Page 15 - N. Richland Hills General Budget

Office of the City Manager
CITY OF NORTH RICHLAND HILLS

• Interest income rates dropped from low to very low as an incentive to stimulate growth during the
COVID-19 situation. For 2020/21 we anticipate receiving $114,363 less in interest earnings.
• A part of the financing plan for the construction of City Hall was the use of designated reserves. These
reserves were transferred directly into the General Fund since placing them in the Debt Service Fund
would have triggered a rollback election even with no increase in total taxes to our citizens. Therefore,
the transfers were made to the General Fund. Unfortunately, as these transfers decline per our
financing plan, it yields a revenue reduction of $234,056.

Sales tax revenues were originally projected to plummet with the business closures and reductions related to
COVID-19; however, sales taxes for March, April and May did not decline from 2019. There are
several potential factors that resulted in avoiding the projected decline. One is that many NRH businesses
were open and active during much of the shutdown. Another factor is the federal stimulus payment to
businesses and individuals along with a record amount of unemployment payments may have supplied the
consumer enough spending power to avoid a decline. A third factor is the implementation of the “Wayfair”
decision by the U.S Supreme Court which requires out-of-state vendors to remit sales taxes
for remote sales. It is our hope that this third factor is a major reason for the steady revenues since
this will be a continuing trend.

In setting a sales tax revenue estimate for the adopted budget, we project revenues will be 0.3% higher than
the Adopted 2019/20 projection but lower than the amount we project to actually receive in 2019/20. While we
are not anticipating a recession, we are being reasonably cautious in our sales tax revenue projections based
on what we are reading from various economists. If a recession does occur, we will need to revisit the budget
at that time.
The July Certified Tax Roll from Tarrant Appraisal District indicates that appraised values
increased 2.62% from FY 2019/20. Based on the FY 2020/21 Adopted Tax rate of $0.5757 cents
per $100 of taxable value this will generate approximately $935,945 in additional revenue for the
General Fund when including new construction. As you may recall, SB 2 passed by the Texas
Legislature in 2019 limits the property tax revenue growth for maintenance and operations to
3.5% annually unless a ratifying election is held the following November. As a reminder, the
3.5% cap does not affect debt service taxes and it does not include new construction added to the
tax roll. Regardless of the growth in the tax rolls, per state law, the $668,483 is the most we
can increase property tax revenue to the General Fund without triggering an election in November.
The tax revenue going toward debt service will remain the same as the amount budgeted in 2019-20.
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The City has lowered the tax rate from $0.61 in 2016 to $0.57 in 2019, and increased to
$0.5757 in 2020. Taxes on many properties have increased based on the increased appraised value.
For reference purposes, the average residential property increased 8.25% in 2017, 7.5% in 2018
and 6.75% in 2019. While only a small portion of the tax burden belongs to the City of NRH, we
are seeing more evidence of tax increase fatigue by our residents. While 71% of NRH residents
surveyed in 2019 indicated they were getting a good or great value for their tax dollars, this
percentage has been declining slightly over the past six (6) years.

P.O. Box 82069  North Richland Hills, Texas 76182-0609
4301 City Point Drive  (817) 427-6003  Fax (817) 427-6016

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