September 20, 2019

The FY 2020 Budget, and How We Got There

The outcome of this year’s budget process is an adopted budget that represents a 4.4% property tax revenue increase, down from the original 8% proposal.  The resulting tax rate increase for maintenance and operations, calculated in accordance with the state Truth-in-Taxation (TnT) formula, is 2.4%, well within the new 3.5% rollback rate that will go into effect next year.  The impact on a home at the average value in Bellaire of $936,582 will be $93 versus last year:

1  The City Manager revised his proposed budget upon receipt of the certified tax roll, to credit better-than-projected growth from new construction, and also to correct an error in Fire Department part-time pay and in response to Council feedback to eliminate a budget enhancement for closed captioning.
2  The proposed budget was further revised, primarily as a result of continued negotiations with our employee health insurance carrier, along with some other, minor modifications.
3  Impacts for these given appraised values are calculated assuming the homestead exemption, but not senior/disabled exemptions.
4  The $145 I previously reported was based on an average appraised value of $937,657, which decreased slightly to $936,582 upon receipt of the certified tax roll.

The adopted budget is responsive to public input and reflective of the prevailing sentiment—among Council, too—that we should find a way to bring down the tax rate as much as possible while minimizing impacts to city services.  But here’s the thing:  How we got there matters.

The budgeted reserve, central to the City Manager’s recommendation, remains essentially unchanged from his original proposal because we instead cut back further on expenses.  Primarily a $150,000 decrease in General Fund salaries and benefits as we seek to contain growth over time in personnel costs, our largest expense category by far.  Make no mistake about it, this will result in service reductions.  Currently vacant positions, including a project manager for Public Works, will be held open longer, so we can reasonably expect it'll take a bit more time to get things done as we've got a lot of civil projects going on around town.  That’s the trade-off.

What also matters is our close and careful scrutiny of expense categories and line items in the budget, as we do every year.  We took all the time we needed, including a third budget workshop, to get answers to our questions, many of which were published and made available to all who were interested.  Council also listened to and considered public feedback on the budget and concern about how our tax dollars are being spent and have been over time.

Much of that concern, and a viral rush to judgment on social media, singled out spending within the City Manager’s office, focused on seemingly large percentage increases in IT and communications.  The City went to great lengths to explain those trends, demonstrating that what was previously a decentralized IT budget across multiple departments has now been consolidated under the umbrella of the City Manager’s office (which also includes the budgets for HR and the City Clerk), resulting in greater efficiencies and cost savings.  Looking at the whole picture, we see that those increases are offset by decreases elsewhere.  Same with interdepartmental personnel transfers; moving an employee from one department to another results in no budgetary impact.

Now, outside of that there has indeed been a rise in aggregate IT and communications spending, as both needs and costs have gone up.  The deployment of body cameras for police officers in recent years has required more bandwidth and storage capacity, for example.  Ever-growing and increasingly sophisticated cybersecurity threats demand stronger protections.  (Just last month, 22 Texas cities were hit by a coordinated ransomware attack.)  Greater reliance on the internet in general, interagency connectivity improvements in public safety, and our implementation last year of the PrepareBellaire emergency alert system, are all included among our communications costs.

It’s important we recognize that a lot of the spending that goes on behind the scenes, and that therefore as residents we don’t see, is still necessary to support the provision of the services we do see.  Tempting as it is to dismiss such unseen expenditures as excessive, to make arbitrary and uninformed cuts to them would risk unintended consequences.  That’s why we rely on and ask questions of the professional staff, who can explain what it takes to efficiently provide the services for which they’re responsible, day in and day out.

Also keep in mind that adoption of the budget isn’t our only opportunity to question these expenses.  What the budget does is to appropriate funds for enumerated purposes, but those funds aren’t actually spent until sometime during the fiscal year, when a particular purchase comes to Council for consideration, with public input, and with considerably more detail and backup than would ever have been presented in the budget document.  If we’re not then satisfied after full and informed discussion, we don’t have to spend the money.

Finally, we also heard from some residents the suggestion that we should cut the budget by reducing funding for debt service.  There are a couple of problems with that.  Most obvious, we’re required to pay our debt.  That’s why state law separates out the debt service rate from the maintenance and operations rate, and debt service is not subjected to the TnT rollback rate, in recognition of the need to pay it.  Plus, we rather like our AAA bond rating, and aren’t going to default on our payments.  The other problem with the suggestion, is that adoption of the budget is a different question from the taking on of new debt, which question is put to the voters in a bond election.  Once bonds are approved by the voters and subsequently issued, future budgets will automatically include the appropriations necessary to service the debt so authorized.  Note also we’ve managed to get more done than we’d set out to do in our 2016 bond program, allowing us to extend it at least one extra year, and possibly more, keeping the progress going without additional funding.

Once again, our legislative process has served us well.  It can be frustrating at times, as Council doesn’t really get to begin making cuts until the night of budget adoption, in the form of amendments.  But there was nothing at all unusual about this year’s process, other than the extra time we spent on it, including that third budget workshop.  The City Manager did his job, which was to propose a budget consistent with our adopted Council priorities, with due attention to both short- and long-term considerations.  Residents did theirs, participating in the process by asking good questions and letting us know their priorities and preferences between the budget and the tax rate.  Staff went above and beyond in producing detailed information to aid our analysis, and to clear up confusion and cut through all the misinformation.

At the conclusion of the process, our questions having been answered and the true facts established, it makes sense that Council would look to salaries and benefits to achieve a lower tax rate, now and into the coming years.  The City Manager had not recommended that, and stood by his advice, out of concern for maintaining service levels.  But it’s a policy question for Council to decide, and in the end, responsive to public input that we should honor the new legislative revenue cap a year early, we decided to make that trade-off and actually came in well below the cap.  How we got there matters.