Overview of McKinney's FY26 Budget Session

The city of McKinney held its annual budget session in August for the upcoming fiscal year, which begins in October. The August 8th meeting can be watched here. The public input on the budget continues at the next City Council meeting on September 2nd. 

Here is the Ad Valorem summary blurb:

"The City Council adopted a $.415513 tax rate per $100 of property valuation for the current 2024-25 fiscal year, which was just over 1 cent lower than the fiscal year 2023-24 rate. With tax base growth in new construction of $1.7 billion and increases in existing property values of 5.0%, the estimated taxable value will grow from approximately $39.6 billion in fiscal year 2024-25 to $43.4 billion in fiscal year 2025-26. The average market home value will grow from $574,579 in fiscal year 2024-25 to $578,991 in fiscal year 2025-26. This budget proposes to lower the tax rate to $0.412284."

This is what goes into (and not into) the no new revenue tax rate, see pg 95 of the budget:

1.     Police/Fire – 5 new police and 5 new fire. I’m not sure if that is enough or just adequate. No matter what survey, residents rate public safety at the top of their budget priorities. See details here.

2.      TIRZ 1 (downtown) – at least they are using funds to pay for fire suppression in the downtown zone and not using the general fund.

3.      TIRZ 2 (airport) – they will be moving less from the operating fund to airport construction fund to cover the costs of the commercial airport and the 9 people they will be hiring to work there.

4.      Airport – expecting operational losses for the first 3-4 years. Talked briefly about why there is ad valorem loss for the airport in 2024: depreciations, relocations, a hangar out of commission, etc. No questions on it.

5.    Low-income/affordable housing – Absolutely NO strategy for the past 5+ years. They want to develop one. This is after years of throwing money, consultants, and newly found tools at the problem. City Council continues to push co-developments with multifamily developers and the MHFC (McKinney Housing Finance Corporation).

A newer entity, the McKinney Public Facility Corporation (MPFC), was established a couple of years ago, and a developer was selected without competitive bidding to construct additional apartments. The City Council elected itself to this board.

There will be no formal evaluation of any low-income/affordable housing for single-family housing using the newly created Community Land Trust (CLT). I don't even see an item for the CLT in the budget. 

The city will be paying the Root Policy Research group to make recommendations again. The city did not adopt a formal policy after this same consultant was paid in 2020. That study advised exactly what affordability price points to target and what the city had enough of. Was that followed?
The only two City Council members I've seen ask any strategy questions are Beller and Cloutier.

Below are the low-income/affordable housing CC goals for FY26 FY26Strategic Goals - Department Objectives

FY2024 Budget Work Session

Overall, the city's proposed tax rate is not bad. The city suggests a 3.0 cent reduction in the tax rate. Our property taxes will still increase because of the higher property appraisals. We will still be paying more in taxes.

I’m always looking for where we are based on the no-new-revenue rate simply because I know the city has money coming in that is not included in the tax rate calculations. For example, the tax rate calculations do not include new construction and the two TIRZs. That means the city has a lot of extra money that is not reflected in that tax rate. When cities have extra money, that is money that can be used on pet projects. Excess fund balances have been another way this city has squirreled away money to fund certain expenditures. The city council came up with over $20M in excess fund balances to buy airport land after the failed 2015 airport bond.  

Here are a few things of note from the budget session (see the presentation here and the budget book here):

THE AIRPORT--The airport runway construction on the south end will continue. The northern segment of the airport runway is set to start early next year. 

Because our city council still has passenger airport service listed as a top priority, the city staff will continue spending money and energy to get Part 139 designation for passenger service. They will continue doing whatever they can to get a public-private partnership deal for passenger service. This is where extra money the city has can come in...

As mentioned in a previous post, a bond election for essential city services will have to happen in May of 2024 because some people didn’t plan for it with this last airport bond. 

The MEDC and MCDC are set to get about $23M each in sales tax money over the year. That is extra money for the airport, parks, economic development, etc.

A city council member suggested that more should be spent on low-income housing. Over the past few years, the city has used multiple sources and tools to establish programs that do not require general fund money.

