Page 22 - Hurst Budget FY21

existing in both revenues and expenditures. Fiscal Management Strategies are located in the Long
Term Strategic Plans and Budget Summary sections of this document. The City of Hurst will remain
agile and committed to financial sustainability. We will work to remain connected to the community
and provide services at acceptable levels and at a reasonable cost.

BUDGET ISSUES

Conservative Budgeting Approach

Each year, the continuation of conservative financial and operational policies guides the development
of annual budget. This conservative approach is critical for the 2020-2021 budget due to economic
conditions related to the COVID-19 pandemic. The city’s two primary revenue sources, property tax
and sales tax, are facing challenges in two different aspects; a more competitive environment for
retailers and legislative changes. Court revenue has been in decline in recent years due to state
legislative changes and national trends regarding law enforcement. For the 2020-2021 budget,
General Fund property tax revenue is expected to increase overall by approximately 6% and is driven
by increases in property values and an increase in the tax rate. Under the truth in taxation calculations,
the city realized General Fund property tax revenue increases in excess of the 3.5% cap due to new
value added to the tax rolls, and changes in value based upon court proceedings and final value of
properties not certified by TAD in the prior tax year. This increase is necessary to offset decreases in
other revenue categories and to fund our current economic development incentive agreements. Sales
tax revenue is budgeted for a decrease of -10.68%, court revenue is also budgeted for a decrease of
-14.82%, and franchise fee revenue is down over 7% over the previous three years which was caused
by legislative reductions in franchise fee revenue. The adopted budget also includes a 1.5% allowance
for uncollectable property tax revenue and sales tax reserve (allowance) of approximately 10%.
Council’s conservative approach to budgeting sales tax provides for contingency in budget as
economic conditions have a more direct and quicker impact on retail sales. As such, the sales tax
allowance is higher than the property tax allowance. There is no change in the city’s sales tax rate as
it is already equal to the maximum rate allowed by state law (2%). The property tax rate is slightly
higher than the prior year increasing from .597299 to .625159 per $100 in valuation. Personnel costs
remain budgeted at full employment although vacancies have been frozen and those savings are
included in the budget. The city also maintains strong fund balances or reserves for emergency needs.

Property Tax Revenues

Each year the City Council and staff work through the challenge of setting the property tax rate to fund
services and programs. The proposed budget cannot be prepared without the Certified Tax Roll
received July 25th from the Tarrant Appraisal District (TAD). Once the roll is received, the tax rate is
set based on both the debt rate needed to pay for the city's bonded indebtedness and funds necessary
for maintenance and operations in the General Fund. The tax rate distribution for 2020-2021 allocates
80.65% of the adopted rate ($0.504186) for operations and 19.35% ($0.120973) for debt. This is a
favorable distribution given an accepted benchmark of a 25% maximum allocated to debt service.

From tax years 2010 through 2020, appraised values have gone up by $1.54 billion and now total $4.11
billion. Net taxable values in tax year 2020, which fund the 2020-2021 budget, increased 1.9%. This
year’s increase is in line with preliminary budget expectations and reflects value growth in Hurst due
to strong demand for housing, a robust regional economy and Hurst’s premier location in the
Dallas/Fort Worth metroplex. The Council’s recognition of capital and economic development needs
coupled with decreasing revenue in sales tax and court fines led the council to approve the voter
approval rate, which is a 3.5% increase in revenue from properties taxed in both the 2019 and 2020
tax years. This means the city will see an increase in total property tax revenue of $931,255 which is
being used to off-set losses in other revenues and economic development obligations. Tax exemptions
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