City Council voted to reduce its property tax rate to 41.75 cents per $100 of valuation. The city had maintained a 42 cent tax rate since 2008. Still, city officials expect an increase in property tax revenue because of population growth and the addition of recently annexed areas.
“We wanted to find ways to put more money back in the citizen’s pockets,” Mayor Toby Powell said. “I wanted to do something [regarding the property tax rate], but because the sales tax revenue is down right now we can’t do everything we want. We have done well with this budget. I think citizens will be happy with this one.”
The city anticipates to garner $162 million in total revenue during the fiscal year, which is a 5 percent increase from revenue generated in FY 2015-16. Similarly, the city expects a 3.9 percent increase in expenditures with an estimated $161 million.
Major initiatives funded by the city’s general fund include $665,041 dedicated to employee raises, $376,442 for personnel and apparatus purchases for Fire Station No. 7 on League Line and Longmire roads and $2,284 for supplemental city department funding.
The city maintains a separate budget dedicated to its capital improvement program. The program uses bond sale proceeds to fund large-scale capital investments. Council approved a FY 2016-17 CIP budget of $58 million and a water and sewer CIP of $34 million.
Major capital improvement projects include a $9.2 million expansion of Longmire Road between FM 3083 and League Line Road, a $9.7 million widening of MP Clark Road, construction of a $4.3 million Fire Station No. 7 and a $4 million fire department training facility and $2.3 million for enhancements to Carl Barton Jr. Park.
Sales tax decline
A decline in the energy sector has lead to a drop in sales tax revenue for the city. The current budget is projected to fall below its FY 2015-16 sales tax revenue projections by about $423,023. Sales tax makes up about 46 percent of general fund revenues, Conroe CFO Steve Williams said.
“Six out of the last 10 months have shown a decrease in sales tax revenue from the same month last year,” Williams said. “The biggest driver of the downturn in sales tax is oil and gas related. We have several large manufacturing companies in the industry that contribute heavily to sales tax, and their numbers have dropped pretty dramatically.”
Williams said the city has also seen declines in sales tax revenue from building materials, which is the largest contributor to the city’s sales tax.
Additionally, the city also saw a $197,203 drop in permits over the previous year, falling below its estimated budget by about 8 percent. Williams said the permit revenue fell because construction of the Houston Methodist The Woodlands Hospital and several large apartment complexes contributed to high permit revenue figures last year.
Water and sewer rates
After considering a 3 percent water rate increase, City Council voted to maintain the city’s water rate at $29.92 per 10,000 gallons of consumption.
However, officials approved a $47.42 sewer rate per 10,000 gallons of consumption—a 10 percent increase—primarily to fund construction of a $56 million wastewater treatment plant, Williams said.
“Council made the decision not to increase water rates, but an increase in sewer rates was necessary at this time,” Williams said. “The plan rate increases are due to the city needing to construct a new sewer treatment plant”
The FY 2016-17 budget goes into effect Oct. 1.
