By Andy Sevilla.
When Kyle’s fiscal year ended in September, the city was more than $70 million in debt. Since then, officials have paid the bills down a bit, but that total encumbrance is expected to rise in a month.
The Kyle City Council gave final approval to issue $1.875 million in short-term debt at its March 18 meeting. The seven-year tax notes will be used for capital purchases delayed due to a slump in the national economy, officials said.
That debt will be issued by April 30, and in the “worst-case scenario” could cost property owners up to two-cents next fiscal year, according to Kyle Finance Director Perwez Moheet.
Under Moheet’s conservative approach, he said the worst case would only come to pass if sales taxes stagnated or the city stopped growing.
Kyle City Manager Lanny Lambert, however, assured council that the debt issuance would not cause a rise in property taxes, and furthermore asserted he would not present an increase in the ad valorem tax rate – already the highest of any Hays County city at $0.5483 – next fiscal year.
Moheet said he estimates between $290,000 and $300,000 would be needed to cover the annual payments for the recently approved short-term debt. Presently, the city collects about $150,000 for every penny on the property tax rate.
Come budget discussions later this year, city officials will be able to rely on a growing property tax base and positive sales tax revenue growth, but they’ll also have to contend with a growing debt payment and the immediate disappearance of $425,000 to cover bills.
In 2008, Kyle issued $22.8 million in Certificates of Obligation (CO) for various capital purchases, including the acquisition of the Wells Fargo building on Front Street and construction of the Public Works building, among other things. Included in that wish list was an Economic Development Industrial Park, which never materialized. Council instead set aside $1.7 million to pay debt down.
Officials put forth $425,000 each of the past three years toward debt repayment. And the current fiscal year is the last year that money is available, Moheet said.
Discussions about next year’s fiscal budget, which will begin Oct. 1, will include $425,000 less for debt payments, plus the need for an additional $300,000 to cover the new debt and a $100,000 payment increase to existing debt.
In other words, before officials begin discussing the cost of the city’s annual operation, they’ll have to come up with close to a million dollars to stay on top of old and new debt.
If the city seeks those funds from property taxes, that could mean about a 5.5-cent tax rate increase. Lambert assured council that is not in his budget plan.
Also, officials could find themselves issuing debt to reconstruct at least one of the five streets set for improvements. At their March 18 meeting, council members approved engineering contracts for Bunton Creek, Burleson, Goforth, Lehman roads and Marketplace Avenue – all part of the $36 million road bond Kyle voters approved last May.
Council members voiced frustration with the length of the engineering selection process and expressed the need to begin reconstructing the roads as soon as possible.
Bunton Creek Road, seemingly, will be the first to see improvements at an estimated cost of $5 million. Payments to cover that debt will likely come from a mix of increased sales tax revenue and potentially increased property taxes.
At full letting, the $36 million road bond project could have a $0.20-cent property tax impact to Kyle homeowners. Officials, however, said last year the impact would be less felt as increasing sales tax revenue and more development would help shave off the financial implications.
The city’s current principal debt is $69.01 million; with interest, it tops $96 million. In August, Kyle will pay $1.19 million toward its principal debt.
