July 28, 2019 • EPE Related News
City budget discussions continue, commercial property valuations fall
City budget discussions continue, commercial property valuations fall
City officials were surprised to find that commercial property valuations fell in reports released by the Central Appraisal District — reigniting concerns about continued tax burdens on residential property owners.
Budget discussions continued Monday as the El Paso City Council prepares to adopt its finances and tax rate for fiscal year 2020. Next week, city staff will present recommendations for an ordinance setting the tax rate along with requests from city representatives.
City officials were puzzled by the decrease in the valuations — the first drop in at least seven years — because there has been an increase in commercial construction for the last three fiscal years and amped up efforts in economic development. The city saw almost $254 million in new commercial construction last year — a 3.5 percent increase from the year before.
Commercial taxable properties went from $7.3 billion to $7.2 billion, according to data provided by the city. That represented a .6 percent reduction from last fiscal year.
Generally, cities look for commercial property value growth to help fund growing budgets associated with operating and management costs and to alleviate the need to lean on residential property taxes.
“This is cutting into muscle,” City Manager Tommy Gonzalez said.
Values came in last week with residential values going up 2.9 percent. Total taxable property for residential and commercial properties combined for a 1.36 percent increase, which came short of the 2.2 percent rise city staff was expecting.
The council is scheduled to adopt a budget and tax rate Aug. 20. The City Council also continued discussions about rolling out a bond initiative valued at nearly $1 billion for the Nov. 6 ballot.
For now, the city has a proposed $1 billion budget for the 2020 fiscal year and a 4 cent increase in the property tax rate. The operation and maintenance costs still sit below rollback rates, according to Robert Cortinas the city’s chief financial officer.
The effects of businesses protesting property values
District 6 City Rep. and Mayor Pro Tempore Claudia Ordaz Perez asked if the reduction in commercial taxable property valuations had to do with businesses protesting their properties values.
Cortinas, the city's chief financial officer, said the biggest commercial properties including the former Western Refinery, El Paso Electric and local hospitals had come to agreements over contested property valuations.
But the appraisal district is still considering other property valuation protests and may be reporting a cushion or estimate of where valuations may be when agreements are finalized, he added.
Cortinas said he is requesting the entire tax roll from the CAD and a list of protests the agency has on file for the fiscal year to analyze.
Ordaz Perez expressed her concerns that commercial property owners continue to challenge valuations against the Central Appraisal District in efforts to reduce the taxable valuation of their properties. It further puts a burden on residential property owners, she added, and is one reason the City Council has initiated efforts to bring businesses to the city as part of the economic development strategy.
Mayor Dee Margo and a few city representative expressed interest in having members of the CAD present their findings next Monday.
"It makes no sense," Margo said. "We may want to take some public action stating our concerns publicly."
November ballot discussion
The City Council has until Aug. 13 to decide what it will place on the ballot as part of a nearly $1 billion bond initiative to pay for public safety, streets and animal services costs.
For now, the council has directed staff to prepare for a bond election but have not decided what El Pasoans will vote for. On Monday, they continued that discussion and will continue next week.
Bonds worth $940 million would go into paying for street reconstruction, street resurfacing, police facilities, fire facilities, animal services and public health.
City staff provided two options for the council to consider when placing items on the ballot. The first option would allow El Pasoans to vote by separate propositions along with the total amount per item including: police, fire, streets, public health and animal services.
The second couples police and fire together and the rest would be the same.
There are new concerns about what would happen if voters did not approve the bonds, specifically for public health. The El Paso Department of Public Health would receive needed funds from the bond to make its move from 5115 El Paso Drive.
The Texas Tech University of Health Sciences Center El Paso is interested in the building for its new dental school.
But if El Pasoans voted down the public health proposition, it's not clear how the department would setup shop elsewhere. Currently, there is nothing within the city's budget to accommodate building a new facility for the health department or moving it elsewhere.
In a pinch, the city can issue certificates of obligation, which is non-voter approved debt, to fund shortfalls or emergencies. But if the public health proposition is voted down, the city would not be able to use certificates of obligation, according to bond counsel Paul Braden.
Braden said the city would need to wait three years before it'd be able to issue certificates of obligation related to anything that's voted down in the bond initiative due to state laws.
District 2 city representative Alexsandra Annello asked if there is a backup plan for the health department if the proposition is voted down in November and District 1 city representative Peter Svarzbein floated the idea of eliminating it from the bond initiative.
The council agreed the issue needed to be thought through longer and will discuss it next week.
"That is a valid question that needs a thoughtful answer," mayor Margo said.
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