Copperas Cove city council talks golf course fund deficit, utility management costs at budget workshop
By BRITTANY FHOLER
The Copperas Cove City Council held a two-hour budget workshop meeting Tuesday evening, going through each fund and department that makes up the city’s proposed $44.65 million budget for the 2019-2020 fiscal year.
The budget is made up of four main funds- General, Water and Sewer, Solid Waste and the Golf Course fund- and then the Other fund, consisting of several smaller funds, such as the Interest and Sinking Fund, the Parks Improvement Fund and the Hotel Occupancy Tax Fund.
The city’s beginning fund balance for the FY 2020 proposed budget is $13,568,125. The total amount of revenues is $42,034,726. The total amount for expenses is $44,658,523. This leaves an ending fund balance of $10,944,328.
The FY 2020 revenue for the General Fund is projected to be $17,370,784, with $18,191,185 in expenses, leaving an ending fund balance of $5.49 million. Water & Sewer fund revenues are $13.38 million, with $13.889 million in expenses and an ending fund balance of $2.46 million. Solid Waste has $4.687 million in revenues, with $4.719 million in expenses and an ending fund balance of $2.678 million.
The Other Fund has $6.27 million in revenues and $7.536 million in expenses and an ending fund balance of $1.7 million. This fund also includes the Street Maintenance Fund which has a beginning fund balance of $545,087, revenues of $440,155 and expenses of $882,568, leaving an ending fund balance of $102,674.
After prior direction from city council, city staff began the process of hiring a supervisor and three workers to begin street maintenance, using a fund made of the 2017 voter-approved allocation of 1/8 of a cent of sales tax revenue. New requests in this fund include crack sealing and other street maintenance/repair material for overlay type project for $268,682.
The Hotel Occupancy Tax Fund is also included in the Other Fund. The Hotel Occupancy Tax brought in $167,205 worth of revenue. The total revenue is $167,337, with expenses equaling the same amount, leaving an ending fund balance of $116,314. The funding requests total $302, 981, which will pose a challenge, according to Interim Budget Director Ariana Beckman, who walked city council members through the budget Tuesday.
The Golf Course Fund has a beginning fund balance of -$1.399 million, with projected revenues of $322,290 and expenses of the same amount, leaving the ending fund balance the same as the beginning fund balance.
The City of Copperas Cove has a policy in place dictating that major operating funds have to have an ideal fund balance equivalent to three months of operating expenditures, Beckman said.
Projected general fund revenues "flat"
The projected General Fund Revenues for FY 2020 are $687,028 more than the FY 2019 projected revenues and $728,262 more than the FY 2019 adopted revenues. Comparatively, the FY 2018 actual revenues were $16.22 million.
Taxes are the largest revenue source in the General Fund, specifically ad valorem tax, sales tax, franchise taxes and then other taxes, making up 68 percent of revenue in the fund.
“The taxes are limited by the 100 percent disabled veteran exemption which is projected to increase by eight percent in the FY 2020,” Beckman said. “However, the budget for the payment relief is expected to increase as well.”
There is a flat projection in the General Fund, according to Beckman, who explained that the city was being conservative with its projections due to the probability of a recession happening some time during FY 2020.
“Taxes are projected to increase approximately $100,000, less than one percent increase overall,” Haverlah said. “Having flat growth is reflective of a recession in that there is a slowing down of that growth and on the major detrimental side of a recession, there is negative growth at times, in other words a decrease in revenues. However, one of the things that I said, is that Texas has also been in a position historically where when recessions or economic slowdowns occur in our nation, we see those occurring typically on the East Coast or West Coast prior to it coming to Texas.”
Fort Hood being the region’s major economic driver ends up shielding Copperas Cove from a recession more than other locations around the country or even in Texas, he added.
Water & Sewer, Solid Waste looking at fee increases
Under the Water and Sewer Fund, the revenues are consistent compared to previous years. The proposed FY 2020 budget includes a one percent rate increase that provides an additional $120,000 in revenue. Other fees include water/sewer tap fees and connects/disconnects.
The current rates for water, per 1,000 gallons, is $4.75 for Residential, $5.82 for Commercial, $4.75 for Sprinkler, $8.52 for Bulk Water and $7.10 for Contractor. All customers pay $6 per 1,000 gallons water usage for Sewer.
The largest expense category in the Water and Sewer Fund is non-departmental, which covers debt service, water purchases and admin reimbursements.
