Kerrville City Council approved two funding agreements for the renovation of the Arcadia Theater on Tuesday night, moving the ball forward on a $2.3 million effort led by the nonprofit Kerrville’s 4th on the River (KFOR). The group applied for and received a $600,000 grant from the EIC (Economic Improvement Corporation 4B salex tax monies) along with $400,000 of HOT funds (Hotel Occupancy Tax). The group will raise approximately $1.3 million in private contributions to fully fund the project.
The $600k in 4b funds were approved by EIC last week, but council had to give its blessing for the grant to become “official.”
The KFOR nonprofit group plans to open the theater by July 3, 2020.
A short presentation was made to council and some of those slides are presented below.
The October 2018 flooding damaged the water reuse lines at the Loop 534 crossing over the Guadalupe River. The aerial utility pipe bridge was constructed earlier in 2018, and the flood event brought massive amounts of debris downstream that washed out the pipes. Since that time, a temporary reuse line was installed to serve the customers across the Guadalupe.
On Tuesday, the City announced that the Texas Water Development Board (TWDB) approved a $1 million disaster recovery grant to finance the planning, acquisition, design, and construction costs associated with the damages.
“The City of Kerrville is very fortunate to be able to take advantage of this TWDB Disaster Recovery Program, which has helped make this a real lemons-to-lemonade type situation. The city intends to leverage these grant dollars to redesign and relocate this water and wastewater infrastructure to the Loop 534 bridge.”
Deputy City Manager E.A. Hoppe, via a statement from City Hall
The TWDB is the state agency charged with collecting and disseminating water-related data, assisting with regional planning, and preparing the state water plan for the development of the state’s water resources.
The damaged pipes had already been removed at the city’s expense while options were investigated for funding.
The next regularly scheduled Kerrville City Council meeting will take place on Tuesday evening at 6 PM in council chambers at City Hall. During this meeting, council will consider two funding agreements to partially fund the renovations at the Arcadia Theater on Water Street in downtown Kerrville.
The first agreement to consider is a funding agreement between the EIC and Kerrville’s 4th on the River (the nonprofit that seeks to renovate and operate the theater). The Economic Improvement Corporation (EIC) approved this agreement unanimously during its latest meeting on June 17. The agreement provides $600,000 in funding for the project based on certain milestones and requirements set forth in the contract.
The second funding agreement is between the City of Kerrville and Kerrville’s 4th on the River, and would provide $400,000 in HOT funds (Hotel Occupancy Tax funds) for the renovation of the theater. The language of this agreement is still being finalized by City Attorney Mike Hayes, and is not available for public viewing at this time.
In addition to these two funding agreements, council will also address these items:
An ordinance to prohibit truck traffic on Riverhill Boulevard
An ordinance to amend the Alcoholic Beverage Code
A resolution supporting Kerrville as a certified “Music Friendly Community”
Waiver of fees for the 2019 Chalk Festival
Extend the term of the Charter Review Commission
A Planned Development District (PDD) for “The Landing” along Thompson Drive
Contract for reconstruction of Hill Country Drive for $162k
As we near the end of a months-long election campaign that has been framed by a debate over debt and finances, the City of Kerrville reported today that the State Comptroller had issued the finance department a “Transparency Star” in the area of debt obligations. This program recognizes entities whose websites show visual and narrative detail on outstanding debt, tax-supported debt obligations, historical bond elections and more.
For the past two months, candidates for Place 1 and Place 2 respectively, George Baroody and Mario Garcia, have run advertisements and made statements that call into question the city’s transparency in the way the entity reports and discusses its debt obligations. For instance, in this advertisement run by Garcia on March 30, he takes issue with the way the city presented their debt obligations, and claimed that Baroody was the only person to point out this alleged flaw in reporting.
In each of their respective interviews with Kerrville United (found in the column to the right on this page) the candidates express their dismay at the way the city handles and presents information related to debt and funding methods to pay for the debt service. But the State Comptroller Glenn Hegar points out that:
By providing taxpayers with essential debt information in a variety of formats, the City of Kerrville has shown a true commitment to Texas taxpayers. This effort achieves the goals set by our Transparency Stars program. I am pleased to award the City of Kerrville a star for its accomplishments.
Texas Comptroller Glenn Hagar
The City of Kerrville Finance Department, headed by Amy Dozier, has received multiple transparency and budget awards in years past.
