Proposed Fiscal Year 2018 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.
Additionally, with fiscal year 2017 sales tax revenues coming in 7.6% lower than the prior year and 1% lower than projections, 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.
Also, 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.
Since the maximum proposed tax rate exceeds the effective rate, the City is required to hold two public hearings on the proposed tax rate. The purpose of the public hearings is to allow citizens to express their views on the tax rate. The public hearings are scheduled for August 22 and September 5, prior to City Council consideration of the tax rate. After input from the public hearings and upcoming budget workshops, the City Council will decide what tax rate is to be adopted for the 2017 tax year. The vote to adopt the tax rate will be on September 19, after the FY2018 budget is approved.
This vote is to determine the maximum proposed 2017 tax rate to be placed on the September 19 agenda for consideration for 2017. City Council may direct staff in the future to prepare the ordinance with a lower tax rate but may not exceed the published amount of $0.33007.