Page 16 - Hurst Budget FY21

economic recessions, sales tax revenue grew steadily for many years. However, more retail
competition in the region and a regional mall entering a redevelopment phase led to stagnating
sales tax revenue. The pandemic accelerated our plans to respond to trends indicated sales tax
decline. Regardless of economic condition, the city will continue to conservatively maintain a sales
tax reserve. This practice has allowed the city to handle declines in sales tax revenue growth while
building reserves. The loss of two anchors, Sears and Nordstrom, at North East Mall will continue
to have a significant impact on sales tax earnings even after the economy recovers from the
pandemic. Under the visionary leadership of our City Council, staff has been active in the business
community recruiting private partners for new developments and rehab of existing commercial
properties. In fact, representatives from Simon Property Group continue to work with the city as
they plan for future use of the Sears and Nordstrom spaces and consider other improvements at
North East Mall.

Property values increased again in 2020; however, the increase in appraised value was much lower
than in recent years. The increase provides additional ad valorem tax revenue which is needed to
offset stagnating sales tax revenue, state mandated reductions in franchise tax revenue, significant
reductions in court revenues, and declines in other General Fund revenues. The adopted General
Fund budget represents a -3.14%, or $1,176,748 decrease. The decrease is the result of our plans
to strategically reduce services and freeze vacant positions. This translates to line item reductions
in the budget which are key to offset the economic impacts of the COVID-19 pandemic.

The city will continue to move forward with capital replacement programs requiring final City
Manager approval throughout the year. Approved 2020-2021 capital expenditures and
infrastructure maintenance projects within the General Fund total $3.5 million. Maintenance of
streets, facilities, fleet, and technology hardware will cost approximately $8.7 million citywide.
Ongoing investments in infrastructure maintenance helps extend its useful life prior to more
expensive replacement.

Debt Service Fund

The Debt Service Fund accounts for a dedicated portion of the ad valorem (property) tax that are
reserved to pay principal and interest on the city’s tax supported indebtedness. Refinancing over
the past decade has provided substantial savings for the city. Staff and City Council evaluate the
city’s tax rate, debt position, and infrastructure needs on an annual basis. Bonds are issued for
capital projects, including public safety, public works infrastructure, facilities and other assets.
Future debt will be considered based upon capital needs and capacity in the I&S tax rate.

 During 2016-2017, bonds were issued for $1.18 million in new debt for a new ladder truck
for the fire department and issued an additional $1.5 million for refunding of existing debt.
 During 2018-2019, a voter approved General Obligation bond was issued for $7.5 million to
fund a new animal services facility and an additional $2 million Certificate of Obligation was
issued for road improvements based upon our pavement condition index.
 During 2019-2020, Public Property Finance Contractual Obligations (PFCO) in the amount
of $575,000 were issued to purchase a new Fire Engine which was partially cash funded.

Community Services Half-Cent Sales Tax Fund

The Community Services Half-Cent Sales Tax Fund provides dedicates sales tax primarily
support parks and recitation operations and pay-as-you-go capital and infrastructure maintenance
programs. The number and scope of pay-go projects varies from year-to-year, which typically
creates large “budget swings” within this fund. A detailed listing of pay-as-you go projects can be

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