City Council - Special Meeting

Don't do that. But it shows that you God gave me two of these. I can tell you there. Trust me. Those bunches that he gave me, I use. It is 5:30. I call to order this special city council meeting September 2nd. 125 at 5:30. Please note that we do have a quorum present on our agenda tonight. Item number two, first reading, discussion of possible action on an ordinance amending ordinance 2024-10-03 to reflect modifying city of commerce water and wastewater rates for FY2026. Mr. Lisby, city manager.

Mayor, council, thank you for the opportunity to present tonight. uh we took what is normally a workshop and and asked for a special council meeting. Uh as part of our annual budget adoption process uh in addition to the the budget adoption, the tax rate adoption, we typically have an additional process to adopt water and wastewater fees um and solid waste or trash collection fees. Um and we do two readings of those ordinances. And so in order to get them uh adopted in September in conjunction with the budget, we needed a first reading at the workshop and the second reading will be uh subsequently in our regular uh September meeting. And so uh in setting up the conversation for the water and wastewater rates, uh I want to take a couple of steps back u revisit some of the material we talked about in our last meeting when we were discussing tax rates. um because tax rates, utility rates um are all part of support of the budget that's being adopted. And if all I did was put the rates in front of you without the context of where it fits in the overall budget, uh that might not be as beneficial for the council or for the public. And so I want to talk just briefly uh about the services that local government provides and then the rates that generate the revenues necessary to cover the cost of those services. Uh it is uh increasingly popular uh in Texas and across the US uh to um to rant and rave about the growth of government uh the waste, fraud, and abuse of the expenditures within government. Uh and I'm typically tend to agree with most of those sentiments. uh and at most levels of government there is a lot of

inefficiency uh because it doesn't typically operate exactly like the private sector does. Uh at the local government level which is the closest form of government that you're ever going to reside to. uh there are some services that we provide that it's practically not possible to operate like uh a for-profit business or or like the business world does. And so as we talk about the taxes or the rates and the cost it has on the citizens uh I want to provide some perspective of the value of the services that those rates support and the role that those services play. Uh so on the screen uh you've got a graph that is um the expense budget for the general fund and I know this particular item is talking about water rates. Uh but as you look at each department and each service that is provided to our local community, uh I want to point out that most all of these services are services that the private sector can't or won't provide because there is not a business model that works uh in a typical for-profit environment. So, as an example, fire and emergency services. Uh the capital cost, the barrier cost of entry to have a privatelyun fire department uh in a local community. Uh the capital cost, as we just saw, uh with a ladder truck being $1.9 million, uh engine 3 being $900,000 and change, brush truck being almost $400,000. uh the equipment necessary to provide those services is very costly. Um and there's not a business model in which you can build the people that use the service. Uh and so what typically happens in those public services that

are necessary for a healthy community, but there is no business model in which you build the users of that service. uh if the private sector did it then you would have a large number of people taking advantage of the service using the service but not paying anything towards the cost of the service and so it unfairly shifts the burden of those costs to a small group of users where a large group of users get to benefit from those services. Uh and so police, fire, uh parks and recreation, code enforcement, uh municipal court, public library, all of these services are necessary for a healthy and vibrant community. But there's not a method in which you can build the users in a way that makes that cost affordable or makes that service sustainable. And so governments use taxes of one form or another to generate the revenue necessary to provide those services. So a tax is different than a fee and that the purpose of the tax is purely to raise revenue and you need enough revenue to cover the cost of the services and the amount of the tax is not tied to the cost of the service. It just generates revenue necessary to cover the cost of all the services that are provided. Um and so as we look at uh property taxes or taxes that are provided in our community, these are the services. a lot of numbers on this screen. Um, but on the right hand side is a basic summary of our general fund. Um, public safety services, our police, fire, animal control, municipal court, and emergency management. Uh, that totals $4,621,377 or 55.9% of the general fund expense budget. Um,

