WESLACO — As the statutory deadline nears for municipalities to approve their budgets for the upcoming fiscal year, the Weslaco and Mercedes city commissions gathered in their respective chambers Wednesday to hammer out the final details.
While officials in Weslaco wrapped up their budget process Wednesday, officials in Mercedes met for one final budget workshop before they put the matter to a vote at the end of this week.
Cities must approve their tax rate for the upcoming year by Sept. 29, according to guidance issued by the Texas Municipal League regarding statutory deadlines for taxes and budgets. As a result, the deadline for adopting a tax rate ultimately informs the timeline a city must follow to adopt its budget, as well.
The Weslaco City Commission passed the second and final readings of the city’s proposed tax rate and budget for fiscal year 2019-20 during a special meeting Wednesday evening.
Residents here will see a 3 cent increase in their property taxes, a result of $10 million in new debt approved by voters in May’s drainage improvement bond election. The commission approved increasing the rate from $0.6667 per $100 valuation to $0.06967 per $100.
Between the three-penny increase and a spate of new construction adding to the city’s tax base, Weslaco expects to see a 5.5% increase in revenue in the coming year, equivalent to some $639,000, according to the budget’s cover sheet.
The $10 million in drainage bonds will be in addition to $4 million in certificates of obligation the city approved for drainage improvements last November, as well as outstanding debt related to the city’s water and wastewater treatment facilities.
Despite its debt load, the city’s financial outlook remains positive. Weslaco has maintained an AA- financial rating and is projecting a small fund balance surplus of $1,311 in the upcoming year. Too, the city has enough in its coffers to fund 103 days of operations, records show.
Weslaco City Manager Mike Perez was optimistic Wednesday, saying the final budget outcome was a result of carefully walking the line between available revenues, outstanding debt and capitalizing on good interest rates when borrowing.
“The department heads did a really good job in their presentations,” Perez said before Wednesday’s special meeting. “Did they get everything they want? No. Do they need more? Yes, but … we only have X amount of money,” he said.
Included in the budget is a 2% salary increase for the city’s non-unionized staff, 2.5% for police officers, and 1% for the fire department, Perez said. Weslaco schoolchildren will also see an increased police presence due to a partnership between the city and Weslaco ISD that will fund eight additional school resource officers.
However, despite the all the positives, the city is still struggling to grapple with deficits in its airport fund.
The airport fund began the current year with a $370,000 deficit, and though expenditures this year were approximately $255,000 less than the previous year, sagging revenues were not enough to keep up, records show. As a result, the deficit for FY 2018-19 widened to some $481,000.
That gulf is expected widen even more — past the half a million mark — in FY 2019-20, according to budget figures.
Meanwhile, officials in Mercedes are running up against the Sept. 29 deadline to complete their budget process and adopt both a new budget and a tax rate. To that end, the city commission sat down with Mercedes City Manager Sergio Zavala and Finance Director Nereida Perez for one last budget workshop Wednesday.
The majority of the discussion focused on a $2 fee that has been levied on Mercedes residents’ utility bills monthly since the passage of an ordinance in 2004. That fee, which was originally to be collected for an 18 month period, continued to be collected by the city and became a vital source of revenue to fund infrastructure repairs, such as water and sewer pipes.
Each year, the fee raises more than $100,000 in revenue for such piecemeal repair projects. In a recent city meeting, the commission voted to rename the fee the “capital improvement fee” and talks about abolishing it have since stalled.
Mayor Henry Hinojosa said the benefits the city reaps from the fee are worth continuing it. “It’s a big help when you see the amounts of monies that we’ve been using to repair, to keep the water and sewer plants and other pipes, este, repaired so we don’t get cited by the state,” Hinojosa said.
“And something’s gotta give, because we haven’t raised the utility rate,” he added, though a moment later, staff noted that the base utility fee had been increased by 11% in the last year.
Zavala cautioned that eliminating the fee would mean city leaders would have to figure out how to accommodate for the lost revenue. “You need to make up the $100,000,” Zavala said. “You need to do it by raising rates and/or staff adjustments until we come up with that budget in the utility fund,” Zavala said.
He went on to clarify that “staff adjustments” could come through a reduction in force, or through existing employees working fewer hours.
The commission will have to make their final decisions at the end of this week. The city is proposing to keep the same tax rate as this year — $.07450 per $100 valuation. It’s a figure that is nearly two pennies higher than the effective tax rate of $0.7262 cents suggested by county tax officials.
If passed, the proposed tax rate would generate an additional 2.5% in property tax revenues in the coming year, or approximately $116,000.
Mercedes will hold a public hearing on the budget at 6 p.m. Friday. It will meet again at 10 a.m. the following day to vote on the final budget and tax rate.