Page 6 - ArlingtonFY24AdoptedBudget

Manager’s Message

INTRODUCTION

Stability Returns Post-Pandemic

It is difficult to remember a time in the City’s history that has brought about more dramatic swings in economic conditions than
the past few years. The sharp downturn experienced during the pandemic, closely followed by the substantial and rapid recovery
that improved our financial outlook beyond our most optimistic hopes, and the new challenges now emerging in the post-
pandemic environment, have tested our ability to adapt and respond while keeping our focus on the City’s long-term strategies
and goals. The need to react quickly to new and unforeseen circumstances can sidetrack steady progress toward long-term
objectives. One of our biggest challenges in the coming years will be achieving the right balance between short-term flexibility
and sustainable progress toward fulfilling the long-term commitments we have made to our citizens.

As the effects of the pandemic gradually faded during 2021 and 2022, a new financial threat arose that had not caused concern
in decades. Inflation that had remained in the 2.0 or 2.5 percent range increased dramatically by the summer of 2022. The
inflation rate for the DFW Metroplex rose to over 9.0 percent by last summer, up from 1.5 percent as recently as January 2021,
causing consumer worries that were already high due to supply-chain disruptions, scarcity of labor in transportation and certain
service sectors of the economy, and rising fuel prices as concerns rose about the global economic impacts of the conflict in
Ukraine. However, there are positive signs of late; the most recent data available from the U.S. Department of Labor shows the
DFW inflation rate gradually returning to historic norms, expected to fall even further during the remainder of 2023 and into 2024.

The just-concluded special session of the Texas Legislature resulted in significant changes to the state’s property tax laws and
the largest property tax cut in the state’s history. Pending approval by the voters in November, S.B.2 and S.B.3 will result in
approximately $18 billion in savings to property owners, primarily by increasing the state-mandated homestead exemption
provided by school districts from $40,000 to $100,000, and to $110,000 for over-65 and disabled residents. S.B.2 will also limit
the annual growth of tax bills for residential and commercial properties valued at $5.0 million or less to no more than 20 percent
under a three-year pilot project. S.B.3 will reduce the franchise fees paid by small businesses for the use of public rights-of-
way to deliver their services.

Opportunities for Continued Success
Passed in 2019, new state tax law allows cities to accumulate the annual difference between the Voter Approval Tax Rate
(VATR, the rate above which a vote by citizens is required for approval) and the adopted tax rate, rolling forward for a period of
three years. This accumulated difference is defined as the unused tax rate increment. Because Arlington has consistently
adopted a property tax rate that is below the VATR, the accumulated unused increment available for FY 2024 is 6.5 cents.

Using the certified tax roll received in July, the City’s proposed tax rate of $0.5898 is 1.25 cents higher than the new VATR of
$0.5773, still one cent below the current rate. This strategy, combined with 14.0 percent growth in taxable property values, will
increase property tax revenues by approximately $19.4 million in FY 2024. A total of $3,852,319 of this increase will be allocated
to begin a two-year program to phase in the expansion of Fire apparatus staffing from three to four (40 positions in year one),
consistent with the staffing levels maintained by many of the large Fire departments in the DFW area. Additional funding will
also be allocated for fire station alerting system updates, upfitting, physical testing and health and fitness services for candidates,
new bunker gear, apparatus purchases, and an amount set aside to maintain General Fund reserves.

The Proposed Budget also reauthorizes all of Arlington’s current property tax exemptions, including the local-option 20 percent
homestead exemption, the $60,000 exemption for over-65 homeowners, and $60,000 for disabled owners. These policies
demonstrate our continued commitment to a taxpayer-favorable and fiscally responsible approach to the resources provided by
our taxpayers.

Keeping Commitments, Expanding Our Services

Much of our success in the coming year will depend on fulfilling commitments that we have already made. As the remaining
resources provided through the American Rescue Plan Act are obligated through 2024, we must replace that funding with
recurring revenues that have rebounded from the effects of the pandemic. Among the significant promises we have made is
the opening of the new Active Adult Center, now scheduled for late 2024 or early 2025. Funding of $653,995 in the General

FY 2024 Adopted Budget and Business Plan iii City of Arlington, Texas