• August 1, 2014

Building permits plunge; drop in construction values means less revenue for Killeen

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Posted: Sunday, July 19, 2009 12:00 pm | Updated: 8:13 am, Thu Aug 16, 2012.

By Matt Goodman

Killeen Daily Herald

Halfway through 2009, statistics show that Killeen has issued 2,456 fewer building permits than at the same point in 2008.

That's a 37 percent drop and about $58 million less than the first half of last year's construction values, which are used to determine taxable property revenues.

"That's the tight credit market," said John Crutchfield, president of the Greater Killeen Chamber of Commerce. "That's the reason building permits are down."

The drop in construction values halfway through the year equates to about $403,000 in taxable revenue that the city would normally have under its belt.

It's also indicative of less money being spent on expanding the city's commercial and residential options.

At this rate, Killeen stands to miss out on about $96 million in construction value by the time residents cross out the last day on their December calendars. That's about $667,000 in taxable revenue the city won't have.

"We've adjusted our budget and reduced it $4.2 million, to factor in sales tax revenue and permit fees and a number of factors," City Manager Connie Green said. "We're showing our economy in a recession so we cut our budget."

When city leaders meet in August to make the yearly budget for the fiscal year – which lasts from Oct. 1 to Sept. 30 – they analyze statistics of previous years to determine the amount of money that will be available in the general fund.

Property tax revenues as indicated by the construction values and individual fees tacked on to the permits end up in the general fund and help pay for projects and improvements around the city, as well as operational costs for city workers.

When this money doesn't arrive, projects stall, said Ray Shanaa, Killeen planning and development director.

"We project the revenues and the expenses and that's when new programs (are planned)," he said. "When the money doesn't come in, when a development doesn't happen, and the value is less than we anticipated …we're missing out on that."

To combat this loss, Green said the city is working to cut operational costs rather than city projects, which means that city workers will likely feel the brunt of the decrease.

"It's the operating budget that we reduce in order to try to bring our budget down more, such as reducing overtime," Green said.

But again, this isn't money that Killeen is losing directly; it only indicates that proper planning in the coming years will be integral in overcoming the decrease, Crutchfield said. For commercial projects, Crutchfield believes that the city must develop a queue that will come to fruition once the market stabilizes.

"You keep trying to fill the pipeline, keep working in projects to get them in shape and we've got a number of those," Crutchfield said. "That's what you do, you concentrate on filling the pipeline up with the expectation that nobody's going to break the ground until the market gets better."

On the residential side, home builders aren't panicking. Terry Neiman, president of the Central Texas Home Builders Association, said he sees the current market as more conservative rather than desperate. He believes the drop in building permits doesn't mean that homes aren't being built; it just takes more time.

"Things are more conservative than I'd like them to be," he said. "But you know, we sold a $400,000 home a couple of weeks ago. And my friends in the lower market are moving houses quite well."

For the city, Green said the budget that will be presented in August for the next fiscal year will be extremely conservative. He said the city is feeling the recession, just as the rest of the country is, and that this budget will brace for the drop in taxable property values.

"It's a very conservative budget that keeps us in our means and continues to improve our capital improvement programs," Green said. "But we'll cut back on adding new programs and defer capital expenditures until the economy gets better."

Contact Matt Goodman at mgoodman@kdhnews.com or 254-501-7550.

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