Through the McKinney Housing Finance Corporation, we now have a new development for low-income (various targeted levels). The MHFC will use any money made through that co-development to put into more low-income housing co-developments. We will have another large apartment being built because of the Public Facilities Corporation that was just established. The city spent money establishing a community land trust. We also have the MEDC, the MCDC, and the TIRZ #1 which can all use their money to fund more low-income housing. The McKinney Housing Authority is also working on improving its properties and funding new ones. 

The Airport Bond Postmortem – Were There Warning Signs?

A lot of taxpayer money was wasted on the idea and execution of the airport bond from the moment the first consultant was hired in 2019. Were there signs that the city council would go on to spend $4M on consultants alone? Did we just miss the signs?

Were public hearings missed? Are there even public hearings for consultants? If not, would there be a total amount that might trigger a public hearing? Are there explicit wording requirements for the spending that can be seen on agenda items that aren’t public hearing items? Does the secret nature of this kind of economic development actually prevent public input and involvement?

The good news is that Mr. Grimes, the city manager, helped answer my questions. The bad news is that there was really no way for us to know what was coming. I know that when looked into the agenda items they were vague. Nor were there any ways we could have gotten involved in the decision-making process. That must change, or we’ll end up in this situation again.

I will just cut and paste his emailed answer because it is inclusive of all my questions:

"I have reviewed the approvals you reference below.  The consent agenda is where you will find many of our ordinances amending the budget and resolutions authorizing the City Manager to sign contracts.  While there is not a set contract amount threshold that, when crossed, requires an item to be moved to the regular agenda, larger contracts sometimes do get placed on the regular agenda to allow for a staff presentation.  Consent items are still on the public agenda, and the City Council can always request that a consent agenda item be pulled down for discussion.  If a member of the public wished for an item to be pulled down from consent and be considered individually, they can certainly speak at the public comment period and/or send a note to the council in advance requesting so.  My hunch is that at least one member of the council would grant such request, and every council member has the ability to exercise that discretion.

 

Below are the agenda items relating to the east side EA and the east side programming documents.  Of these items, the only public hearing was held during the TIRZ 2 Board meeting where $2 million was approved towards the programming document process.  Airport Director Ken Carley presented during this meeting and explained the request for TIRZ funding.

 

12/7/21 City Council Meeting – Agenda Item #21-1072 (consent) – Ordinance amending budget providing $550,000 for East Side Environmental Assessment

12/7/21 City Council Meeting – Agenda Item #21-1080 (consent) – Resolution approving contract with Garver for East Side Environmental Assessment

 

1/4/22 TIRZ 2 Board Meeting – Agenda Item #21-1183 (public hearing) – Resolution authorizing $2.0 million in TIRZ funds for East Side Programing Documents

1/4/22 City Council Meeting – Agenda Item #21-1170 (consent) Ordinance amending budget providing $1.5 million from Airport Operating Fund Balance and $2.0 million from TIRZ 2 Fund Balance for East Side Programming Documents.

1/4/22 City Council Meeting – Agenda Item #21-1173 (consent) – Resolution approving contract with Garver for East Side Programming Documents

 

3/7/23 City Council Meeting – Agenda Item #21-0166 (consent) – Ordinance amending budget appropriating $234,000 from the Airport Construction Fund balance to Airport Long Range Planning"

How many people would know what "East Side Programming Documents" meant? I know I thought they were talking about the runway extension that we already knew about.

If we asked our city council members what was going on at the time of the first or second consultant authorization, how many would have told us that they were in the planning stages of another airport bond, especially if they considered the airport an economic development that possibly included secret negotiations? It would be interesting to get their thoughts on this question. 

Transparency must be improved, especially in the case of consultants—any consultants.

McKinney's Pandemic Budget Planning

We're approaching the city budget season in McKinney for the new fiscal year starting in September. There are more unknows going in this new budget season than we've ever experienced. At this Tuesday's (5/19/20) city council meeting, the citizens are being asked to give some input into the fiscal year 20/21 budget that starts in September (item #20-0415). This, other than the online survey that will open soon, is evidently our only chance for public input before the city puts their vision together for new budget. 

