On Thursday at a retreat, Conroe City Council reviewed the city's proposed budget, general fund and capital improvement program for FY 2018-19.
Discussion revolved around the fire department staffing requests for phasing in six-person station teams over the next 10 years and hiring three new battalion chiefs this year. The proposal includes a property tax rate increase.
"We've got to make bold decisions, and sometimes being bold might include a slight tax increase," Position 3 Council Member Duke Coon said. "We're 20 cents behind the closest comparable cities to us and we've got to meet our objectives."
Conroe, with a population of 84,378 residents, has a property tax rate of $0.4175; Baytown, with a population of 79,215, has a rate of $0.822; and Bryan, population 85,613, has a rate of $0.6299.
If property taxes go up, it could cost residents an extra $6 per 1,000 square feet each year, according to Steve Williams, the assistant city administrator and chief financial officer.
"If you change the tax rate by one penny, it would affect the general fund by $824,000," Williams said.
In Conroe, property tax revenues make up 31 percent of the general fund, and sales tax collections equal 46 percent, according to the proposed budget.
"The reason why property tax is more ideal than absorbing it [the higher expenses for the fire department] organically through the budget is because as the sales tax gets higher, it's like a wobbly tire," Williams said. "As sales tax becomes a greater part of the budget, downturns are more severe—you really suffer when it goes down. Right now, doing a little bit at a time is a good thing."
According to the proposed budget presentation, one of the goals in Conroe's official strategic plan is to enhance alternative revenue sources to reduce dependency on local sales tax revenue because of this kind of fluctuation. Property tax revenue is generally more stable.
The city's total gross revenue for FY 2017-18 is $188 million—a 10.9 percent increase from the FY 2017-18 budget, but an 8.4 percent decrease from the FY 2017-18 estimate. The city's total net revenue is $158 million, a 9.4 percent increase from the FY 2017-18 budget but a 7.9 percent decrease from the FY 2017-18 estimate.
"It's a decrease from the estimate because of impacts of Hurricane Harvey," Williams said.
Because of Conroe's population boom and further expectations for growth, the budget proposal includes additional staff for police patrol, police investigative services, the animal shelter, the fire department, administration, finance department, HR clerk, recreation and aquatic centers, park operations, transportation, public works and engineering.
Gross expenditures are estimated to be $204 million, an increase of 17.2 percent from the FY 2017-18 budget, and net expenditures are estimated to be $154 million, an increase of 7.3 percent from the FY 2017-18 budget.
As for the general fund, the city's total gross revenue for FY 2017-18 was $76.8 million, and total gross expenditures equaled $77.3 million.
The final budget report, the 2017 Certified Assessment Rolls from the Montgomery Central Appraisal District, is expected to be published July 25, after which city officials can calculate the actual budget values instead of estimates. There is also a compensation study expected to come out in late 2018 that will include cost-of-living adjustments.
City Council is scheduled to consider the tax rate July 31. The first public hearing on the tax rate is scheduled for Aug. 9, and a second public hearing is slated for Aug. 16.
The council plans to adopt the new budget and capital improvement program Aug. 23 before the new fiscal year begins Oct. 1.
Read more about the proposed budget and capital improvement program here.