EDITOR’S NOTE: All statistics discussed herein are based on the best currently available data received from KCAD on April 23, 2019. We know there are some gaps in this data and some potential for errors, but this analysis incorporates the data as we received it this week and represents the best data currently available. If we receive different information, we will update this article immediately.
Last year the City of Kerrville implemented a program called the TIRZ, which stands for Tax Increment Reinvestment Zone. Under this program, “incremental” tax revenues are reinvested within the geographic zone that the city defined, which includes all of the downtown area. See our previously published video below to refresh yourself on what the TIRZ is and how it works.
Here is a map of the TIRZ area. A more detailed map is available here.
Does the TIRZ have anything to do with the rise in property valuations by KCAD?
There have been some theories posited online that suggest that the implementation of the TIRZ is somehow responsible for the rise in property values within that geographic zone. We heard from folks that identified specific examples of sharp rises in property values within the TIRZ. But these random examples don’t tell us much if we don’t have a full picture of the data. So, we went to KCAD, got the full data set for the entire county’s valuations going back to 2015, and we started crunching numbers.
Using GIS software, we identified all of the parcels within the TIRZ. There are approximately 600 parcels* in this geographic zone. Here are some takeaways for the TIRZ specifically:
The total market value within the TIRZ in 2019 is $133 million.
The total market value within the TIRZ in 2018 was $123.4 million (Please note that this value differs from the one the city presented in 2018 when discussing the TIRZ. We have reached out to the consultant to see why our numbers differ.)
That is an increase of approximately $9.63 million, or approximately 7.8%.
Compare that with the county-wide increase in total market value of approximately 7.3%.
The total value within the TIRZ rose just slightly more sharply than the county as a whole.
Given that the TIRZ makes up a significant portion of downtown commercial property, a slightly sharper rise is not unexpected.
(* Footnote: Parcels come and go year to year, so the number of parcels isn’t actually consistent from year to year. There are several reasons for this, but those reasons are outside the scope of this article.)
Now let’s go over some of the specific changes within the TIRZ:
There are approximately 589 parcels within the TIRZ that have appraisal values for 2019.
Of those, 165 parcels (28%) increased in value from 2018 to 2019.
Of those that increased, the average increase was approximately $81,000.
395 TIRZ parcels (67%) saw no change in value from 2018.
29 TIRZ parcels (5%) were decreased in value from 2018.
Here is a map showing the TIRZ parcels. Gray had no change, green decreased in value, and orange increased in value.
What about the City of Kerrville as a whole?
Here are a few statistics about the city valuations as a whole (inclusive of the TIRZ area):
There are approximately 11,000 parcels within the City Limits (as per the KCAD assignment of CKV taxing entity)
The 2019 total market value for CKV parcels is $2,239,352,154
The 2018 total market value for CKV parcels was $2,041,671,250
The one-year increase was approximately $198 million (9.7%)
Compare this figure with the county-wide increase of approximately 7.3%.
314 city parcels decreased in value since last year (2.8%)
3,867 city parcels did not change since last year (35%)
6,810 city parcels increased in value since last year (62%)
Notably, property within the TIRZ decreased LESS sharply than the city as a whole. The TIRZ increased approximately 7.8% while the city as a whole increased approximately 9.7%.
Also, the percentage of properties within that TIRZ that saw an increase is lower than the percentage of properties citywide that saw an increase.
While valuations of properties within the TIRZ did rise sharply from 2018-2019, they actually increased less sharply than the city as a whole. Properties within the TIRZ were LESS LIKELY to see an increase than properties in the city as a whole.
Again, we are studying this with the best available data. KCAD and the various taxing entities will receive certified copies of appraisals in the coming weeks, so the exact values may change. We will update our website with new information as it becomes available.
We will be live-blogging the Kerrville Area Chamber of Commerce candidate forum at Schreiner University beginning at 6:00 PM.
5:45 PM – Candidates and community members are gathering and visiting ahead of the forum, which is scheduled to begin at 6:00 PM. Chairs are set for approximately 200 spectators on the second floor of the student activity center. Behind the candidates’ stage, the easterly view looks over the front entrance toward Highway 27.
5:55 PM – The five-minute warning has been announced and all four candidates are in their seats on the stage. From left to right, there’s the moderator’s podium, then Gary Cochrane, George Baroody, Mario Garcia, and Kim Clarkson. Tonight’s moderator is Walt Koenig, executive director of the Kerrville Area Chamber of Commerce. The crowd is taking their seats and it’s a near-capacity crowd.
