Post Number: 1
|Posted on Tuesday, August 26, 2003 - 01:42 pm: |
I noticed there is a public hearing on a proposal to increase property taxes by almost 37 percent. Also it appears that our Mayor Pro Tem Mather Maso, Deputy Mayor Pro Tem Matt Lafata, and Council Members Bob Allen, Tony Felker, Jim Joyner, and Joy West are all FOR the proposal. Under this proposal the taxes on the average homestead would increase by $267.65.
With all the sales tax revenue collected off of the numerous Frisco sporting venues plus the biggest mall in North Texas, why is it necessary to raise taxes 37%? We are just now starting to see signs of recover from one of the worse economic recession in decades. There is no guarantee that we are out of the woods yet because hiring has not picked up significantly. Gasoline prices are soaring thru the roof. Frisco citizens just recently approved a $478 million dollar school bond. And the citizens will in *someway* be picking up a portion of the new Burn stadium to be built by 2005.
I'm all for progress, but maybe we should think about trimming down the 194 page 2004 Budget Proposal.
Why not a gradual 5 percent increase every 15 months when appropriate to cover budget proposal issues?
Jason Gray, Assistant City Manager
Post Number: 120
|Posted on Tuesday, September 02, 2003 - 10:24 am: |
Thanks for your questions. Regarding the proposed tax rate increase, the City Council has not yet taken a vote on the proposed tax rate, so it is premature to state that all of the members are for the proposal. The advertisement that you are referring to simply states that all of the members of the City Council were in favor of moving forward with the public hearing process as required by state law and by our City Charter at the proposed rate.
In response to your question of why the rate is proposed to increase - the property tax rate is actually made up of two distinct rates, the Maintenance and Operations (M&O) rate and the Debt Service rate. The M&O rate is designed to generate revenue sufficinet to, as the name suggests, maintain and operate a portion of the general fund functions of the City. This includes funding for the Police, Fire, Administrative Services, Parks and Recreation, General Government, and Planning and Development Departments of the City. It goes to pay operating costs like salaries, programs, equipment, etc. This rate is the more discretionary of the two.
The Debt Service rate is the rate that is necessary to generate sufficient revenue to pay the principal and interest on the bonds owed by the City. This amount must be set sufficient to cover the payments.
In the current year, our overall tax rate is $0.33705 per $100 of valuation, which consisted of:
$0.241559 in M&O Rate
$0.095491 in Debt Rate
$0.337050 Total Rate
The proposed rate includes a decreased M&O rate and an increased Debt Rate:
$0.225954 in M&O Rate
$0.206046 in Debt Rate
$0.432000 Total Rate
The reason for the increase in the debt rate is directly tied to the $96.5 million in debt that was part of the $197.5 million voter-authorized debt and was recently sold for funding for a new Police HQ, expanded Central Fire Station, Recreation Center, Library, City Hall, Road Improvements, Parks and Hike and Bike Trails, etc.
In checking with other surrounding cities, our proposed tax rate of $0.43200 is still well below the area average of $0.5433. We are always looking for ways to keep a high level of service while maintaining a relatively low tax rate, and I would encourage you to come to the public hearing at the regular City Council meeting on September 2 at 6:30 PM in the municipal complex on McKinney Road to hear more about and comment on the proposed budget and tax rate. If after reviewing the document you have ideas on where money could be saved, please don't hesitate to contact me with the ideas. I know that although the staff and Council have reviewed this budget many times over the past several months, that there still may be some room for savings with new ideas.
Thanks again for your input, and I look forward to hearing from you.
Assistant City Manager
Post Number: 8
|Posted on Tuesday, September 02, 2003 - 02:08 pm: |
Thanks for your explanation of the tax rate breakdown, it does make some things clearer. A couple of additional comments and questions.
1. Having voter approval to sell bonds does not necessarily mean that the city should sell those bonds. Economic conditions continue to be very bad, and affect many of our neighbors. At the same time, we are hit with a)increased assessments, b)over 100% increase in the debt service rate, c)fisd rate increases, d)proposed county bond sale. We need to distinguish needs from wants in times like these and spend accordingly. One immediate suggestion is the city could have saved $500k by not funding workforce housing.
2. Can we expect the M&O rate to continue to fall in years ahead? It seems like this should be the case, as the city gets bigger, the cost of services is spread over a larger population, not to mention skyrocketing property values that benefit the city revenue.
1. Why are we not seeing more benefit from the TIF? When passed, it was touted as being a way to offset a lot of infrastructure costs associated with a growing city.
2. What safeguards are in place to prevent overspending on debt service. I know that school districts have a legal limit on the debt service rate, is there a similar control for city spending?
Post Number: 1
|Posted on Tuesday, September 02, 2003 - 03:20 pm: |
I think people seem to think that bonds are free. I wonder if the Library, Rec Center and park/bike trails packages would have passed if the cost was actually spelled out like Jason did here.
Jason, can you tell us specifically how much each of these packages costs in terms of the proposed tax rate?
Post Number: 8
|Posted on Tuesday, September 02, 2003 - 12:55 pm: |
How does this ~37% compare to the numbers citizens were told prior to the bond election last September? I do not recall any of the City provided information (webpage, mailouts, etc.) stating this high of an increase.
