The Killeen City Council and city staff are working to institute a sweeping reform of Killeen’s municipal finance policy.
Who cares, right?
While policy discussion sounds to some like nails on a chalkboard, how the city manages taxpayer money was at the center of the council’s catastrophic recall election in 2011 — in which five council members were removed from office — and the recently completed management audit of the city’s finances.
The audit, resulting in part from residents’ anger over the handling of public funds, revealed a web of mismanagement and a lack of financial controls that precipitated years of questionable spending practices and poor council decision making.
In short, Killeen residents care about how their taxpayer money is spent, and tight fiscal control helps prevent waste and promote growth.
Here are some of the biggest highlights of the new policy and how it affects taxpayer money.
The city’s updated debt policy would limit the amount of property tax used to service debt and limit the ability of the council to increase the city’s indebtedness.
The city’s new policies governing debt servicing would require the city to move toward a goal of 25 percent for the interest and sinking portion of the total property tax rate.
“The city will be considered compliant with this policy as long as the interest and sinking portion of the tax rate continuously decreases until it reaches the 25% level,” the policy states.
The city’s current interest and sinking portion of the property tax rate is 34.2 percent.
The new policy would ensure that more of the property tax bill a home- and business owner pays each year go to city operational expenses such as paying for public safety and improving community services.
In addition, the new policy ensures the council can propose a general obligation bond election — voted on by Killeen residents and paid for by property tax revenue — only if the debt service portion of the property tax stays level or decreases.
That effectively means the council cannot propose a bond election without an accompanying increase in the city’s property tax, adding a clear mechanism to pay back the floated debt.
“The staff is going to be compelled to come back to the council and say ‘you’re violating your policy,’” City Manager Ron Olson said Nov. 10. “It will help us understand (that) issuing debt without raising the tax rate is going to take us in the wrong direction,”
The city of Killeen currently holds $252 million in debt paid back through property tax revenue and utility payments, according to the Texas Bond Review Board.
While that debt figure is not unusual in relation to cities of similar size, the amount of an average resident’s property tax dedicated to servicing the city’s debt is unusually high for comparable municipalities.
In fiscal year 2017, the city paid 30 cents per $100 of taxable value assessed toward servicing its debt.
That number is only bested by the cities of Copperas Cove, which paid 32 cents per $100, and Temple, which paid 34 cents per $100, in the city’s 10-member benchmark group of cities comparable in demographics and size.
As revealed in the city’s external management audit in August, past Killeen administrators did not have a plan to pay for annual grant expenditures after the limited-time money ran out.
Without a future plan, the city has scrambled to identify funds to pay for expenses covered by state or federal money.
For example, the city accepted three separate COPS grants — federal money used to fund police department positions — and has struggled annually to pay for salaries and benefits when those grants ended.
The city’s new policy would tackle that issue head on — but there are still kinks in the system.
The section devoted to grant funding in the policy ensures that the city will propose accepting a grant only if a long-term funding plan is concurrently presented.
But just before the policy discussion Nov. 10, the council asked no questions about long-term funding for a state grant outfitting Killeen police officers with rifle-resistant body armor.
As part of the city’s resolution, the state would offer more than $127,000 for the plating and vests with a five-year warranty period before the cost of maintaining and replacing the equipment falls on the city. The cost of replacing the entire armor inventory alone is more than $81,675.
But in the council memorandum for the resolution, there is no plan for future funding for the equipment, only a passing reference to the department’s intent to ask for budgeted funds or seek other grant opportunities.
During the policy discussion, Olson said: “The intent of the language is to say we won’t accept a grant unless we have plan to pay for it.”
The council will vote on the armor grant resolution Tuesday.
The city will plan to expand its policy of requiring the city’s operational fund to maintain a 25 percent reserve to all funds within the city enterprise.
The city has long maintained a 22 percent to 25 percent threshold for the city’s operations as a way to accommodate emergency expenses.
But as the city underwent a six-year span of deficit spending from 2011-2016, that fund reserve continuously dipped below the city’s targeted range.
In January, then-interim City Manager Dennis Baldwin proposed moving $1.67 million from the city’s solid waste enterprise fund to the operations reserve fund to prop up the city’s operational savings and prevent — in the worst-case scenario — a downgrading of the city’s credit rating.
The council approved that move Dec. 13.
But when Olson was hired in February, he promised to bring a balanced budget before the council — a promise that he kept.
The city’s policy would now stipulate if fund reserves reach higher than 25 percent, those funds would immediately be transferred to the corresponding capital improvement funds.
Shorthand: If the solid waste enterprise is operating at a significant profit, those proceeds would go to improving and replacing solid waste vehicles. If the general fund exceeds expectations financially, the proceeds would go toward improved buildings, community services and more.
But Councilman Jim Kilpatrick said Nov. 10 another option could be on the table: Lowering the city’s reserve range and freeing up more money each year for city departments to play with.
Lowering the operations reserve account range just 3 percent each year could free up to $2.5 million each year for operational expenditures, including police overtime, expanded community services, road repairs and more.
The city is expected to discuss that idea at a workshop session this month.
INTERNAL CONTROLS: The highlight of the internal controls section is the stipulation of segregation of duties, in which procedures to detect errors or irregularities are performed by staff that did not perform the original transaction.
The individuals double-checking their co-workers’ work will also be informed where to report irregularities of fraud if it is found, namely through City Auditor Matthew Grady and Olson.
Access to city assets will only be allowed after management authorization, and departments will also undergo “periodic independent verification” to ensure departments are adhering to financial policy.
FINANCIAL REPORTING: While the city already posts its monthly financial statements online at www.killeentexas.gov, Olson said the reports often take months to post — and he wants them sooner.
The city previously waited to post financial statements when its monthly books closed, but Olson said he expects statements to be received by his office within 30 days of month’s end and posted online immediately, giving residents a quicker snapshot of the city’s finances.
“They will be accurate enough for to manage this city,” Olson said of the reports. “It took a little arm twisting and convincing, but we can do it.”
BUDGETING: The schedule for the city’s budgeting, governed primarily by state law, will stay mostly the same, but Olson has said annual budgets will be balanced and rely on conservative estimates of past expenditures and revenues.
Importantly, the council will be tasked early each calendar year with reviewing its budgets passed each September and also its entire financial policy package.
Olson said the council would be provided with reports on the city’s conformity with the policy and any room for improvements.
The city also set percentage amounts for each department in the operational fund.
Those percentages are:
Public safety (police and fire) — 73.0213 percent.
General government — 7.3853 percent.
Community services — 7.5623 percent.
Public works — 6.1836 percent.
Community development — 4.8431 percent.
Planning & development — 1.0044 percent.