The Odessa City Council met with staff to discuss FY23’s proposed budget for the first time Tuesday. Included in the proposed budget is a 6% increase in water/sewer rates, a 3.5% increase in solid waste rates and a possible 2 cent property tax rate increase for every $100 of assessed valuation.
City staff has recommended the council adopt a $109 million general fund budget compared to $101 million last year, with the additional funding, in large part, going toward park improvements, fire rescue radios, IT switch upgrades, repairs and improvements to several city buildings. The general fund budget also includes a 4% pay hike approved by the council in May.
Included in the proposed budget are two neighborhood parks on the eastside and $10 million in street projects, with part of the funding coming from leftover FY21-22 funds.
City Manager Michael Marrero and Assistant City Manager of Administrative Services Cindy Muncy explained the rate increases are due, at least partly, to inflation.
Marrero, Muncy and Assistant City Manager Phillip Urrutia provided many examples over the course of the city’s four-hour meeting. They said the city experienced a 6% tipping cost increase at the landfill this year. There’s been a 50% increase in chemicals used by the city’s parks and water departments and a 30 to 40% increase in equipment costs compared to the more typical 5% increase.
A Faudree Road improvement project was budgeted for $20 million, but a recent bid came in at $31.5 million due to inflated asphalt and cement costs, they said.
The 6% water/sewer rate increase is connected to the $95 million in Certificates of Obligation that were passed by the council last year to rehab the city’s water treatment plant, they said.
“We normally do a 2.5% increase. That’s been our normal for the last few years because every year costs are going up. You give people a raise costs go up. So 2.5% is our normal and we added 3.5% to that to help start covering the debt payment for the water treatment plant,” Muncy said.
The council members spent much of the work session weighing the property tax increase, which would add about $1.3 million to the city’s coffers.
The city did not raise the tax rate the last two fiscal years but rising appraisals meant most still paid more in property tax. If approved during the final budget meeting, the tax rate could increase from 0.477115 to 0.478874. Muncy said the 2 cent increase may change depending upon what other taxing entities decide.
Last year, a homeowner with a home valued at $174,000 paid $827.45 in city taxes, Muncy said following the meeting. If the 2 cent increase is adopted, that same homeowner would pay $862.07 in city taxes.
Mayor Javier Joven and councilmembers Denise Swanner and Mark Matta voiced opposition to the increase, noting taxpayers will already see water and solid waste rate increases.
Councilmembers Steve Thompson, Detra White, Tom Sprawls and Mari Willis reluctantly expressed support for the increase, in large part because the city is hiring an outside firm to compare the city’s employee compensation packages with other communities and are convinced the city will end up having to increase wages as a result.
Muncy told the council the city has a “very good fund balance” in the general fund and staff is recommending using some of that for capital projects.
Sprawls said he didn’t seen an option.
“After reviewing our needs… taxes are going to go up anyway. We’re all going to hear about it. We will all hear the complaints,” Sprawls said. “We have enough needs and if you look just a few months in the future when we have the salary assessment (study), we know there are going to be some needs there.”
Thompson said he didn’t disagree.
“We’ve tried to hold it down all we can, but it comes to a point, you’ve got to pay the fiddler. Or you’ve got to use the fund balance and that’s dangerous,” Thompson said.
Thompson reminded his fellow council members of his idea of issuing revenue bonds through the Odessa Development Corporation.
Earlier this month, the councilman said the economic development group has roughly $23 million to $25 million in uncommitted funds and a portion of it could be used to address Odessa’s aging water system and/or to improve Odessa’s roads without impacting taxpayers.
The ODC uses sales tax revenues to provide companies with incentives to move to Odessa, but the grants they provide are paid on a staggered basis, so there is always funding available.
“We’re always behind the curve on infrastructure and we’ve got to get ahead of it,” Thompson said.
Willis noted that although taxpayers won’t be happy, the increases impact council members and city staff as well.
“We’re not just putting it on them, it’s us as well,” Willis said. “We have a lot of needs and I wish we had the money to do a Christmas list and just get everything done. It’s just not possible.”
At the start of Tuesday’s meeting, Marrero told the council the city has seen a 4% increase in preliminary property values and a 16.79% increase in sales tax revenue collections.
City staff has tentatively budgeted $45 million in sales tax receipts for FY23, roughly $6.5 million over last year.
“We feel comfortable going to the $45 million, We feel very comfortable, but every time you turn around they’re talking inflation, inflation, inflation and somebody says ‘Oh, yeah, but we’re going to have a crash,’ so you listen to economists you don’t know which way they’re really going to go,” Muncy said.
Also included in this year’s proposed budget is a 2% increase in the city’s contribution to Odessa Fire Rescue’s pension contribution plan, which would take it up to 28%.
The first public hearing on the budget is slated for Aug. 23.
