Declining revenues force Sugar Land to raise taxes

City adopts tax rate, budget for 2018

The Sugar Land City Council was to consider the 2017 tax rate and fiscal year 2018 budget at a regularly scheduled meeting on Sept. 19 at Sugar Land City Hall.

Public hearings on the tax rate were held on Aug. 22 and Sept. 5, and a public hearing on the budget was held Aug. 15.

City Manager Allen Bogard submitted a proposed $231 million budget on July 18. For details on the proposed budget, visit www.sugarlandtx.gov/budget. A series of five budget workshops was held during the month of August.

The proposed general fund budget of $90.4 million includes $2.9 million in savings as compared to fiscal year 2017.

Reductions include the following items:

  • $655,000 is saved on fixed costs such as fuel/electricity and the streetscape beautification program.
  • A $560,000 increase in budgeted salary savings represents a reduction to expenditures.
  • Infrastructure rehabilitation funding, which was previously funded at a level of more than $3 million per year, was reduced to $1.4 million for fiscal year 2018.
  • Capital projects were spread out, with many delayed.

The proposed budget is fiscally conservative and proactively responsive to changing consumer retail patterns, ongoing uncertainty in the oil/gas market and the city’s aging infrastructure and population. Issues facing Sugar Land – including declining revenue streams, unfunded state mandates and preemption of local control – create challenges in maintaining the high level of services that citizens expect while maintaining one of the state’s lowest tax rates.

The proposed budget is based on City Council-approved financial policies that call for an effective tax rate – the rate required to raise the same amount of revenue in 2017 from properties that were on the tax roll in 2016 – plus 3 percent to address annual inflationary costs of business.

“In most years, the effective tax rate plus 3 percent to achieve the budgeted revenue doesn’t require any adjustment to the tax rate itself,” said Bogard. “The growth in property values covers the conservative growth in expenditures. This year, property revaluation was only 1.53 percent for residential property and 3.53 percent for commercial – which means we either have to cut services or adjust the tax rate to achieve the revenue necessary to support the budget.”

The effective tax rate plus 3 percent of 32.233 cents means the nominal tax rate increases by .638 cents compared to last year.

During budget workshops, City Council expressed concerns about the decrease in funding available for rehabilitation due to the decline in sales tax revenue and valuations that fell short of projections.

A tax rate of 32.233 cents funds the budget as proposed and ensures that the city will have revenues available to support services in uncertain economic times.

The city’s sales tax revenue continues to fall short of last year and could further be impacted by Hurricane Harvey into fiscal year 2018. With the recommended tax rate of 32.233 cents, the average home valued at $379,530 with a 10 percent homestead exemption will see a tax bill of $1,101.01 for 2017, an increase of $43.21 from 2016 – or $21.41 more than the bill would be with a flat tax rate of 31.595 cents.

Other recommendations in the proposed budget include: implementation of annexation for Greatwood and New Territory, with annexation revenues covering all annexation costs; and for the parks bond projects approved by voters.

To date $21.2 million in General Obligation bonds have been issued out of the $31.5 million approved by voters. So far, the City has avoided the full 3.1 cent tax increase authorized to fund the projects and has only increased the tax rate by .7 cents in 2014.

Sugar Land’s tax bill represents 15 percent of the total residential tax bill, with the school district accounting for 64 percent and the county 21 percent. Funding a high level of services while maintaining one of the state’s lowest tax rates has been accomplished, in part, by an aggressive economic development program.

The city’s economic development efforts have led businesses to expand, construct improvements, or relocate to Sugar Land – as well as to the completion of destination entertainment venues such as Constellation Field and the Smart Financial Centre at Sugar Land.

The positive economic impact of these programs and substantial expansion of the city’s commercial property tax base has allowed the city to offer increased homestead exemptions to residents and lower its property tax rate by approximately 18 cents since 1993.

State law requires the city adhere to strict timelines in the truth in taxation process. This process includes dates for public hearings and a final vote on the tax rate, and the schedule was set long before Hurricane Harvey formed.

The final vote on the budget and tax rate must take place on Sept. 19, and the city welcomes input through other means than the public hearings – such as speaking during the public comment period at the council meeting or emailing the city’s budget office at budget@sugarlandtx.gov.

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