Odessa City Manager Michael Marrero proposed a budget for the fiscal year beginning in October that would raise property taxes and boost spending, with measures aimed at retaining city employees and keeping up infrastructure amid strain on the city brought by the oil boom.
Marrero plans to spend about $93.6 million from the general fund, which funds most of the core city services and is supported mainly by property and sales taxes.
Spending in the proposed general fund budget, released on Tuesday, amounts to about a $7 million increase from the fiscal year that ends Sept. 30. But, even with soaring sales tax revenue that enables the spending increase, there are few new big-ticket items.
â€śWe have record-low unemployment and an abundance of job opportunities,â€ť Marrero told the City Council. â€śHowever, that prosperity, as you all know, has also created some challenges.â€ť
He cited a housing shortage, a struggle hiring city workers, an increased demand for city services and strain on infrastructure.
The city manager recommended buying a new ambulance for about $500,000, along with adding nine new firefighters at an annual cost of about $616,500. Mayor David Turner had cited the ambulance as a priority because of surging call loads Odessa Fire/Rescue faces.
In addition to the firefighters, the budget proposal calls for adding five other employees, including a water plant specialist, a solid waste truck driver and three inspectors in building, utility, and construction.
The budget also proposes a 3 percent raise for city employees at a cost of about $1.5 million, which includes money drawn from other funding sources for some workers such as the utility and water accounts. The city has about 162 vacancies and struggles to fill some key positions, Marrero said.
In addition to the raise, the general spending budget calls for setting $1.8 million aside to cover a study of city employee wages and pay changes that may result from it.
As the city prepares to study workforce housing through the Odessa Development Corporation in hopes of attracting private development, Marrero also plans to spend $500,000 on an undeveloped Fitch Avenue property that the city owns to develop infrastructure where officials estimate 31 homes could be built.
Marrero did not propose any water or utility rate increases.
In all, Marrero proposed funding about $3.9 million in departmental requests out of current yearâ€™s reserves and about $5 million in the budget for the coming fiscal year. Thatâ€™s about double what the city funded last year.
But Marrero recommended that the City Council later consider taking on debt for major projects to keep up with the cityâ€™s growth, such as new fire stations, a new animal control facility, road improvements and new parks.
Because of the timeline city officials are forced to follow in passing a budget, Marrero had to propose the spending plan without the final property appraisals used to calculate the property tax rate. But based on the latest estimates from appraisersâ€™, Marrero proposed a property tax rate of 47.68 cents per $100 taxable value.
That is lower than the current rate. But it would amount to a tax increase because of higher property values, bringing an additional windfall of about $2.3 million, or nearly 9 percent, to the city.
The proposed tax rate is just shy of the rollback rate that, if breeched, would allow voters to kick the tax rate down to a lower level.
Sales tax revenue collected by the city rocketed in the past year, attributed to the booming oilfield services sector in Odessa. Monthly collections average 47 percent higher than last year, and the city now expects nearly $17 million in sales tax revenue that budget writers did not anticipate when the fiscal year began Oct. 1. City officials estimate total collections for the fiscal year underway will exceed $48 million.
Despite still-surging sales tax revenue, Marrero recommended budgeting just $38.2 million for the coming fiscal year, describing it as a conservative approach in case the economy suddenly turns as it did in late 2014.
â€śWhile sales tax are higher than normal and have risen quickly, they can also decline just as quickly,â€ť Marrero said.
The Odessa City Council this month approved using a $5.8 million chunk of the sales tax windfall to cover cost overruns of the project to renovate the Ector Theatre. The theater project, with costs that doubled from estimates a year ago, is part of the city-backed downtown hotel and conference center. City officials also expect cost-overruns for the conference center, initially budgeted at $16.6 million, but not as steep.
Marrero recommended setting aside $1 million from the occupancy tax fund of the current fiscal year, filled by revenue from hotel stays. Marrero also proposed setting aside $500,000 in occupancy taxes for the coming fiscal year to cover conference center costs, if needed.
The City Council is not scheduled to adopt a budget until September, after a series of hearings over it and the property tax rate.
Itâ€™s likely that the city will not be the only local governmental body seeking to shore up property taxes this year, with school district officials discussing an election to ask voters to approve an increase.
â€śGrowth comes at a cost, because we are going to have to put in more infrastructure, we are going to have to put in more people,â€ť Turner said. â€śItâ€™s stretching everybody right now.â€ť