Kyle city leaders are anticipating a continuing drop in sales tax revenues and rising delinquency rates in water and wastewater bills as the COVID-19 crisis continues, with deficits possibly extending into the next fiscal year. The city anticipates a FY 2021 budget to be much like FY 2020 but minus big-ticket projects.
In the interim, the city pool is unlikely to open this summer, summer camps are indefinitely postponed and events like Fourth of July fireworks and the Pie in the Sky Festival in September are under a big cloud of maybe.
The Kyle City Council held a more than two-hour special meeting on Thursday to gauge how the novel coronavirus has impacted city revenues and expenditures.
City Manager Scott Sellers opened the meeting with a presentation and warned of projected deficits in all the city’s sources of revenue.
The general fund is roughly composed of one-third sales taxes, one-third property tax and one-third other revenue. Most property taxes were paid earlier in the year but all other revenue sources are measured month to month and Sellers told council members he expects deficits of 12 to 16 percent in sales tax and 10 to 15 percent deficits in the water, wastewater and storm drainage utility funds because of delinquent accounts.
“We’re trying to crystal ball it as much as we can, but because we’re not deep enough into what we think the deficits are going to look like, it’s hard to know which expenditures need to be deferred, frozen or, in the worst case, cut,” Sellers said. Currently, he said, city staff is taking “a wait-and-see approach at least for the next few weeks or so.”
There are currently almost $20 million in Capital Improvement Projects “underway or soon to be underway,” he said, explaining that the city had long planned for this year’s undertakings. This year, he said, “was really our year for capital improvements. We’ve been modeling and engineering for many years to get to this year of large expenditures.”
However, Sellers also noted that during times of deficits, “where the economy needs to kind of do a kickstart, a very good place to do that is in expenditures of capital projects.”
Sellers proposed deferring some equipment purchases and possibly some water line improvements. The Plum Creek Project is the largest expenditure from the Storm Drainage Utility Fund and Sellers said he’s “not sure” that will be gotten around to this year.
Additionally, Sellers said some open positions have been frozen along with nonessential travel. New professional contracts will not be entered into and any equipment purchase greater than $25,000 will have to be approved on a case-by-case basis.
Also, he said, the city does have a fund balance that will allow it to “float several months of deficit,” though the city doesn’t plan to dip into it this fiscal year.
“We are confident in our budget and in our ability to get through this and hopefully to get through it without any disruption to the organization or to the residents,” Sellers said, before opening up the meeting to questions from council members.
Council member Alex Villalobos asked if next year’s property taxes will be affected. The Hays County Appraisal District recently sent out appraisals that, according to Finance Director Pervez Moheet, show an overall nine percent rise in property values.
Moheet predicted that protests against the appraisals will rise. “We think that nine percent will not hold when the certified tax roll is presented to us in July.”
Council members Villalobos, Tracy Scheel and Robert Rizo asked about a plan for households delinquent on their utility payments and Sellers said staff would “come up to something” to present to council. “Up to this point our messaging has just taken us through this disaster period.” Sellers said although at some point decisions will have to be made on how long to defer utility bills, “as of right now, our status quo plan is just through the end of this month.” Council members were adamant that no one has his or her water cut off, but also want the word out that arrangements will have to be made to settle the delinquencies.
Scheel also asked about the city’s wastewater treatment plant expansion. “Things are on track as much as they can be,” Sellers said. Construction has not yet begun on the expansion, though the facility has been running over capacity and a contractor has been chosen. Sellers said the contractor asked that the city defer its Notice to Proceed on the project because of trouble staffing due to the pandemic.
Director of Development Howard Koontz had this to say about the uncertainty the bug has brought, “We’re a ship without a rudder, waiting to see what the winds have in store.”
