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Letter from Mayor Karen Hunt: Budget & Tax Rate

​​An Open Letter to Residents from Mayor Karen Hunt:

Hello, everyone!  

To most, the topic of the annual city budget is neither exciting nor interesting. But this year has been challenging for all of us, the City included. Despite the pandemic and all of the curveballs that we have all faced this year, the City was able to maintain continuity of government with minimal impact to service. I am hopeful you will see why your City Council and City staff believe we have a good story to tell.  

The end of 2019 and 2020 have presented challenges for all of us individually. The City of Coppell has also experienced some challenges – mostly in changes to sources of revenue.

  • During the 2019 Texas Legislative Session, a new law, Senate Bill 2 (SB2), was passed that governs the municipal budget process. Changes are in the form of condensed timeframes and additional restrictions on revenue.
  • In late 2019, the State of Texas Comptroller of Public Accounts changed the definitions and rules regarding a city's collection and distribution of sales tax. These changes, if they go into full affect, will lower Coppell's share of sales tax revenue by an estimated 60 percent. By the way, that is a big number.
  • And then there was 2020 and the pandemic. Enough said about that!!

With direction from City Council, City of Coppell staff started studying departmental budgets and planning for reductions immediately after the passage of SB2. That planning was intensified with the announcement from the Comptroller's Office regarding the change of rules and definitions concerning sales tax collections. The first action taken by the City was the implementation a hiring freeze. Then, each department came to the table with projects that could be delayed or cancelled. We are also preparing for some permanent changes.  

With an eye to the future, the anticipation of revenue changes and advanced planning prepared Coppell well for the effects of the pandemic on sales tax revenue in this fiscal year and for the years to come. Amid all this uncertainty, City continues to receive recognition for financial practices. Coppell's AAA and Aaa investment ratings were recently reaffirmed, lowering the City's interest rate and saving money for taxpayers. Our planning and transparency are second to none.

Now let's talk about the Fiscal Year 2020-2021 budget that Council voted to approve on September 15, 2020. The budget includes tax rate of $0.5800 per $100 valuation, which is a decrease over the current rate of $0.58400. The lower rate will allow the City to continue to provide high-level service in our core responsibilities of Police service/safety, Fire and EMS services, Public Works maintenance, streets, and infrastructure. This new budget will go into effect on October 1, 2020, and it includes significant expenditure reductions over the current budget:

  • Budget represents a 13.29% decrease over the Fiscal Year 2019-2020 budget, a result of analyzing departmental expenditures line-by-line
  • Current vacant City staff positions are frozen and seasonal staff numbers were reduced
  • Budget contains no salary increases for City staff
  • Select capital projects were postponed, resulting in a 77% decrease in capital expenditures from the Fiscal Year 2019-2020 budget​

Thank you to everyone for the kind words and notes of support, patience and grace during the last several challenging months. As we look toward the future, your City Council and staff will continue to work to ensure that Coppell not only remains a stable partner with businesses and residents, but also continues to innovate to improve municipal services. More challenges lay ahead, and we are not out of the woods yet. But I am hopeful for the future and appreciate your patience and grace.

Here is a summary of how the City was able propose a decrease to the current rate: 

  • City was able to propose a rate of 0.5800 as a result of Council and staff's careful planning and conservative approach 
  • City began planning for the loss of revenue resulting from SB2 in 2019
  • Planning for revenue reductions intensified as a result of the proposal of Rule 3.334 in December 2019
    • Rule 3.334 describes the allocation of sales tax revenue in the State of Texas
    • Rule was proposed by Texas State Comptroller of Public Accounts
  • Departments budgets were analyzed line-by-line to identify expenditure reductions
  • Hiring freeze immediately instituted
  • Select capital projects postponed
  • City identified approximately $5.6 million in expenditure reductions prior to COVID-19
  • Existing fund balances were identified to mitigate impact of the expected remaining revenue loss
    • Funds Council had previously set aside in the City's designated fund balance 
    • Fund that Council had previously set up to be used in case of revenue threats
    • Transfers from the Water/Sewer Fund and allocations from other fund balances
  • City has identified expense reductions for 99% of the expected $9.2 million revenue loss due to COVID-19 while maintaining continuity of government and without drastic changes to necessary staffing levels 
  • City continues to receive recognition for financial practices
    • AAA and Aaa rates reaffirmed, lowering City's interest rate and saving money for taxpayers 

Here are a few new definitions that could be helpful when you review budget document: 

  • Per Senate Bill 2, City is required to present additional tax rate information to residents
    • Proposed Rate – 0.5800
      • Based on certified property values provided by the County Tax Offices
      • Virtual Public Hearing to discuss proposed rate on September 8
      • Will be presented to Council for approval at a virtual meeting on September 15
    • No-new-revenue rate – 0.638729
      • Previously known as effective rate
      • At this rate, city generates no new revenue from existing property over previous year 
      • Not presented to Council for approval
    • ​​Voter-approval rate – 0.654106
      • Rate at which Council would need to hold an election to allow for voter approval
      • Under SB2, an election must be called if the proposed tax rate generates more than a 3.5% increase in revenue from existing property
      • Not presented to Council for approval