property taxes bottom left. Uh this budget anticipates $3,92,395 of operating and maintenance property tax revenue. And so the property taxes that we receive don't cover the full cost of public safety. Uh and public safety is the fundamental most basic service that we provide to our community. Uh and so when you look at the revenues generated from these taxes, uh property taxes doesn't even cover the cost of that fundamental public safety component. Uh and so we have a whole list of other services and fees and and charges that we use to try to recover uh the cost of all of the services that are provided. But generally for the general fund, public safety is $4.6 million. Non-public safety is $3.6 6 million for a total of about uh 8.2 $8.3 million of expenditures. Now, within the tax base, it's it's interesting to see um there's going to be a lot of charts and colors here. I'll try to move through them quickly, but if you look at the number of properties or tax accounts that are each classification, uh residential properties uh are roughly 50% of the tax accounts or tracks of land uh that are within our community. Uh 615 of those are vacant land uh which don't have a a land use associated with them. Uh then a and commercial uh make up the the remaining portions. Um so there's just how the land is used shaking it out. Uh how the acres uh so if residential is almost 50% of the accounts uh there are 596.7 acres uh of the total acreage of our

community. Uh so a land uh is the largest uh amount of land within our community and then the tax exempt is the second largest amount of land within our community. Uh within those categories the new value that was added in this last year almost all over 75% of the new value added our community was residential in nature. uh the rest was commercial uh land use that had new development, new additions. Um now of the total city uh the market value uh right at $1.6 billion of valuation in total. Um residential is at $377 million of valuation. Then you've got a small sliver that's vacant a land. So again, if you look at the number of acres of a land as a huge portion of our community, the value of that land is relatively small uh in terms of market value for our community, but 55% of the value of our community is listed as tax exempt. Um and so the taxable value uh then moves into residential properties are the of or probably 55% of the taxable value of our community are associated with residential properties. That's single family and multif family uses. Um commercial is the next largest and industrial after that. Uh so if you look at the total value of our community, there's a huge chunk of the value of our community that's tax exempt and it comes off the table. So of a $1.6 billion valuation, roughly $660 million of that uh is taxable. And so the majority of the tax value in our community that is taxable

falls on the residential customers. And so as we look at the cost of the services that we showed at the beginning and how we distribute the cost of those services, these are all essential services that the community needs to be healthy and vibrant. And unfortunately the residential class property owners in this community have to bear over half of the cost of those services because of how the property is is laid out within our community. Um and so as we saw um in our last meeting uh the no new revenue tax rate which is calculated and given to us um by the state is 82 cents uh and the proposed budget that we have in front of us that bottom line uh proposed rate is 83 cents and some hanging decimals. Uh and so there is a slight tax rate increase uh proposed for that budget. And again, uh, we recognize that there's some impact on the residential side because they have the majority of the taxable property, uh, within our community. Now, what the impact of that residential tax is going to be, uh, the median home value on this chart uh, is kind of in the middle. $184,611 is the median value of a residential property uh, in our community. And so with the bottom line, that tax increase is 3 cents and some trailing decimals. Uh for that median home of $184,000, their annual tax bill will go up $58.51 or approximately $4.88 a month. Uh is what the additional cost would be of that property tax. Again, we covered this last time, but I want to add that to the conversation as we talk about the impact of water um and sewer rates and what it will have on those residential

customers. Now, for that tax rate, um we've looked at um this is the math that the state gives us. Very bottom line, uh you're going to have an additional $196,000 of tax revenue uh from this tax rate that's being proposed. 111,000 of that is coming from new construction, mostly residential. Uh and so the tax increase as far as the state uh regulatory language is required is an additional $85,000 approximately of property tax revenue that we're asking for uh from the community and what is the value they're getting for that additional uh tax revenue. Uh we saw these numbers earlier on the public safety side. Uh we've got 10 uh new patrol vehicles uh that are in the budget for a total of $80,000 a year. Uh we've got fire engine number three uh that's $66,000 a year. A new public radio system, $70,000 a year. Uh an improved forensics at $12,000 a year. So just on public safety alone, we're asking for an additional $85,000 revenue, but we're improving the level of service or adding new services to public safety uh as you see in those four line items. And then in parks recreation, uh we have the middle school gym uh that we are using as a rec center. Uh and then the significant improvements to the baseball fields at anymore. So there's a lot of improvements to the level of service that is being added uh for the relative cost of a monthly cup of coffee uh for residential uh for the average residents. Uh and so we feel like there's a tremendous amount of value the community is receiving uh for that conversation. uh as we start looking at uh the water

