On the heels of an overwhelmingly supported Sales and Use Tax election in Hays County Emergency Services District (ESD) 8, Kyle council members and ESD 5 commissioners trucked along with discussions to put a similar proposition before voters this November.
“We have no choice but to find an alternate source of funding,” ESD 5 Commissioner Mike Fulton said earlier this year. “We’re at the point where our options are – find another source of funding or shrink the fire department with the cost of inflation each year. Those are the only two options that we have … we are at our maximum funding.”
Fast forward a couple of months and a new fire chief, and funding scarcity concerns have lessened, though they remain of principal interest, commissioners said at their May 13 meeting. After tightening their budget and restructuring personnel, ESD 5 will be able to finish the fiscal year with enough money.But, increased revenue will be necessary into the future as calls for service and the Kyle Fire Department (KFD) grow, officials said.
ESD 5 is the governing board for KFD.
Commissioner Eric Holen said the district’s tax rolls – about $1.8 million – would be the department’s major funding source in the upcoming fiscal year, which begins on Oct. 1. Their expenses, however, surpass the incoming revenue, and new sources are necessary to fund department’s activities, he said.
A grant that allowed the department to bring in five firefighters is set to expire this fiscal year, Holen said, which was the second largest chunk of funding for the department in FY2013.
ESD 5, too, is constrained by state law, which asserts that they can only levy a maximum $0.10 tax per $100 of property valuation within their district.
“We are currently at that cap,” Commissioner Susan Meckel said. “Our revenue is dependent on the tax rolls, if they go up, we might get a little more to supplement our budget.”
“The cost of fuel and equipment maintenance and all of that is going up, but our tax revenues have been staying pretty low,” she said.
So, ESD 5 is hunting for other funding sources within their district and that brings up the idea of sales taxes.
Commissioners are seeking to call a Sales and Use Tax election, asking voters’ permission to increase sales taxes in unincorporated areas within their district – Kyle’s Extra Territorial Jurisdiction (ETJ).
If approved, the measure would allow ESD 5 to collect $0.015 in sales taxes, which amounts to about $60,000 annually, according to Interim Kyle Fire Chief Clay Huckaby. There are about 182 businesses operating in Kyle’s ETJ, he said.
Kyle officials, however, worry that the ESD 5’s collection of sales taxes within the city’s ETJ would prevent annexation, as sales tax revenue would be earmarked for a separate entity.
“For us, sales tax is huge,” Kyle council member David Wilson said. “For us to do things in the future (roads, maintenance, infrastructure improvements, etc.), sales tax has to be that tool. Plus, we buy down our tax rate, to keep our taxes as low as possible for people that live in this community with sales tax, too.”
Businesses within Kyle collect sales taxes at a $0.0825 rate – $0.0625 goes to the state, $0.005 goes to Hays County, and $0.015 is returned to Kyle, $0.005 of which is used for property tax reduction in the city.
Kyle officials could thwart the ESD 5’s efforts to collect sales taxes in its ETJ by annexing territory, or by building a campaign against a Sales and Use Tax election, as Buda did with ESD 8 in 2011.
Buda’s efforts in 2011 killed ESD 8’s attempt at collecting sales taxes in their ETJ, but a later effort this May was successful after ESD 8 and the city agreed on revenue sharing terms.
ESD 5 commissioners have, from the beginning, planned on including Kyle in their attempt at collecting sales taxes in the city’s ETJ, ESD 5 President Beth Smith said, adding that an interlocal agreement specifying future revenue sharing has always been in the plans.
In ESD 8, the district would collect a $0.015 sales tax in unincorporated areas of Buda, but if and when Buda annexes areas of its ETJ, that sales tax would then be divided three ways – $0.005 for the ESD 8, $0.005 for Buda and $0.005 for Buda’s Economic Development Corporation.
Kyle, too, was included in that agreement as parts of ESD 8 cover areas of the city’s northwest ETJ. If and when Kyle annexes those portions under ESD 8, the district would keep $0.005 of the sales tax collected and the city would take in $0.01 of that revenue.
Kyle has begun annexation efforts, as they are entitled to annex 30 percent their land area, though the process has been, admittedly, slow.
Kyle Mayor Lucy Johnson said the city has had annexation in its sights since last year, dating before any discussions of ESD 5’s sales tax ambition.
“Our plan, and the reason, for annexation is to: number 1 – help protect the value of the city and have a hand in the planning of areas in our ETJ, which is important to the community; and number 2 – annex areas that we feel are particularly prone to commercial growth in the future,” Johnson said. “Those commercial areas are particularly important to us in being able to provide resources to our citizens.”
“Obviously, any area that we would annex, we’d want to make sure we have all the resources – property and sales tax wise – to provide service to those newly annexed areas. I feel like it’s my job as mayor to make sure that I secure those resources for our newly annexed citizens,” she said.
Despite not annexing any areas yet, the city is poised to move forward and Johnson said all resources and revenues should be available to Kyle, “to turn around and provide adequate levels of service to those areas.”
Both entities agreed on researching and discussing a potential interlocal agreement that would satisfy each government’s need, with review of Memorandums of Understanding to be held this summer.
Huckaby said that if ESD 5 wants a November Sales and Use Tax election, they would have to call the election sometime in late August.
Council members also showed interest in setting up a separate ESD for emergency medical services (EMS). Such an entity could also collect a max $0.10 tax per $100 of property valuation within its borders.
Huckaby said 70 percent of fire calls are for EMS – about 10 to 15 per day. If EMS had its own ESD, then ESD 5 expenses would be lowered as they would no longer allocate resources for that service.
