The City of Devine finished the 2019-2020 fiscal year nearly half a million dollars in the red, but started the 2020-2021 fiscal year with a slim surplus.
The Devine City Council adopted the FY 20-21 budget and tax rate and accepted the amended FY 19-20 budget during a Special meeting held last Tuesday, September 29.
Both the final amended FY 19-20 budget and the FY 20-21 budget are available on the City’s website at www.cityofdevine.org.
FY 2020-2021 tax rate and budget
Council unanimously approved a 2020 property tax rate of $.5298 per $100 of valuation. While the rate is the same as 2019, a 6.55 percent increase in taxable value means the City projects tax revenue of $2,652,408, an increase of $244,518.
Property tax revenue is used to support the General Fund, which covers the bulk of the City’s operations including police, streets, municipal court, animal control, library, golf course, airport, and parks and rec, among others.
With the addition of fees and fines, grants and contributions, interest earned, permits and licenses, services and charges, and other revenue, the City’s total FY 20-21 General Fund operating revenue is estimated at $3,825,015, an increase of $244,518 from the previous fiscal year.
Operating expenditures were pegged at $3,769,063, an $83,274 increase. The biggest bump came in the street department, which saw its budget jump over $276,000 to $629,559. The budgets for Animal control, administration, health and sanitation, police school resource officer, and the library also increased.
In the weeks leading up to the budget adoption on Sept. 29, multiple proposed budgets included a General Fund deficit of several hundred thousand dollars, due in large part to a $325,000 line item in Capital Outlay for the purchase of 28 acres of land along Hwy. 173. Purchase of the property is a step in a Council-approved plan to try and attract private development to a Tax Increment Reinvestment Zone (TIRZ) along IH-35.
A TIRZ captures projected tax revenue increases and uses that money to construct public infrastructure and reduce the cost of private development by reimbursing developers for eligible improvements. A Board of Directors runs the TIRZ and can both borrow money and purchase property. In Devine’s case, Council also functions as the TIRZ Board.
TIRZ consultant Lance Elliott suggested in a Sept. 22 meeting that the City use a portion of the TIRZ proceeds as collateral for a short-term bank loan to purchase the 28 acres.
Consequently, the $325,000 expenditure was removed from Capital Outlays. After adjusting for the $35,210 remaining in that fund, the General Fund was left with a net surplus of $20,742.
A separate TIF (tax increment financing) Fund was added to this year’s budget and features a $32,500 expenditure but no revenue.
“According to Lance, we’re having to assign the [real estate] contract to our TIRZ Board,” Mayor Cory Thompson said. “And because of that, he went ahead and asked to apply 10 percent, which is what the $32,500 is, towards the purchase of the property.”
At current interest rates of around 2.5 percent, Elliott estimated debt service on the land purchase between $9,000 to $10,000 per year.
“[Elliott] says that is well below what the actual TIRZ revenue will be,” Thompson said.
“And that comes out of the TIRZ account,” Interim City Administrator Dora Rodriguez said. “We didn’t put anything on the revenue because that’s coming from taxes.”
The Sewer and Water Fund is projected to bring in $2,664,653 in revenue in FY 20-21, a decrease of $287,023 from the previous year.
Operating expenses are down over $93,000 to $2,329,773, leaving a net surplus of $334,880. Transfers out of $210,814 for bond debt service payments, leave a net cash flow of $124,066.
After starting with an $81,704 surplus in the General Fund, the 2019-2020 fiscal year ended with a $499,473 deficit.
Municipal court, streets, police, health and sanitation, the airport, community center, and code enforcement were all over budget.
However, the various grants that the City received during the fiscal year are not calculated into the budget until it is audited.
“We show you the expense, but it’s not a line item to put that grant money anywhere,” Rodriguez said.
Once the auditors have accounted for grant money, the General Fund deficit should decrease.
The Sewer and Water Fund finished with a $528,595 surplus. After transfers out of $443,379 for bond debt service payments, sewer equipment, water wells, sewer line extension materials, and water equipment, the net cash flow was $85,216.
The General Fund also finished in the red in FY 2018-2019 to the tune of $722,508.06, bringing the total deficit over the past two years to $1,221,981.06.
According to an investment report provided at the Sept. 22 meeting, the City had $2,637,174.61 in cash in its various bank accounts as of June 30.
By Marly Davis