Pearland city staff gave an update on the city’s financial situation with a focus on new debt service tax rate projections at a Feb. 20 meeting.

Interim City Manager Trent Epperson said during a staff report that the city was able to successfully acquire an accurate version of a tax worksheet that previously was discovered to include what city staff called incorrect information. The sheet was released by the Brazoria County Tax Assessor-Collector, according to the City Council.

The miscalculation on the previously incorrect sheet significantly overvalued some north Pearland properties, bringing the city a deficit and inaccurately low tax rates. City staff referred to the drop in property tax rates from tax years 2022 to 2023 as “artificial,” where the overall rate dropped by over 7 cents.

“As we continue to discuss this, we need to start to understand council’s [tolerance for] getting back closer to where our tax rate was in [2022] to support our needs for our operational needs,” Epperson said.

As a result of the incorrect rates, the city had previously projected the debt service rate—one part of the two-part property tax that goes toward paying the city’s debts—would rebound and increase by up to 6 cents by 2025. This estimation included the assumption that voters pass the upcoming $181 million bond package in May.

However, city staff and the city’s Financial Adviser John Robuck proposed a possible refinancing plan that would transfer reimbursements from a Tax Increment Reinvestment Zone from the city’s general fund to its debt service fund. The reimbursements from the TIRZ would allow the city to reduce its outstanding debt over the coming years, allowing for a lower debt service tax rate than previously expected, Epperson said.

According to the presentation, the new highest estimated debt service tax rate is an increase from $0.3388 to $0.365, rather than the previous estimation of $0.395 per $100 of property valuation. These projected rates both assumed the passage of the bond package.

City staff will provide additional fiscal year 2022-23 projections for the purpose of a second budget amendment in June this year. The process for determining the next fiscal year’s budget will kick off in April.

“At some point here relatively soon, we need to have a discussion about some of the additional assumptions about staffing and other things moving forward,” Pearland Mayor Kevin Cole said.