6:00 PM – Tim Rye, head of the chamber’s governmental affairs committee, welcomes the audience and the candidates. Walt Koenig takes to the podium and encourages the candidates, thanks the crowd for participating in democracy. “We can’t have a democracy if we don’t have a choice.”
Rules/Format: Each candidate will give a three minute opening statement. There is a timekeeper in the front row. Series of questions to follow — some from Walt and some from the audience. The audience is invited to write questions on note cards and hand them in during the event. Each question must be answered in one minute. At the end, each candidate will give a two-minute closing statement. The order of the seating has been assigned randomly, and the order of the statements is also random.
Kim Clarkson goes first. She goes to the podium for her opening statement… She was born and raised in Kerrville, came back to Kerrville after college, and taught at Starkey Elementary. Seven years later she joined her family’s business, and decided to go to work for various nonprofit organizations in Kerrville including CWJC, Habitat, Blue Santa, etc. She was asked to be on various boards such as KPSF, Chamber, Executive Women’s Club, United Way, and more. She has honed her leadership skills at these organizations and her family business. She was involved in local government via the Kerrville 2050 Plan, governmental affairs committee chair at Chamber. She has developed the necessary skills to do this job, and her heart is with this community. She has proved this with her actions, not just her words.
Gary Cochrane goes second… After thanking the chamber and the audience, he starts by saying he’s not a public speaker or a politician. He loves the community and has come to realize that we have some issues on city council that need resolution. It’s his turn to step up and make a change. We all want good roads, water, safety, etc., and have different means of getting there. This election isn’t as much about issues as it is about the people getting elected. Certain traits are important: integrity, moral standards, vision, communication, listening, trust. Trust has been violated on current council. Issues are important, but this election is about the people.
George Baroody is third. He stands at podium… He’s 51 and has lived in Kerrville 17 years. He’s an umpire. He defines the job of council as an advocate for the people. Convey the wishes of the people to the staff and the public. The vision that each has involves where they’re coming from and where they’re going. He isn’t trying to take the city somewhere. He’s continuing the traditions of Kerrville. He isn’t satisfied with the current trends going on in city government: spending is going up, debt is up, household values are up 25%, all while population is going up, and personal income is going up only 6%. The gap between income and expense is a problem. Must come to table with ideas to resolve the problem. Need accountability with our economic development. Shouldn’t be subsidizing businesses. Should invest in workers, not just businesses.
Mario Garcia goes fourth from the podium… Everything everyone just said is true. He grew up in Kerrville and he’s running to make his mom and kids proud. He’s also doing it for all of the seniors and elders in the community that raised him. He has old and traditional values. Who are these individuals running for council? He’s a Navy vet, carried top secret clearance working on nuclear weapons. Was a stay-at-home dad for a time. Started a business in Austin and brought it back to Kerrville. Wanted a sense of community for his family and children. He has been running Kerr PC for 14 years in Kerrville. He’s been hustling, working, volunteering as a coach, CMJC, and elsewhere. He comes from traditional values, has a different belief about spending (not a club to damage ourselves). He’s proud of where he comes from.
Question 1: What is your vision for the future of Kerrville?
Cochrane: His vision is not as important as the citizens’ vision. Citizens created 2050 plan, and council should honor that. Wants Kerrville to continue to grow responsibly. Can’t stand in the way of progress. He’s a big advocate for quality of life programs. His vision is to continue both of those trends.
Baroody: Keep looking forward with an eye on the past. He’d like to see Kerrville keep its identity. Growth is coming, and it must be sustainable. Need opportunities for all; not just a few. That’s his biggest factor. The people need a voice. No Kerrvillian left behind. Everyone counts equally, and policies should be equitable.
Garcia: His vision wants to be “shared.” We don’t have enough community input; need more. He has a lot of respect for past. One foot in the past, one in the future. Growth is coming. Everyone is talking about sustainable growth, but we shouldn’t inject it. It should be natural growth. Let’s have more community input and put citizens first.
Clarkson: Reads from mission statement of Kerrville 2050. “Kerrville will be a vibrant and inclusive community…” This is our statement, the vision from Kerrville 2050. Every decision should be based on a look to the vision and a look to the future.
