City of Gonzales explains budget adjustments

The city of Gonzales for several years has been following a practice of making large transfers of revenue from the Electric, Water and Wastewater Funds to the General Fund. Ostensibly this has been done to keep property tax rates as low as possible. The city’s current tax rate is $0.1769, one of the lowest in Texas. In the last few years the city has relied on increased levels of transfers to lower taxes while General Fund operating costs were rising. It is not a financially sustainable practice. Fund balances for the General Fund and the Electric Utility Fund have been pulled down to levels that are not acceptable. The first priority for use of Utility Fund revenues has to be to meet the operating expense needs of the utilities. With home values in Gonzales below average it is unreasonable to think that the city can continue to have such an extremely low tax rate. The average Texas city tax rate is about $0.54 per hundred dollars of value. TML data shows that on average Texas cities receive 40 percent of their General Fund revenue from property tax. In Gonzales that number is 13 percent.

Starting with the current year budget, revenue and expense budgets will have to be adjusted downward to more realistic levels. For the FY 2017-2018 Budget, property taxes will have to be raised to pay for debt service on the hydroelectric facility as well as to pay for operations in the General Fund, i.e., Police, Fire, Streets, etc. For the next several years the City will have to gradually reduce its dependence on utility fund transfers and work on rebuilding fund balances in the General Fund and Electric Utility Fund. This is going to require a disciplined review of spending priorities as well as a program of raising general fund revenues from all potential sources, including the property tax.