Reyes views city finance highs, lows

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Pearsall City Manager Federico Reyes believes he has a comprehensive overview of factors that may influence municipal finances, including inflation.
Reyes outlined the financial outlook for the city in late April and reviewed revenue projections and operating expenses for the current fiscal year.
“During the height of the pandemic we saw a decrease in sales tax of nearly four hundred thousand dollars,” the city manager said, adding that City Hall expects those revenues to rebound as the oil and gas industries ramp up their South Texas operations.
Nonetheless, the city’s financial outlook includes highs and lows.
According to Reyes, litigation between South Texas Electrical Cooperation (STEC) and the city has been settled; 2020-21 revenue projections include an anticipated drop by $600,000.
“We have seen an increase in our permit and rental fees,” the city manager said. “And then we adopted the utility ordinance that will implement a slight increase in utilities over the next five years.”
Due to the STEC settlement, Reyes said, the city will have to decrease capital street improvement projects to absorb the revenue drop.
The city makes its final $40,000 tax abatement to the HEB grocery store this year, under a plan established a decade ago when the store was built on commercial property beside IH-35.
Pearsall has a yearly $1.7 million debt service payment for bonds issued in 2012 and 2016.
“Most of the debt issued has been utilized for improvements of basic services such as water, sewer and streets,” Reyes said.
In June, the city is set to receive its second American Rescue Plan (ARP) contribution, of which the administration is asking that $352,000 be used towards refurbishment of the water storage and elevated tanks. Reyes said he hopes the council will approve some of the $1.3 million in ARP funding to be used to replenish loss revenue from the pandemic.
The expansion of water and wastewater infrastructure along Business Loop 35 is a pressing issue due to a recent annexation project, the city manager said.
Recently, city staff submitted a project information form to the Texas Water Development Board (TWDB) for capital improvements to include construction of water and wastewater lines, one water well, an elevated storage tank and the replacement of a 12-inch main line on Colorado Street. Those projects, if approved, cannot be funded “until the second or third quarter” of the 2022-23 budget cycle, Reyes said.
“It is a longer process to borrow money from the water board,” the city manager said. “But, in my opinion, it pays off. There may be loan forgiveness through grant funding.”
Reyes said he anticipates an increase in material costs, such as road aggregate, fuel surcharges, and plumbing supplies. He plans to cut travel and training expenses and make other cuts to compensate for inflation.
“I do feel a lot better about the financial position of the city than I have in some time,” the city manager said.