Decision Points : budget

Proposed budget features lower tax rate, increased funding for street maintenance

Will Hampton — Wed, 08 Aug 2012 18:34:00 GMT

The City of Round Rock’s proposed fiscal 2013 budget features a tax rate slightly lower than last year while increasing funding for street maintenance by 36 percent, and maintaining an emphasis on public safety, community development and parks.

City Manager Steve Norwood formally presented the draft budget (PDF) to the City Council on Aug. 1. The City Council will review the budget at its Aug. 14-15 annual planning retreat. The budget and tax rate will be voted on at the Council’s two regularly scheduled meetings in September. A helpful Budget In Brief (PDF) document provides a high level overview of the budget. We've also compiled an FAQ for the budget.

“The City continues to take a conservative, long-term approach to its financial and operational planning,” Norwood said. “The decisions that are made now will strongly influence what the City will look like and how it will operate for years to come.”

Priorities addressed in this budget provide adequate funding to maintain current service levels in a growing community, with the exception of increased funding for street maintenance.

The budget proposes a tax rate of 42.035 cents per $100 of property value, compared to 42.321 cents last year. The owner of an average value home would pay $732.29 under the proposal, about $12 less than last year.

The City of Round Rock continues to have a property tax rate that is among the lowest of any medium-to-large city in the state, including those cities with an additional half-cent sales tax for property tax reduction.

Sales tax revenue is extremely important to the City in that it reduces property taxes and makes up approximately 51 percent of the General Fund revenue. Sales tax revenues have seen a stabilization trend for the past two years, and are continuing.

While Dell sales tax figures continue to show declines from the previous year, sales tax from other sources within the City help to reduce the impact. Due to the volatile nature of sales tax revenues, a conservative approach was utilized in estimating this budgeted amount. Reflecting current and anticipated economic conditions, this budget includes a sales tax estimate for the General Fund of $45 million.

Water and wastewater rates will remain unchanged from current rates. The City Council adopted a four-tier water rate structure in May that is designed to encourage conservation.

“I believe the proposed budget reflects a fiscally responsible approach to improving the City’s current infrastructure, and meet the current demands while maintaining the City’s strong financial position,” Norwood said. “We look forward to Round Rock citizens input and discussion of the FY 2013 proposed operating budget.”

Public hearings will be conducted at the Sept. 13 and Sept. 27 Council meetings.

Budget plan restores funding for street maintenance, balanced at effective rate

Will Hampton — Tue, 02 Aug 2011 14:34:00 GMT

The Round Rock City Council will consider a $137 million fiscal 2012 budget (PDF) that includes renewed funding for street maintenance, balanced at the effective tax rate, and no water/wastewater utility rate increases.

City Manager Steve Norwood presented copies of the proposed budget to the City Council on Monday, Aug. 1. The City Council will discuss the budget in detail at its Aug. 16-17 retreat, and will vote on the budget and property tax rate at its Sept. 8 and Sept. 22 meetings.

The proposed general fund budget is 2.4 percent higher than the current budget. For the past two years, the general fund budget has decreased by a total of nearly 6 percent.

The budget projects sales tax revenue to increase to $43 million, 6.2 percent more than was budgeted in the current fiscal year.

“This budget continues a very conservative approach to revenue projections,” Norwood said. “We are definitely seeing improvement in our local economy, but we want to ensure we are living within our means and this budget reflects that approach.”

The effective tax rate of 42.321 cents per $100 of valuation provides the same amount of revenue collected last year from properties on the tax roll last year. Because overall property values have decreased slightly, the effective rate is slighter higher than last year’s tax rate. An individual property owner’s payment will vary compared to last year based on the change in the appraised value of their home.

The budget includes $1.2 million for street maintenance. New funding for street maintenance had been put on hold for two years due to budget constraints. The funds for street maintenance scheduled to begin later this month were carried over from previous budgets.

