City leaders here are looking at ways to tighten a proposed $127 million budget for the upcoming fiscal year, and at least one councilmember proposed axing its $1 million contribution to the school of medicine. Whether that happens or not remains to be seen.
Edinburg councilmen proposed to keep the same tax rate of 68 cents per $100 valuation during a city meeting last week, but not before discussing ways to possibly trim the budget and offer taxpayers some much-needed relief via a tax cut.
Edinburg City Manager Ron Garza reminded the council they already essentially extended a 1-cent tax rate reduction to homeowners through what the city calls the COVID-19 Homestead Exemption.
In July, councilmembers agreed to essentially lower property tax valuations by $5,000 for homesteads in Edinburg. As a result, the city will not collect about $500,000 in property tax revenue, which is about 1 cent of the tax rate.
“Collectively, for each individual taxpayer, it’s not a lot of money. It’s about $50 per year,” Garza said. “But collectively, when the city absorbs it, that’s about $500,000.”
Councilman Gilbert Enriquez asked if the $1 million the city gives to the University of Texas Rio Grande Valley School of Medicine was already paid this year and if it was included in next year’s proposed budget.
Edinburg Finance Director Dagoberto Soto said the city pays the university in three payments throughout the fiscal year. Two of them have already been paid out this year, and the last payment is about to be made.
The contribution for next year is also already included in the proposed budget for fiscal year 2020-21, Garza said.
But foregoing that contribution could also mean a possible two-cent reduction to the tax rate, bringing it down to 66 cents per $100 valuation.
“I’m just a little wary that we’re not able to help out our citizens a little bit more with maybe reducing the tax rate, but if we don’t reduce the tax rate, I’m OK with that as well,” Enriquez said.
He then asked Garza to explore ways to lower expenses this upcoming fiscal year, so the council can consider giving a tax break next year.
Councilman David White, however, appeared ready to tighten the city’s fiscal belt.
“As long as we keep the same money coming in, we’re going to keep spending it,” he said.
“If you want to drop it a penny or two this year, we make our purse strings … tighter. The same thing when I was a director here — you dropped my budget, we just had to make it work.”
Councilman Jorge Salinas agreed.
“I like that 2-cent drop, and don’t give the million dollars to UTRGV. I mean, that medical school gets funded millions upon millions. I’ve always been against it,” he said. “I’ve always wanted to use that $1 million (for) the cultural arts center, but if we can drop 2 (cents) off the tax rate and help everybody out, just like David (White) said, ‘Hey you take away the money, you’ll figure out some way to fix it.’ So I say we give them (taxpayers) 2 cents this year and 2 cents next year. Why not?”
Two days later, Veronica Gonzales, UTRGV vice president for governmental and community relations, tried to answer that question during a follow-up special called meeting.
“I know you’re in the budget process, which I appreciate the difficulties of the process. We’ve been doing it ourselves, and we’ve looked at ways to tighten our own belt,” Gonzales told the council during the public comment section of the meeting. “But like you, we strive to keep those items and expenses that are going to bring us the greatest return on our investment, and that’s why it was very concerning to us to hear that y’all were considering discontinuing the annual payment to the school of medicine because we believe that the medical school’s overall value to the community and to Edinburg far exceeds the cost.”
Gonzales noted that in the last four years, the school of medicine has hired over 1,000 faculty and staff members, which she said had good paying jobs and live, shop and dine in Edinburg. Enrollment has grown to 221 students and the school has already graduated its first class.
The medical school has also opened several clinics in Edinburg and constructed two buildings with University of Texas System funds.
“Also, more importantly, when the pandemic started, we were quick to set up a lab. It was a Zika lab that we turned into a COVID lab,” Gonzales added. “Here in Edinburg, we set up drive-thru testing sites, and by far, the one here in Edinburg is the busiest. We’ve already tested over 12,000 patients, and we give the results in 24 hours.”
Just recently, the university also hired about 200 contact tracers.
