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Finance | FIscal Year 2021 Proposed Budget

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1. What is the City Budget?

The budget provides the financial framework for all city activities during a twelve month period, called a fiscal year. The City Charter requires the city manager to prepare a budget for each fiscal year. The budget sets forth the funding for services, programs, and activities of the various city departments, and must meet all fund requirements provided by law and required by bond covenants. It must also include a multi-year capital improvement program and a current year capital budget.

2. How is the budget created?

The City of Sugar Land’s fiscal year runs from October 1 to September 30. The budget process begins in March with preliminary discussions with the City Council, and the proposed budget is filed by the city manager in July. A series of budget workshops is held in August to review the proposed budget with City Council, and the final budget is adopted in September.

3. How can I get involved in the budget process?

All City Council budget workshops are open to the public. In addition, a public hearing is held in August after the proposed budget has been filed, and before the final budget is adopted. The proposed budget is available on the city’s website and a hard copy is available for review in the city secretary’s office.

4. Does the city prepare a long-term financial plan?

Yes, as part of the annual budget process, a five-year financial forecast is prepared for all major operating funds and the Capital Improvement Program. The forecasts are available in the budget document.

5. How can I invest in municipal bonds from the City of Sugar Land?

The city’s bonds are traded in the municipal bond market. Bonds are issued in increments of $5,000 and pay interest in February and August. Your investment broker can assist you in locating bonds on the secondary market available for purchase. Tax-backed debt issued by the City of Sugar Land is rated “AAA” by both Standard & Poor’s and Fitch Ratings.

6. How do I get a sales tax permit for a new business in Sugar Land?

The Texas State Comptroller’s office issues all sales tax permits and collects sales taxes from businesses across the state. Visit the state comptroller's website for more information.

7. Given economic conditions related to COVID 19, what is being done to manage the budget?

The proposed budget includes $226.9 million for operations – a more than 2 percent decline from the prior year – and $27.5 million for capital projects, including a first, but limited, phase of projects approved by voters in 2019.

8. Has COVID 19 created revenue shortfalls for Sugar Land?

Overall, the city is facing and has identified strategies to offset a revenue shortfall of approximately $3 million across all major funds as a result of COVID-19 in FY20 – including a significant impact in the city’s main operating fund that is projected to further continue into FY21.

9. What has been done to respond to revenue shortfalls?

Recognizing the economic impacts of COVID-19 on residents and businesses, the City immediately began taking budgetary actions at the start of the global health emergency to respond to anticipated declines in various city revenues – most notably sales tax revenue, which is a major funding source for the city’s operating budget. Actions and strategies, which are in accordance with the strong financial management practices that have earned Sugar Land recognition as a financial leader across the nation and by bond rating agencies, include:

• reducing departmental expenditures to continue line-item reductions identified in FY20;
• managing vacancies and continuing a non-public safety hiring freeze, with the potential to eliminate vacant positions if necessary;
• reducing and delaying major expenditures, such as infrastructure rehabilitation and fleet and high-tech equipment replacements, until there is more economic certainty; and
• focusing on critical infrastructure projects – including implementation of the Integrated Water Resource Plan (IWRP) to further secure the city’s future water supply and a limited number of projects approved by voters in 2019 to address structural flooding.

10. What tax rate is necessary to fund the budget?

A tax rate of 33.65 cents is needed to fund the budget. This is less than a half cent increase from the current rate of 33.2 cents. The approximate half cent is a portion of 3 cents approved by voters in 2019 to fund projects to address drainage, public safety, mobility and an animal shelter. Drainage projects have been identified for the approximate half cent in fiscal year 2021.

11. What is the impact of the tax rate being considered to my City tax bill?

For the average home in Sugar Land, the proposed less-than half cent tax rate increase with the homestead exemption of 12 percent results in a tax bill that is about $27 higher than last year.  The city’s portion only makes up about 15% of your total tax bill. The approximate half cent increase is less of a financial impact than a normal year of valuation increases.

12. For fiscal year 2021, Sugar Land plans to issue less than a half cent of the 3 cents voters approved in 2019 for bond projects. How does this impact the delivery of the 2019 bond projects authorized b

The 3 cents tax increase was originally planned to be issued in FY21 with projects expected to be completed within three to four years. Due to economic conditions related to COVID 19, the schedule has been expanded to five years with approximately half of a cent of the voter-approved 3 cents targeted for drainage projects in fiscal year 2021, with an emphasis on those addressing structural flooding.  The remainder of the projects and the three cent tax rate increase will be implemented in future years.

