With another fiscal year behind them, both Pearland and Friendswood’s city councils in September passed their respective fiscal year 2022-23 budgets.

Pearland’s budget includes increases to both water rates and trash pickup rates along with raises for employees and funds to hire new personnel, including firefighters. It also includes a tax rate decrease compared to FY 2021-22.

“We’re shaping our future with purpose, and we’re committed to the public safety, our employees and building our future together,” Pearland City Manager Clay Pearson said.

Friendswood needed to manage record inflation on goods and services in the upcoming fiscal year while undertaking its largest drainage improvement effort. Despite this, the tax rate will not change from the previous year.

“Our challenge was how do we meet those needs without overly burdening our taxpayers, our customers,” Friendswood City Manager Morad Kabiri said.

Rate increases

Perhaps the biggest change for residents in Pearland’s FY 2022-23 budget, which was approved Sept. 26, is its 13.1% water rate increase.

However, most Pearland residents will not see a flat 13.1% increase, according to budget documents. The average Pearland household uses 6,000 gallons of water per month and will pay about $7.53 more a month, which is an increase of 9.5%.

This is due to various factors, including moving off the city’s 32/30 plan, in which Pearland water customers were billed every 30 days for 32 days’ worth of water use to make up for a gap in collections. The city moved off the plan by Sept. 30.

Driving the water rate increase is a $535.1 million investment in projects to expand and upgrade water systems. Pearland’s new $175.5 million surface water treatment plant, located on the west side of CR 48 south of Magnolia Parkway, will be in operation in FY 2022-23, and other water reclamation and plant facilities will be improved and expanded, according to the documents.

The rate increases will not stop at 13.1%; the FY 2023-24 through FY 2026-27 budgets call for additional annual increases ranging from 8% to 19%.

A few council members at the Sept. 12 meeting asked why an extra $1.4 million in revenue the city received in the FY 2021-22 budget—due to extra water use during the drought—could not help lower the proposed rate increase. City officials said the money is earmarked to offset future debt and would not have a huge effect on rates.

“There’s zero pity for the people that actually have to buy the water,” Pearland City Council Member Alex Kamkar said of the rate increase at the Sept. 12 meeting. “I struggle with that.”

Mayor Kevin Cole agreed the rate increase is high.

“Nobody likes to pay a 13% increase. I don’t want to pay it,” he said. “But I also want to make sure we pay our bills and deliver our projects, so we’ve got to figure that out.”

In addition, residents’ solid waste fee is set to increase as part of the budget. A Pearland resident pays $18.26 a month for trash pickup; this will increase to $19.25—a 5.42% increase.

Budget compromise

The budget includes $110.26 million in general fund expenses. For comparison, the FY 2021-22 budget was $99.62 million when originally passed, though it was amended up to $106.98 million throughout the fiscal year, according to budget documents.

Major changes in the FY 2022-23 budget include hiring four new firefighters to balance shifts, hiring two telecommunications operators and one police officer, hiring new drainage maintenance crew members, updating the city’s master drainage plan and purchasing police equipment.

In addition, the budget raises pay at least 5.5% for city employees and increases sick leave buyback from 40 hours to 60. Sick leave buyback allows employees to annually trade in unused sick time for money.

All told, these additions and changes total $5.1 million.

A few council members tried to lower the budget and the tax rate before final approval Sept. 26.

Council Member Adrian Hernandez said he studied the budget and failed to come up with ways to reduce the tax rate to $0.543044, which is the no-new-revenue rate, or the rate at which the city would collect about the same amount in property tax revenue as it did the previous fiscal year.

Kamkar made a motion to reduce the general fund budget by $4 million down to $106.26 million. That would have reduced the tax rate down to $0.5988. The motion failed due to a lack of a second.

Mayor Pro Tem Tony Carbone said he did not want to cut the budget in a way that would result in additional turnover.

“It’s a good budget. It funds what needs to be funded,” he said.

Other council members mentioned while they are not completely satisfied with the budget, this is the best the city can get.

“I think it’s the best that we’re going to get this year,” Council Member Layni Cade said. “The taxpayers are getting some relief. I can live with a compromise.”

The tax rate passed to fund the budget is $0.623765 per $100 valuation, which is over $0.08 lower than the FY 2021-22 rate of $0.70416. Under the new rate, the owner of an average $313,200 home will pay $1,953 to the city in property taxes.

Tackling inflation, capital projects

Friendswood adopted the previous year’s property tax rate of $0.487314 per $100 valuation at the Sept. 12 meeting despite inflationary pressures on contract services and undertaking $59 million in capital improvement projects.

“Every year, the budget challenge is how do we provide all the services that our residents expect, keep our police force doing all the great things they do to keep us one of the safest cities in the Houston area, and keep the streets repaired ... and not be too much of a burden on the taxpayers?” Friendswood Mayor Mike Foreman said.

The FY 2022-23 budget includes $118 million in revenue, down 6% from last year, and $114.2 million in expenditures, down 7% from last year, across all funds. The city expects to generate an additional $263,070 in property tax revenue this year from properties added to this year’s tax roll.

“Not having new construction, we don’t add a lot of new revenue to the rolls each year, so it’s dependent on the properties that were here last year,” Kabiri said.

The combined tax rate of $0.487314 results in no change from last year’s rate but exceeds the no-new-revenue tax rate of $0.4574. Owners of a home with the average value of $435,000 will see an increase of $149 in city taxes over last year due to increases in property values, Kabiri said.

“We shoot for the lowest possible tax rate that we can squeak out and still provide all of the services that our residents expect,” Foreman said.

Since the city operates with one of the lowest staffing ratio in the Houston metro area with a total of 242 employees, it outsources services to avoid the need for a full-time employee and save on overhead costs.

However, inflation has drastically increased the cost for these services, Kabiri said.

Of the $1.78 million worth of additional property tax revenue the city will receive from the flat tax rate this fiscal year, $1.4 million will be used to cover contract services that increased in cost due to inflation.

“These are services that we have to publicly bid based on state law and our own procurement policies, and the bids that we receive are what they are,” Kabiri said. “We don’t have any negotiating flexibility there.”

The city has also undertaken numerous capital projects since 2019 with $59 million budgeted for capital improvements in the upcoming fiscal year. This includes continued funding for the largest drainage effort in its history with $3.4 million for the Forest Bend Detention Pond and $2.5 million for the Deepwood Infrastructure Project.

Construction on the detention pond in the Forest Bend neighborhood kicked off in August and is scheduled to be completed in June 2023, Deputy Director of Engineering Samantha Heritos said. The city is still working to acquire the land for the Deepwood terracing project.

“This will drastically improve our flood mitigation capabilities during major events,” Kabiri said.