Lakeway is projected to have a $1.6 million shortfall for the upcoming fiscal year as revenues are down by 5.5%, equalling $19.5 million, while expenditures have increased by nearly 6% at $21.1 million, Lakeway City Manager Joseph Molis said at a June 15 City Council meeting.
The overview
The city has historically built its budget around development growth, as the ongoing decline in high value developments is a major contributor to the decrease in revenues, Molis said.
In 2021, $2.9 million from development contributed to 20% of Lakeway’s operating revenue, yet today that number is at $750,000, or 6% of operating revenue.
“We were in a period of high growth and now we need to adjust for that,” Molis said.
Despite the decrease in revenues, the city is currently $200,000 ahead in sales tax revenue compared to this time last year, Molis said.
The city also has 58% of its fund reserves available from the general fund balance and the capital fund balance.
Molis said the city is “well within the comfort zone” of maintaining 40%-50% in reserve in order to address emergencies like natural disasters.
“We’re still fiscally very strong,” Molis said. “We have had really great years of sales tax and property tax revenues, and our general fund balance has always been healthy.”
The details
Three strategic options were presented to the council to improve the balance.
The city can increase revenue by adjusting tax rates, fees and pursuing new revenue sources.
Improving tax base productivity may also decrease the shortfall by supporting development or redevelopment that expands the tax base and generates long term revenues.
Service levels may also be adjusted as service delivery models, staffing levels and program offerings are evaluated to reduce recurring expenditures.
“We can’t do all three things simultaneously ... we have to balance how we prioritize community values,” Molis said.
Lakeway will also begin charging "convenience fees” for credit cards to minimize expenditures as the city previously absorbed approximately $54,000 in credit card fees, Molis said.
Something to note
The city will have a more comprehensive view of the budget once property tax revenues are available.