utility uh within the water utility system uh 86% of all water utility accounts are residential in nature. Uh we saw on the tax side uh residents for taxable value or about 55% of the community. Uh they're 86% of the accounts uh that we have and commercial is almost 11% of the accounts. Um and then the remainder are all small in terms of the number of accounts. If you look at consumption uh residential consump consumers use 42.7% of the water. Commercial uses 15.7% of the water. Uh institutional uses 13% of the water. Industrial uses 10. And then wholesale is 18.6% of the water that we produce uh goes outside of the community to rural users uh that we have wholesale contracts for. So while residential accounts are 86% of the accounts, they consume 42% of the water. Now on the water side for the revenue right now residential customers both single and multif family provide about 50 to 51% of the revenue. And so over the past several years we've seen that residential customers have typically subsidized commercial customers because they use less water at 42% but they provide more revenue at 50%. And so as we've been adjusting the rate structures, we've been slowly shifting that to par uh so that the class of customers that the revenue they generate should be consistent with the volume of water uh that they uh consume. Um but you'll see on the wholesale side, wholesale uses 18.6% of the water. They

provide 9.2% of the revenue. Um and so as we are raising the rates uh that we charge to wholesale customers that is improving that scenario. Um sewer revenue u residential customers provide about 53.5% of the sewer revenue. Uh commercial is 15 institutional is 21 um industrial is 10 and we don't have uh wholesale sewer revenue customers. So, what we're asking for tonight in the ordinance, taking a look at how we're changing uh the water and sewer rates uh for the residential class customers, uh we still have what we call the lifeline rate for residential class customers. And so, that's the first 4,000 gallons of water consumption. That $4 per thousand uh consumption charge is actually below the marginal cost to produce that water. So, in theory, you could say that we're losing money on those 4,000 gallons uh because it cost us more than 4 thou $4 a,000 to produce it. Um but it is uh essential for basic life necessity needs and so we protect that first 4,000 gallons at a lower uh rate. It also protects uh the large number of our homes that are senior citizens or on fixed income. Um, and we'll see later that about 67% of our customers never get outside of that 4,000 gallons uh consumption range. But then as you use more water from there, the cost escalates. So 5,000 to 15,000 is $6.75. 16 to 50,000 is $7.75. And if a residential account uses more than 50,000 gallons, then it's 875 uh per thousand after that.

Um potentially um multif family as apartment complexes uh they don't have the lifeline rate because you usually have one large meter for multiple units and there's no way for us to calculate that out uh than commercial, industrial, institutional and wholesale water contracts. the contracts that we have with those wholesale customers control how we escalate those rates. And so we've demonstrated that they use more water but provide less revenue. We're slowly working within the contracts we have uh to adjust those rates and bring some some equity there. Um on the sewer side again we have the same lifeline rate on the sewer charge for residential accounts. It is tied to your water consumption. So, the first 4,000 gallons of water consumption will also see a $4 per thousand charge. Um, and then for residential accounts, anything above $4, it's that $7.75, but we cap that at 10,000 gallons uh of consumption because studies show that a residential account using more than 10,000 gallons, um, most of that additional water is not going down the sewer line. that's probably a discretionary outside use uh on the yard or in a pool or washing a car. Um if my grandkids are there, they're playing in the sprinkler and so that water is not going down the sewer line. Uh and so the assumption we make there is anything less than 10,000 potentially is going down the line. Um may or may not, but we don't have a way to measure and know for sure. um multif family, commercial, industrial, all of their water consumption uh includes the sewer charge. Um and so um the impact of that, we saw the impact of the tax uh rate that's proposed on customers. So, what this table, again, a

