In January, Assistant City Manager Sam Roberts said City Council has been evaluating options to fund the full-service stormwater department for several years with the goal of not increasing taxes or implementing a new fee.
“Following rigorous public outreach effort this past fall, and plus the work we’ve been doing the past couple years, the recommendation has been made to utilize a small portion of sales taxes from the Type A Corporation,” he said.
Per state law, a city cannot exceed a 2 percent sales tax rate. For every 2 cents in sales tax revenue for Cedar Park, 1 cent is allocated into the city’s general fund, and a half-cent each goes into its two development boards.
According to the city’s website, the Economic Development Corp. Type A Board, or 4A Board, promotes bringing new businesses to Cedar Park and enhancing and expanding business enterprises to create jobs in the city. The city’s Community Development Corp. Type B Board, or 4B Board, can promote community development projects.
Some projects funded by the 4A Board include the planning and construction of the H-E-B Center at Cedar Park and economic development agreements with companies such as Firefly Space Systems, Swagelok, and Innovative Funding Services. The 4B Board has funded economic development agreements, parks and community facilities, and transportation projects, according to city documents.
If approved by voters, the city would redirect about $1.8 million from the 4A Board for the stormwater drainage program starting next fiscal year.
Cedar Park drainage issues
In the past, city-hired consulting firm Freese and Nichols identified 19 projects around the city that need infrastructure upgrades to improve drainage. During a presentation to the 4A Board in November, City Finance Director Kent Meredith said the cost for the projects is estimated at $38 million—65 percent would be for fixing drainage infrastructure, 10 percent to fix utilities and the remainder for street repairs related to drainage improvements.
Cedar Park resident Tim Hudgeons has lived within one of these zones in the Riviera Springs neighborhood since 2013. He said his parents previously lived in the house since 1983, and his family home never had flooding issues until Tropical Storm Hermes in 2010 when it filled with 5.5 feet of water.
Hudgeons said as more development has occurred by Lakeline Mall over the years, he has noticed it has taken lesser amounts of rainfall to fill up Buttercup Creek in his neighborhood.
“The pond used to go dry in the summers, and [now] it never does; it always has water running through it now,” he said. “It really seems like the development has impacted that watershed.”
After he moved in, he said his home flooded again in 2015. That is when he began attending City Council meetings, which he said he has attended for the past 27 months to keep the city’s focus on fixing drainage issues.
Cedar Park staff previously evaluated six different options in order to fund a stormwater drainage program, Meredith said. Those options included implementing a drainage utility fee as a line items on water bills, paying for the program through the city’s general fund, issuing bonds or creating a special taxing district.
“Every single case would have been an increase in taxes, or setting up a special taxing district would have isolated a population that would have probably paid a lot more than if we spread this out through the entire citizen base,” Meredith said.
Stormwater drainage program
Last year city staff began exploring letting citizens choose whether to redirect some sales tax revenue from one of the city’s development boards. In August, City Council debated placing the item on the November ballot, but some council members raised concerns that the process had felt rushed. On the day council voted on whether to hold the election, some 4A Board members said it was the first time they had heard about the possible election.
During the November presentation to the 4A Board, Meredith said city staff recommended that the sales tax redirection come from the 4A Board’s budget because it has more restrictive rules regarding what it can fund. According to the State Comptroller’s Office, Type A Boards can fund economic development, while Type B Boards can fund economic development plus a variety of community development projects.
“In the event that we need to do more economic incentive agreements, we can use 4B for that,” Meredith said. “But we can’t go the other way around.”
If citizens approve the election, Meredith said the city’s stormwater drainage program would be in charge of infrastructure projects, program management, maintenance and permit control.
The infrastructure projects are the 19 identified drainage issues estimated to cost $38 million to fix, and Meredith said the redirected sales tax revenue would help fund some of the projects. The drainage program would also include funds for staff to oversee the program.
Regular drainage maintenance and complying with state and federal stormwater permits will also fall under the duties of the created drainage program, but those tasks would continue to be paid for by the city’s general fund. Though as the city ages, additional funding for drainage maintenance would come from the sales tax revenue, Meredith said.
The impact to 4A Board
If approved by voters, the sales tax redirection would be implemented in the start of fiscal year 2018-19, which starts Oct. 1.
According to the city’s current sales tax projections, the 4A Board will bring in about $7.2 million in sales tax revenue in FY 2018-19. The one-eighth of one cent redirection would decrease the board’s budget by about $1.8 million, leaving the board about $5.4 million to pay its staff and board expenses, economic development agreements, debt service and to have available money for new economic development projects.
Kevin Lancaster, the president of the 4A Board, said he does not believe that the sales tax redirection is the best source of funds for the stormwater drainage program. He said he would be concerned with the board’s ability to pay its obligations and debts if there was an economic downturn.
“That will immediately reduce the revenue of what [4A is] currently bringing in, and if that’s the case, will we then have any additional funds to bring in economic development on the 4A?” he said. “And if [the economy] really takes a downturn, will we then be able to continue to fund the H-E-B Center?”
In 2006 voters passed a proposition to allow the 4A Board to finance the planning and construction of what is now the H-E-B Center. For the past eight years, the Texas Stars have been responsible for 100 percent of the building’s capital improvements and repairs, Cedar Park Economic Director Phil Brewer said. In September, the 4A Board became responsible for one-third of the building’s improvements and repairs, and will become 100 percent responsible in another eight years, he said.
During the November meeting, Lancaster expressed concern that the city will take responsibility for improvements and repairs as the H-E-B Center becomes older. Brewer said an annual operators fee and facility fees for most events at the center will help the 4A Board pay those bills.
Lancaster said city analysts have told the board that it would have funds to pay its obligations and debts. In November, Meredith said the board could afford to see a 13 percent reduction in sales tax revenue in FY 2018-19 in the worst case scenario, which is based on current sales tax projections. He said the biggest downturn the city saw in recent history was in 2008, when the board had a 6 percent decrease in sales tax revenue.
“We still have ample opportunity to fund the current incentives that exist and have money to go out and get new projects, and maintain the [minimum] reserve,” Meredith said.
Lancaster also said fixing the infrastructure projects around town will affect a fraction of Cedar Park’s residents. He said the funds would benefit more people through economic development by bringing more higher-paying jobs to Cedar Park and giving the city additional tax benefits.
Lancaster suggested waiting until there are fewer opportunities for economic development in the future.
“[My] thought process is maybe hold off on the infrastructure until our economic dollars are not going to be able to put new buildings up or bring new people in because we’re now land-locked and can’t grow any further,” he said.
Hudgeons said he believes the program will affect more people in the city in the long-term.
“When they get all the immediate problems fixed, there’s infrastructure inside the new neighborhoods that are going to start needing work, but right now there’s not any money for the city to fix them, but they will have a department to start fixing that,” he said. “So this will be a citywide solution.”
The day after City Council called for the special election in January, he went down to City Hall and filed paperwork for a political action committee, called One Cedar Park, to encourage the passage of the proposition.
“It doesn’t raise fees; it doesn’t raise taxes; and it helps the whole city; and that’s why we strongly agree with this,” he said.