“Without question the No. 1 issue I have heard from council and residents is the need to improve our maintenance program as it relates to residential streets,” Norwood said. “This budget has a significant amount of additional dollars dedicated solely to improving the condition of our neighborhood streets.”

For the second consecutive year, there are no proposed increases to retail water and wastewater rates. There is also no increase in drainage utility rates.

The budget includes funds to bring various employee salaries up to market levels. City employees have not had salary increases since April 2009.

“This budget continues to place a priority on our public safety and public service employees, and we have a limited amount of funding to ensure many of our job classes are paid competitively,” Norwood said. “It’s not huge, but it does address the most pressing areas.”

New drainage utility fee goes into effect in March

Will Hampton — Mon, 28 Feb 2011 15:30:00 GMT

A new drainage utility fee goes into effect with March utility bills. The fee is part of the City’s long-term effort to reduce its reliance on sales tax revenue and was approved by the City Council in November.

All single family residences will pay a flat fee of $2.75 per month. The fee for commercial, industrial and multi-family properties is calculated based on their amount of improved area – buildings, parking lots, driveways, etc. So if a commercial property has 10 times the improved area as compared to an average home, its fee would be $27.50 per month.

The City’s stormwater drainage program is designed to protect life and property from flood damage and keep runoff from polluting creeks and other waterways. The program had been paid for through general fund revenues like sales taxes and property taxes.

The City Council has been studying the concept for about a year. As part of its early budget deliberations in February 2010, as the economic downturn continued, the City Council asked staff to evaluate the appropriateness of a Drainage Utility.

More than 60 cities in Texas have created drainage utilities to ensure consistent funding for regulatory compliance, environmental preservation and protection of life and property from flood damage. A Drainage Utility also aligns with our citizens’ preference for user fee based program funding, where costs are paid for by those who use and benefit the most from the service.

Because Round Rock is one of the most sales tax dependent cities in Texas, the City Council in recent years has been systematically reducing our reliance on that revenue source for daily operations. For example, the City has paid cash for some one-time capital expenses to reduce our debt burden. Last year, the City Council decided the time had come to change how we fund the stormwater system due to declining sales tax revenues and increasing demands for other services funded by general revenues, such as police and fire protection.

Information on the Drainage Utility is available at roundrocktexas.gov/stormwater.

City Manager proposes reduced budget for FY 2011 that includes additional police, new transit program

Will Hampton — Mon, 02 Aug 2010 18:54:00 GMT

The Round Rock City Council will consider a fiscal 2011 General Fund budget that is almost $3 million less than the current budget, but adds police officers, a new transit program and establishes a parks maintenance fund.

Round Rock City Manager Jim Nuse submitted his budget proposal (pdf) to the City Council on Monday, Aug. 2. The proposed tax rate for the $81.1 million General Fund budget is 41 cents per $100 of valuation, which is one cent below the Effective Tax Rate.

The Effective Tax Rate provides the same amount of revenue collected from properties on the tax roll last year. This state-mandated rate calculation requires taxing entities to account for changes in the value of existing properties. This rate calculation, however, does not include new properties. Under the proposed rate, the owner of an average value home ($175,980) would pay $725.53. Under the Effective Tax Rate, they would pay $743.13.

More than $1 million in savings has been achieved by eliminating 24 budgeted positions through a public works reorganization, as well as implementing process efficiencies. The budget plan also proposes refinancing and early payment of portions of the City’s outstanding debt.

“Over the past two years, our employees accepted the challenge of cutting costs and working more efficiently and that hard work has paid off,” City Manager Jim Nuse said. “I’m especially proud of the reorganization of the public works departments, which has consolidated functions from three departments into two.”

The proposed budget also accomplishes a critical goal of the City’s financial management policy – reducing reliance on Dell sales tax revenue to fund daily operations. Currently, Dell sales tax revenue comprises 40 percent of the overall sales tax revenue. Next year, it will be 36 percent.