Monies allocated for utility administration services with FATHOM
Under Utility Administration, $309,670 is proposed for salaries and benefits, $18,947 for supplies and materials, $45,900 for maintenance and repair and $938,336 is set aside for contractual services, which would be the contract with FATHOM Water Systems. The adopted budget in FY 2019 set aside $749,094 for contractual services, with the Projected FY 2019 actually spending $825,306 instead.
The FY 2020 budget accounts for the city potentially getting billed for “excess calls” to Fathom.
Haverlah explained that the city’s 15-year contract with FATHOM allows for a maximum of a 10 percent call volume, which amounts to approximately 1,400 calls a month.
“We have experienced anywhere between 15 to 25 percent call volume which means we’re over that 10 percent call volume,” Haverlah said. “Since we have been working with Fathom, contracted with Fathom, we’re now in year 2. We have passed year 2 of that initial agreement, and Fathom has not charged the city for that initial call volume and that’s in recognition of the shortcomings that they’ve had in regards to that contract.”
The most recent quarterly update from FATHOM showed a breakdown of what the calls were.
“Just simply based on that disposition, we will almost always be over that 10 percent and that’s just because of the environment of the type of customers we have that come in and go out,” Haverlah said. “The fact is that Fathom has not charged us. They are working hard to fulfill the terms of the contract on their side. We have worked hard and based on council’s direction and action to take action to fulfill our side or our piece of the contract, so there is an anticipation at some point in the future we will be charged for that additional call volume that comes in.”
Haverlah explained that city staff were working with FATHOM to try to figure out ways to reduce the call volume.
There was no mention of the exact amount of what FATHOM would charge for the excess call volume.
In the Solid Waste Fund, the city has been able to accumulate the fund balance allowing for the purchase in FY 2019 of large capital items rather than issuing debt and paying interest on it, including the purchase of several garbage trucks, according to Beckman.
Changes in revenue include a proposed $1 fee increase to customers for garbage collection and a $5/ton fee increase for the landfill. The current rate for garbage collection is $18 for residential and $37.50 for commercial.
Council looking at moving Golf Course Fund into General Fund
Council members also discussed at length the Golf Course fund, which has repeatedly been “in the hole”.
“It’s been a course of over 10 years in order to get a -$1.4 million fund balance in the golf course,” Haverlah said.
The expenditures and revenues match for the proposed FY 2020 after proposed budget cuts to include cutting the hours of Golf Course staff.
Haverlah explained to council members that the deficit in the Golf Course Fund started several years before 2007 and 2008. There was a balance in the fund because there was a transfer from the General Fund into the Golf Course Fund, but the city council eliminated the transfer because they figured the golf course was an enterprise fund and needed to stand on its own, he said.
“In essence what that did was it really just messed up the chart,” Haverlah said. “All of those negative numbers doesn’t mean we still owe somebody $1.4 million. What it means is the General Fund continued to cover that cost, there just wasn’t a transfer from the General Fund into the Golf Course Fund.”
The golf course itself has an outstanding obligation to the General Fund.
Council member Kirby Lack asked how the city council could go about fixing this before council member Jay Manning spoke up
“It looks to me like determining at some point that it’s an enterprise fund and that it should stand on its own is an accounting disaster because it’s not going to do that,” Manning said.
Mayor Bradi Diaz agreed with Manning and called the golf course an “asset to the city”.
“And I think it should be considered an asset just like our parks are an asset to the city, our library is an asset to this city and I don’t think it should be considered – it’s never going to cash flow,” Diaz said. “Whenever, like Mr. Manning said, as soon as we tried to treat it like an enterprise fund is whenever this started, and I think we’re making ourselves look bad financially with this huge deficit on our books when we should be supporting in my opinion our golf course financially.”
Diaz said she thought it should still charge members and make money, but it shouldn’t be expected to make a huge profit.
“And I don’t understand why we have always had this mindset that the golf course should be some miracle money-maker for the city of Copperas Cove,” Diaz said.
Council members gave consensus to directing Haverlah to bring a future agenda item to discuss the steps necessary to move the Golf Course from an enterprise fund back to a governmental fund.
Upcoming budget meetings, hearings
The next City Council meeting will be July 16. On July 30, there will be a workshop meeting to discuss the tax rate and fee schedule changes, with public hearing on the proposed budget during the regular meeting. On August 1, city council will hold a workshop for outside entities and Hotel Occupancy Tax Funds requests before holding a record vote on the proposed tax rate and setting a public hearing on a tax increase.