Tuesday, February 25, 2014 by Andy Sevilla

Kyle to issue almost $2 million in debt for capital expenditures

Kyle property owners can expect increases in their property tax rate and city utility bills next fiscal year as City Council members prepare to issue $1.866 million in short-term debt. The city will issue the debt to buy various equipment, system software, infrastructure improvements and vehicles for three city departments this spring.

The City of Kyle – which already has the highest ad valorem tax rate of any Hays County city – would need to increase the property tax rate by about three cents to cover the debt service payments from the city’s general fund alone. Payments, however, will come from both the city’s general fund and the utility fund. The utility fund was largely in the red before city leaders approved a 70 percent increase in water rates and 55 percent increase in wastewater rates structured over the last three fiscal years.

Kyle City Manager Lanny Lambert said that with the increases to water and wastewater rates, the utility fund is now balanced. Property owners, however, have time to prepare for the rate hikes, which take effect in November.

“We would not have any debt service impact in this fiscal year,” for the 2014 tax notes, said Kyle Director of Finance Perwez Moheet. That means property taxes and water and wastewater rates would not increase until October, when the new fiscal year begins. Of the $1.866 million the city will raise in short-term debt, $830,000 – 44.49 percent — will go to the general fund, while $1.036 million – 55.51 percent – will go to the Utility Fund.

The council, which could potentially have four new members after the city’s May 10 election, will have to contend with increasing property taxes, water and wastewater rates during budget deliberations later this year.

However, Lambert said that he does not plan to recommend an increase in property taxes in the upcoming fiscal year, and said he is confident the city’s operating budget could cover the approximate $300,000 to $350,000 it will take to cover the debt service payments for the tax notes over the next seven years.

Moheet said that given Kyle’s current property valuations, one cent of ad valorem taxes raises about $140,000. The city’s present tax rate is $0.5483 per $100 of assessed value.

“We definitely know that our city is growing. We’re going to need equipment – for example, for the police department. We also know that we have a number of water system reservoirs that need rehab in the future,” Moheet said.

An audit of the city’s water and wastewater systems proved major repairs were also needed, including “urgent” repairs to water reservoirs amounting to about $450,000. The city is also in need of water and wastewater system modeling, each expected to cost $150,000. Both expenditures are included in the tax notes.

Through the tax notes, the city will also buy three new Chevrolet Tahoes cruisers for the police department, four new vehicles for public works and a pickup truck for meter reading.

The city is also looking to purchase seven defibrillators to put in different Kyle buildings, a radio system upgrade for police, as well as a radar trailer, and two new Toughbook laptops with stands for the public works department.

“This was something that we’ve been discussing for a while. I’m glad we’re using the tax notes” as a funding mechanism, said Kyle Mayor Lucy Johnson. She said the city specifically to purchase vehicles which have a seven to 10-year life span, so that the city will finish paying for the vehicles before their useable life is up.

And though the police department would get three new Tahoes through the tax notes, Council Member Samantha LeMense was hoping to get four more for the department.

Council agreed to remove the $350,000 purchase of the Hays County Health Department building behind City Hall from the tax notes, and with that savings LeMense suggested purchasing the four additional Tahoes for cops, each at $75,000. However, she was unable to muster a second for her attempt to add the extra cars to the list of purchases.

“You know, I think we went through the budget process with the police department, and I appreciate your spirit, but I want what we need and don’t want to pay for things we don’t need immediately,” said Council Member David Wilson, who made the motion to approve the tax notes.

Moheet told council members at last week’s meeting that after consulting with the city’s bond council and advisors, he would bring a bond ordinance for approval at their second meeting in March.

Council members green lighted the list for the future 2014 tax notes during the current fiscal year’s budget deliberations last September. The council gave final approval to the $1.866 million list last week.

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Key Players & Topics In This Article

certificates of obligation (COs): These bonds are issued directly by the borrowing entity. Though not subject to popular vote, their issuance can trigger tax increases. That, in turn, can trigger a petition--if the tax increase is beyond the year's rollback tax rate--and a potential bond election.

Kyle City Council: The City Council for the City of Kyle, south of Austin.

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