“While sales tax revenue has rebounded somewhat this fiscal year, we must continue to systematically reduce our reliance on it to fund day-to-day expenses to maintain our long-term fiscal sustainability,” Nuse said. “This budget proposal takes another step toward accomplishing that key City Council goal.”

The City’s target is to systematically reduce its reliance on Dell to 20 percent of overall sales tax revenue for operations by 2017.

The budget includes four new police officer positions and $300,000 for a new Peak Hour Express Bus and Reverse Commute program. It also earmarks $750,000 to establish a fund for parks capital maintenance and replacement.

Tax rate-stormwater fee impact

The proposed tax rate is one cent below the Effective Tax Rate to reflect the transfer of the stormwater drainage costs out of the General Fund into a new utility. That revenue will now be collected through a new fee on monthly utility bills. We anticipate implementing the new fee in spring 2011. Fees will be based on a property’s impact to the drainage system, which would more appropriately and fairly allocate the costs for storm water services while providing vital funding stability.

If the City Council adopted the Effective Tax Rate of 42 cents per $100 of valuation, the owner of an average value home would pay $17.60 more than the proposed 41 cent tax rate. We estimate a homeowner will pay about $18 next fiscal year through the new drainage utility fee.

Retail water and wastewater rates are unchanged for fiscal 2011.

Overall FY 2011 proposed budget

General Fund	$81.1 million
Debt Service Fund	$12.8 million
Water/Wastewater Utility Fund	$38.8 million
Drainage Utility Fund	$1.6 million
TOTAL	$134.3 million

City prepares for $5 million revenue shortfall; considers new long-term measures for changing economic model

Will Hampton — Tue, 23 Feb 2010 19:30:00 GMT

As the recession continues to negatively impact City of Round Rock sales tax revenues – we anticipate a $5 million shortfall this fiscal year – we will aggressively reduce expenses in the short term, while retooling operations and our financial management program to deal with what we expect are long-term changes to our revenue model.

As of February, we anticipate sales tax revenue will total $37 million this year instead of the $42 million we budgeted for last September. We plan to make up the difference with $1.8 million in savings from a hiring slowdown and operational efficiencies, $1.6 million reduction in sales tax sharing with Dell, and by cutting $2.7 million slated for street maintenance.

We will not forego street maintenance this year. Instead, we’ll use a portion of the $6 million budgeted over the past two years but not spent as we developed a pavement management system to target those roads most in need of maintenance.

The reduction in sales tax sharing with Dell results from decreased sales tax revenue from the company. As part of the economic development agreement the City and Dell entered into in 1994 when the company announced its move to Round Rock, the City makes monthly program payments to Dell based on the amount of sales tax revenue the company generates. The payment rises and falls based on revenue performance.

If all goes to plan, our austerity program could actually result in a slight budget surplus by the end of the fiscal year, Sept. 30.

Because we expect a continued softening of the economy next year, as well as continued long-term reductions in sales tax revenue from Dell as a result of its changing business model, the City Council is considering additional measures to sustain Round Rock’s solid financial status next fiscal year and beyond.

Among the new measures being considered are:

Shift approximately $1.5 million in general fund expenses that pay for our drainage system to a new utility. This drainage utility would charge a fee to properties based on the amount of stormwater runoff they generate

Increase parks and recreation user fees to generate an additional $600,000 in annual revenue (the plan is to increase our cost recovery to 70 percent from 60 percent of operational expenses)

Use $500,000 a year of revenue generated by our half-cent sales tax for transportation improvements to help pay for the street maintenance program to lessen the impact on the general fund, which pays for basic city services like police, fire, library and parks and recreation

Increase the transfer from the water-wastewater utility to the general fund by $400,000 to cover actual expenses provided by the general fund.

Begin charging for some fire and emergency response services, a move that could generate $100,000 a year

We anticipate being able to balance the budget for fiscal year 2011 using these measures. At this point – six months before the City Council finalizes the 2011 budget – we are projecting a balanced budget without an increase in the effective property tax rate as well as no performance-based pay increases for employees. It also assumes no increase in police staffing, even though we expect our population to continue to grow.

