Fiscal Year 2018 Proposed Budget

The fiscal year 2018 proposed budget has been prepared using conservative assumptions for property tax revenue based on the effective tax rate plus 3%, consistent with the City Council adopted Financial Management Policy Statements and Council direction at the spring retreat. The effective tax rate - or "no new taxes rate" - represents the tax rate needed to raise the same amount of property tax revenue for the City of Sugar Land from the same properties in both the 2016 tax year and the 2017 tax year.

The fiscal year 2017 sales tax revenues are coming in 7.6% lower than the prior year and the revenues from sales tax are budgeted with no growth in fiscal year 2018.

The proposed general fund budget, reviewed at the August 3 workshop, is conservative, with no new programs or services, and moving rehabilitation work from the capital improvement program into the general fund at a reduced level.

At the August 10 workshop, the debt service funds and property tax roll were reviewed with the City Council. Based on the Certified Tax Roll, the tax rate necessary to fund the budget as proposed is $0.32233, which is the effective tax rate plus 3%, consistent with the City's Financial Management Policy Statements.

In 2013, Sugar Land voters authorized an increase of $0.03100 on the tax rate for bonds totaling $31.5 million to fund two parks projects. The city has so far avoided the full voter-approved tax increase for the construction and operation of these projects and has only raised the tax rate $0.00700 in 2014. In this economic climate, however, the City may not be able to afford to continue to subsidize these voter-approved projects without cutting basic services or implementing the full $0.03100 increase.

Maximum Proposed Tax Rate for Discussion Purposes

Based on information received at the first two budget workshops, the City Council directed staff to publish the attached Notice of 2017 Proposed Tax Rate at a rate of $0.33007, which would fund the budget as proposed and provide additional rehabilitation funding to supplement the funding levels in the proposed budget, which were reduced in FY18 due to the decline in sales tax collections experienced in FY17. Approximately $864,000 of the FY17 sales tax revenue decline is the voter-authorized half-cent sales tax for property tax reduction, which is equivalent to $0.00774 on the property tax rate.

This is the maximum tax rate that can be considered by the City Council - recognizing that the maximum proposed tax rate is for discussion purposes only, as the record vote adopting the tax rate will not occur until September 19, 2017.

The City received the 2017 certified tax roll from the Central Appraisal District (CAD) on July 27, 2017. The tax rate necessary to support the proposed budget is $0.32233.

The effective tax rate and rollback tax rate have both been calculated based on the certified roll. The effective tax rate is the tax rate that is necessary to collect the same tax revenues in 2017 as the City did in 2016, allowing for exclusion of new value, refunds of prior year taxes and court ordered value reductions. The rollback tax rate is the rate that allows for an 8% increase over the maintenance & operations effective tax rate, plus the tax rate necessary to repay debt. 
 
The calculated rates are as follows:
2016 Tax Rate:                              $0.31595

Proposed Tax Rate:                       $0.33007

Effective Tax Rate:                        $0.31293

Rollback Tax Rate:                        $0.33352

Effective Tax Rate Plus 3%:       $0.32233 (Rate needed to support FY18 Budget)
 
The City is following the process defined by Local Government Code 140.010 (e) for public notice of the proposed tax rate. The process requires the proposed property tax rate be published in the paper of record or mailed to all residents no later than September 1. The notice must also be placed on the City’s website by September 1. Cities that provide notice under Texas Local Government Code 140.010 (e) requirements are exempt from the notice, publication and injunction provisions of the Tax Code. The City published the tax rate notice in a paper of general circulation on August 15, 2017. The notice has also been placed on the City’s website. Since the proposed tax rate exceeds the calculated effective tax rate of $0.31293, the City must publish a notice and hold two public hearings in accordance with the Local Government Code.
 
Although the published notice and public hearings are for a tax rate of $0.33007, City Council can adopt a tax rate lower than the proposed rate, but cannot exceed the published rate of $0.33007. The purpose of the public hearing is to allow citizens to express their views on the tax rate. The first public hearing was held on August 22, 2017.

 
Staff recommends City Council hold a public hearing to receive and hear all persons desiring to speak on the 2017 proposed tax rate.  During the meeting, the date, time and place for the vote on the tax rate should be announced. The tax rate will be adopted on September 19, 2017.