13. Do I have to do anything to receive the homestead exemption?

You do not have to do anything to receive the exemption, as long as you have a homestead exemption already on file with the Fort Bend Central Appraisal District.

14. What drainage projects are being funded in the proposed budget?

Drainage project represent 95 percent of the proposed fiscal year 21 capital improvement program.  Projects include:

Project Name	Phase	Amount in FY21 Budget
Austin Park /Chimneystone Drainage Improvements	Design	$1,200,000
Greatwood Village Drainage Improvements	Design/Construction	3,000,000
Avalon/Brazos Landing/Commonwealth Drainage Improvements- Lake Control Structure Modifications	Design	$100,000
Avalon/Brazos Landing/Commonwealth Drainage Improvements Phase II- Elkins Rd	Design	$520,000
Telfair Drainage Improvements- New Territory Blvd & Chatham Ave	Design	$206,000
Riverbend Stormwater Inlets & Pipes Replacement	Design	$250,000
Flood Control Improvements- Dam III Oyster Creek @ Lexington Blvd.	Construction	$800,000
Sugar Creek Drainage Improvements- Montclair Dr Phase I	Construction	$4,500,000
Citywide Flood Prevention & Drainage Studies	Study	$600,000
Total Drainage Projects in FY21		$11,176,000

15. What is the IWRP?

The Integrated Water Resources Plan (IWRP) previously adopted by City Council was the result of several years of work by the IWRP Task Force. The IWRP includes recommendations on how best to meet the long term water needs for our city, considering the cost, reliability and yield of new water supply options.  For more information, please visit: http://www.sugarlandtx.gov/1747/Integrated-Water-Resource-Plan

16. How do the unfunded mandate for surface water conversion and implementation of the IWRP affect my utility bill?

An approximate $10 monthly increase to utility bills for customers is included in the proposed budget as the city prepares to implement the IWRP and meet the unfunded mandate to reduce groundwater consumption by 60 percent in 2025.

17. How long has it been since the City increased utility rates?

The last scheduled increase was in 2020. Prior to that, the city had not increased water or wastewater rates since 2011, and surface water rates have not increased since 2014.  These rates are the main source of funding for the utility system. If the operating and capital needs of the system exceed the capacity generated by revenues (payments), then rates have to be increased to maintain a financially sound, self-supporting utility system.  The rate increases are necessary to support the City in meeting the 60% groundwater reduction mandate as recommended by the Integrated Water Resources Plan. Read more at http://www.sugarlandtx.gov/1879/2020-Utility-Rate-Changes.

18. Over the past few years, we have seen a significant reduction of retail sales in physical stores, the closing of businesses, etc. Has this factor been built into the projected income from sales tax?

Over the last several years the City has been making progress toward reducing dependence on sales tax to fund the operating budget.  The resiliency initiatives that were formalized in the most recent adoption of the Financial Management Policy Statements (FMPS) were designed to further strengthen the financial position of the City by lessening the impact of economic swings associated with sales tax - a major revenue stream for the City, but one that is highly volatile and difficult to forecast. One key assumption is a conservative estimate of sales tax revenue based on current recurring collections, with no growth assumed in the budget. Using this methodology, actual sales tax should come in higher than budgeted, as the City regularly receives one time payments and audit adjustments which are not included in the budget.  These revenues are then available for one-time use in the following year’s budget as they become part of the fund balance.

19. Why did Sugar Land city council pass a resolution calling on the Fort Bend tax assessor-collector to calculate the city’s voter-approval tax rate at 8 percent instead of the new 3.5 percent threshold

This action was taken before the proposed budget was filed with City Council. Recognizing the economic impacts of COVID-19 on residents and businesses, the City immediately began taking budgetary actions at the start of the global health emergency and intentionally delayed major decisions on the preparation of the Fiscal Year 2021 budget to better align with the availability of data. Such actions and strategies included moving forward with City Council consideration of a resolution directing staff to calculate the voter-approval tax rate with an 8 percent limit – consistent with past practice – in response to the disaster declaration made by the Governor in March.  Ultimately, the proposed tax rate of $0.3365 was not only below the voter-approval tax rate as calculated at 8%, but is also below what the calculation would have been at 3.5%.

There will be a series of public workshops held by City Council prior to approving the budget in September. This will include opportunities for public input. Sugar Land has the second lowest tax rate in Texas for cities our size. City Council is considering less than a half cent of the 3 cents approved by voters. The approximate half cent will be used to fund voter-approved drainage projects, with an emphasis on those addressing structural flooding.

