Preliminary numbers show sales/hotel tax revenue slowing, property tax revenue growing for San Marcos

Hotel/motel tax revenue has tapered off over the last year in San Marcos. The City Council got a first look at the fiscal yer 2018-19 budget at the end of February.

Hotel/motel tax revenue has tapered off over the last year in San Marcos. The City Council got a first look at the fiscal yer 2018-19 budget at the end of February.

San Marcos City Council members got a first look at the preliminary fiscal year 2018-19 budget Feb. 22 during a work session meeting.

This is the first budget cycle with the city of San Marcos for new City Manager Bert Lumbreras, and discussions on the budget began about 30 days earlier than usual.

"That's very intentional," Lumbreras said. "We want to give the council as much opportunity as we can to weigh in."

The council is going into the start of budget season with five strategic initiatives in place: workforce housing, public transit, stormwater, community partners and city facilities.

Sales tax, hotel/motel tax revenue down

Revenue trends are not what they used to be in San Marcos, according to Director of Finance Heather Hurlbert, which means it is going to be another conservative year for San Marcos.

While operating revenues are going to continue to exceed operating expenses, such as salaries, supplies and contracting services, there will be continued pressure on the general fund balance, she said.

Hurlbert predicts a drop in sales tax revenue from the outlet malls, which typically make up about 40 percent of the city's total sales tax revenue.

"Sales [tax revenue] has decreased as we've diversified that revenue," she said, pointing to the growth in property values, new construction and fee increases.

The city collects 1 1/2 cents on every dollar spent on taxable goods and services within the city limits.

Hurlbert said the city will not immediately see the benefits of the Best Buy economic development agreement, which is expected to bring $43 million to the city over the length of the agreement's terms.

Under the terms, the city and Hays County will rebate 75 percent of sales taxes generated at the site with two automatic renewal 10-year terms, assuming the company meets the agreement’s terms. The company will also be granted a 10-year personal property tax rebate of 50 percent.

Eventually, the Best Buy agreement will render a 4 percent sales tax revenue increase, Hurlbert said.

The city's hotel/motel tax revenue has also slowed. According to Hurlbert, while the number of hotel rooms has increased, occupancy has declined over the last few years.

Since 2007, the city has seen 1,028 new hotel rooms, and the additions of Studio 6, Holiday Inn Express and Homewood Suites in, as well as a new Residence Inn in 2019, will bring an additional 352 rooms to the area.

Property values expected to go up 10 percent 

Hurlbert said the city has experienced double-digit property tax revenue growth in three of the last four years, and that is unlikely to change in 2018-19.

While preliminary appraisals will occur in April, Hurlbert said the city can expect at least a 10 percent growth in revenue from increased property values and new properties. In FY 2017-18, about 22.3 percent of the city's total general fund revenue—about $15.92 million—came from property taxes.

The city's adopted tax rate is 61.39 cents per $100 valuation, approved by voters in May 2017 as part of a bond for the construction and operating expenses of public safety and library facility expansions. Council members said they did not want to raise the tax rate this year.

Council members also requested more information on possibly creating a homestead exemption. Hays County and San Marcos CISD already have senior homestead exemptions, in which taxpayers who are 65 years or older, or who are disabled, have their county and school district taxes capped.

On Tuesday, council members will vote on whether to approve their strategic initiatives for the next 12-18 months and hold a public hearing to adopt a budget policy for FY 2018-19.

City department heads will then be invited to submit their budget requests, and the council has scheduled a series of budget workshops throughout the summer.

The council will also have a work session April 3 to discuss the city's debt.

If all goes according to plan, the budget and tax rate will be adopted Sept. 18.
By Marie Albiges

Marie Albiges was the editor for the San Marcos, Buda and Kyle edition of Community Impact Newspaper. She covered San Marcos City Council, San Marcos CISD and Hays County Commissioners Court. Marie previously reported for the Central Austin edition. Marie moved to Austin from Williamsburg, Va. in 2016 and was born in France. She has since moved on from Community Impact in May 2018.


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