by SEAN KIMMONS
Amidst concerns over a rising tax rate, Kyle city councilmembers took the initiative March 16 to start an early discussion of nailing down top priorities and sharing ideas for the Fiscal Year 2010-11 budget to be adopted this fall.
Newly elected mayor Lucy Johnson, who has been an advocate for a strong council and against excessive city spending, called for the workshop.
“My goal is to set objectives and budget priorities to help guide staff in their preparation of the next fiscal year that we will be voting on in September,” Johnson told the council.
Councilmember Russ Huebner introduced the idea of a capital improvement account, a sort of piggy bank that would eliminate the city’s reliance on issuing new debt for projects.
He reinforced his idea by saying that the city’s debt, currently at about $73 million, would take decades to pay off, even if it issued no new debt in the time being.
With the account, Huebner believes, future projects could be paid off with cash instead of new bonds. When the city pays interest on a bond, a project typically costs two to three times more in the long run, he said.
“We can pay cash for those projects as opposed to taking out bonds and paying interest on top of the regular principle cost of the project,” said Huebner, a local banker. “I believe we’re spending around $3.5 million annually in just interest expense.”
In the short term, Huebner said it’s possible that the savings account could accumulate $1 million, depending on sales tax revenue, in the next fiscal year. To do this, the city would keep the debt rate constant and put part of its growing sales tax revenue into the account and use the other part to lower the city tax rate, he said.
On the other hand, since it would take time to build up account funds, projects could be delayed, such as the slated $3.2 million library. He suggests spreading the library project out in phases.
“It would take a little long-er to get the project done but we won’t be issuing new bonds,” Huebner said.
Councilmember David Wilson, who also promoted water and wastewater projects, advised that taxpayers would more likely want to see lower tax rates than saving for future projects over time.
“Taxpayers, I am sure, would not want to pay a higher tax rate with a portion of that tax rate to save for something in the future that may or may not happen,” he said.
With population estimates at more than 90,000 residents by 2040, Councilmember Michelle Lopez stressed that new debt would have to be issued to handle infrastructure needs.
“If we’re putting away money, then that money really needs to go to things that are pressing right now,” she said. “We haven’t been able to keep up with what we need to do presently.”
Lopez is aware that city residents don’t want the council to increase taxes if they’re not smart about it, she said.
“We need to get ahead of the curve,” she said.
Kyle City Manager Tom Mattis said that a capital improvement account could work but would push projects back.
“It can be accomplished that way but I do think it will definitely be a challenge,” he said.
And to generate $1 million into the savings account while keeping the tax rate static in next year’s budget would create a 10 to 15 percent budget cut in every department, Mattis said.
“That will affect the city’s service level,” Mattis warned.