Question 2: If elected, what would your top three priorities be?
Baroody: Economic well-being of the individuals of Kerrville; Housing; Growth status of city regarding infrastructure and potential businesses. As to economic status, it needs to be said that economic status of individuals has been neglected, and should be the focus. We’ve invested in the new instead of the existing. Once we do that, everything else becomes easier if you’ve invested in the people. “No Kerrvillian left behind.”
Garcia: Radical openness… we need to share ideas. Radical transparency means that everything needs to be open. Last is citizens. Need more citizen participation. He’s going to have monthly meetings for citizens.
Clarkson: First is civility. We are not able to effectively communicate if we can’t listen. Without listening, we can’t grow. Second, basic infrastructure and housing needs. Third, grow and diversity the economy. Bring in jobs with good wages so that all can enjoy quality of life. Lastly, quality of life. What made you want to move here? We enjoy the river trail and other thing and our future depends on quality of life so that it’s a place people want to come.
Cochrane: Our council is broken and it needs to be fixed. Second, economic growth. We have to come at it from all angles for sustainable and safe growth. If not growing, we’re dying. Lastly, housing. He doesn’t have the solution today, but we have to lay the groundwork for a solution. Baroody hasn’t put forth any ideas in his two years, but Cochrane has ideas, and he’s ready to get to work.
Question 3: What is the city’s role in terms of helping the current housing deficit?
Garcia: “Strong towns” idea. We’ve been increasing our liabilities. We need to focus on our existing beautiful neighborhoods. Build on vacant lots. Build up parks. Some things we can do downtown, too. Needs to be sustainable. We have lots of real estate inside city to continue growing. “We cannot keep going into liabilities.”
Clarkson: The city is not a builder or a developer. What can the city do? Provide a space that is attractive to builders and developers, such as city property on Loop 534. City can build infrastructure and send requests to developers to bring ideas and solutions. 2050 plan has told us that we need to diversify housing. Must play our part to encourage the kind of housing that community needs.
Cochrane: There is no easy solution. Must look at increasing density through some potential zoning changes. The city should extend services such as water and sewer to encourage development. Must begin planning for water/sewer. City isn’t in development business and city shouldn’t incentive developers. “If you build it, they will come.” Builders want to make money, so if it’s attractive to do so, they’ll come and build.
Baroody: The city isn’t a builder or developer, but we can incentivize. First, need incomes to the point where they can afford housing, and needs jobs that pay well. If Cochrane was paying attention, he’d note that projects have been proposed, but they’ve stalled, and Baroody doesn’t know why. We’ve been trying, but it hasn’t been followed through on.
Question 4: If elected, how do you see the dynamics of council working? And community engagement?
Clarkson: Citizen engagement is critical to success of city. We do not need to dictate the decisions for the future of our city. Those decisions come from citizens. We can continue to push out the information, ask questions. If we can’t communicate effectively, we can’t govern. Need a diversity of opinion, and need to be able to move forward after a decision has been made.
Cochrane: The council is a team, but doesn’t mean they always agree. Needs respect. You discuss, communicate, decide, and move forward. If I don’t agree and I lose a vote, that’s ok, we’ll move forward. Not going to keep going back to subjects from two years ago. For community engagement, he wants to reach out and hear what people have to say. The door is open to the citizens.
Baroody: The ability to have dissenting discourse and keep that civil. Right now, dissenting views are shut down. That’s wrong. You have to have the discussion. If we can’t find a way to disagree, then that’s the fault of the entire council. Just watch the last city council meeting and see how I just accepted a lot of heated comments.
Garcia: When citizens are more involved, you get the personalities out. I’m not everybody’s cup of tea. I enjoy dissenting opinions, because it’s necessary. Put it on the ballot. Put big things on ballot such as big projects, long-term debts. This is your city.
Question 5: What is the city’s role in economic development?
Cochrane: The city’s job is to provide framework and environment that is attractive to businesses. Infrastructure, quality of life, attractive place to live. When he was on EIC, companies asked what their employees would do after work. You don’t want to incentivize anyone without “clawbacks.”
Baroody: City should be in the business of setting up framework to be equal and fair. Every business has advance knowledge of risks, etc., not just “knowing somebody.” Need standards and benchmarks from our economic development strategies. We need to know what to expect from council and city. Shouldn’t use public funds in a speculative way.