lot of numbers and I apologize, but for residential customers that use 4,000 gallons or less, uh 67% of our residential customers stay within that 4,000galon a month range. Their current bill is $80. That's both water and sewer for 4,000 gallons. The proposed change is going up to $82. That's a $2 a month increase uh or a 3% adjustment. uh 28% of our customers uh never get above 10,000 gallons a month. Um and so for a customer using 6,000 gallons, their bill will go up $3 a month. Uh and for a customer using 10,000 gallons, their bill will go up $5 a month. So all in uh we saw that the average residential home, the tax is going to be about $4.88 a month on the property tax rate. Uh for the utility rate, the average residential customer will see an increase of $2. So you're looking at about a $6 to7 a month impact for the average residential home in our community. And that supports the budget that was presented. On the commercial side, um 58% of the commercial accounts use 4,000 gallons or less. Um but then you've got restaurants and other commercial businesses that use more. And then finally uh on the industrial or institutional side uh they're using a lot larger volumes of water but it's basically a 3% increase across the board uh is what you're seeing for all of those classes of customers. And uh that concludes the presentation and I'll be happy to answer any questions that you have.

Any questions for Mr. Lisby? There being none, may I have a motion? I move that we uh move forward on the first reading on the ordinance amending the two 24 uh 24103 to reflect modified city of commerce water and wastewater rates for fiscal year 2026. We have a motion and a second. All in favor say I. I. Any oppose like sign?

Motion carries. Thank you. Item number three, also a first reading discussion of possible action on an ordinance amending ordinance 2024-10-02 to reflect modified city of commerce solid waste fees. Miss Campbell, assistant city manager, financial services.

Good evening, mayor and council. So, um along with the water and wastewater rates, uh we usually bring solid wastes uh rates um for two readings before you guys. Um with the city sanitation contract being reviewed and um negotiated currently, I know you haven't seen that yet. I know it hasn't been a motion yet, but anticipation of that, we wanted to go ahead and get the solid waste fees in front of you that we are proposing to um bill our customers. The residential rate that everybody sees um is not changing. Um, uh, I believe city sanitation has requested a 2 and a.5% increase to their fees, um, and which you guys will negotiate and talk about during that contract. And so what I did was I took that 2.5% on their increase and just uh, pushed forward the typical 5% increase that we do with our um, customer rates. We try not to have a very large margin. Um, we try to keep it at the 5%. And we do the 5% mainly because when we do that large pickup, that fall and spring pickup, we don't bill that to the customers per se on their bill. So, this 5% helps us kind of make sure that we're covering the cost of those large bulk pickups that we do. Um, and so the rates that you have in front of you are in theory 2.5% higher than they were um last year. Uh, with the residential rate of I believe it's $19 and some change. I don't have it in front of me, I'm sorry. Uh, that will remain the same.

Um and then the only other thing that is dependent is um large pickups that we have to have uh Republic come and do. Um we go based off their rates. It's a pass through rate from city sanitation to us. It's a pass through rate. Um, and typically that is only done on um internal um sludge pickup from the wastewater plant at this time. Um, and so that's the only one that's based on a pass through. Everything else is um 5% higher than city sanitation uh bills us and it's only at 2 and a half% from last year. if you have any questions. Any questions for Miss Campbell?

There being none, may I have a motion? May I make a motion that we adopt ordinance amending ordinance 24102 to reflect modified city commerce sideways? Second. We have a motion and a second. All in favor say I. I. Any oppose? Like sign. Motion carries. Thank you, council. We have no other items on our agenda for this evening. So, may I have a motion to adjurnn? Move. Second. All in favor say I. Post like sign. We are journ at 555.

Don't let the door hit you on the wind. No. Let's see. She goes, "Oops, I forgot.