Council sets new tax rate, budget

The San Marcos City Council set the tax rate for the 2020 tax year at 59.30 cents on each $100 of taxable property. They also approved the fiscal year 2021 budget of $258,741,410 effective Oct. 1.

Councilmembers debated the 7.9% revenue increase heavily, knowing residents were directly impacted by the economic crisis of COVID-19. However, just as residents were impacted, the city’s revenues have already seen a deficit from projected levels, and they resolved to increase the property tax revenue as much as possible to ensure they can withstand the economic fallout and provide vital services in years to come. 

“The recent spike of COVID cases has been alarming and can have a very negative affect on our economy. We have to consider the subsequent years and make the right changes that will sustain us beyond fiscal year 21,” said City Manager Bert Lumbreras in an early budget work session, referring to projected revenue shortfalls due to COVID-19.

Director of Finance Melissa Neel was working with an assumption that property values will not increase in fiscal year 2022 and fiscal year 2023 due to COVID-19 when she made revenue loss projections considered in the budget.

Residents may wonder how this tax rate, which raises 7.9% more revenue than last year’s tax rate of 61.39 cents per $100, is possible after Texas Senate Bill 2 recently capped revenue increases at 3.5% before requiring voter approval. The disaster declaration is what has allowed the city to increase revenues up to 8% without voter approval, as the policy was prior to SB2.

While the rate has decreased from 61.39 to 59.30, the new tax rate will generate more revenue for the city because of increased property valuations and new property. The new rate will generate $2.7 million more revenue than last year, $1.5 million of which was from new property. 

San Marcos’ property appraisals totaled $6.272 million up from $5.644 million in fiscal year 2020, bringing in $38 million in property tax revenue up from $34.6 million last year.

Of the 59.50 cents per $100 of taxable property, 41.94 cents will be deposited into the general fund and 17.36 cents will create a sinking fund for the payment of the principal and interest and the retirement of the bonded debt of the city as it becomes due.

In the city’s latest update, they were expecting a net revenue shortfall of $2 million compared to their initial projection of a $6.4 million loss. 

They also projected a 10% decline in sales tax revenues and a 30% decline in hotel occupancy tax revenue.

The city has worked to reduce expenditures by $4.7 million to compensate for the projected revenue shortfalls and passed an allowance for the general fund balance to fall below 25% in light of the disaster. 

San Marcos is expecting $91.1 million in general fund revenues for fiscal year 2021 up from $90.9 million and general fund expenditures of $93.9 million up from $88.8 million resulting in a $16.1 million general fund balance, down from $19.3 million.

The city generally contributes 70% of property tax increased value to Downtown TIRZ, and it reduced contribution to 25%, which will bring in $1.3 million more to the general fund. 

In other efforts to balance the budget, city council also adjusted water and wastewater rates impacting the average monthly bill by $3.75, adjusted the stormwater utility rates by 6.5% impacting the average monthly bill by 78 cents and adjusted rates for solid waste and recycling by 3% resulting in an average monthly bill impact of 78 cents.

They increased contract services for transportation by $840,000 and contract services for the airport by $9,300.