Money in the Bank: City officials advocate tax rate increase despite budget surplus

While city management paints a picture of financial crisis and constraints, the proposed budget and the numbers show otherwise.

The proposal shows that the city will end this fiscal year of operations with a fund balance of $14.4 million.

The debt service fund alone has been generating surpluses since 2003 to the present with a fund balance of $3.2 million in the account. The balance shows that the tax rate applied for the yearly debt payment not only generates enough to pay the debt, but also creates a surplus.

The funds allocated for debt service can only be used for that.

Officials say that this is not over-taxation.

"It's on the conservative side," Deputy City Manager Pete Gonzalez, who also serves as finance director, said of the proposed budget for the new fiscal year beginning Oct. 1.

"You always want to have some reserves. I always emphasize that," Gonzalez said. "You always want to keep a few dollars in reserve. I don't call that overtaxing."

He also pointed out that the proposed budget is still in the working stages and said that he will have updated numbers at Tuesday's special meeting at 6 p.m. to continue budget discussions. The session will be held at City Hall, 1001 E. Elizabeth St.

Gonzalez said he needs to include some expenditures not yet in the proposal, including an allocation of roughly $850,000 for supplemental pay for firefighters and a $2.6 million judgment against the city in favor of the police union.

"We will be forced to dip into that reserve," Gonzalez said.

"You've got to have a comfort zone," Mayor Pat M. Ahumada Jr. said of fund reserves. "What would happen if the peso devalues, sales tax drops, if we have another hurricane and property values decrease?"

"I think it is the wise thing to do," the mayor said of keeping hefty fund balances.

In regards as to how to determine to how much of a surplus is enough, Ahumada said that, "we have to rely on the city manager and the city finance director. I feel comfortable."

Management is proposing a tax rate increase of 3.2597 cents from the present rate of .650517 cents per $100 of assessed valuation to .683114 cents.

Of the proposed rate, .387659 cents would be for maintenance and operation and .295455 cents would be for debt service.

Gonzalez said that each cent generates about $500,000.

If so, about six cents generate the surplus in the debt service fund under the present tax rate.

Gonzalez also expressed fears of significant economic impact on the city's finances.

"In the early 1980s, we took a big blow and our fund balances were almost zero and that is what we are afraid of. That is why I am conservative. I don't know what is going to happen," he said.

Public records also reflect that the city routinely underestimates revenues and overestimates expenditures.

In 2005, for example, it estimated its fund balance at $7.2 million, and that is what the then City Commission worked with during budget preparation time. The actual fund balance turned out to be nearly $15.5 million.

Since 1997, the projections presented to the commissions have been far less than actual fund balances, public records show.

 2003: $10,165,870 -$2,178,746

2004: $12,768,543 -$2,416,038

2005: $15,495,753 -$2,236,938

2006: $18,317,375 -$2,386,963

2007: $17,609,690 -$3,542,624

2008: $14,403,097 -$3,212,787

2009: $12,617,618 -$3,156,747 (projected)

Source: City of Brownsville

Balances in the general fund - Balances in the debt service fund alone.