Sugar Land, Texas – City Council will consider recommended reductions of $1.58 million to the fiscal year 2018 budget, cuts needed to address lower than budgeted sales tax and property tax revenues.
The city will receive $600,000 less from property taxes in the general fund than planned in the budget due to the adoption of a tax rate of 31.762 cents, which was lower than the recommended tax rate to support the adopted budget. The general fund supports most city services.
In each of the four months since the budget was filed, the City experienced lower than projected sales tax collections. The fiscal year 2018 sales tax estimate was based on zero growth from 2017 estimates; the actual revenue came in lower than anticipated for the last three months of the fiscal year. The main sectors that are down are information, natural resources and wholesale – all highly influenced by the oil and gas sector.
The downward trend continued into October, leading to a recommended $1 million reduction in budgeted sales taxes, of which $750,000 is for the general fund. Recurring reductions are necessary to maintain the structural balance of the city’s budget; meaning that recurring revenues fund recurring expenditures.
The recommended budget reductions were selected based on their recurring nature, which support the city's financial resiliency. Since the city's financial decisions are not made one year at a time, the entire long-range forecast needed to be re-evaluated using updated assumptions for revenue growth based on City Council's direction.
Budget reductions needed to have a recurring impact and minimal disruption to core city services. Reductions are spread across most city departments and target reducing subsidization of services by other entities and prioritizing “needs” versus “wants” and reducing discretionary service levels, especially services that place significant overtime demands on city staff. There are no reductions to public safety, though every employee in every department will feel the impact of the budget reductions through reduced funding and flexibility to perform their jobs. Some reductions will result in reduced flexibility to respond to unforeseen events that may occur in the future.
During a workshop on Sept. 26 to discuss budget reductions, a majority of City Council urged preservation of a proposed 3 percent employee merit pool. City Manager Allen Bogard, however, is recommending reducing the allocation for performance-based increases and adjustments to salary structures to 2 percent of salaries. Bogard stated, “While employees appreciate the Council’s direction to preserve the merit pool funding, there is a desire to balance compensation with other budget reductions that impact service levels.”
Recurring expenditure cuts totaling $1.58 million are recommended, including the following, with the budget impact for each:
To determine if the city can improve drainage systems to prevent future structural flooding, $210,000 in one-time funding has been allocated for engineering studies identified after the recent flooding from Hurricane Harvey. In the capital projects fund, adjustments to establish capacity to fund the improvements have been identified.
The five-year capital improvement program has been reduced from $130.3 million to $96.4 million, eliminating projects that cannot be funded within revised debt capacity from the effective tax rate plus 1.5 percent from property taxes, which is the only funding source for bond-funded capital projects. Several projects have been eliminated from the five-year capital program due to funding capacity. Design funding in fiscal year 2018 will be removed from the budget to provide capacity to address improvements needed due to Hurricane Harvey.
Projects eliminated include:
Other project schedules have been adjusted to fit within funding available under the revised forecast.
The 2013 voter-approved park bond projects required a 3.1 cent tax increase to fully implement in addition to a 3 percent growth in tax revenue to support the city’s needs. The city has only raised the tax rate .7 cents for the park bonds, generating $836,000 of the resources necessary to support the $1.9 million in annual debt service and operating costs of the projects funded to date. Until property tax revenues can be adjusted to eliminate park bonds subsidies, the park bond program will be suspended with $10.26 million in projects still to be funded.
The City Council will vote on the amendment to the budget on October 17 at 5:30pm at Sugar Land City Hall.