Page 12 - City of Colleyville FY22 Adopted Budget

Issues & Challenges

Colleyville benefits from a strong residential base, which helps mitigate the negative
effects of economic fluctuations, such as those we have seen in FY20 and FY21.
Property values had been experiencing tremendous growth, although the last two
years’ certified values have shown more modest increases. This modest showing
appears to be a symptom of a more conservative approach to property appraisals by
the Tarrant Appraisal District, as municipalities all over the County experienced it.
However, although Colleyville is close to build-out, the City did enjoy over $70 million
in new property value in the previous year and almost $60 million in the current year,
most of which is located outside of the Tax Increment Financing District. One of the
City Council’s highest priorities has been minimizing the tax burden of our citizens,
so this new growth is crucial to maintaining that goal. Each year, careful consideration
is given to the amount of revenue (and associated tax rate) needed, as opposed to
simply maintaining a tax rate that brings in additional revenue due to increased
property values. The City Council’s budgeting strategy is that any tax rate above the
no-new-revenue rate must be fully justified for specific programs or services. For
reference, the no-new-revenue rate is a tax rate that aims to keep the average
property owner’s tax bill static from year-to-year, meaning only brand new property
that didn’t exist in the previous year can result in new revenue. Fiscal Year 2022
represents the fourth consecutive fiscal year in which the budget is funded with the
no-new-revenue tax rate.

Sales tax is the second largest General Fund revenue source. The City’s primary
commercial corridor is located on Colleyville Boulevard (SH26), which has recently
completed its construction (expanding from four-to-six lanes with medians) and
beautification efforts. Our biggest sales tax earners tend to be large grocers and
liquor stores. As those businesses carry items many shoppers consider to be
essential, their sales tend to fluctuate much less than other economic sectors.
However, about 10%, or $800,000 worth of tax does come from our restaurant/bar
industry, which has been substantially impacted from the COVID-related restrictions.
Once it was clear that COVID was going to have the impact it has, staff prepared to
rely on its financial contingency plan to compensate for an anticipated sales tax hit
to the restaurant sector. While that industry (and others) did feel an impact, sales
tax as a whole did not decrease as predicted. This was due primarily to sales from
online purchases that were sourced to Colleyville. Fiscal year 2020 sales tax receipts
actually saw an 8.7% increase over the previous year. Similarly, fiscal year 2021
receipts are projected to bring in a similar, if not stronger, gain. For the purposes of
budgeting conservatively, staff balanced the FY22 budget with a more modest, 1-
1.5% increase over the current year.

Even though the City’s sales tax as a whole improved substantially, it must be
acknowledged that segments of Colleyville’s economy have nonetheless suffered. In
keeping with its history of being proactive and creative in supporting local
establishments during business interruptions, the City implemented grants and
several rounds of a gift card program to try and spur consumers to patronize local
restaurants and retailers during the last year. These programs were very well
received by all involved, and staff will likely implement them in the future as well. It

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