Council votes against tax hike
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“You cannot expect a city to do more when you are cutting the budget…”
Pearsall councilors have voted 6-1 against imposing a two-cent property tax increase for the 2022 fiscal year.
The Tuesday, September 13, decision leaves City Manager Federico Reyes two weeks to cut the approved budget by $50,000.
“This budget does include a tax rate increase,” Reyes said of the original proposal.
The city manager said Pearsall lost a sizable amount of revenue when the PILOT (payment in lieu of taxes) agreement with the South Texas Electrical Cooperative (STEC) was cut in half.
“We budgeted for that last year,” Reyes said. “We anticipated an increase in sales tax revenue of $300,000; so we have cut positions to make those budget adjustments. The things that have happened since I have been here have been mainly health-related emergency stuff.”
Reyes reminded councilors that the coronavirus pandemic began in March 2020 but the city did not receive any significant financial assistance until August 2021.
The city received two $1.2 million dollar payments from the American Rescue Plan (ARP) Act; the first was received in the latter part of 2021. Based on the federal government’s funding, the city chose not to raise taxes for the 2021 budget.
At the time, then-finance director Santos Alarcon told councilors the city was in a unique situation with the ARP monies but the funding would not last.
“It is some flexibility but is a one-time deal,” Alarcon said last year. “If you decide to not raise the taxes, it will correspond with the city’s history not to increase taxes but does affect the upcoming years and with that mentality as you embark on more projects it will increase the debt service as you float more bonds.”
Reyes reiterated to councilors that the city is still not collecting penalties and interest for late utilities from citizens and that there was a significant increase in police department officers’ salaries.
“Those increases come at a cost,” the city manager said. “Who pays for them, the taxpayers? We are looking at adding expenses to the budget but those have to balance out. I believe what we have cut from the budget to make the budget balance, but something has to give. I wish I had a magic wand to create money.”
According to the city manager, the city has not given any raises to employees with ARP monies. Reyes told councilors that there are less than ten percent of the staff who make over $50,000 annually.
The two-cent tax increase would give the city an additional $50,000 in revenue.
“We started this process back in June; it is a lot of effort from the city staff,” Mayor Ben Briscoe said. “There are a lot of changes. A lot of big-ticket things coming down the pipes. The concerns are things we cannot see. We are in a big inflation period. There are some major infrastructure things that we will be paying for. This tax increase will have an impact of just dollars. Our city budget is twelve million; this is a small part of what we generate. This is something we are faced every year.
“I know as taxpayers, we do not like paying higher taxes,” the mayor said. “If we continue to cut as we move forward with bigger expenses, we will have to look at borrowing money to do these bigger projects.
“I vote only in event of a tie,” Briscoe added, “but I think it is important that you all know where I stand.”
Councilor Ramiro Trevino quizzed the city manager on how the tax increase would directly benefit future economic development.
“We have all these consultants and we have nothing to show for it,” the councilor said.
“Ever heard the term, chaos brings opportunity?” Reyes said. “That is what the pandemic did for us. Best thing we have done is invest dollars in planning. My recommendation is to finish the planning process, which should finish this month, and then I ask you act on it.”
Councilor James Leal voted for raising taxes, a decision only supported by the mayor.
Briscoe, who only cast a vote in the event of a tie, did ask for his vote to be recorded in an effort to provide transparency and let the public know he supports a tax increase.
“There are results, quality and taxes and you can only fix two. Unfortunately, this time we chose to keep taxes the same and results,” Leal said during a phone interview Monday afternoon. “You cannot expect a city to do more when you are cutting the budget requested. There is an outcry for economic development, utilities and road improvements but without proper funding, none of these things can get accomplished.
“Sometimes the decisions that have to be made by the council are not popular nor do we all agree,” Leal said. “But in order for us not to hinder the city from moving forward these decisions have to be made. We also have to understand we are at an all-time inflation and this budget was not based on that.”