Killeen City Manager Kent Cagle on Monday offered the same presentation he did in November that provided a cost analysis and options for issuing debt based on those estimates as council members consider calling a bond election in November.
“Now, remember, when you’re forecasting out this far, it’s not an exact science,” he said in front of a crowd of about 20. “And almost any time you project into the future, you’re going to project some kind of a deficit. As a reminder, we’ll never adopt a budget that is in a deficit. This is just a forecast.”
It could take as much as $232 million in bond debt over the next nine years to improve public buildings and quality-of-life issues, Cagle told the City Council on Nov. 15. He also said that because Killeen is “a growing city,” the need for public facilities and the infrastructure that supports them often exceeds the revenue available to fund them.
“We expect by 2023, our population is going to be over 160,000,” he said. “We’re a growing community. Typically, we have more need for more projects that are generally funded by debt than those that are not growing. The residents and the demand for service and the demand for facilities come in faster than the tax revenue to pay for them.”
In 2021, the city’s population was 156,261 — a nearly 16% increase over the previous decade. Killeen officials have estimated the population could reach 180,000 by 2030. Other Texas cities comparable in population are Pasadena (148,626), Denton (148,146) and Mesquite (147,691).
On Monday, Cagle said that much of the city’s costs “revolve around personnel.”
“And we have a very low number of employees per 1,000 population,” he said.
That number is 8.44.
Three funding options
And as he did in November, Cagle said that “this discussion” started with some of the projects the city could pay for through bond debt.
“We proposed a (certificates of obligation) issue to deal with a number of maintenance issues here at City Hall,” Cagle said. “The question became, ‘Should we continue to spend money on this building that’s almost 100 years old or build downtown.’ I’m working with an architectural firm, and we should have a proposal next week where they will give us more of a cost forecast.”
The City Council has three options for funding renovations at or construction of Killeen public buildings, including City Hall and the two police stations, and other projects — certificates of obligation, general obligation bonds and tax increment reinvestment zone revenue.
“My recommendation is that if the law doesn’t require you to do GO bonds — which have to be put out for a vote — that you don’t do it,” Cagle said in November. “You do it with COs. You don’t have to put debt for a fire station out to a vote. The things that we have on this list are things that require a vote of the public.”
General obligation bonds aren’t secured by municipal assets, whereas revenue bonds are backed by income generated from specific sources or projects, according to the Texas comptroller’s website.
Tax increment reinvestment zones are “special zones created by City Council to attract new investment in an area. These zones help finance costs of redevelopment and promote growth in areas that would otherwise not attract sufficient market development in a timely manner.”
Projects the city may complete with certificates of obligation include construction of a new City Hall at a cost of $66 million. The existing Killeen City Hall is on the National Register of Historic Places. Renovated for that purpose in 1993, the original Killeen High School was built in 1923 on a city block bound by Avenue E to the south, Root Avenue to the west, North College Street to the east and Avenue D to the north.
Other projects that may be funded with general obligation bonds include an animal quarantine facility ($1 million), a southwest branch library ($10.7 million), recreation and teen center ($25.7 million), new park development ($65.5 million) and new roads ($10 million). The combined cost is $179 million. The estimated total tax rate on that debt issuance is $0.085.
Through certificates of obligation, Cagle recommended funding projects that include building two fire stations ($16.2 million), feet services facility ($15.5 million), fire station expansions ($4 million), City Hall structural improvements and heating and air conditioning maintenance ($2.5 million), renovating the North Killeen police precinct ($7.1 million), grounds maintenance facility ($7.1 million), expanding the police headquarters parking lot on Community Boulevard in south Killeen, building an evidence storage facility ($2.5 million) and a “terminal-type” building at Skylark Field ($2.2 million).
‘Our due diligence’
That is a project cost of almost $54 million and a total tax rate of $0.03.
“I would like to start out by saying the reason that myself and (Councilman Michael) Boyd brought this forward (is) we often hear about what our responses here as a council are,” Mayor Pro Tem Ken Wilkerson said. “Whether it’s public safety, infrastructure, parks and recreation and improving quality of life in Killeen — which ultimately drives the economic development factors in the community — I think we’re doing our due diligence and we’re being prudent in all options available.”
The combined cost of those projects is $179 million. The estimated total tax rate on that debt issuance is $0.085.
“We have to do something,” Wilkerson said. “If you’re going to address these issues, you have to pay for them. I look forward to hearing from the community tonight and going forward. What we hear today is important.”
‘Will look differently’
“The presentation here for some of these projects is relevant,” he said. “We currently don’t have a (recreation) center on the southwest side of Killeen. There’s only two libraries in Killeen. We could use another library. There’s obviously a need for more park development. At the end of the day, if these go through, Killeen will look differently.”
If the City Council ultimately agrees to issue debt to pay for some of the projects, that could happen four times over the next nine years — $69 million in 2023, $75 million in 2025, $52 million in 2028 and $35 million in 2031.
The city’s total tax rate for fiscal year 2023 is $0.62. Cagle said that is expected to increase to $0.74 by 2029 if all of the debt is issued.
“We do have to do something,” Councilman Jose Segarra said. “There’s so much we’ve got to do here. (Residents) want to see some kind of progress. We’ve just got to figure out what that is.”
As of Oct. 1, the city’s outstanding bond debt was $212.3 million. Outstanding interest was $46.5 million.
“The great thing about this discussion is that everyone gets (their input),” Councilwoman Nina Cobb said. “And when we hear your input, we go back and plan. We have to rank everything in its importance and look at what that’s going to cost.”
Cagle said city officials “have a lot of work to do.”
‘Has to be in November’
“If it is the decision to have some dollar amount on a (general obligation) bond election, that has to be in November,” he said. “Four months or so from November, we’ll need to take action to call the election.”
Killeen’s 2023 budget is $265 million, with property taxes accounting for much of the city’s revenue. In fiscal year 2022, the total levy on certified values was almost $54 million, with a tax rate of $0.7004.
This fiscal year, the preliminary assessed value is $12.1 billion. The legal limit for debt service is $302.7 million. For the same fiscal year, tax-supported debt service is $13.7 million.
Budget documents show that the maturity date for certificates of obligation is August 2025. For a limited tax note, it’s February 2027, followed by the maturity of general obligation bonds in August 2039 and revenue bonds in August 2040.
But by 2026, a penny on the tax rate could equal $1 million in revenue, Cagle said.