19 - Memo to GB - Proposed FY24-25 Budget - July 2024 (002)

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Ifat any time the reader of this memorandum has any questions, please contact the City Manager’s office at City Hall. We will be more than happy to answer any questions you have. Summary Prior to getting started with the substance of this memorandum, wewould 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 & Orate is subject to Senate Bill 2 (2019)growth restrictions year to year while the Debt Service rate is not; both will be discussed in further detail later in this memorandum.The Proposed FY24/25Budget assumes an M&O rate of $0.30373 which is the voter-approval M&O rate. This rate is only $0.01027 higherthan the No New Revenue rate of $0.29346 and gives the City $254,500 in additional revenue. The City has held its O&M taxes at the same amount ($8,030,000) for the last three years, With the current inflationary pressures, the City cannot continue to operate at that level of income. The Debt Service levy isproposed to decreasedue to the SuRRMA Loan being paid in full this year(23/24).Inthe proposed FY24/25budget the total combined property tax rate between M & Oand Debt Service is decreasingby 2.581 cents.Changes in property valuations through the Lamar County Appraisal District impact the final rate associated with our budgeted levy amounts.The following lists theFY21/22, FY22/23, FY23/24and the ProposedFY24/25tax rates: YearM&ODebtTotal FY21/22$0.37357$0.08016$0.45373 FY22/23$0.34377$0.09901$0.44278 FY23/24$0.32176$0.15606$0.47782 FY24/25$0.30373$0.14828$0.45201Preliminary The following represents a comparison of these tax rates against that of the Proposed FY24/25tax rate: FY24/25FundFY21/22FY22/23FY23/24 $0.30373M & O($0.06984)($0.04176)($0.01803) $0.14828Debt$0.06812$0.04927($0.00778) $0.45201Total($0.00172)$0.00923($0.02581) The Proposed FY24/25Tax Rateis, to the best of our determination using the Comptroller’s Forms, infull 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-edgedsword.Wewill provide more details regarding this Actlater in this memorandum, nevertheless, given the restrictions this Actplaces upon municipalities, it is strongly recommended that the City of Paris utilize the allowed restricted growth passed by the State Legislature when needed 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 ourabove statement however is “when needed”.In FY22/23,the City did not use its full 3.5% 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 memorandumillustrating this, thus why foreclosures occur from time to time, but rather we typically hover around 97%. Therefore, it is logical to utilize a more realistic Page 2of 18