Revenue reductions and increased expenses have forced the City of Brownwood to examine other ways to meet its budget for the 2017-18 fiscal year.
The decision was made to raise the property tax rate, utility rates and other fees to make up for the financial shortfall.
Raise taxes to bring in more revenue, or raise fees including utility rates?
Or a combination of the two?
Brownwood City Council members, the mayor and city staff plowed into that question Tuesday during a public hearing for the city’s proposed $34.35 million budget for fiscal year 2017-’18, facing a dual challenge of overcoming significant revenue reductions and increased expenses.
‘About as bare bones as it gets’
Finance Director Walter Middleton presented a proposed budget that council members had hashed out in earlier workshops.
It’s a budget that relies on a combination of a property tax rate hike — the first since 1999 — and increases in utility rates and other fees. Council members had initially considered a budget that contained larger fee and utility rate increases but no increase in the tax rate.
The council is proposing a tax rate of $.7946 per $100 valuation, a 6.5 percent increase from the current rate of $.7463.
The increases in the tax rate and fees and utility rates, if approved, would add a total of $7.05 a month, or $84.60 a year, to an average residence valued at $92,750, Middleton’s budget presentation states. Council members will give final approval to the budget next month.
“This budget is about as bare bones as it gets,” Middleton said. “There’s just no way to get the budget done without revenue increases.”
The city faces a $1.74 million swing because of three significant revenue reductions that total $897,000, and major changes in the expense side that total $848,463.
Major revenue reductions are:
• Sales tax projections — down by $412,000.
• Water revenue sales — down by $375,000.
• Loss of sewer revenue from the City of Early — $168,000.
Changes in expenses are:
• Bond payments for waste water treatment plant improvements — $338,516.
• Medical insurance — a 14 percent increase of $271,457.
• Meet and Confer promotions — $85,000.
• Personnel and overtime changes — $153,490.
No one wants to raise taxes
“No one that’s on this council wants to raise taxes,” Mayor Stephen Haynes said. “But we have a fiscal responsibility to the city. The reality is, we have had less revenue in the last year and we have had more expenses — the two largest which are largely outside of our control. We had no choice but to make the improvements to the waste water treatment plant. We have no choice in relation to health insurance.”
Haynes said increases in fees and utility rates tend to be regressive, requiring lower income people to pay the greatest percentages of the increases. “My personal opinion is, a budget with heavy increases in fees and lower taxes would be detrimental to a lot of low income folks,” Haynes said.
The only option to bringing in more revenue would be to “dramatically cut expenses, and the hard reality is, that means probably laying people off, and that means firing firefighters and firing police officers, and picking up the trash one day a week instead of two, or not repaving your street,” Haynes said.
“I don’t think the council was willing to do that.”
Haynes also said bond rating companies don’t like to see a city transferring money out of its proprietary accounts to the general fund. In other words, “we’re making money on water and fees and not raising any tax, and the bond people don’t like that,” Haynes said.
Other factors in the budget include:
• There were no across-the-board pay raises granted to city employees.
• The Brown County Water Improvement District increased its wholesale water rate by 3.6 percent. The budget proposes a 1.8 increase in the water consumption rate to cover the increase, costing an average household 40 cents a month.
• A sewer rate increase of 8.4 percent, to cover the bond payments for the treatment plant improvements, is proposed. This would increase the minimum level of service by $2.08 a month.
• An increase in the sanitation rate of 4 percent, to cover the cost of buying two new trash trucks and the increased maintenance on an aging fleet of trash trucks, is proposed. This would add 84 cents a month to a residential bill or $2.42 a month to a minimum commercial bill.
• An increase of $2 per ton to the landfill gate rate is proposed.
Council member Larry Mathis recalled his previous years as the Brownwood High School theatre director. “One of the things we talked to the kids about all the time was, when gathering evidence and looking to establish a plan, one of the last things you do is ask yourself a question: it’s not a matter of who’s right, but what’s right?” Mathis said.
“It’s not easy. We don’t want to see taxes go up. But when you look a the totality of it all, it’s what’s right for this community. It’s what’s best for this community, to offer the kinds of services that we do.”
The splash pads question
Craig Younce, one of three citizens who spoke, questioned the council’s wisdom in approving, in June, an expenditure of up to $551,732 for the installation of three splash pads.
City Manager Emily Crawford said the splash pads are funded from a 2016 Certificate of Obligation for $3 million that is paying for improvements to parks, streets and city facilities.
“What you’re seeing in this proposed tax increase this year is not going to pay for those improvements,” Crawford said. “They were already figured into our budget before this tax increase was proposed.”