20. Sugar Land residents have a very high tax burden. Why add more?

Sugar Land’s tax rate is the second lowest in the state for cities with a population over 60,000 and one of the lowest residential tax burdens per capita in a comparison with peer cities. Sugar Land’s tax rate represents a very small percentage of the total tax burden. Less than a half cent of the 3 cents approved by voters is necessary to fund voter-approved drainage projects.

21. Did City Council support the bond election?

Sugar Land City Council unanimously voted to call a bond election to provide voters an opportunity to decide whether to fund projects identified by residents to address drainage, public safety, mobility and an animal shelter.

22. When will the projects be completed?

The projects were expected to be completed within three to four years. Due to economic conditions related to COVID 19, the scheduled has been expanded to five years with less than a half cent of the voter-approved 3 cents targeted for drainage projects in fiscal year 2021.

23. Why is the City holding a bond election rather than paying for the projects as we go?

The city issues bonds to finance projects that will benefit the city for decades, allowing the cost to be spread across the useful life of the project.  It would take many years to accumulate enough funding to pay for these projects as we go- during that time the projects don’t get built. History has shown that construction inflation far outpaces interest costs and are not fixed as the interest will be on bonds. The city’s AAA-rated GO bonds carry the lowest possible interest rates which allow the projects to be financed economically over an appropriate period- usually about 20 years.

24. What is the bond election's impact on Sugar Land's tax rate?

Voters approved 3 cents to fund the $90 million in projects that were identified by residents to address drainage, public safety/facilities, mobility and an animal shelter. 3 cents represents an extra $10 per month for the average Sugar Land homeowner. The projects will be funded in future capital programs to begin with drainage projects in fiscal year 2021, with an emphasis on those addressing structural flooding.

25. What are property tax impacts if the bonds are approved?

The bonds represent an investment of approximately 3 cents on the tax rate or about $10 per month for the average Sugar Land homeowner to fund items such as drainage improvements, a public safety training facility, a public safety dispatch and emergency operations facility, new animal shelter and roadway improvement projects. Less than a half cent of the voter-approved increase has been identified in fiscal year 2021 to begin drainage projects.

26. What is Sugar Land’s current level of debt, and what revenue sources are used to make those debt payments?

Including all debt backed by property taxes, the City has $288 million in outstanding principal and interest on bonds issued by the City and assumed by the City through annexation and dissolution of Municipal Utility Districts over time. This figure does not include debt supported by Sugar Land Regional Airport, the water utility system or economic development sales taxes. 

Property taxes are the only repayment source for General Obligation bonds. The City currently has tax-backed bonds that were inherited from Municipal Utility Districts upon annexation- the water/wastewater component of those bonds are supported by utility revenues.  Other bonds (Certificates of Obligation) are backed by property taxes but are supported with repayment from restricted revenue sources such as hotel occupancy taxes, lease revenues and public improvement district assessments.

27. What checks and balances are in place to make sure that bond money is only spent on the projects as authorized by the voters?

There are several layers of checks and balances to ensure proper monitoring and handling of the bond program. These checks and balances begin at a staff level as part of the reporting delivered to City Council. Additionally, before any project begins, each must be presented to and approved by the City Council, which usually occurs through the annual Capital Improvement Program Budget Process. In addition, the City Council (at public meetings) must vote to issue the debt and approve design and construction contracts associated with each project. The City also goes through extensive auditing process by outside auditing agencies.

28. How do the proposed drainage bond projects interact/coordinate with drainage projects that are ongoing within the City’s various LIDs and Fort Bend County?

The city of Sugar Land works closely with flood-control partners -- including Levee Improvement Districts and Fort Bend County -- tasked with protecting residents from river flooding.  Routine maintenance and targeted drainage projects are important to protect Sugar Land during extreme weather events. The city’s regional approach to flood-control projects recognizes that each agency has an important role to play in keeping residents safe.  Joint studies and agreements combined with ongoing communications ensure a coordinated effort. Projects included in the bond referendum build on efforts being implemented by area LIDs that are investing in increased pumping capacity and levee improvements. Project timing will be well coordinated with the LIDs’ projects to ensure the drainage system functions as an integrated system. Sugar Land takes the same approach with Fort Bend County on projects impacting city residents.

29. What is the impact of the tax rate being considered to my City tax bill?

For the 2021 tax rate, an approximate one cent increase to the tax rate is being considered to fund the continued implementation of the voter approved GO bonds from 2019.  With the 12% homestead exemption, the impact of a one-cent increase in the City's tax rate on a $400,000 home is $35.20 per year.