Garcia: The city has to be involved, but he’s not big on incentives. He won’t say “never,” but wants checks and balances. Need to analyze and show a return on investment. Everywhere else, we need to show a return, but not in government. Must be very careful when we invest in economic development.
Clarkson: The 2050 plan says that economic development is important. We have a starting place with the comprehensive plan. Must provide infrastructure that encourages development. Need quality of life projects to attract businesses. The EIC funds are designated for these things, and we must use that money for infrastructure in support of economic development, and for quality of life projects. We must continue to use that funding source.
Question 6: How do you see your role in fulfilling the objectives of the 2050 plan?
Baroody: I want to change the title of the plan to “Our voice, our city.” Council must cheerlead for the plan but constantly review it. What needs to be tweaked? It is an evolving document. Just because it’s in the plan, doesn’t mean we have to do it. Always paying attention to what’s in the plan, but looking to better it.
Garcia: It’s a living document, not permanent. Need to have at least five years to review it before implementing it. Is it applicable to the direction we’re going? Is it future proof? We need to make sure that the citizens are involved. Need to review the document as we go. It is necessary for us to have it, to have a vision, but it needs to be reviewed.
Clarkson: We have a council-manager form of government. We hear the goals from the community, set the priority, and implement that vision. We can revise it if we hear something different, but we look at the plan and see what was identified as priorities, and we set the strategies to make them happen.
Cochrane: The citizens put this plan together. It belongs to the citizens, not to the council. It’s a roadmap, a goal, and that’s what the comprehensive plan is. We can reach the goals in many different ways, evaluate the plan on a regular basis, and receive citizen input along the way.
Question 7: Actions to develop tourist industry?
Garcia: Tourism has always been here, ie summer camps. We have never had a problem with tourism. It’s already here. We have a sufficient amount of tourists. We don’t want to be like anybody else. We can’t forget who we are. We have everything we need, we should enjoy the tourists, and we need to spend our money to take care of the residents, not the tourists.
Clarkson: We should look at building a convention center. We can attract more professional groups that come here, spend money, leave behind their tax dollars, and use those monies locally to reinvest into local community. Bring people in, then send them home, and it’s a win-win.
Cochrane: Kerrville is very attractive to tourists. We have a sense of community and environment. We need to continue to develop the river trail system as a tourist attraction and also the urban trail. We need to look at supporting downtown revitalization. Vibrant downtown is a tourist draw.
Baroody: Tourism is a secondary topic. We just keep making Kerrville the greatest city we can, and tourists will come. The river is always going to be there and we should enhance the use of it. I support downtown development, but not every mechanism used to support that. The role of the city is not about incentivizing tourism, but to welcome it.
Question 8: Give your evaluation of the overall financial status of our city.
Clarkson: Looking at the budget was the first thing I did as a candidate. I asked lots of questions. What I conclude is that we have had leaders with vision to create self-imposed debt limits to keep us from getting into a bad situation. We have a AA bond rating, clean audit, debt limits… We can sustain ourselves because we have ways prove to ourselves that we’re on track.
Cochrane: I have a degree in finance and have been in business, but I’m not a financial expert. I surround myself with experts, and I trust and verify with them. We have independent analysts that tell us that we’re in good shape. We have a professional city staff. Yes, we’re in good financial shape. I find it interesting that some of the other candidates don’t want to compare our city to certain other cities, but they will when it comes to debt.
Baroody: The financial situation is strong. We have a AA rating. We’re not going to default on debt. The taxpayier position is more important. Our median household income went down while our debt went up. We need to focus on that. We need to address any future debt this way.
Garcia: We’ve been increasing debt. Must look at the graph from a distance. Kim brought up the convention center. The comptroller has a report that convention centers are saturated and small towns shouldn’t do convention centers because it’s a waste. This is the difference of ideas. That’s one idea, and we’ll go into debt, and it will be a vacant building with no one using it.
Question 9: What priorities would you put on spending discretionary money to advance objectives of the city?
Cochrane: The city has to spend money. We have to provide the services to the community. I’m fiscally conservative. Can we use debt for capital projects? Yes. We can’t improve our infrastructure without using debt.
Baroody: Prioritizing spending is very important and we don’t spend enough time on it. Since 2011 our priorities are off-track. We focused on “wants” instead of infrastructure. We haven’t addressed infrastructure. We’ve borrowed money to spend on attractions, and we can’t borrow for other things. We should sit down and prioritize our entire budget.
