Brittany Kelley
KYLE — Residents of Kyle should see no change in water and wastewater rates and a lower tax rate for the upcoming fiscal year, which begins Oct. 1, following recommendations made at the Aug. 13 Kyle City Council meeting.
Water and wastewater rates
According to agenda documents, the city contracted Raftelis Financial Consultants to conduct a study for the water and wastewater service. The purpose of the study is to determine the city’s cost of providing these services and the rates to cover the cost.
Interim city manager Perwez Moheet recommended no rate increases for both inside- and outside-city customers' water and wastewater services. This comes from “significant cost reduction and cost containment measures” implemented within the Water Utilities Department, which are expected to affect the cost structure and allocation of functional costs for FY 2026-27 and FY 2027-28.
Moheet explained that staff started to reexamine how the city plans its water supply needs. The city used to rely on developers for the information, but now, it’s looking at the commitment it has made and how accurate the projections were. As a result, developers are required to pay for the water reservations, whereas before, the city was footing the bill. With this, Moheet estimated that the fund balance at the end of 2027 for water utility would be $23.96 million and $30.86 million for wastewater utility.
This recommendation was also made by Raftelis vice president Angie Flores for FY 2026-27 and FY 2027-28, though residents may see a small increase for the years 2029-31.
“We were headed down a very scary road of spending a lot of money that we didn’t have and, as a homeowner and a taxpayer, I appreciate the council and our staff reevaluating all this,” said Mayor Yvonne Flores-Cale.
Council member Courtney Goza was concerned, due to the 1952 city of Texarkana vs Wiggins case, which she states determined that a geographical line, such as a city limit, cannot be a factor that determines what it costs to provide service to someone.
“That seems to be exactly what we’re doing,” claimed Goza. “They could be side-by-side customers and one of them will still pay significantly more because they are past the geographic line and that to me does not seem to fall in line with that 1952 case, nor with the reaffirmation in the Supreme Court in 2021.”
However, council member Claudia Zapata stated that the case is contextually different than Kyle, as it was based on the fact that Texarkana passed an ordinance with no documentation as to why it was creating separate rates.
Raftelis uses the industry standard methodology when determining what outside city limit customers would pay, said Angie Flores, who added that she was not familiar with the case.
Goza also stated that there have been home developers outside of the city limits using water for irrigation, as well, so the study included them, which, ultimately, negatively affected the customers.
“Even though the utility basis for outside customers is acceptable methodolgy by the American Water Works Association, we will be looking at perhaps changing that methodology to a cash basis. I’ve also — in my head — thinking long term, ‘Do we need to have an inside/outside city separation?’ So, we’ll look at all those options. We’ll bring it back to council for your consideration [in the future],” said Moheet.
Zapata also suggested looking into lifeline rate structures, which provide discounted rates for baseline consumption. Moheet did state that this cannot be done in two weeks, which is when approval is needed, so it will not be presented to council right now.
Council had no opposition to the water and wastewater rates staying the same. It will come back to be voted on at a September council meeting.
Tax rates
The current tax rate sits at $0.5957, which is composed of $0.3212 of maintenance and operations (M&O) and $0.2745 interest and sinking (I&S). This makes Kyle have the second-highest tax rate amongst 10 peer cities, including Austin, Buda and San Antonio, sitting behind San Marcos., according to agenda documents.
Regarding the upcoming tax rates, Moheet first explained that tax increment reinvestment zone (TIRZ) #4 affects all tax rate calculations. Moheet clarified that this is because there was a change to the TIRZ in 2024 that changed the boundaries, added revenue increment participation and added county participation, but the base value was incorrect, as all participants had different estimates. The Hays Central Appraisal District was able to give the final determination, which sits at $154 million.
Additionally, the no-new revenue rate is usually lower than voter-approval rates, but because of council approving bond debt defeasance this year, it is the opposite.
Moheet presented the following tax rates:
• Current tax rate: $0.5957
• No-new revenue tax rate: $0.6322
• Voter-approval tax rate: $0.5650
• Proposed tax rate #1: $0.5600
• Proposed tax rate #2: $0.5340
“In [option #1], what I did was I looked at a midpoint because when we were talking about the budget presentation on Aug. 1, some council members were interested in perhaps providing for some wage adjustment for our employees,” said Moheet. “So, when I heard that conversation when I was working on the tax rate, I said, ‘Okay. What tax rate will help us, if council was to decide to implement that option?’ I think for all of our employees, 1% is about $500,000 … So, if you were to adopt a tax rate of $0.5600, it’s lower than the voter-approval tax rate, it will give us the money we need for our debt obligations, but it will also give us about $1.8 million cushion in general fund.”
For option #2, he looked at what tax rate would generate as close to the budget necessities as they could get, which was $0.5340.
The average resident home is valued at $301,530, which is a decrease of approximately 5% from last year. So, for option #1, an average resident would pay $1,688.57 or, with the homestead reduction, $1,464,57. This is a 11.44% reduction.
For option #2, an average homeowner would pay $1,610.17 or $1,396.57, after the homestead reduction — a decrease of 15.55%.
Council made no decision regarding which tax rate will be adopted, but it did vote 6-0 to approve a maximum tax rate of $0.5650. Council member Lauralee Harris was absent.
Council will discuss budget, fees, utility rates and property taxes for its first reading Saturday, Sept. 5, followed by a second reading Tuesday, Sept. 15.
To listen to the full discussion, visit bit.ly/45rX6eM.
