City of Kyle discusses budget

KYLE — Kyle City Council took the first step in adopting a new budget during a special budgeting workshop held on Saturday, May 13.

Members heard from the interim city manager Jerry Hendrix about the current state of the city, as well as an introduction from the new city manager, Bryan Langley, and presentations from department directors regarding budget requests for operating and capital budgets.

Hendrix outlined the directives and budget priorities for the workshop for Fiscal Year (FY) 2023-24 to include the following: identify cost reduction and containment strategies for the coming year; enhance customer service experience; expedite engineering, design, construction and completion of capital improvement projects; focus on making street condition improvements; and investment in the citywide beautification program.

“Our number one priority is cost containment and evaluating the vacant positions to determine if they’re still relevant and needed or if they can be re-tasked to other positions,” Hendrix said. “A big part of what we want to do with our budget is be able to enhance the customer service experiences that we have.”

“We going to look at our different (capital improvement projects) and how we might further expedite those CIPs,” he added. “We’re going to focus on improving street conditions, including street lighting, lane markings, seal coating, pothole repairs and street construction based on condition of our assessment report … and then investment in our citywide beautification program, which has been a priority for council for the last several years.”

The presentation began with a look at the overall current budget and fund structure, which included a total budget of $212.77 million broken down by governmental funds ($171.22 million) and proprietary funds ($41.55 million).

The general fund revenue for FY 2022-23 was broken down by the following categories: transfer in, $2,742,319 (5%); interest, $855,500 (2%); development fees, $9,612,600 (18%); franchise fees, $2,868,500 (5%); court fines, $530,000 (1%); solid waste, $4,201,100 (8%); sales tax, $15,875,000 (30%); property tax, $16,009,200 (30%); and other, $638,500 (1%).

The general fund expenditures for FY 2022-23 were broken down by the following categories: administration, $4,591,105 (7%); community development, $6,813,026 (11%); IT, $1,205,815 (2%); police, $14,870,348 (24%); financial services, $2,264,154 (4%); parks, $3,424,446 (6%); engineering, $776,461 (1%); solid waste, $3,113,041 (5%); library, $1,038,325 (2%); economic development and incentives, $2,291,581 (4%); streets, $3,740,363 (6%); transfers out, $15,183,572 (25%); and other, $1,870,101 (3%).

“The biggest chunk is actually transfer out, which is for mostly CIP programs that we transfer out of the general funds into the specific projects,” the interim city manager said. “The next biggest slice is our police department at 24%, which is pretty typical of local government funds toward public safety.”

The difference between revenues and expenditures was approximately $8,000,000. The discrepancy was due to capital expenditures that the city drew down in the fund balance.

Hendrix then touched on property and sales tax revenue histories, as well as a 10-year development revenue history. Kyle Director of Finance Perwez Moheet explained some key assumptions looking forward in the city’s future financially.

“In 2023, we saw a growth of 23.7% [in existing properties value growth]. Looking at our average annual growth, we’re predicting in 2024 at 15% and then being conservative in three or four years, at 3%,” Moheet said. “New construction has been a boom for the city. If you look at new construction [taxable] value in ’23, we went up by $342 million. Over the five-year horizon, it’s an average of $300-350 million in new construction each year.”

He then explained growth in sales tax revenue for the future, which totals a 12% increase in 2023 and a 5.7% increase in 2024, leveling off at approximately 5% over five years.

Projected property tax rates for the next five years were increased from $0.5082 in 2023 to $0.5699 in 2024, leveling off at $0.59 for the following years.

The key takeaway from the data, he said, was required minimum fund balance per policy (25% of the total requirements) — $15,292,734 in the approved budget versus $14,196,815 for the current year estimate.

“City charter requires that we maintain in our city general fund at least 25% of our total annual requirements in reserves,” Moheet said. “We are the envy of most cities in Texas. [The city's] general fund is very healthy in terms of future forecast. It gives council and the city manager great flexibility in deciding key policy decisions as to capital spending, operating budget expenditures and council's priorities for the future.”

Council had the opportunity to ask questions throughout the workshop as department directors presented their needs for the upcoming fiscal year.

“The initial budget presentation is council’s way of getting an unfiltered lookout the department head’s needs and by unfiltered, what I mean is each department presents their projected needs in order to take their department to the next level,” Mayor Travis Mitchell said, noting that the requests are certainly more than the budget will allow. “That’s by design, so we can just get a look at how each department views itself and what each department wishes to see.”

From this point, the city manager will take all the requests, as well as council’s priorities, and bring a proposal back, Mitchell explained, adding that the group did not broach the big picture ideas for the future as time was a limiting factor on Saturday.

“We didn’t really get into the big picture stuff,” he said. “I think the new city manager is going to help us streamline the budget process moving forward … Bottom line: we still have a whole lot of work to do to get this budget whipped into shape and to set the direction for the future.”

Council has established a mini-visioning workshop for June 24-25 — an opportunity for the dais, city manager and executive team to have a conversation.

“The budget presentation was 90 slides and we really only got through half of them on Saturday in our six-hour meeting,” Mitchell said. “All the slides in the back related to capital improvement projects were overlooked because we just ran out of time because council was sort of spending too much time per department. The council really needs to get focused on what we’re trying to achieve.”