Garcia: Spending happens all the time, but I’m not a proponent of going into debt. We have spent on nice things but don’t have the money to spend on other things. All debt spending is affecting future spending. We have to be very careful how we use debt. Let’s focus on primary services. Take care of infrastructure first.
Clarkson: I never said that we need to spend money on a convention center. I said that we can grow the tourism industry that way. I am conservative. I have one mortgage which will be paid off in five years, but I couldn’t have bought a home without debt. We cannot do big projects without taking on debt. We have to see the big picture.
Question 10: How do we make Kerrville attractive to all age groups?
Baroody: Until we have good jobs, we can’t retain our young folks. If we can’t get jobs with those salaries that can support a family, they won’t stay. The solution is complicated, but jobs will retain the young people, and we should focus on that.
Garcia: The Kerrville Youth Advisory Council could benefit from mentors. We should embrace them. Very few people are in their meetings. We need to educate them. When they get older, we need a workforce that’s inviting to them. I left and many others have left, too. I’d love for them to stay here.
Clarkson: We start by listening. We have the Kerrville Youth Advisory Committee. We need listening opportunities. In the future, what makes them come back? They need a job, an affordable home, and a reason to want to come back here.
Cochrane: When I was on EIC, we brought Fox Tank to Kerrville, and they provided education for welders, and that’s been successful. We can do more things like that. They must be able to make a living wage. My son graduated from Tivy and was fortunate to find a job, but most struggle to come back here. So it comes to jobs. People want to be here, but they have to make a living.
The candidates receive another round of applause. The closing statements are in reverse order from the opening statements. Two minutes each.
Garcia: Tonight was a comparison/contrast. I won on Wheel of Fortune. Before I received the money, I decided to use it wisely. The difference between us is that I’m someone who wants to spend your money to get a return. It’s easy to spend money and have no expectations. I got $40,000 from Wheel of Fortune, and I’ve turned it into more than that. I’m not a big spender. This is your money, and I need all of your input. Debt was a tool for me.
Baroody: This open discourse is rare but valuable. We’re all qualified in different ways. My qualifications are a willingness and desire to not just serve a portion, but to serve all of the community and provide the information that isn’t being provided anywhere else. All can enjoy and use that information. The issue that’s important to me is household incomes. The median household income and the number of students on subsidized meals shows that our economy isn’t as strong as we’d like to believe. We have income inequality. We have to address that. The workers that are needed here can’t afford to live here.
Cochrane: I’m up here applying for a job. The job is Place 1 City Council. You have two resumes. Hopefully mine looks pretty good. When you hire somebody, you look at experience, similar service, leadership, work with others, vision, communication, and more. It is about the messenger and the message. We need to treat others with respect. My record speaks to financial responsibility. I have the qualifications and I hope you’ll consider voting for me.
Clarkson: I want to be part of the journey. This is a marathon, not a sprint. You have to see the future and see a solution and get there step by step. That’s the challenge that city council has to look at — long-range perspective. I have shown you my heart through my service. I’ve shown you my leadership through my service in organizations. I want my kids and grandkids to come back to a vibrant community. I want to work with you to accomplish goals to lead us into the future.
7:28 PM – Koenig encourages everyone to turn out to vote and increase the rate of turnout in this election. Call neighbors and friends to turn out the voters. Thanks to Schreiner University for providing this venue free of charge. Thanks to Chamber Board. Goodbyes.
The Kerrville Area Chamber of Commerce will host the final public forum of this year’s election calendar on Monday, April 15, at 6:00 PM at Schreiner University Student Activities Center. All four candidates will participate, including Place 1 candidates Gary Cochrane and George Baroody, and Place 2 candidates Kim Clarkson and Mario Garcia. The forum is open to the public.
The Chamber has indicated that the forum will be filmed by Schreiner University and the recording will be made available for public viewing. We’ll bring you the link just as soon as it’s available.
Early voting begins one week after the forum, on April 22, and runs through April 30. Election Day is Saturday, May 4.
In the weekend edition of the Kerrville Daily Times, published on March 30, city council candidate for Place 2, Mario Garcia, published an alarmist advertisement that characterized the City of Kerrville as a debt-plagued government body that is driving the community over a financial cliff. These claims are misleading, at best. While we are used to half-truths from national political figures, we hope that our local politicians can stay “above the fray” and give the citizens honest and complete information. Unfortunately that is not the case with this ad.