(Message edited by karinh on September 03, 2003)
Jason Gray, Assistant City Manager
Post Number: 121
|Posted on Wednesday, September 03, 2003 - 01:56 pm: |
Matt, Mr. Erickson, and Mr. Smith-
Thanks for your questions, I will attempt to address all of the questions of the last three posts in this thread. If I miss anything, please let me know and I will try again. I apologize for the length of response, but want to provide the requested information. I will organize the answers by the poster of the question:
Response to Matt on 9/2/03 at 02.08PM
You're right that having voter approval to sell bonds does not mean that you have to sell them. However, clearly the voters expect the City will proceed rapidly with the proposed projects. The voters authorized $197.5 million, and the City sold $96.5 million in this first sale. We have made every effort to minimize the impact of the sale, and I believe that we have proposed those things that are needs rather than wants. That being said, needs and wants are sometimes dependent upon the perspective from which you are viewing a situation. Good people can and will disagree on the differences between needs and wants.
2. (from comments)
I will try not be too long-winded here, but it is a complex answer, so please bear with me. In general, it should be expected that the M&O rate should decrease if there is an increase in value on the same property year-to-year. In fact, we are proposing a 1.56 cent decrease in the M&O rate for next year.
However, this must be weighed against the increased cost for expanded services for the new property and people that come into the City as these new properties and people place a higher demand on services that must be provided. For instance, it is reasonable to expect that if property values rise an average of 10% and there are no more people or property in the City from one year the next that the M&O rate will decrease at least to what is known as the "effective" tax rate. The effective tax rate is the rate that would be levied to generate the same amount of revenue as the previous year based on the same property as the previous year, in this hypothetical case, decreasing the M&O rate by 10%. However, it probably is not reasonable to expect that if the property and population in the City grows substantially that the same level of service can be provided with the same resources year-to-year. For instance, if there are 20% more people driving on the roads, can we reasonably expect that those roads will not have to be more heavily policed and maintained to establish the same level of service, or that if there are 20% more houses and businesses that the Fire Department could reasonably service this new area just as effectively as the prior year with no additional resources? Probably not, assuming that there is some level of efficiency in the year prior to the growth. If you believe that things like tax rate or number of City employees per capita is any (albeit imperfect) indication of efficiency, it is clear from our significantly lower tax rate compared to the area average and competitive employee per capita ratio that we have a relatively high level of efficiency.
1. (from questions)
We are seeing significant benefit from the TIF. Major projects such as the Ballpark, StarCenter, and Soccer Complex are being funded through the TIF and not being paid for from our General Fund property taxes. Again, none of this proposed tax increase is due to any of these projects. In addition, the Frisco ISD has saved literally millions of dollars for taxpayers by funding several of their building programs from TIF dollars. The Frisco TIF is one of the, if not the most successful TIF in the state and it has saved taxpayers millions of dollars. This is one of the reasons that we are able to have some of the high-quality amenities that we have while maintaining a tax rate that, even at the proposed increase, is 11 cents lower than the area average.
2. (from questions)
There is a statutory limit on a City's total tax rate at $2.50 per $100 value. As you can see, we are well below that limit at the proposed $0.432 per $100 value. The other limit that exists is at the discretion of the voters. All of the debt being paid for by this proposed tax rate is voter-authorized debt.
Response to Joe Erickson on 9/2/03 at 3.20PM
The sale of the $96.5 million in bonds affects the tax rate by about $0.1247 per $100 of value. This is more than the debt rate increase shown above due to the fact that the rate to cover the existing debt decreased in relation to the growth of the tax base. The breakdown (by project) of the affect on the tax rate for the new $96.5 million in debt follows:
|Project||Amount Sold||Affect on Tax Rate |
|Fire Stations & Equipment|| $7,000,000 || $0.0090 |
|Roads and Streets|| $30,000,000 || $0.0388 |
|Police Headquarters|| $16,000,000 || $0.0207 |
|Central Library|| $10,000,000 || $0.0129 |
|City Hall|| $18,000,000 || $0.0233 |
|Hike & Bike Trails & Neighborhood Parks|| $3,000,000 || $0.0039 |
|Rec/Aquatic Center|| $11,000,000 || $0.0142 |
|Heritage Center|| $1,500,000 || $0.0019 |
|Total|| $96,500,000 || $0.1247|
Response to Mike Smith on 9/2/03 at 3.20PM
The ~37% effective increase compares quite favorably to the increase that we told the citizens prior to the election. In several town hall meetings, numerous City Council meetings, on our website in several forms, on our cable channel, in news articles, and in publications delivered to all households we stated prior to the bond election that approval of the bonds would likely cause the tax rate to increase to $0.459 cents this year, or a 45.42% effective increase under the same calculation method. We are able to propose a rate lower than what was projected because the tax base increased more than we had projected and the interest rates on the bonds that we sold was lower than we had expected.
I sincerely hope that these explanations help. Again, if you need any additional information on this, feel free to contact me directly at 972-335-5551 x125 or via email.
Assistant City Manager