Lakeway City Council members voted Friday in a special session to set a proposed property tax rate of 19.29 cents per $100 of assessed property value to fund the city’s proposed 2010 budget of $7.88 million.

 The rate is an increase of 1.02 cents over last year. To the owner of a $407,000 house in Lakeway, which is the average appraised home value in the city, the increase would be $66 for the year.
If approved, the rate would equal, but not exceed Lakeway’s rollback tax rate of 19.29 cents. If it were to go above that rate, it would trigger the possibility of a petition by voters calling for an election.
Lakeway isn’t the only municipality struggling with the “revenues down, expenses up” challenge, but some council members regretted having lowered the property tax rate by 3.12 cents from 21.39 cents in 2007 to 18.27 in 2008 to be bitten by lower-than-expected sales tax revenue and significant drops in building development as the economy spiraled downward that year.
“It’s a compounding effect. We overestimated our sales taxes so we lowered the property taxes too much. We’re playing catch up,” Mayor Dave DeOme said.
In his budget presentation to council members, City Manager Steve Jones cited sales tax revenue that hit a plateau and development fees that fell from a high of $1.4 million in 2007 to $365,000 the following year. Property taxes rose from 47 percent to 51 percent of the city’s budget during that time.
He also said that if the city were to maintain its property tax rate it would suffer a $250,000 shortfall.
The city’s health insurance costs will jump by 40 percent and its budget for legal fees will increase, if the proposed budget is adopted.
“I asked our departments to be as lean as they can. They came through with that and I appreciate that,” Jones said.
Under this budget plan, the city would not hire new personnel and would freeze six unfilled positions. Also, the city would budget three employees from the Public Works Department in the city’s Parks and Recreation Department’s finances and one parks employee to the Lakeway Activity Center.
No across-the-board wage or salary increases would be implemented, but merit raises would remain. The city implemented a 3 percent across-the-board raise last year.
The city’s capital outlay would include one police patrol car, three pickup trucks, a Computer Aided Dispatch and Reporting System and Mobile Data Computers, which will be paid for through a grant. The city also plans to raise its Municipal Court service counter, resurface tennis courts and replace steps on the slide at its pool and shower towers.
Property taxes would form 53 percent of the city’s budget if the council adopts it.
Council member Bruce Harris asked Jones if the city had incorporated anticipated additional sales tax revenue from new restaurants and businesses expected to open in the next fiscal year.
Jones said that unless a big box retailer or a large retailer such as a grocery store opened in Lakeway, the city would not see a significant increase to its sales tax revenues. He explained that city staff members rely on historical data to make their projections.
DeOme asked if the city could implement any structural changes, add services or adjust fees to offset the loss in revenues in building development revenues.
Jones said he transferred an employee from Building and Development Services to solid waste to offset the hit to revenues. That employee, under the new budget, would go from solid waste to finance.
“She’s been our rover,” Jones said, referring to the softball position that can be moved to any spot on the field.
The city changed its health-care system from the Texas Municipal League to Aetna last year and saved $100,000, Jones said but the costs will increase by $100,000 this year.
“We had some extraordinary claims. Hopefully, we won’t have those from year to year,” Jones said.
Harris asked why the swim center had experienced a decrease in revenues from the preceding fiscal year.
“We thought it would be a banner year, but it was too hot [this summer],” Deputy City Manager Chessie Blanchard-Zimmerman said, noting a drop in parties, admissions and memberships.
The city would trim its Fourth of July account from $29,500 to $28,050 under the proposed budget by eliminating last year’s laser light show.
“This budget meets our goals. It’s balanced,” Jones summarized.
Council member Dee Ann Burns-Farrell said the city was proposing a tax rate that would allow the city to maintain services and a quality of life that residents have come to expect.
“The infrastructure is really important. We can’t sacrifice that. I don’t think any resident would want us to lower services,” Burns-Farrell said.
“This is a tough time and a tough economy,” DeOme said.
Lakeway will hold public hearings on the proposed property tax rate and fiscal year 2010 budget at 6:30 p.m. Sept. 21 and 2 p.m. Sept. 28 at the City Council’s budget work session. Both hearings will be at Lakeway City Hall.
The council is set to adopt the final tax rate and budget at a special session Oct. 5.