What are citizens supposed to say when we have no idea what the city plans on doing and when we have no idea what additional damage the pandemic will bring?

The city let us know at the last city council meeting that the normal city revenues, like sales tax, fees, and property taxes will be severely impacted. City budgets, much like our own family and business budgets, are about how much money we're projecting to get and what we are going to earmark it for throughout the year (the following slides are from the budget presentation on this week's agenda):

Here are the sales tax projections for the rest of the summer. We have no idea what reactions to the pandemic will do to sales tax projections for the rest of 2020 or first half of 2021:



















Here are the preliminary property tax revenue projections for the new year:


We will be getting some state and federal relief. Most of that will be going directly to residents and businesses impacted by the lockdowns. During the lockdowns, the city furloughed the many city employees who worked at the Apex, the community centers, and some from the parks department. What should this next year look like for hiring or furloughing city employees? Are pay cuts out of the question in some departments?

Should the city and city council put grand plans on hold, like the new city hall project, like the dream of a park bridge/highway 5 tunnel to connect west downtown to east downtown, airport expansion plans, etc? What if the city asked for a property tax increase to offset the lost revenue so they could continue those plans? What would you be in support of?

Here are a few things to think about for your email or phone comments for the budget public hearing at the meeting on Tuesday:

• Budget cuts do not have to mean any reductions to police and fire. Some cities have been known to threaten that budget cuts mean police and fire cuts. Don't fall for it.
• In 2010, our city decided to create two tax reinvestment zones (TIRZ). The general fund gets a small set amount of money every year from the downtown area in TIRZ#1 and the rest is kept in a special fund to be spent on projects the TIRZ#1 board (made up of City Council and a few others) decides on. There is currently about $9M sitting in the downtown TIRZ#1. It is well within the rules of a TIRZ to dissolve completely or to change the project plans. This might be the right time to rethink the utility of reinvestment zones.
• Is it time to consider zero based budgeting? Here's some information on it:

https://www.anaplan.com/blog/zbb-zero-based-budgeting-guide/

Can't think of what to email? Think about what you'll be saying to yourself, your employees, and/or your family the rest of this year. How can that be applied to your comments about the city budget?

Here's the info from the agenda about emails on this agenda item #20-0415, citizen input on FY 20/21 budget:

Public Comments regarding agenda items, including Public Hearings, may be submitted by
email to City Council at contact-citycouncil@mckinneytexas.org. To be included in the
meeting record, emails regarding agenda items must be received between the time of this

posting and 6:00 p.m. on Tuesday, May 19, 2020.

Here's the link to the agenda 

There will also be a work session and a TIRZ #1 meeting set for Tuesday. Be sure to look on legistar for details. 

Real Number Breakdown of Appraised Values for McKinney

McKinney Citizen to Citizen (MCtoC) added real numbers to the percentages from McKinney’s FY2011-FY2018 Historical Makeup of Appraised Values slide from this year’s Budget Summit because percentages alone don’t tell the whole story. Citizens can think about what’s required for this residential/commercial balance if we have the real numbers and the percentages in one place.

From the City’s percentage slide alone, we can see that the Commercial category went down from 19.4% in FY2017 to 18.7% in FY2018.

We could be alarmed by that percentage drop until we see the real stock and money numbers from each property tax category. Every category increased, including Commercial. Single Family seemed to increase moderately. If you look at Lot, Land, Farm, it increased from 3,874 lots in FY2017 to 5,559 lots in FY2018 but represented the same percentage of total appraised value both years (at 8.1%). No, we don’t know what those lots will turn into. But, it does give us part of the reason that the Commercial percentage decreased this year. The real numbers are important for a complete picture.

It will be good to see how much Commercial has had property tax abatements over this period too.

This is a city of McKinney slide that was presented during the Budget Summit on 8/4/17. The real numbers were given to MCtoC by the Finance people through an Open Records Request. The city file has been posted in the File section of the MCtoC page on Facebook.

**If you look at the City’s spreadsheet for FY2013, there is an error in the total stock of Single Family residential. I just left it with a question mark on the slide because I can’t find the right amount.