Once again, money is at the center of Killeen City Council business.
On Tuesday’s agenda are two very different items — one to call for an election to amend the city sales tax rate, and another to authorize the purchase of $2.1 million in fleet vehicles.
But both items are central to the city’s biggest issue right now: keeping the budget in the black.
The proposed change in sales tax designation was in response to a state law that took effect Jan. 1. The new law reduces the allowable annual increase in property tax revenue for maintenance and operations from 8% to 3.5% — otherwise known as the rollback rate — beginning in Fiscal Year 2021, which starts Oct. 1.
Killeen currently charges an additional 0.5% sales tax, known as property tax relief, which factors into the calculations for the maximum tax revenue increase.
That doesn’t sound like a big deal, but interim City Attorney Traci Briggs said the property relief portion of Killeen’s local sales tax reduces the rollback rate ceiling by 13 cents — a figure that would have put it below the city’s actual tax rate and cost the city more than $1 million this year.
If voters agree to redesignate the property tax relief to general government purposes, the city will feel less of a pinch from the lower cap placed on the annual increase.
Even though the state law takes appraisal valuations into account, that 3.5% cap sounds like a tough budget to live within for a growing city like Killeen. In fact, several lawmakers from high-growth areas opposed the bill because they felt it would negatively impact cities that needed more tax revenue to operate efficiently.
Fortunately, the law has a provision that allows cities to “bank” the difference between the effective rate (unchanged revenue from the previous year) and the rollback rate — now known as the voter-approval rate, for a period of up to three years and add it to the maximum rate. It’s sort of like having rollover minutes on a wireless bill.
The provision was designed to keep cities from maxing out their rate of revenue increase each year, thereby easing the tax burden on property owners.
In theory, if a city keeps the annual tax revenue increase low, it has the opportunity to expand the top rate occasionally when a major expenditure arises.
Certainly, the merits of the new law can be debated, but if Killeen voters don’t approve the change in sales tax designation, the city could find itself in a serious budget crunch this fall.
Compounding the revenue pinch is the state’s disabled veterans tax exemption, which cost the $6.3 million in property tax revenue in the current fiscal year. The estimated reimbursement from the state is roughly half that amount — $3.2 million, but the resulting $3.1 million not covered is equivalent to 5 cents on the tax rate, Briggs said in a report to the council.
Briggs was right to caution in her recommendation that without a change in the sales tax designation, the combined loss of revenue from the veterans exemption and new state tax law would make it difficult for the city to maintain the current level of services to residents.
That’s an ominous statement — and one that should motivate the council, staff and city manager moving forward.
It’s time for the city to start pinching its pennies, in all areas.
The council should start by deferring the $2.1 million purchase of 31 fleet vehicles for the police, solid waste, water and recreation departments — an expenditure included in the current budget. No doubt, the vehicles are needed, but so is the money it will take to buy them. Perhaps a phased purchase of the vehicles would be a better step.
Another number the council should examine is $400,000. That’s the estimated revenue loss this year for the veterans parking fee exemption at the Killeen-Fort Hood Regional Airport. While recognizing our community’s veterans for their service is laudable, it’s important to keep the financial impact in perspective.
In 2018, the exemptions accounted for more than 41% of the airport’s parking revenue and 11.7% of all airport revenue. The lost revenue totaled $307,800 in 2018, $367,700 last year and an estimated $400,000 in 2020.
Removing the airport parking exemption entirely might not be acceptable to council members, but amending it to include only first-day parking fees might be a consideration.
It may be an unpopular option, but council members may have to consider new fees to provide stable revenue streams needed to augment the city’s sales and property tax revenue.
Last year, Killeen implemented a street maintenance fee — a $1.70 charge on residents’ monthly utility bills — to help fund repairs to existing roadways in the city and reduce the backlog of streets in need of repair work.
The city also assessed a 50-cent monthly charge to residents as part of an insurance plan to help cover the cost of repairing potential sewer line breaks.
After years of discussion, an ordinance to impose impact fees was brought to a council vote Jan. 14, but it failed by a narrow 4-3 decision. Nevertheless, discussion of the fees — which would be charged to developers and builders to help pay for infrastructure leading to a development — has been resurrected through a petition drive by a councilwoman who was on the short end of the vote.
Where that public discussion leads remains to be seen, but it may be a factor in the May city elections.
Bottom line, the city must consider every available option when it comes to cutting costs and increasing revenue.
That means an extensive review of staffing needs by new City Manager Kent Cagle, as well as cost-conscious examinations of expenditures such as car allowances and travel expenses, and a thorough analysis of city programs and services.
Former City Manager Ron Olson made great strides in streamlining and improving the city’s operations, as well as reducing the its dependence on grants.
Now it’s Cagle’s turn to tighten up the ship.
Residents need to have confidence that their taxes, fees and utility charges are being put to use in the most efficient way possible, and that the funds are being managed wisely.
A vote to change the property tax relief designation should be viewed as a covenant with the city and its officials.
The proposed ordinance will not change the sales tax rate or the property tax rate, and it won’t change the revenue.
But it will give the city a little breathing room in the budget — and that’s what is needed right now.
In exchange, residents have the right to expect the city to live within its means and to be as open and transparent as possible when it comes to tax-funded expenditures.
Residents shouldn’t just expect their elected officials and city staffers to pay attention to the details when it comes to spending.
It’s in all our best interests to watch where the money goes and examine how it’s spent.
Ultimately, it’s all about who pays the bills.
And a good portion of the time, that’s us.