Page 17 - NRH FY20 Approved Budget

anticipated collection from the State of Texas as a reimbursement for Medicaid related calls.
This projected revenue of $400,000 made a significant difference in the adopted budget.
Without this revenue source additional budget reductions would have been required.

Development related fees such as building permits continue to remain strong as we anticipate a
steady level of building activity in the coming year. State law changed the method from
calculating building permits from a construction value to a square footage value, but this change
in fee structure was designed to be revenue neutral.

As you may recall, funding for the City Hall project included a series of transfers from designated
reserve funds to reduce the amount of debt service that must be paid through property taxes.
As planned, this use of reserve funds was designed to diminish over a period of years as the
debt service dropped down to the level where it could be fully supported by the 4 cent tax
increase voters approved to fund City Hall. This use of reserves is slated to drop from
$1,100,000 in FY 2018/2019 to $734,056 in FY 2019/20, a reduction of $365,944. While there
is a corresponding reduction in the Debt Service Fund for the City Hall project, the impact is felt
in the General Fund.

Other than the funds designated for the City Hall Project Debt , General Fund revenues such as
interest earnings, intergovernmental revenue, indirect cost allocation and miscellaneous
revenues remain essentially the same as budgeted last year. In general these revenues will
not change significantly from year to year.

The bottom line is that General Fund Revenues, excluding property taxes, increased a mere
$19,056 over the FY 2018/2019 Budget. That is not a significant figure on which we can fund
inflationary increases, let alone keep pace with the jobs market in this competitive labor
economy. Combine this lack of revenue growth with the need to provide full year funding for
new Fire and Police services and the cost of a competitive compensation package, and it is easy
to see why there is so much pressure on property taxes.

Property values have grown by 9.5% with around 1.5% of the growth coming from new properties
added to the rolls and 8% growth in values for existing properties. Property tax growth for the
General Fund (Maintenance & Operations) is capped at 8%. Property taxes needed to fund debt
services will actually decline which will provide an opportunity for a tax rate decrease. In
developing the adopted budget the tax revenue that is going to the General Fund was set near
the 8% cap. This revenue amount allows the City to offset the decrease in franchise fees,
staffing costs that had been previously paid from the red light camera revenues and full year
costs for recently added Fire and Police positions, and attempt to maintain a competitive
compensation package.

While the tax cap law passed by the state does not go into effect until next year, City staff has
developed a series of budget reductions and fee adjustments that would reduce the property tax
growth down to the 3.5% level. Reducing the tax growth down to a 3.5% level would require a
reduction of $659,970 from the adopted budget. Below is a series of program cuts that
illustrate staff recommendations should tax growth had been limited to the 3.5% level this
fiscal year:

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