EDC sales tax funds presented as option to offset Copperas Cove's General Fund $1 million deficit

By BRITTANY FHOLER

Cove Leader-Press

With the city of Copperas Cove’s upcoming budget planning, the city’s general fund is facing a $1 million shortfall. 

Copperas Cove city council members were recently presented with several possible options for balancing the city’s general fund budget. Two options included taking back 2/8-cent or 3/8-cent of sales tax revenue from the EDC and diverting that back to the general fund. 

The 2/8-cent would add just over $1 million to the city’s general fund, while the 3/8-cent would add just over $1.5 million. 

If the Copperas Cove city council were to send the 3/8-cent option to the voters and it was approved, that would mean that the EDC receives zero sales tax revenue and would lose its main revenue stream.

Either action would require voter approval via a special election, as when Copperas Cove voters voted in 2016 and again in 2020, to use 1/8-cent sales tax for city street maintenance and repairs. 

During that city council workshop meeting, Mayor Bradi Diaz asked whether the EDC had been informed of this discussion and was told that the Executive Director Jonas Titas had been made aware that the item would be on the agenda for discussion. 

Diaz said she did not feel like this was something that could be discussed in time for this budget cycle. The council will be receiving the prepared budget during at its June 1 meeting to next week to begin the process of finetuning the budget and tax rate for the fiscal year beginning in October 2021. 

In an email to the Leader-Press, Mayor Diaz, a former EDC board chair, clarified her stance on reallocating funds from the EDC. 

“As stated during our council meeting, I am not interested in pursuing the change in EDC rate disbursement options outlined by the City Manager during the budget process,” Diaz wrote. “However, I am not opposed to sitting down with the council and EDC to thoroughly discuss various options. I don’t think such a decision should be made without input from all interested parties.”

The Leader-Press contacted councilmembers Joann Courtland, Fred Chavez, Dan Yancey, Jack Smith, and Jay Manning for comment on the EDC options for balancing the general fund, but did not receive a response as of press time Thursday. 

While awaiting the outcome of the original 2016 special election, the EDC had to prepare two budgets, one to use if the measure passed with Copperas Cove voters, and the other budget to use if the measure failed with voters, and the EDC retained its full ½-cent funding. At this point, the EDC has already prepared and its board approved next year’s proposed budget, with the full 3/8-cent of funding.

EDC budget:
starting fund balance increases annually

The EDC’s proposed budget for fiscal year 2021-2022 shows a beginning fund balance of $7,088,148. 

It anticipates receiving $1.29 million in sales tax revenue and $1,000 in interest revenue in the next fiscal year, which means that the total funds available for the EDC are $8,379,148.

Budgeted operating expenditures are $613,318, combined with $149,426 for debt services, for total expenditures of $762,744. 

This leaves the EDC with an ending fund balance of $7,616,404. The EDC’s ideal fund balance, or the amount that the EDC would need to operate for three months, is just $153,330. 

EDC Executive Director Jonas Titas said that the EDC is very happy to be able to decrease the amount for debt service and other expenditures and not propose any budget increases, “but still have a robust and aggressive economic development program and still have the capacity to tackle a lot of the capital projects that we are talking about.”

The EDC’s current budget started with a beginning fund balance of $5,622,907, with $1.29 million in sales tax revenue and $36,000 in interest revenue. The projected year end amount for fiscal year 2020-2021 sees the sales tax revenue at $1.3 million and the interest revenue at $2,000, plus a land sale worth $919,565. 

The current budget also had other expenditures held in the budget such as $2 million for the land swap with Fort Hood, $500,000 for a Defense Economic Adjustment Assistance Grant (DEAAG) match for a Multimodal Rail/Truck Facility, $278,811 in debt services and $405,102 for the Gas Lines Capital Project. 

Over the years, the EDC’s starting fund balance has been increasing annually. For comparison, the EDC had a starting fund balance of $3.23 million in fiscal year 2016-2017. Then for fiscal year 2017-2018, following a land sale the prior fiscal year, the EDC had a starting fund balance of $5.06 million. Thereafter, the EDC began budgeting $2 million fiscal year 2017-2018 for the still uncompleted land swap with Fort Hood. 

The EDC currently receives 3/8-cent sales tax revenue, with that 3/8-cent being diverted from the city as originally approved by Copperas Cove voters when the EDC was first established. The city of Copperas Cove receives 1.5 cents sales tax revenue for its general fund, and 1/8-cent going to street maintenance and repais as approved by voters in 2016 and again in 2020. 

As with the proposed animal shelter, the city council would have until August 2021 to call for a special election to put any measure regarding EDC funding on the November ballot.

Other budget-balancing options given by city administration

Aside from calling for a special election to divert further funds from the EDC and back to the city’s general fund, other options mentioned to the council included cutting services for programs where the expenditures were far larger than the revenue they brought in, such as the Senior Center, the Parks and Recreation Athletics Programs and the Parks and Recreation Aquatics Programs. 

City staff also mentioned the removal of the homestead exemption for property taxes which would be paired with lowering the tax rate by nearly two cents, from 78.65 cents per $100 to 76.85 cents per $100.

The list of options also included the removal of three traffic unit positions from the Copperas Cove Police Department plus the Community Services Division which oversees various community programs and the department’s Public Information Officer duties. The list also mentioned cutting the number of firefighters on shift from 15 to 14, removing a part-time kennel position from the Copperas Cove Animal Shelter and cutting a position from the Library as well, to try to cut spending to decrease the deficit. 

Editors note: This is the first in a series of articles addressing the city’s projected $1 million general fund deficit.