This article originally appeared in the Friday Aug. 9, 2019 issue of the Progress Times.
The city of McAllen plans to increase the property tax rate next year to pay for drainage and traffic projects.
Voters approved the projects in May 2018, when they authorized the city to borrow a maximum of $25 million. McAllen sold the bonds in January.
To cover the debt payments, McAllen will increase the property tax rate by about 1.6 cents per $100 of taxable assessed valuation — slightly less than anticipated, thanks to low interest rates and the city’s AA+ credit rating.
“We’re proposing a tax increase,” said City Manager Roel “Roy” Rodriguez. “And it is strictly to ensure that we’re able to pay the bond issue that we just passed.”
Initially, the city estimated the debt would require a 2 cent tax increase, Rodriguez said. Thanks to McAllen’s credit rating and low interest rates, the city received a better deal.
“As it turns out, the required increase in debt is 1.6 pennies,” Rodriguez said. “And that’s what we’re recommending we increase.”
Even with the increase, McAllen’s property tax rate will remain substantially lower than Pharr and Edinburg.
Mission, which has comparable rate, is considering a substantial tax hike to fix a myriad of financial problems.
Rodriguez discussed the property tax rate Monday, when the City Commission met for a budget workshop at the Palm View Golf Course.
The city would collect about 49.6 cents per $100 of taxable assessed valuation in 2020, up slightly from the current rate of 47.9 cents, according to a handout provided to members of the City Commission.
Every penny adds $10 to the tax bill for a piece of property worth $100,000.
Rodriguez also briefed the City Commission on the proposed budget.
After reviewing requests submitted by city departments, Rodriguez recommended a $116 million operating budget.
The proposal included a pay increase for city employees and a slightly higher contribution to employee retirement accounts.
“We’re recommending an increase in compensation for employees of 1.75%,” Rodriguez said. “Quite a bit lower than we usually recommend, especially with the fact that our budget looks as good as it is. However, we’re also recommending what we call an ‘updated service credit.’”
The updated service credit, which essentially means the city will contribute more to employee retirement accounts, is equivalent to a 0.85% raise.
Proposals from individual departments also include salary adjustments for select employees. Higher pay may reduce turnover.
In 2016, the city had 11% turnover. In 2017, the city had 12.6% turnover. And in 2018, the city had 15.5% turnover.
“We should be concerned about that number,” Rodriguez said. “We need to try to figure out what is going on.”
The budget adds 19 new positions, including five new groundskeepers, three new police officers and a firefighter.
Rodriguez said the proposed budget, which included conservative property tax and sales tax projections, would leave the city with a nearly $2.4 million surplus.
“I feel really good about this budget,” Rodriguez said. “It’s certainly a lot easier when you’ve got a little bit of money left than when you don’t.”