According to a recent (unscientific) poll conducted on the Kerrville United Facebook page, approximately 2/3 of our readers HAVE seen city council political ads in one of the local newspapers, so we feel it is important to fact-check these ads, provide context, and give additional resources to voters to peruse on their own.
The whole story of the city’s finances is very complex and cannot be reduced to bumper sticker slogans and simple charts. But if you read no further, you should know that Kerrville continues to receive an “AA” rating from independent ratings agency Standard & Poors (you know, S&P, as in the S&P 500). The S&P evaluates cities across the country and rates their ability to pay their current debt, as well as their “credit rating” to take on new debt. It’s kind of like Kerrville’s credit score. According to Standard & Poors…
An obligor rated ‘AA’ has very strong capacity to meet its financial commitments.
Contrary to what Mr. Garica concludes in his advertisement, S&P considers Kerrville’s financial situation to be strong and healthy when considering all of the factors that they examine, including creditworthiness and capacity to meet financial commitments.
We examined the city’s finances in detail in our 2017 white paper entitled, “Financial Review of the City of Kerrville.” While the specific numbers have changed a little, the overall concepts have not, and that paper is a great primer to read before we go further.
The advertisement in the Kerrville Daily Times, which was paid for by Mario Garcia’s political campaign, also endorses George Baroody as a candidate for Place 1. The full ad is printed below. Click the image to see it full-size.
At the top, Mr. Garcia presents a table titled, “How Kerrville Compares.” In this table, he compares Kerrville to nine other cities of similar populations and gives their “Tax Supported Outstanding Debt,” “Tax Supported Debt Outstanding Per Capita,” and “Population.” However, the numbers don’t add up! The per capita debt should be found by taking the total debt and dividing it by the population. But when you do that, you get different numbers than what Mr. Garcia has presented. See the figure below. In red are Mr. Garcia’s numbers, and in green are the numbers as calculated using his figures for total debt and population.
FOOTNOTE: It appears that Mr. Garcia took these numbers directly from the State Comptroller website without checking to see if the math was correct. For an advertisement that appears to question the competence of government, he seems to put a great deal of faith in the numbers provided to him for this message.
Even if we put aside the fact that the numbers don’t compute, we can also immediately see that these nine other cities look nothing like Kerrville. For one, many of the cities have experienced much less growth than Kerrville has experienced since 2010. In fact, several of the cities including Paris, Corsicana, and Marshall have seen NEGATIVE population grown since 2010. We would expect that cities that are shrinking or growing more slowly than Kerrville would be incurring less debt to finance expansions of utilities, services, or public works. But cities that are growing, such as Kerrville, which has experienced 4.6% population growth since 2010, should be financing expansions of municipal services to keep pace with that growth — one element of responsible growth!
Other Differences Between the 10 Cities on the List
When placing these nine Texas cities on a map, one will immediately notice that none of the cities are anywhere near Kerrville geographically, and further, most of the other cities are very close in proximity to a major urban center such as Dallas, Fort Worth, San Antonio, and Harlingen. Meanwhile, Kerrville is geographically isolated out here in the Texas hill country, with no major urban centers to rely upon for major infrastructure such as water, sewer, and roads.
We are on our own to provide all of the services we need locally, which includes expensive infrastructure costs for things like a sewer plant, water plant, electrical service, roads, bridges, and more. Our unique hill country topography and relative remote location makes all of these items more expensive than they would be in flatter urban areas. Thus it is hard to compare Kerrville’s finances and operations to these other cities.
Comparing Tax Rates
One fact that Mr. Garcia left off of his ad is Kerrville’s total tax rate compared to these other nine cities. Interestingly, Kerrville’s tax rate is LOWER than six of the other cities on this list. It seems at odds with Mr. Garcia’s conclusions to point out that Kerrville, with the second-highest tax-supported debt total on the list, also has one of the lowest tax rates on the list. Kerrville has not raised the property tax rate for 10 straight years. In fact, in 2010, City Council established a policy that no new tax-supported debt would be issued that would require a tax increase. That policy remains in place to this day.
How is this possible? The reason that Kerrville is able to pay off the debt we have without raising taxes is because the majority of the “tax-supported debt” is not actually paid for with property tax revenue. For example, according to the City of Kerrville’s 2018 debt disclosure document, of the approximately $60 million in outstanding debt, more than $30 million is related to water, sewer, and other infrastructure. Those debts are typically paid off using water and sewer revenues (your water bill).
