The city of Pearland recently discovered a property valuation error that caused a roughly $10 million deficit across two funds. Its next meeting on Nov. 21 will focus on possible next steps for tackling the issue.

According to the city’s agenda packet for the upcoming meeting, the city’s financial advisor presented options to refund, restructure and defease debt at an audit committee meeting Nov. 15.

The approximately $10 million deficit consists of general fund revenue decreasing by about $4.7 million, or about 4.3% of the general fund revenue, and a decrease of about $5.6 million from the tax-backed debt service fund, or 11.6% of the total fund revenue.

To address the general fund revenue decrease, the city may use some carryover money from items ordered in fiscal year 2021-22 that have not yet been received, according to the agenda. The agenda states that a budget amendment using reserve funds would keep the city above its 90-day policy, which translates to maintaining at least $27.7 million.

For addressing the tax-backed debt fund, the agenda states that the solution is in three parts. These entail: transferring funds from higher-than-budgeted interest earnings in three bond funds to the debt service fund; removing an expense already budgeted for in the enterprise debt fund; and restructuring the Series 2022 PIB Bonds alongside a cash defeasance of the Series 2019B Certificates of Obligation.

The agenda states that the actions will have “no impact” on the property tax bills of residents and businesses in FY 2022-23. Additionally, it states that the city’s investor services, Moody’s, confirmed the city’s “strong financial position.”

Finally, the agenda features an item considering engagement with an independent third party to conduct an audit “with respect to the role of the parties and processes involved with the city’s fiscal year [2022-]23 budget process.” The item, if passed, states the audit would be produced on or before Dec. 31.

The city will discuss and vote on these items at the Nov. 21 meeting.