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If at any time the reader of this memorandum has any questions, please contact my office at City Hall. I will be more than happy to answer any questions you have. Summary Prior to getting started with the substance of this memorandum, I would like to present to you a few initial summary results regarding the Property Tax Levy and Rate, as well as the balancing of the Operational Funds. Of greatest interest to most any Council Member and citizen is the impact of the proposed budget to the Property Tax Rate and Levy. The City has a Maintenance and Operation (M & O) property tax rate and a Debt Service (sometimes also referred to as "Interest and Sinking" or "I&S") property tax rate. These rates, once applied against the property valuation, produce the tax levy (the dollars the City receives). The M & O rate is subject to Senate Bill 2 (2019) growth restrictions year to year while the Debt Service rate is not; both will be discussed in fiuther detail later in this memorandum. The Proposed FY23/24 Budget incorporates a flat property tax levy for the M & O as compared to last year. In other words, the $8,030,000.00 in proposed property tax revenue in FY23/24 for M & O matches the budgeted amount from FY22/23, which also matches the levy in the FY21/22 budget. This will be our second consecutive year of keeping the property tax levy static. This is based on a 97% collection rate. The Debt Service levy however is proposed to increase in order to subsidize the rising utility rates needed to pay for the City's bonded indebtedness tied to its new Wastewater Treatment Plant (WWTP). This will be discussed in depth later in this memorandum. As occurs each year, changes in property valuations through the Lamar County Appraisal District impact the final rate associated with our budgeted levy amounts. While the M & O rate is decreasing in the proposed FY23/24 as compared to FY22/23, the total combined property tax rate between M & O and Debt Service is increasing. The following lists the FY20/21, FY21/22, FY22/23 and the Proposed FY23/24 tax rates: Year..._.................m............ .....__._._..... M&............._—......__._. _�..:D.ebt .......... Tota t FY22/23 $0.39788 $0.08290 $0.48078 FY21/22 $0.37357 $0.08016 $0.45373 FY22/23 $0.34377 $0.09901 $0.44278 FY23/24 $0.32176 $0.15606 $0.47782 Preliminary The following represents a comparison of these tax rates against that of the Proposed FY23/24 tax rate: FY23/24 Fund FY20/21m FY21/22 FY22/23 $0.32176 M & O ($0.07612) ($0.05181) ($0.02201) $0.15606 Debt $0.07316 $0.07590 $0.05705 $0.47782 Total ($0.00296) $0.02409 $0.03504 The Proposed FY23/24 Tax Rate will be the highest tax rate since FY20/21 ($0.02201 less) and before. This tax rate is, to the best of our determination using the Comptroller's Forms, in full compliance with Senate Bill 2, also known as the Texas Property Tax Reform and Transparency Act of 2019, approved by the Texas Legislature in 2019. Among other things, this Act is designed to restrict the City's ability to raise property taxes. This is a double edged sword. I will provide more details regarding this Act later in this memorandum, nevertheless, given the restrictions this Act places upon municipalities, it is strongly recommended that the City of Paris utilize the allowed restricted growth passed by the State Legislature when needed in order to keep up with the vital services we offer the citizens. To fall behind under this legislation could eventually prove irreversible thus detrimental to the desired operations and services the citizens expect of the City. The key point in my above statement however is "when needed". In FY22/23, the City did not use its fu113.5% growth due to better than expected Sales Tax revenue. Instead, we left $0.00681 available to be utilized if ever needed in the next three years (SB -2 allows it to remain available for up to three years before disappearing forever). In addition, we have balanced our budget using the 97% value of the total estimated property taxes to be received under the M & O property tax rate. Historically, the City never receives 100% of the property tax levied, a table is shown later in this memorandum, thus why foreclosures occur from time to time, but rather we typically hover around 97%. Therefore, it is logical to utilize a more realistic 97% figure when balancing the budget Page 2 of 23