These far-reaching changes are being considered because property values are expected to decrease or remain flat, while sales tax revenue continues to decline.

While Dell remains a global leader in technology, changes to its business model have a significant long-term impact on our revenue. Here’s why: When Dell sells a computer or other product via the web or catalog in the state of Texas, that produces local sales tax revenue to the City. As the company’s business model has evolved and it has begun selling more products in retail stores in recent years, sales tax revenue from the company has been steadily dropping.

To put the changes to Dell’s sales tax revenue in perspective, consider that from its peak of $24.9 million in 2006, we are projecting it to be $13.3 million this fiscal year. We are planning for it to continue to slide to $5.4 million in 2016.

That conservative use of Dell revenue has resulted in $49 million for capital projects in recent years. Had we borrowed that money instead of using the cash on hand, our property tax rate would be 10 cents higher than it is today.

These changes to our financial model could well result in changes to service levels. Our goal is to deliver the services citizens say are most important while sustaining the City’s strong financial standing.

City plans budget reductions as revenues decline

Will Hampton — Wed, 10 Feb 2010 20:50:00 GMT

You may have seen in the news in January that Round Rock bucked statewide trends when its sales tax revenue increased 10 percent compared to a year ago. Most cities saw double-digit declines in sales tax revenue for the month.

Because sales tax revenue makes up 50 percent of the City’s $84 million general fund budget – and usually reflects what’s going on in the local economy – an increase is always good news.

However, the increase we saw in January reflects one-time, out of the ordinary activity from Dell. If you factor out that anomaly, which corrected a prior accounting miscalculation, the data shows the significant sales tax decreases the City has been experiencing the past six months are continuing. If we adjust for the anomaly, sales tax revenues were down 10 percent for the month.

Dell’s presence in Round Rock has been a significant benefit to local taxpayers since the company began operations here in 1994, generating around $45 million cash for capital projects that we would have otherwise had to issue debt for. (When Dell sells a computer or other product via the web or catalog in the state of Texas that generates local sales tax revenue to the City.) Had we issued debt for those purchases, our property tax rate would be 10 cents higher than it is today. Since Dell’s arrival, the City’s policy has been to limit our reliance on that single source of revenue for daily operations because of the volatile nature of retail sales in general and the computer industry specifically.

As Dell’s business model has evolved and the company has begun selling more products in retail stores in recent years, sales tax revenue from the company has been steadily dropping. Because of the changes at Dell and the national economic recession, the City forecasted conservatively when the budget was formulated last summer. We projected that Dell revenue would be down 10 percent, while non-Dell revenue would be down 5 percent. Combined, that’s 7 percent less than last year.

But the revenue decline has been worse than expected – sales tax revenues are down 15.7 percent so far this fiscal year, which began in October – as the recession continues to impact retail sales both nationally and here at home. So City staff is developing a plan to reduce the budget accordingly. The cuts will include position reductions, and other permanent budget reductions. The plan will be presented to the City Council at its winter retreat, scheduled for Feb. 17.

We will provide details on these and other future changes to City operations – which could include decreased levels of service in some areas – as the City Council provides guidance. Our goal is to deliver the services citizens say are most important while sustaining the City’s strong financial standing.

Your thoughts on the services that are most important to you are welcome, as well as suggestions for reducing expenses. We went through an extensive public process in 2006 to gauge the public appetite for service level changes as well as how to pay for services. That input has influenced budget deliberations ever since. Now, it's time to begin the conversation anew.Join us.

Let's talk dollars -- 2009 Round Rock budget and tax rate

Will Hampton — Thu, 28 Aug 2008 16:54:00 GMT

It's time for public input as the City Council considers the 2008-2009 budget and tax rate. The proposed $134.6 million budget and our strategic budget can be found here. They're huge documents, so be patient as they download. For an overview, you'll want to read the Budget Message that starts on Page 4 of the budget document.

