Page 16 - NRH FY20 Approved Budget

In addition to salary escalation, we are also still working to get our health insurance program
back to a financially stable level following four years where bad experience led to deficits. For
2019/2020 we are projecting a 5% increase in medical costs which also has a significant impact
on the budget. This impact increases the General Fund budget by $383,556.

Sales tax revenues have increased an average of 2.5% per year over the past 8 years. This
has a noticeable impact on the General Fund but it has a more pronounced impact on the Park
and Recreation Development Fund and the Crime Control District Fund (CCD) which rely heavily
on sales taxes. Almost all of the CCD funding comes from sales tax revenue. Over the past few
years the growth in sales tax revenue has not kept pace with the growth in Police salaries.
Reserves have been utilized to a point where that is not a feasible option, and the CCD fund is
facing a $265,679 deficit. To close this deficit we will not be filling two vacant Public Safety
Officer (PSO) positions. The PSO’s are valuable in that they take a significant workload off of
regular patrol officers by handling calls that do not require an armed officer. Not filling
these positions will delay responses to some calls as patrol officers will be occupied with calls
that PSO’s would normally have handled. Even not funding these two positions leaves a
$143,469 gap that will be funded through a contribution from the General Fund. This
contribution increased the budget reductions required in the General Fund, but staff
believes these cuts were a lower priority than making additional reductions to the CCD which
would have come in the form of Police staffing.

General Fund Revenue

Years ago sales tax revenues were the primary determining factor in budget development, but
changes in our economy have minimized its impact on today’s budget in cities such as NRH.
Sales tax revenues are showing limited growth in NRH, however, they are dropping in some
neighboring cities. Increases from new businesses such as Babe’s and Alamo Drafthouse are
partially offset by reductions in retail sales from other businesses such as the big box stores.
Competition from online retailers continues to affect local brick and mortar businesses. While
we are optimistic that a recent change in law requiring that sales from retailers outside of Texas
be remitted back to Texas will be beneficial, we do not know the extent to which this will boost
our sales tax revenues. At this point we are projecting sales tax revenue to be flat when
compared to the amount budgeted in FY 2018/2019.

Franchise fees have not been growing recently, and the change in law regarding
telecommunications franchise fees described above is resulting in a significant reduction in
revenue to the City.

Municipal Court fines are projected to be level with the amount budgeted in FY 2018/2019. The
issuance of citations remains steady, however, law changes and court rulings have diminished
the capability of the court to impose and collect fines on individuals who indicate they do not
have the money to pay the fine. Contrary to popular belief, the issuance of traffic citations is not
a money making proposition for the City. When the cost of the police officers issuing the citations
is added to the cost of providing the municipal court and the mandated state fees are deducted
from collections, it actually costs the City money to enforce traffic regulations.

Ambulance fees remain steady with a gradual increase corresponding to an increase in
emergency calls. The largest impact to the FY 2019/2020 revenue stream comes from an

16