FY18 Budget Highlights

Proposed Budget

Fiscal year 2018 filed with City Council on July 18 and is available online at www.sugarlandtx.gov/budget

Builds on decades of financial strength and uses conservative revenue estimates and minimal additions to the budget

  • Based on City Council-approved financial policies that call for an effective tax rate plus 3 percent
    • Simply put, the effective tax rate is the “no new taxes” rate required to raise the same amount of revenue in 2017 from properties that were on the tax roll in 2016
    • 3 percent represents the annual increase necessary to address annual inflationary costs of doing business
  • Additionally, with fiscal year 2017 sales tax revenues coming in 7.6% lower than the prior year and 1% lower than projections, the revenues from sales tax are budgeted with no growth in fiscal year 2018.
  • Additionally, the proposed budget anticipates flat utility rates, with only minimal CPI-based adjustments to user fees.
  • No adjustment to homestead exemption for residents – which remains at 10% and was increased in previous years to reduce the impact of rising home values on residents in prior years when value growth was higher

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Financial Resiliency

Recommended budget is fiscally conservative and proactively responsive to changing consumer retail patterns, ongoing uncertainty in the oil/gas market and the city’s aging infrastructure and population

Issues facing residents -- including declining revenue streams, unfunded state mandates and preemption of local control -- create challenges in maintaining the high level of services citizens expect while maintaining one of the state’s lowest tax rates

City’s ability to continue providing a high level of services and low taxes depends on balanced economic development, comprehensive future land use planning and a strong financial position

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Overall Facts

The proposed budget includes $208.6 million for operations and $22.4 million for capital projects

  • Capital Improvement Program (CIP) will continue to focus on capital asset construction and major reconstruction, including street, drainage and water/wastewater improvements
    • Building on recent investments in a data-driven asset management system, the CIP focuses on streets, sidewalks, drainage and utility infrastructure and includes resources that will maintain the longevity of these critical assets
    • Streets and drainage continue to be priorities, with a total of $6.4 million included in the proposed budget
    • Funding for utility projects continues to emphasize rehabilitation of lift stations, the collection system and ground water storage tanks; water and wastewater projects total $10.1 million
  • Proposed 2018-2022 CIP totals $130.6 million, with final phases of voter-approved parks projects planned for construction in FY19

Funding for rehabilitation of streets, sidewalks, drainage, parks and facilities – which has traditionally been funded solely from sales tax – has been included in the operating budget at a reduced amount to ensure the benefit of more stable revenue sources (Note:  If revenue growth occurs as anticipated over the five year forecast, City will get back to prior funding levels)

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Key Components

Implementation of annexation for Greatwood and New Territory, with annexation revenues covering all annexation costs and resulting in benefits to the city now and in future

Funding for rehabilitation of streets, sidewalks, drainage, parks and facilities at a reduced amount, part of a strategy to move away from sales tax funding for annual infrastructure reinvestment and fund it through more stable revenue sources

  • While this ensures safety needs are quickly addressed, will result in delays for projects related to preventative maintenance, aesthetic requests and other items such as lower priority sidewalk repairs

No proposed additions to city staff except for those related to annexation

Funding for a 3% merit pay increase for City employees

Adjustments to starting salaries to ensure City retains its competitive position within the region, particularly in public safety, which accounts for nearly half of General Fund salaries & benefits

A 4% increase to health benefits

Implementation of contractual increases, such as an increase to the City’s landscape services contract, the City’s janitorial contract and an information technology fiber contract

Recognition of more than $500,000 in savings captured through decreases such as a reduction in the amount reimbursed to HOAs for landscaping services, fuel and electricity costs due to a rate reduction

Adjustments to the Capital Improvement Program (CIP) shifting some projects previously proposed for FY18 to out-years.

