Mercedes officials are looking to tighten the city’s financial belt as they work to develop a balanced budget for the 2021-22 fiscal year.
An increase in expenditures, combined with rising debt obligations, and the continuing COVID-19 pandemic has put a strain on the Queen City’s finances — so much so, that as department heads stood before the Mercedes City Commission on Friday evening to deliver their budget presentations, they repeatedly made mention of the narrow line the city is walking.
“The working copy I have… shows that the budget has been reduced from last year’s budget by $113,000,” said police Chief Roy Quintanihla, who took over the department just last month.
Quintanihla — who was the first department head to speak — was referring to the amount of money he projects the police department will need to operate in the coming year. His predecessor, former Chief Jose Macias, had calculated the budget which Quintanihla was referencing.
“The amount that is here is because we are financially strapped… What was requested was what we need to operate. Obviously, there’s gonna be some additional cuts made to this. We understand it. It’s our intention to do that,” the chief said, indicating he is looking for additional ways to pare down the department’s budget.
But it’s not just the police department. Across the board, city staffers are looking for ways to make cuts in order to reconcile an expected 18% rise in expenditures versus a much smaller rise in revenues.
According to a draft copy of the proposed budget, revenues are only expected to increase by 4% compared to last year.
As it currently stands, the city’s proposed budget will fall more than $1.6 million short of available revenues, according to the draft budget.
“We understand the budget crisis that the city is going through,” Quintanihla said, before adding that the city’s cash-strapped status means the department will “have to get creative.”
“This is not the first time I’ve ever been part of an agency where the entity doesn’t have enough money… we will look for better days in the future,” the chief said.
So what does “getting creative” mean for the police department?
Quintanihla said it translates to the department operating only with what it has now — so, no new uniforms, no high-tech equipment, like new radios. And the biggest cost savings? No new police hires, since personnel account for the largest of a city’s expenditures.
The same will hold true for the fire and EMS department, where Fire Chief Javier Campos said he doesn’t plan on making any new hires, other than to fill three vacancies that have been open for months due in large part to what Campos called a paramedic shortage.
Instead, Campos will rely, in part, on the help of volunteer firefighters in responding to fire calls, he said.
Mercedes is also expecting to have higher debt obligations in the coming year.
Currently, the city owes the Rio Grande Valley Premium Outlets several million dollars as part of an agreement the city came to when the retail center first opened.
According to Finance Director Nereida Perez, the city owes the outlet mall some $6 million that it must repay over the next seven years.
The mall has been pressing for Mercedes to make its full annual contributions to the debt repayment, but thus far, the city has been paying less than that amount.
“We are scheduled to pay them 100% of the half cent, which would be about $1.5 million,” Perez said of how much the outlet expects Mercedes to pay in the upcoming year.
The city is hoping to negotiate that figure down by about half, said Place 2 Commissioner Leonel Benavidez.
Other expenses that are chipping away at the city’s coffers include its partnerships with the Economic Development Corporation of Mercedes and the Chamber of Commerce.
“We are gonna need about $133,000 from reserves,” Perez said, speaking of pulling money from the city’s reserve fund balance in order to meet funding obligations the city has promised to the EDC and Chamber.
That money will go toward funding community events, like the Texas Street Festival and Little Nashville, Perez said — events that the city had cancelled last year at the start of the COVID-19 pandemic, but which have returned this year.
There was also some confusion about expenses and revenues in the city-owned ambulance service, which first came into operation in the summer of 2019.
Since its inception, the EMS’s financials have been a source of controversy amongst members of the commission. Benavidez, in particular, along with fellow Commissioner Jose Gomez, have often questioned how the department is funded.
The pair have sought numerous times to understand the department’s funding structure, including by inviting its administrator, state Rep. Armando “Mando” Martinez, to meetings to explain it.
Earlier this year, while the city was under the administration of then-interim city manager Kevin Pagan, the commission held a series of workshops to learn more about the financial workings of the city’s biggest departments. Martinez was slated to deliver a presentation during one of those workshops, but it never occurred.
A few months later, when financial auditors delivered a report of the city’s annual fiscal review, they, too, had concerns about the EMS department’s finances and recordkeeping.
On Friday, Benavidez continued his questions about the EMS service, asking Perez how much revenue the department generated this past fiscal year, and if it was self-sustaining.
“The actual cash brought in was around $447,000, $450,000, somewhere around there. The audit does show a higher number because whatever was billed up to September (2020) was accrued as revenue,” Perez said, explaining that the EMS department had reported its billings as revenue, rather than its collections.
The discussion continued for several long minutes, with the commissioners debating back and forth about how EMS personnel payroll is funded — whether that payroll comes from the money the department collects from calls for service, or whether it comes from the city’s general fund.
“Most cities have it under the general fund because it’s not considered a profit-making fund, it’s considered a service,” Perez said.
“If you want to slice and dice whether it’s profitable or not, I think you need to decide, do you want service and people not dying?” added City Manager Alberto Perez in a comment directed at Benavidez.
But again, Benavidez lobbed a criticism that the workings of the ambulance service’s funds remain unclear.
“Our coordinator, Armando Martinez, says that it’s self-sustaining and it’s not,” Benavidez said.
“It’s all political, man,” responded Mayor Oscar Montoya with a note of frustration.
The city plans to hold additional workshops in the weeks leading up to the Sept. 29 statutory deadline for the commission to adopt a budget.
