Highland Village police officers and other employees would receive a pay boost in the next fiscal year upon council approval.

The proposed fiscal year 2023-24 tax rate and budget was presented to the Highland Village City Council at its regular meeting July 11. Assistant City Manager Ken Heerman, who oversees the finance department, led a discussion about the budget. Human Resources Director Kim Lopez discussed the city’s compensation system.

The outlook

The proposed tax rate is $0.52373 in FY 2023-24, a drop from $0.546825 in FY 2022-23. The projected budget shows a proposed $22.3 million in expenditures and a proposed $21.4 million in revenues for FY 2023-24. A breakdown of revenues shows $13.9 million in property tax, $3.9 million in sales tax, $1.5 million in franchise fees and $1.9 million in other revenues. The FY 2022-23 year-end estimate is $20.6 million. The property tax valuation is projected to be $3.1 billion, a 3.8% increase from FY 2022-23’s $3 billion.

Council will have a public hearing and conduct the first reading of the tax rate and budget ordinances Sept. 12, followed by a special called meeting Sept. 19 where the new ordinances will be read.

The specifics

In addition to the $21.46 million in general fund revenue, there is also $534,000 transferred from the utility fund and $186,275 for the sale of vehicles that will be replaced. These amounts, along with the general fund revenue, amount to $22.32 million, Heerman said. The excess fund balance will be used to make up the difference.

Last year’s adopted expenditure budget was $21.3 million, and the revenues portion was a little over $20 million, according to Heerman’s presentation.

City officials are estimating to have 44% of the total operating expenditures in the city fund balance at the end of this fiscal year; city policy requires a minimum 20% fund balance with a targeted range of 20%-25%, Heerman said. The percentage of fund balance equates to the percentage of the operating budget that is in the fund balance, and because the city is estimating such a large fund balance, officials will use those funds to offset expenditures and get closer to its fund balance target, Heerman said.

In explaining the transfer from the utility fund, Heerman said it is for costs that are paid for by the general fund but are attributable to the utility fund. This includes staff time for those who are paid from the general fund but spend a portion of their time working on utility fund functions. It also includes overhead for office space and other equipment that is paid for by the general fund.

Also of note

The property tax valuation has increased by 3.5% over the last 25 years, and the figure has gone up an average of 4.8% over the last five years from 2019-23 and 4.7% for the five years previous to that.

Sales tax revenue reveals changes over the last few years with more people shopping online. The Marketplace shopping center in Highland Village represents 31% of sales in FY 2022-23 with The Shops at Highland Village in second as far as retailers at 18%. Various retailers on FM 407 represent 13% of sales. Internet sales make up 19% of revenues, which is up from 7% in 2019. Other dollars, such as from retailers and utilities, represent 19% of sales tax revenues.

“Online sales are bringing in revenue that is pretty substantial, actually, that equals to what we did at The Shops,” Heerman said.

Those sales are coming from Amazon and Apple, among other companies, and the sales tax revenues are based on destination, council learned.

A closer look

Regarding compensation, city officials examined other cities’ employee salaries. Officials pulled data from cities in a 40-mile radius, and they looked at “direct competitors with similar positions and organizational structure,” Lopez’s presentation showed. Those market cities are Colleyville, Coppell, Corinth, Flower Mound, Keller, Lewisville, Little Elm, Murphy, Sachse and Southlake.

In the 2023-24 budget, a 3.5% general pay schedule increase is proposed for new hires and a 5% pay schedule increase is proposed for public safety new hires. The total personnel budget increase of 7.25% is comprised of cost of living, market adjustments, compression and merit increases as warranted.

Lopez said the city should be at the midmarket in salaries for all positions and wants to attract “superstar” employees, stabilize turnover and increase tenure, be fiscally sustainable with salaries and benefits, and provide a workplace that people won’t want to leave.

Council saw salary increases of three different employees: crossing guards, utility technicians and police officers. The base pay for an officer would increase from $64,110 to $70,681, while base pay for crossing guards would be $15 an hour, up from $12 an hour, and for utility technicians, annual base pay would rise from $35,174 to $36,405. Each employee category features a pay maximum, and for a police officer, that proposed annual salary max is $98,954. The total budget increase would allow the city to make adjustments to the pay schedule market adjustments and compression, Lopez’s presentation stated.

Later, in an email, Laurie Mullens, director of marketing and communications for the city, said the city has included funding in the budget for a cost of living increase for all employees as well as funding for market adjustments and one-time merit increases on a case-by-case basis.