We face a challenge as the City develops its budget this year. We are confronted by a general economic slowdown while our population continues to grow. Because we have successfully diversified our economy over the past 15 years, the City can continue to provide the core operating services our citizens rely upon.

The City of Round Rock’s budget planning is affected to a large extent by Dell, since the company’s presence here has such a significant impact on our finances. Because Dell’s corporate headquarters and sales staff are located here, the City collects sales taxes on most of Dell’s Texas sales. For the past two years, though, Dell’s sales tax revenue to the city is down.

The City has managed its reliance on Dell in a couple of ways. First, through a policy that limits a specific portion of Dell revenue for day to day operations while providing the remaining funding for large projects and debt reduction. Second, through an economic development strategy that focuses on bringing dollars to Round Rock from sources outside our community.

The twenty-four month general decline in Dell’s sales tax revenue appears to reflect a long-term shift, not a temporary downturn as we have seen in the past. So, the City Council is now considering a gradual shifting from sales tax to the property tax in a manageable and affordable way to maintain quality levels of service.

So what does that mean to you? At the tax rate the City Council is considering, the owner of the average value home would see their tax bill increase by about $33 next year. That $33 will help us maintain current service levels while adding staffing to police and parks and recreation.

The tax rate currently being considered by the City Council is 36.5 cents, the same as last year, which translates into a City tax bill of $676.84 for an average value home. Note: The 36.5 cent tax rate is slightly higher than the rate shown in the proposed budget documents we link to above. The original proposed budget included no new employees and was balanced at the effective tax rate of 35.1 cents (The effective tax rate is the rate that would provide the same amount of revenue collected last year from properties on the tax roll last year -- it does not take into account new properties added to the tax roll this year).

The City Council at an Aug. 20 meeting voted to consider the slightly higher rate after much discussion about the impact of Dell's declining sales tax revenue. We'll continue to closely monitor sales tax collections as the City Council makes its deliberations on the final tax rate.

The first public hearing on the tax rate will be 5 p.m. Thursday, Sept. 4, in Council Chambers at City Hall, 221 E. Main St. A second public hearing, and first reading vote on the budget and tax rate, is scheduled for Thursday, Sept. 11, during the regular City Council meeting. A final public hearing and second and final reading votes are scheduled for the Thursday, Sept. 25, regular meeting.

That's a long post, I know, but budgets and tax rates are not simple issues to explain. You can watch a video about the budget on our access channel, Time Warner cable 10, at noon, 2 p.m., 4 p.m., 6 p.m., 8 p.m. and 10 p.m., or online: Launch Video Player

Final update: Time to talk budget, tax rate is over

Will Hampton — Thu, 20 Sep 2007 14:25:00 GMT

The Round Rock City Council approved the fiscal 2008 budget and tax rate on second and final reading Sept. 27, so the time for formal public comment is over. If you're still interested in learning more about the City's fiscal issues, we'll keep the complete budget posted on the City web site. We've also produced a video about the budget and posted it online.

The approved property tax rate is 36.522 cents per $100 of valuation. The average home value is $176,214, which translates into a City tax bill of $643.57. The tax rate includes the increase necessary to pay debt service on the final issuance of bonds approved by voters in 2001.

The budget includes new patrol officers, investigators and civilian staff for the police department. A new fire station will open later this year, and additional firefighters will be added to complete the department’s staffing needs.

The planned utility rate increase was also approved. It will go into effect Jan. 1, 2008. The new rate translates into about a 6 percent increase for the average utility customer.

When you combine the monthly impact to the average homeowner of property taxes and utility payments, Round Rock is the lowest in the region at $144.68. Compare that to the following: Leander $241.77, San Marcos $240.28, Hutto $226.33, Pflugerville $220.65, Austin $186.88, Temple $181.57, Cedar Park $176.31, and Georgetown $150.19.