  • 5-Year CIP includes all projects from previous 5-year CIP, albeit at a slower implementation than previously shown

 Efficiencies recommended as the result of an enhanced accountability program to assess the performance of city services – ranging from a streamlined method of preparing public meeting minutes to the continued implementation of a successful staffing model for the Fire/EMS Department

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Impact of 2013 Parks Bond Election

Proposed budget includes continued implementation of the parks projects totaling $31.5 million for which voters authorized an increase of 3.1 cents on the tax rate for bonds in 2013

  • Election called to give voters a choice to fund wants with a tax increase to avoid cutting into funding for needs

Ultimate impact of 33.995 cents for full implementation of GO Bond projects and operating costs

  • While city has so far avoided full increase and only raised rate .7 cents in 2014, it may not be affordable to continue to subsidize projects without cutting basic services or implementing full 3.1 cent increase in the current economic climate
  • Bond related expenses taken on to-date equal 2 cents on tax rate ($1.46M debt payments, $500k M&O expenditures)

Goal Measures program identifies 32.895 cents as target tax rate to date with implementation of bond election, which is higher than the effective plus 3% tax rate

  • Past councils have been prudent in implementing the voter authorized increases due to higher valuations; in 2017, growth did not occur as necessary to be able to implement without raising the tax rate

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Lower than Expected Residential Property Growth 

Revenue required to achieve effective tax rate plus 3 percent typically doesn’t require any adjustment to the tax rate itself, as growth in property values typically covers this conservative growth in expenditures

This year, however, property value growth was only 1.53 percent for residential property and 3.53 percent for commercial

  • This means the City either has to cut services or raise the tax rate to balance the budget

Based on the Certified Tax Roll, the tax rate necessary to fund the budget as proposed is $0.32233

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Property Tax Rate Options

City Council discussed three potential tax rates during a workshop on Aug. 10:

  • Keeping the current rate of 31.595 cents requires budget cuts of $802,710 from the proposed budget, resulting in a reduction in service levels
  • The effective tax rate plus 3 percent of 32.233 cents funds the budget as proposed and is consistent with the City Council-adopted Financial Management Policy Statements
  • A rate of 33.007 cents, which would fund the FY18 budget as proposed and provide for replenishing rehabilitation funds reduced in the proposed budget by recovering revenue lost through the decline in sales tax revenue approved for property tax reduction
    • Approximately $864,000 of the FY17 sales tax revenue decline is the voter-authorized half-cent sales tax for property tax reduction, which is equivalent to .774 on the property tax rate

Difficult to make such financial decisions that impact residents and businesses while the state legislature continues its consideration of imposing revenue caps on cities across Texas

  • Such revenue caps provide no tax relief to residents and will also have unintended consequences on the city’s ability to adequately fund services such as public safety in the coming year and long-term

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Public Input Encouraged

City Council will continue to discuss budget and tax rate considerations at future meetings

City Council holding a series of budget workshops that continue through Aug. 31

A public hearing on proposed budget is scheduled for Aug. 15, at 6 p.m., at Sugar Land City Hall

At the Aug. 15 meeting, City Council will also take a vote to consider a maximum proposed 2017 tax rate up to 33.007 cents per $100 at a future meeting

  • Proposed rates for consideration must be posted by law and are for discussion purposes only; a final decision to approve the budget and set a tax rate is not scheduled until Sept. 19
  • Since the maximum proposed tax rate exceeds the effective rate, the City is required to hold two public hearings on the proposed tax rate
    • The purpose of the public hearings is to allow citizens to express their views on the tax rate
    • Public hearings on the proposed 2017 tax rate are scheduled at City Hall on Aug. 22 at 5:30 p.m. and Sept. 5 at 6 p.m.

After input from the public hearings and upcoming budget workshops, the City Council will decide what tax rate is to be adopted for the 2017 tax year

  • City Council may direct staff in the future to prepare the ordinance with a lower tax rate but may not exceed the published amount of $0.33007.

The vote to adopt the tax rate will be on September 19, after the FY2018 budget is approved

For more information on the budget, proposed tax rate and public hearings, visit www.sugarlandtx.gov/budget

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