Following a Kerrville City Council Candidate Forum held last week, City of Kerrville Public Information Officer Stuart Cunyus submitted clarifications to some of the topics discussed at the forum.
The city’s budgeting process is transparent and open to public input and comment. Below is a brief timeline of the City’s budget process during the compilation, presentation and ratification of the recent FY2021 budget:
• March 10 – Budget workshop (open to the public).
• June 16 – City Council Budget Workshop (televised).
• July 20 – Kerrville Daily Times story – “City Council to discuss Kerrville’s 2021 budget.”
• July 21 – City Council Budget Workshop (televised).
• July 31 – City places FY2021 Proposed Budget on city website, with copies placed for public viewing at the Butt-Holdsworth Memorial Library and in the city secretary’s office.
• Aug. 1 – City Manager announces FY21 city budget available for review in “Keeping Up With Kerrville” column, which runs in Kerrville Daily Times and Hill Country Community Journal newspapers, the City of Kerrville’s Facebook page (with its more than 9,300 followers), and on the city’s website and Twitter feeds. All of these outlets (KDT, Hill Country Community Journal, Facebook, website, Twitter) provide direct link to the budget posted online on the city’s website for citizen review.
• Aug. 11 – City Manager presents budget to City Council (televised and open to public comment).
• Aug. 11 – Public notice placed in KDT regarding public hearing on FY21 budget on Aug. 25. Notice also placed on city website and run continuously on city’s Channel 2.
• Aug. 19 – HCCJ story, “City unveils 2021 budget.”
• Aug. 21 – KDT story, “Kerrville City Council to host public hearing on 2021 budget.”
• Aug. 25 – Public hearing and first reading for budget (televised and open to public comment).
• Sept. 3 – HCCJ story, “City approves FY21 budget, tax rate on first readings.”
• Sept. 8 – Public hearing and second reading for budget (televised and open to public comment).
The city’s budget can still be viewed online by anyone who wishes to do so at https://www. kerrvilletx.gov/DocumentCenter/View/36143/FY2021-Proposed-Budget-Book.
The city has NO unsecured debt, and the city’s debt financing has once again been reviewed and rated “AA” by Standard and Poor’s.
For more than 150 years, S&P Global has been gathering intelligence in every corner of the globe to deliver the credit ratings, assessments and analyses that governments, companies and individuals depend on all over the world. The company is listed on the New York Stock Exchange under the trade symbol SPGI.
At the end of FY2020, the City of Kerrville’s total tax-secured debt obligation (outstanding principal) is $66.5 million. Of this amount:
• $40.7 million is supported by Water Fund revenue and pays for projects like the new Legion Lift Station (which will provide expanded water service to southeast Kerrville), the reuse pond (which provides treated irrigation water to large commercial water customers and thereby saves valuable drinking water for citizens), and other water and sewer infrastructure needs.
• $11.8 million is supported by 4B sales tax revenue and pays for projects like the Kerrville Sports Complex and the River Trail, both of which generate substantial dollars for the local economy.
• $14.0 million is supported by property taxes and pays for streets and drainage improvements and expansions, as well as other needed infrastructure projects and city operations.
While only the $14.0 million is required to be secured by property taxes, the City of Kerrville securitized the other $52.5 million in debt in order to obtain the most advantageous interest rates on that debt. As in all prior years, the city expects that the Water Fund and 4B sales taxes revenues will be sufficient for debt service obligations on the $52.5 million. The city does not anticipate paying Water Fund or sales tax-supported debt with property taxes in any year.
The city also has a $7.5 million loan with the Kerrville Public Utility Board that is secured by franchise fees, not property tax.
S&P Global’s comments on the City of Kerrville’s debt include the following statements:
• The fiscal 2021 budget is balanced with underlying assumptions that we view as conservative, particularly given the uncertainty associated with the (COVID-19) pandemic. In the event that revenue trends remain depressed or unexpected expenses arise, Kerrville maintains very strong available reserves and liquidity that it could use to keep the budget in line, supporting near-term stability.
• We view the city’s management as very strong, with strong financial policies and practices under our FMA (Financial Management Assessment) methodology, indicating financial practices are strong, well embedded, and likely sustainable.
• Officials also maintain a five-year financial forecast that is based on conservative assumptions, with a goal of ensuring fiscal sustainability and maintaining desired reserve levels.
• The fiscal 2021 budget is balanced and approximately 2.4 percent lower than the fiscal 2020 budget at $28 million.
• Kerrville's budgetary flexibility is very strong, in our view, with an available fund balance in fiscal 2019 of 30 percent of operating expenditures, or $8.6 million.
• In our view, Kerrville’s debt and contingent liability profile is strong. Total governmental fund debt service is 7.4 percent of total governmental fund expenditures, and net direct debt is 69.9 percent of total governmental fund revenue. Approximately 66.9 percent of the direct debt is scheduled to be repaid within 10 years, which is in our view a positive credit factor.
Long-range water supply plan
The City of Kerrville commissioned HDR Engineering to perform a long-range water supply plan for the city in 2019, which was adopted by the city council in January 2020. That plan laid out five “recommended water supply strategies” for Kerrville:
• Additional Conservation;
• Local Ellenberger Well;
• Remote Ellenberger Well Field;
• Water Right Acquisitions;
• Water Right Amendments.
HDR wrote, “The combined supply from these strategies is more than sufficient to meet Kerrville’s projected need of 1,730 acft/yr in 2050. Should projected growth rates continue to 2120, the need for additional water supplies would require Kerrville to expand the remote Ellenberger well field, develop alternative strategies, and/or import water supplies from other sources outside of Kerr County.”
Per the alternative strategies above, HDR identified and included two possible strategies for the future:
“ASR expansion with additional treatment capacity and advanced treatment of treated wastewater to create a potable reuse supply.” (Page 7 of the “2018 Kerrville Long Range Water Plan,” which can be accessed at https://www.kerrvilletx.gov/DocumentCenter/View/35169/2018_Report_Kerrville_Long_Range_Water_Plan_Final.)
It should be emphasized that “advanced treatment of treated wastewater to create a potable reuse supply” was an alternative water strategy suggested by HDR, NOT the city, in the event of severe drought conditions and only if the other recommended strategies were not successful. The city is not considering using treated water for potable uses, and in fact cannot do so under current conditions, as the HDR report points out on Page 34:
“The City does not currently have the infrastructure to treat and distribute treated wastewater effluent to potable water customers.”
The city’s 95-million gallon reclaimed water storage facility was built to supply the needs of large irrigation water customers like Scott Schreiner Golf Course, the Kerrville Sports Complex, the Kerrville Soccer Fields, Schreiner University, Tivy High School, Comanche Trace Golf Course, and River Hills Golf Course. These facilities formerly relied on potable water for their irrigation needs, so the use of treated wastewater is conserving vital potable water for our citizens, and will continue to do so during periods of extreme drought conditions.”