Sugar Land City Council express concerns over flatlining sales tax revenue for upcoming fiscal year

The city of Sugar Land proposed $90.4 million expenditures from the general revenue fund for fiscal year 2017-18 during an initial budget workshop with Sugar Land City Council on Aug. 3.

Although general fund expenditures increased to $90.4 million from $78.4 million in the current 2016-17 fiscal year, officials are projecting a slight dip or flatlining in sales tax revenue. The diminished resources means the city will divert funding from other sources to maintain sales tax-funded services; sales tax comprises the top source of revenue in the general fund, officials said.

The general fund acts as a catch-all fund for day-to-day city operations, but it is not cumulative city expenditures.

“[Relying on sales tax] comes with a lot of risks,” said Justin Alderete, budget officer for the city of Sugar Land.

The city's general fund is projected to collect $37 million in sales tax revenue for the upcoming 2017-18 fiscal year, which is a $1 million dip over the current fiscal year. Sales tax is projected to comprise 41 percent of the general revenue fund for the upcoming year, and property taxes could make up 25 percent of the general revenue fund.

The next budget workshop to discuss property tax rates and debt service will be held on August 10. The state deadline for final approval of the city's budget is September 30.

“We’re planning very conservatively, but history has told us to expect better than what we’re planning,” Alderete said.

In order to reduce the city’s reliance on sales tax revenue, Sugar Land City Manager Allen Bogard said officials plans to constrain expenditures and grow the city's tax base through economic development, such as land redevelopment near Imperial Boulevard and the relocation of Schlumberger Ltd.'s headquarters to Sugar Land.

The city reduced funding for its Pay-A-You-Go rehabilitation program, which is currently 100 percent funded by sales tax revenues, Bogard said. Beginning FY 2018, funding will be allocated through the general fund as the city forms longterm plans for "sustainable revenue sources". The shift away from a purely sales tax funded program will most likely cause delays for repair work orders, Bogard said.

“We’re planning to end the year better than expected as a result of the reduction and transfer of the Pay-As-You-Go fund, and that’s more than offsetting the decrease in our revenues,” Alderete said.

However, one thing to consider is the importance of sales tax to the city and how it allows residents enjoy lower property taxes, Sugar Land Mayor Joe Zimmerman said.

“Our voters authorized sales tax as a way to subsidize, if you will, property tax,” Zimmerman said.

Whether property tax rates will rise has yet to be determined, Bogard said.

“I want [residents] to understand that a 25-year strategy that we’ve had of growing our sales tax base to be able to keep property taxes low is not a sustainable plan for the next 25 years,” Bogard said.

Additionally, officials discussed in the budget workshop how the annexation of Greatwood and New Territory will require more resources to provide city services.

The annexation is funded by services fees the communities paid to Sugar Land, Bogard said. That, in addition to money from debt reduction funds, will sustain funding for city operations throughout the annexed communities until fiscal year 2018-19 when the city can collect property tax revenue from Greatwood and New Territory.
By Renee Yan
Renee Yan graduated May 2017 from the University of Texas in Arlington with a degree in journalism, joining Community Impact Newspaper as a reporter in July.