McAllen considering $655M budget as sales tax revenue reaches historic level

McALLEN — “Let me start by telling you that the city of McAllen is in great shape. It really is. It’s in such great shape that it’s a little scary.”

That’s how McAllen City Manager Roel “Roy” Rodriguez kicked off the first in a series of budget workshops with the city’s department heads and elected officials during a pair of workshops at the Champion Lakes Golf Course this week.

A combination of historic sales tax revenues, booming development and residual monies leftover from federal COVID-19 relief funds have put the city in a position to fund more than half a billion in appropriations, the city manager explained.

The city’s finances are in such good health that officials are recommending a tax rate decrease of just over 2.26 cents.

“Nothing could make me happier than to have a budget like this, where we’re recommending a tax rate decrease,” Rodriguez said last Wednesday, after the second workshop.

The city’s finance department has been working on the proposed budget for months based on revenue projections and knew a tax rate decrease was likely. But, when officials received the official property tax tallies from the county earlier this week, they found reality had exceeded their expectations.

“It’s substantial,” Rodriguez said of the proposed tax rate decrease. “But in fairness, we have grown tremendously in our city, and so we’re receiving new revenue. And one, part of it is how the state law works, and the other is it’s the right thing to do.”

Currently, McAllen levies a property tax rate of $0.4799 cents per $100 valuation, meaning a home with a $100,000 valuation would owe $479.90 in ad valorem taxes.

Rodriguez is recommending the McAllen City Commission approve a tax rate of $0.457285 per $100 valuation in the coming year.

At that rate, a home valued at $100,000 would owe $457.29 in property taxes.

The city manager attributed the tax rate decrease to both higher property valuations by the Hidalgo County Appraisal District, but also to an unprecedented amount of growth.

“That’s because of the incredible amount of construction that has gone on in McAllen, and the fact that the values in McAllen have gone up. We saw a tremendous increase in our footprint,” Rodriguez said during Tuesday’s workshop.

But it’s not just property taxes. Sales tax revenues have also hit historic levels.

“The budget reflects about $90 million worth of sales tax revenue. We’ve never hit $90 million in our history,” Rodriguez said.

That stellar sales tax performance has allowed a 19% reduction in property taxes, he added.

Altogether, those and other revenues will allow McAllen to fund some $655 million in appropriations across the entire city, which includes things like public safety and parks, but also operations at the city’s two international bridges, its Public Utility Department and more.

McAllen’s general fund, which pays for city operational costs, is also in excellent shape.

Officials are projecting that revenues there will exceed expenditures by just over $8 million.

And the general fund’s unassigned fund balance, sometimes called a rainy day fund, is projected to grow to more than $76.6 million.

That’s enough money to fund more than half a year of operations.

“We’ve got 201 days of working capital,” Rodriguez said after the workshops. That figure is well in excess of the 140 days in reserves mandated by the city policy.

Those revenues take into account recommendations to give a 1.5% pay increase across the board to non-civil service employees, as well as a 4% pay bump to McAllen’s firefighters, and a recently agreed upon 5% pay increase to its police officers.

It’s also enough to fund the creation of 11 new employee positions. Revenues from other funds will go toward funding the creation of another half dozen jobs, for a total of 17 new employees, Rodriguez explained.

And during the first pay period in November, longtime McAllen employees will see new longevity pay incentives reflected in their paychecks.

The $655 million budget also includes some $339 million in capital outlay and projects.

“That’s bigger than most budgets in Texas,” Rodriguez said Tuesday.

Of that, $280 million is allocated for construction projects, while the remaining $59 million will go toward high dollar purchases requested by various departments, including things like vehicles and equipment.

City leaders will continue to discuss the proposed budget during additional workshops throughout the month. The commission will vote on the final proposed budget and tax rate in late September.