Rising property values to bring additional revenue
The rise in costs for managing local cities' operations may mean homeowners pay a little more in the upcoming fiscal year, as increasing property values in the area are slated to bring in more revenue. Cities have been discussing tax rates and budget proposals that balance residents' tax rates with growing city needs for fiscal year 2014, which begins Oct. 1.
Round Rock
On Aug. 1, city staff presented the Round Rock City Council with a $144.2 million FY 2014 budget that features a lower property tax rate than the previous year.
The proposed property tax rate of 41.949 cents per $100 of valuation is 0.086 cents lower than last year's rate of 42.035 cents. The city was able to lower the rate because the average home value in Round Rock has risen approximately 4 percent during the past year, from $174,210 to $181,526. With the value increase, under the proposed tax rate, the average homeowner will see an increase of $29.19 to his or her bill in FY 2014.
Sales tax makes up 51 percent of the city's general fund revenue, and the city is looking to diversify its sales tax revenue streams to maintain a low reliance on property taxes. Despite profit declines at Dell, one of the city's major sales tax sources, in FY 2014 the city expects to receive $46 million in sales tax, a 2 percent increase compared with last year.
"We always conservatively project our sales tax revenue, but this [budget] is based on all the tracking patterns that we've seen," Round Rock Finance Director Cheryl Delaney said. "The [revenue estimates] are lower than what we'll [actually] receive this year."
New expenses in the proposed budget include 11 new staff positions for six firefighters, four budget employees and a youth librarian. Other expenditures are earmarked for traffic signal improvements.
These items contributed to an increase of $2.9 million in the city's general fund expenditures compared with 2013, bringing the fund's total to $90.5 million. The budget also includes $12.8 million for the city's debt service fund and $40.9 million for the water and wastewater utility fund.
"[The proposed budget] is the city manager saying in order to offer the same services at the high level we do, these are things we needed," Delaney said.
The council is scheduled to vote on the budget and tax rate Sept. 12 and 26.
Pflugerville
With average home values increasing by more than $6,000 during the past year, Pflugerville City Council is looking to continue its tradition of lowering tax rates.
At its Aug. 13 meeting, the council agreed to cap the FY 2014 property tax rate at the city's effective rate of 57.86 cents per
$100 of valuation. The effective rate is the tax rate that brings in the same revenue as the year before, taking into account increased home values.
The council is also considering lowering the tax rate an additional half cent from its effective rate for a total property tax rate of 57.36 cents.
"We have had a combination of growth in housing and growth in sales tax and growth in commercial properties," Pflugerville City Manager Brandon Wade said. "The council made a decision years ago that as Pflugerville grows, they wanted to make sure we gave back to the citizens."
Pflugerville's reliance on property tax revenue continues to decrease as more commercial development comes to the area. This year, sales taxes will account for 21 percent of the city's revenue, with 49 percent coming from property taxes. Additional monies will come from licenses and permits, franchise taxes, fines,
transfers, grants, recreation income and other sources.
"I think [the increase in commercial tax revenue] is [attributed to] a couple of things," Wade said. "One is that we've had an increase in consumer spending in the city. Another is that we've had growth in our shopping centers."
The city's proposed budget accounts for $62.3 million in expenses, including a
25 percent increase in the general fund for salaries for new positions. In FY 2014, the city plans to hire an administrative technician and a geographic information systems intern in the planning department. The police department will also add new personnel, including a detective, information technology assistant, property crime scene technician and dispatcher.
Other new expenses include parks and recreation projects; continued funding for the city library; upgrades to municipal court facilities; merit-based bonuses of up to 3 percent for city employees; and allotting money for pay increases for police officers and new equipment and patrol vehicles.
The budget is scheduled to receive approval from City Council on Sept. 10.
Hutto
Hutto's FY 2014 budget raises $320,901 more in property taxes than FY 2013, reflecting a 6.9 percent increase.
On Aug. 22, Hutto City Council approved keeping its FY 2014 property tax rate the same as the previous year's, positioning the city to bring in $182,518 from new residential developments built in the past fiscal year. The increased revenue is also attributed to rising home values, which rose from an average of just under $125,000 in FY 2012 to nearly $130,000 in FY 2013.
"For the first time since 2007, home values, overall, have risen in Hutto," Hutto Assistant City Manager Micah Grau said. "The impact of this is that the city is able to maintain the same tax rate as the previous year even though expenses related to operations and debt service have risen."
Sales taxes, which make up 27 percent of the city's operating revenue, are part of approximately $37.9 million in total expected revenue for FY 2014. The remainder of the revenue is pooled from water, wastewater, trash and development fees and the city's hotel occupancy tax as well as sales and franchise taxes.
Commercial property tax revenue is projected to rise about 1 percent compared with FY 2013 projections. Both of the city's largest development projects, the East Williamson County Higher Education Center and the YMCA, are tax exempt. Providing water for these entities, however, is expected to expand water and wastewater revenue.
"The city is working hard to increase [its] amount of commercial property," Grau said. "While much of this is market-driven [by property taxes], Hutto is positioning itself to attract more commercial growth from job creators [and] retailers."
The city is projecting a budget with more than $38.5 million in expenses. The city also plans to issue $19.8 million in bonds to cover additional expenses. Hutto's largest expense line item is its capital improvement project fund, which makes up 51 percent of the city's cash outflow, followed by public works at 18 percent, administration at 11 percent, debt repayment at 9 percent, police at 8 percent and parks at 3 percent.
The budget allots funding for capital improvement projects including approximately $19 million for wastewater infrastructure as the city begins construction on the new plant. Plant expenses will include construction costs at more than $14.8 million, a main water line for the plant costing $3.6 million and a 12-inch water line on FM 1660 at just over $1 million.
"Capital projects account for a large portion, about 51 percent, of the budget," Grau said. "As a growing city, expanding infrastructure is needed in order to serve the growing population."
