Council that the City has expenses totaling $48,000 for July. However, available cash is limited to $11,098 in TexPool and $38,336 in the General Fund.
"I think we desperately need a reserve fund and we should avoid spending it," Harkrider said at the workshop. Canady said he agreed, but the reserve cash was needed this quarter to make payments on patrol cars and pay employees.
"Last year, we were able to build it (cash reserves) up, but this year has been a struggle," Canady said.