Tax Rate Half-Step Uptown Toodeloo

Updated Sunday: I had the opportunity to ask Mayor Todd Webster, if the increased property valuations translated into more money than anticipated flowing into the General  Fund, would he rather the city manager recommend those additional funds be used to provide more city services or to reduce the rate hike needed to pay for the 2013 road bonds, This was his reply:

 "I would prefer that the city manager use his training and expertise to provide the city council with an accurate picture of what he and that staff believe the city needs to address and make a request that addresses services and makes progress toward rehabilitating our infrastructure. I don't want him to adjust that request based on available revenue. The city council is more than capable of prioritizing the items requested and determining whether the revenue is deficient, sufficient or surplus and then setting the tax rate accordingly. Again, there are state laws that limit revenue growth that is achieved from increases in property valuations. Your question is coming from the flawed premise that a 17 percent increase in valuations will generate game changing access to amounts of new revenue on the M&O side. It will generate some new M&O revenue but my experience has been that to get access to the kind of M&O revenue you are thinking of, we would need to exceed the rollback rate. I apologize in advance if I misunderstand your premise. Now, I am assuming that you are asking about using M&O decreases to offset increases on the I&S or debt service rate. I suspect that the valuation increase will provide limited opportunity to do so. On the other hand, a valuation increase should separately have a downward impact on the rate necessary to pay bonded debt service for the road bonds but how much will depend on the assumptions that our very good Finance Director has been using to provide us with the rate estimates. I doubt he used 17% so I think we can be optimistic that the rates may not be as high as anticipated. Bottom line, my educated guess is that without exceeding the rollback rate limit, tax payers in Kyle will see a lower M&O rate and a lower I&S rate. It could even be the case that we could set a rate that is lower but still exceed the rollback limit. If that happens, then the voters would have an opportunity to weigh in directly. But, the real game changer could be due to growth in the base that is not attributable to valuation growth. I believe that we are likely to hit somewhere near 100 new residential building permits this year. Add all of the new commercial properties that have been added and we could see some spreading of the tax effort in way that lowers rates in the way that your question implies. One caveat. I am not sure when added properties get added to the rolls. There could be some lag.

"Oh... should see a lower I&S rate than than the increase that has been projected as the result of issuing the road bonds."

Toodeloo. Toodeloo.

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Original post: In case you missed the news in Thursday’s paper, the average property tax values in Kyle jumped 17 percent this year, from $133,879 to $156,536. That’s significant for a number of reasons. First, it means that much more money is available to the city to spend on services for its citizens and it could also have a significant effect on the size of the tax rate hike needed to pay off the 2013 road bonds.

Of course, this 17 percent figure is not etched in stone. Individual property owners have the right to appeal their tax evaluations and most who do so claim their evaluations are too high (i.e., they want to pay less taxes on that property). But even the most conservative estimates say that figure rarely, if ever, decreases by more than 3 percent. So let’s say the very worst happens, that Kyle’s taxable property only increases 14 percent when the final figures are announced July 25. That’s still seems like a hefty increase from the year before.

The city manager is required to present his proposed budget to the City Council no later than Aug 1, which is only a week after the certified valuations are released. It would be foolhardy to think the manager is going to wait that long to assume what almost half of the city’s General Fund revenues are going to be if he is going to present a balanced budget.

Based on all that, I was curious to the city’s reactions to the release of the numbers from the Hayes Consolidated Tax Appraisal District. I wanted to know (1) how the release affected current budget assumptions and (2) had it adjusted thinking about tax rate increase. So I sent the following e-mail Thursday to Chief of Staff Jerry Hendrix who has been designated by City Manager Scott Sellers as the one and only spokesperson for the city’s staff:

"I read in the (Austin American) Statesman today that HCAD as increased the average home valuation in Kyle from $133,879 to $156,535, an increase of, according to my calculations, an astounding 17 percent. I realize homestead exemptions and contested valuations are going to factor into this. But my question is when will Scott or Perwez (Finance Director Perwez Moheet) be willing to go on the record to forecast what impact this will have on the city's budget for fiscal 2015-16 and particularly on the proposed rate increase needed to pay for the road bonds?"

Seemed innocuous enough. In an attempt to answer my question, Hendrix apparently forwarded it to Moheet who provided this response:

"The numbers released by the HaysCAD are preliminary subject to protest hearings and final determinations by the Appraisal Review Board. The City Manager's proposed budget will be based on the "certified tax roll" provided to the City by HaysCAD by July 25, 2015 (deadline by state law).

"One of our primary goal (sic) is to minimize and mitigate to the maximum extent possible, the property rate impact on our citizens. By basing the proposed budget on the certified tax roll, the revenue estimate from property tax can be (1) accurately calculated in compliance with the state law, (2) it will take into consideration the latest certified taxable valuations from HaysCAD, and (3) thus minimize the property tax rate impact on our citizens.

"There are simply too many components of the proposed budget that are still being developed and as such, are not quite final. Until all of the pieces, parts, and components of the proposed budget have been fully developed and vetted by the City Manager, it is difficult to be precise with the tax rate calculations. "Specifically, the proposed budget for FY 2016 when presented on August 1st by the City Manager to City Council, will include the tax rate impact of the road bonds."

This told me absolutely nothing I did not already know and that I implied in my original question. All I really wanted to know was how the leaders on the city’s staff reacted to the preliminary numbers, not absolute numbers I would hold against them at a later time. I’ve been involved in these things for too many years to know I couldn’t take any number as absolute at this date. So I shot the following note back to Perwez:

"Can I get some kind of reaction statement from you or Scott or anyone based on these preliminary figures? I think you will agree that usually the certified numbers rarely, if ever, vary from the preliminary figures by more than 3 percent. Are city leaders happy, jubilant, upset, cautiously optimistic -- exactly how do they feel about this these preliminary figures and if the certified rolls are within the 3 percent range will this mean significantly more, slightly more, slightly less or significantly less for next year's budget than was currently forecast?"

I really thought and still think Kyle property owners would be interested in the answers to these questions. What I received instead was THE OFFICIAL STATEMENT from Hendrix:

"While the increase in property values is certainly good news and a sign that the City of Kyle, Hays County and Central Texas in general remains a prime destination for families and business, it is far too early to predict the actual effect on our city budget. Tax rates, property values and municipal governments all have a lot of moving pieces and our budget process needs to take into account the total impact of these values and rates on our residents, businesses and government services."

In other words, city officials really don’t want to answer this question for some reason. Instead, they chose to dance around it. And I have absolutely no idea why. It’s a far cry from the last place where I lived. There, the city manager was not only willing to answer questions about preliminary tax valuations, she invited the media to a special one-hour briefing on the subject the day the preliminary valuations were made public during which she outlined all the possible alternatives these numbers had on property owners, the city’s General Fund and the tax rate. As long as you are clear to the public that all this is somewhat hypothetical, why not give property owners and other residents of Kyle a sneak preview of what they might expect? What’s wrong with making those who live here more informed about the decisions that will have a direct affect on them and the city they call home?