Pharr report says city ‘no doubt’ in trouble

PHARR -- The "Hub City" may take several years to fully emerge from the financial hole it has dug for itself, according to a candid city report issued recently.

Pharr has suffered from years of poor financial planning by city leaders and Pharr cannot afford to start any new capital projects for two years unless it develops new ways of paying for them, the report states.

Prepared by Pharr Finance Director Juan Guerra and presented at a City Commission workshop last month, the document highlights "historical situations that have bred an acceptance of self-created financial hardships that over time evolved into a normal way of doing business."

The city's bond rating is one step away from that of junk bonds, Guerra warns in the report, partially because the city's fund balance is in the red. The balance is supposed to be a reserve for unforeseen situations but has been used to finance other areas of the city.

It's a double whammy. Not only is the rainy-day fund essentially wiped out, but because it is used as a barometer of the city's financial health, the depleted reserves also mean it will be costlier and more difficult for Pharr to get loans to pay for the city's biggest projects.

Guerra, who took over the city's finance department about a year ago, also notes the department will need two to three years to operate efficiently.

He states the bulk of the city's financial woes are due to unbudgeted spending on capital projects.

The city is already taking steps to remedy its finances, however.

Paying a $300,000 retainer to City Attorney Michael Pruneda makes "no financial sense," Guerra's report states. "Even Texas' biggest cities do not come close to that fee," according to the document.

After the report came out, the City Commission voted to pay Pruneda an hourly rate of $175, which is expected to greatly reduce the city's costs related to legal services.

Rectifying the city's financial situation is "very doable," City Manager Fred Sandoval said. The city is in the midst of planning for next year's budget and has already set aside $1.5 million to put in its reserve, with a goal of putting in another $3.5 million in the coming years.

The city also is examining tax revenue sources that would provide new funding for capital projects, Sandoval said.

Guerra's report, meanwhile, offers its own set of recommendations for trying to improve the city's financial situation. Those proposals include:

>> Requiring input from the finance director on all fiscal agenda items.

>> Reducing unnecessary spending.

>> Being more transparent with residents about the city's finances.

Since the 1990s, the city has made major transfers from its reserves to fund payroll and operations. The report recommends avoiding that practice and letting the City Commission know if it does occur.

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Ryan Holeywell covers PSJA, the Mid-Valley and general assignments for The Monitor. He can be reached at (956) 683-4446.