Another large portion of the debt is related to the River Trail and Sports Complex, which are bonds that are paid off using 4B sales tax revenues from the EIC — NOT from property taxes. The EIC is paying about $1.1 million per year for the River Trail and Sports complex (about 44% of the total annual debt service for the general fund). However, to get a good rate on that debt, the notes are SECURED using ad valorem property taxes. So even though we don’t use ad valorem taxes to pay off these notes, we do use the taxes we collect as COLLATERAL to secure a better deal.
As you can see in the graphs below, the city’s debt service is around $2.5 million annually for the general fund debt and about $4 million per year for the water fund debt. As mentioned above, the EIC pays about $1.1 million per year, and the ad valorem taxes only pay about $1.4 million per year right now. But by 2020, you see our debt service start to fall as some of the loans/bonds are paid off. At this rate, if we don’t incur any new debt, our payments on the general fund debt would be down to about $500,000 by 2032.
The Water and Sewer Fund debt is paid for with revenues from your utility bills, but it is also secured by ad valorem taxes so that we can get a good rate on the notes. This is another misleading factor from Garcia’s ad, because this is a large portion of our debt, yet we’re not using our property taxes to pay it off.
Garcia’s ad also mentions the city’s consideration of taking on new debt in the form of a General Obligation (GO) bond in November 2019. The city is considering a bond issue, according to statements made in the FY2019 budget (page 202). The budget document states:
The City anticipates holding a bond election in November 2019. The City will propose issuing new debt without raising taxes in order to fund General Fund projects, such as a Public Safety Complex
What’s important to note here is the word “election.” The city is contemplating putting this matter before the voters. Also, importantly, adding new debt to finance a Public Safety Complex for enhanced fire and police protection would be achieved WITHOUT raising taxes.
Financial Summary and Takeaways
City finances is a very complicated subject. It takes a lot of work to understand the intricacies. But luckily, as a voter and a taxpayer, you’re not expected to be totally fluent in all aspects of city financial statements. What you should know, though, is that Garcia’s numbers don’t add up mathematically, and they’re not a fair representation of the city’s complete financial picture.
Here are just a few key takeaways…
City Council has a policy that it WILL NOT increase taxes to pay for new debt. This policy has been in place since 2010.
Standard & Poor’s ranks Kerrville with an “AA” rating and has stated in their review that Kerrville demonstrates “very strong management with strong financial policies and practices”
The city also has a policy that Water and Sewer Fund debt CANNOT exceed 35% of the fund’s annual revenue. Right now we’re at roughly 31%, so we’re under that conservative benchmark policy.
Much of the city’s debt is not actually paid for out of ad valorem (property) taxes, but most of it is SECURED using that tax base so that we can achieve a good interest rate. Right now we pay interest rates as low as 2.25% (Water Development Board subsidized bond) which is VERY LOW.
Since a large portion of our debt is NOT paid for by property taxes, the claim that every “man, woman, and child” is on the hook for nearly $3,000 of debt is not valid or helpful.
Kerrville’s total debt has increased since 2008, as Garcia claims, and most of that increase is to pay for repair, maintenance, and construction of infrastructure projects like water and sewer facilities. Thanks to the utility bills you pay every month, the city is able to finance and pay off these infrastructure improvements that will help Kerrville continue to grow responsibly AND take care of our current needs.
The City of Kerrville passes a balanced budget every single year. For the city’s largest operating funds, expenditures do not exceed revenues.
Comparing Texas’s debt to New York’s debt does not seem relevant or important in the least. Invoking “New York values” seems to be purely political theater in this context and does not provide useful information.
Any new debt issuance for a public safety complex would be put to a vote, according to the city’s budget documents published in 2018.
Garcia’s ad is misleading and does not represent the truth about the city’s complete financial picture.
Thanks for reading this very nuanced and complicated article on a very nuanced and complicated subject! Please contact us with any questions you may have. Also, check out this video that we created in 2017 that explains the city’s finances in greater detail.
The Hill Country Area League of Women Voters hosted candidate forums at Schreiner University this week. Place 3 and Place 4 candidates answer questions in the two videos below, but no mayoral forum was held because Bonnie White declined the invitation to participate.