City’s sales tax woes worsen as council obliterates plan to prevent it happening again

Disaster!

That’s the only adequate word to describe Kyle’s August sales tax collections which were an astronomical $108,382.52 below projections. That means, on the books, the city faces a budget deficit of at least $226,229.22 for the year. That’s equivalent to a tad more than one cent of the property tax rate; i.e., the city would have to increase its property tax by $.01 per $100 valuation to cover this deficit. It also means that August alone contributed roughly 49 percent of that total deficit, which is why I referred to August’s collections as a "disaster."

Here’s the problem. Sales tax forecasts are not based on increased per capita spending, but on more people spending roughly that same per capita amount. Sales tax revenues are down because (1) the city’s population obviously didn’t grow (other than by annexation which doesn’t count because those consumers being annexed were already spending sales tax dollars here anyway) as much as anticipated, and (2) the city didn’t attract enough visitors willing to spend sales tax dollars here over an extended period of time (which is the principle reason City Manager Scott Sellers has wanted to make Kyle "a destination city.")

Also parenthetically, that is why I have opposed all these grandiose schemes for new highways designed to expedite motorists’ trips through and around Kyle. I don’t want plans to get people through Kyle, I want to see plans to get people to Kyle.

Council member Travis Mitchell also expressed alarm about this deficit during the city council’s July 30 budget workshop. He actually talked about reducing the sales tax forecasts for the upcoming fiscal year by as much as $200,000, which wouldn’t obviously cover this year’s shortfall (unless the city miraculously experiences a major rebound in the one month left in the fiscal year), but then next year’s forecast are not as optimistic as this year’s.

But then a miracle did come along. The cavalry (disguised as the Hays Central Appraisal District) rode to the rescue by releasing its certified tax rolls that were much higher than anticipated. So much higher, in fact, the city would be collecting $518,000 more than anticipated in revenue from property taxes even by lowering the current rate a penny. What Sellers proposed to do with that money was to use $200,000 towards higher police pay to put the Kyle Police Department pay scale near parity with surrounding police departments, use $118,000 to increase the pay of non-civil service employees and the remaining $200,000 as a cushion against possible future sales tax deficits.

It was obvious from watching the reactions on the dais at last night’s council meeting that Mitchell loved the idea. But then council members began chipping away at the $200,000, finding other things to spend that money on and with every chip, I could see Mitchell’s smile reduced a notch until, by the end of the evening, there was roughly only $45,000 left in that pot or enough to cover a mere 41.5 percent of one month’s — this month’s — shortfall.

The good news is sales tax collections are 12.4 percent higher so far this fiscal year than at the exact same time last year. The bad news is the budget projected them to be 15.6 percent higher. That 12.4 percent figure is actually rather healthy, from my point of view, but the 15.6 percent projection was simply overly optimistic. It was obviously based on a major influx of new residents that never occurred, Sellers’s proposed budget for the upcoming fiscal year projects a 13 percent increase in sales tax revenues over this year’s. Personally, I would view that 13 percent number with a degree of skepticism, but it is far more realistic than that 15.6 percent projection.