“But we need your help. We need your support. And contrary to what people may think, we do not have millions of dollars lying around. I can tell you right now, the cost exceeds the revenue. And the state’s already told us, plan for a 5% budget cut for this next session, which for us is a tremendous amount of money,” she said. “We have CARES funds but they have to go to certain causes and students. They’re primarily the ones who will benefit, and rightfully so.”
The school has also seen its clinical revenues drop because clinics could not perform elective surgeries for some time and were limited in what they could do.
She also reminded the council that the first two years of the medical school, which are the most lucrative, were placed in Edinburg because the city and other local governments agreed to help fund it.
“This was instrumental in getting the school of medicine placed here in Edinburg. So much growth has happened since then, and so much growth is going to continue to happen,” she said. “And so, I know you’ve got some tough decisions, but I ask you to please consider the overall value, and that you not go back on the written commitment that was made to fund the school of medicine for 10 years.”
Councilmembers didn’t make mention of the school of medicine during that meeting, but Garza did discuss ways the council could possibly trim the budget, as requested at the previous meeting.
Garza offered four ways to possibly reduce the tax rate.
One of them is to increase the projected property tax collection rate from a very conservative 94% to “one that introduces another level of risk” at 97%. Garza explained the city usually expects 96% of taxpayers to pay their property taxes on time, but because of the uncertainty that is COVID-19, he opted to use 94%.
“If we have low turnout of property tax once they’re due — and we do anticipate some individuals paying late — it gives us a buffer there,” he said.
The city manager also was very conservative in projected sales tax collections, basically accounting for a 0% growth.
“This year, even given the pandemic … we’re projecting right now that we will have somewhat of a flat (line) at $19.5 million in sales tax revenue,” he said. “That really goes against the trend that we’ve seen here in the last many years. The city has experienced great growth, but again, due to the pandemic we are being conservative there and anticipating 0% percent growth in our sales tax.”
Garza also said the council could consider a 2% cut across all of the city departments to reduce the tax rate or lower the number of new positions the city is currently proposing in its upcoming budget.
As it is currently proposed, the city would open 45 new positions, which Garza believes are needed to make the city run more efficiently. He took time to go through each and every position he believes is necessary, including a purchasing manager, a procurement specialist, and an internal auditor, among others.
The budget also calls for a 2% salary increase for employees and proposes further investments in the public safety sector. Garza proposed a 5% increase to the police department’s overall budget, which would fund seven new positions, including two police officers, and an 8% increase to the fire department, which would fund six new positions, including three firefighters and three captains.
Even with all of those additions, Edinburg would remain with a healthy fund balance, he said, noting the city has the equivalent of 120 operational days in its reserves.
“So we are looking favorable,” Garza told The Monitor in August. “And my message to the council regarding our upcoming budget was that we are very cautiously optimistic. Obviously, the longer the pandemic is with us, the greater we have to watch this, but we have some natural things about the structure of our budget that actually are very resilient for the city.”
One of those is the city’s solid waste fund, which transfers about $5 million into the general fund each year.
“So the city of Edinburg is really fortunate. We have what I like to call just some natural diversification and natural resilience built in because number one, we have a landfill, which is the definition of an essential service,” he said. “So unlike the city of McAllen or Pharr that have an international bridge that was affected, obviously solid waste is a very stable revenue source. So that’s one very, very positive.”
The city also has what he liked to call a “naturally diversified revenue stream from property taxes and sales tax.”
“Again McAllen is very heavily dependent on sales tax, especially international shoppers from Mexico. Well, the city of Edinburg is not like that,” Garza said. “So a lot of our large sales tax base has been very healthy.”
And as far as the smaller businesses, Edinburg has already deployed an economic recovery program that injected $2 million into the local economy, he said.
“We’re conservatively budgeting for next year. But even at that, I mean, there has been no data-driven trend to indicate that we would be in any kind of deficit for 2020-2021,” Garza said.
“We built in a lot of conservation measures to ensure that if there is a steady declining of revenue, we can address that, but obviously there’s a level of uncertainty there that we need to prepare for.”
Edinburg city leaders are scheduled to adopt the property tax rate Sept. 15.