Council eyes lower 2021 property tax

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3% drop may be OK'd; cit also proposes fee freeze

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Fredericksburg’s city council approved a maximum property tax rate lower than the current rate during its Monday budget meeting.

“This was a preliminary approval of the maximum tax rate, which means the rate that is adopted on Sept. 21 can’t go higher than this number,” City Manager Kent Myers said.

To do this, the council proposed the no-new-revenue tax rate, formerly called the effective tax rate. The rate approved by council was 22.0775 cents per $100 valuation, less than the 2020 rate of 22.7284 cents. That marks a .65-cent decrease, or 3% lowering of the tax rate.

With this rate, property taxes would not increase if a property owner’s appraisals don’t increase.

“Our residents and businesses are struggling right now because of this pandemic and we don’t want to tag an additional burden to our taxpayers,” Myers said.

Myers also wanted to clarify that the city’s property tax rate is one of many factors of a resident’s tax bill.

“We are actually the lowest tax rate,” Myers said. “The school district has the highest rate and the county has the second highest.”

 

User fees

Another way the city is trying to help residents, Myers said, is by not increasing user fees in electric, water, wastewater, sanitation, building, golf, health, animal control or emergency management services.

“The timing would not be good at this point to recommend any sort of fee increases,” Myers said.

The only user fee increase will be in RV Park fees, which had been approved by the city council. That fee hadn’t increased for several years, but since ongoing improvements have been completed, Myers said staff felt it was time to increase the fees.

While the tax and fee freeze steps may help residents, Myers said it means some challenges for the city.

“We’ll have to tighten our belt and look at ways to continue to reduce spending,” Myers said. “It also means we will have to use fund balance money, which is kind of like our savings account.”

He added the city has a sufficient amount of fund balance to help them get through the coming year, as the city expects to have $4,404,044 in general fund balance, or $490,993 over its necessary three-months of reserves.

 

Budget overview

The proposed Fiscal Year 2021 budget is $63,392,208, which is a decrease from last year’s budget of $70,354,022.

Most of this decrease, according to city documents, can be attributed to the completion of most of the city’s water improvement projects funded by utility bonds issued several years ago. Other decreases relate to capital improvements and decreases in equipment purchases.

 

Sales tax

One of the biggest budget revenues heavily impacted by the COVID-19 pandemic has been sales tax.

“In terms of sales tax revenues, it is very difficult to project a budget for these revenues during the next 12 months due to the many uncertainties that we face,” Myers said.

But, Myers added, the city has not seen a major decrease in sales taxes over the past several months.

“Based on traffic on Main Street, it looks like retail businesses are getting more customers, so we may see an increase in sales tax revenue,” Myers said.

Mayor Gary Neffendorf said he’s also been pleased with the increase in foot traffic.

“It seems like a lot of people are coming to town and spending money,” Neffendorf said.

Still, to be conservative, the city is budgeting its sales tax revenue at $5.5 million, a $700,000 decrease from the revenues collected last year.

Neffendorf was in favor of this.

“I’m glad we’re setting the sales tax numbers lower for safety until we know how we’re going to get out of this pandemic,” Neffendorf said.

 

General fund

The city is planning to spend less on new services and personnel, as its revenues are estimated to be lower than the previous year.

General fund revenues for 2021 are budgeted at $14,787,359, which is a decrease from 2020’s budgeted revenue of $15,437,218.

“We’re taking a real conservative approach to what we’re doing and try to preserve services we’re already providing,” Myers said.

There will be some new capital costs, as the budget includes funding for new police vehicles, sidewalk improvements, shelving for the new Parks Maintenance Building and partial funding for Marktplatz playground equipment. Full funding for the annual street maintenance program has also been added back to the general fund.

He added that the city tried to avoid employee layoffs by not adding salary increases or employee benefits.

They will also be adding a new police officer and an arborist over the next year.

This approach puts the budgeted general fund expenditures at $15,668,204, which is less than the 2021 budget of $15,979,398.

 

What’s next?

The final budget and property tax rate will be adopted on Sept. 21, during a 6 p.m. meeting in the H-E-B Room of the Hill Country University Center, 2818 U.S. 290 East.