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

Justified or Not, McKinney's Leadership Finds Other Taxpayer Funded Ways to Pay for a Commercial Airport

City leadership is advancing other city funding sources for the airport even though taxpayers voted down a commercial airport bond less than a year ago. They have decided that taxpayers voted down the commercial airport bond ONLY because voters did not want to pay for it with general obligation (GO) bonds.

1. This interpretation of the bond loss assumes taxpayers really want a commercial airport. Do they?

2. This interpretation of the bond loss also assumes taxpayers want to continue paying for the airport’s infrastructure and more; they just do not want to use GO bonds to do it.

Are the conclusions reached by city leaders legitimate, or are they a series of rationalizations made so they can continue pursuing airport expansion without firm taxpayer backing? 

The city of McKinney commissions reputable survey companies every other year to get the pulse of the residents. The 2017 and 2019 surveys asked questions about the airport. 

The results suggested a split city, much like the failed airport bonds in 2015, failing at 50.99% (for hangars and to purchase land on the east side of the airport), and a 2023 bond failed with 58.6% voting no (to build a commercial airport on the east side). Unsurprisingly, the 2021 and 2023 surveys asked no questions about the airport. 

Yearly, an unofficial budget priority survey allows citizens to rate their budget priorities 1-10 (1 being the most important and 10 being the least important). Nearly every year, the airport is rated at or near the bottom of importance for residents.
Citizen Survey | McKinney, TX - Official Website (mckinneytexas.org)

At the 2/6/24 regular city council meeting, the Mayor of McKinney, George Fuller, doubled down in his interpretation. He said he commissioned his own survey with his own money. He read out the questions and results at the meeting. He claimed the results justify his interpretation of what voters said and did not say by defeating the bond. Here are the questions (based on my transcription of the video since the study he commissioned is not available):

1. Are you aware that McKinney owns TKI National Airport, located approximately five miles east of Central Expressway? 82.96% said yes, 17.4% said no.

2. Are you aware that 737 aircraft land and take off at the airport now? 44.93% said yes, 55.7% said no.

3. Are you aware that school and property taxes are collected on corporate assets, primarily jets, at TKI totaling more than $3 million a year, reducing our residential tax burden? 46.38% said they were aware, and 53.62% said no, they were not.

4. Would you support $200 million in bond debt paid for with property tax revenue for the development of a commercial passenger service at the airport? The question sounds familiar was on our last bond election. 40.58% said yes. 59.42% said no. I believe that's within about a percentage point of what the results were of the election if I’m not mistaken.

5. Would you support commercial passenger service at TKI if that service were negotiated with an airline and was provided without the use of any property tax backed bonds? 61.97% said yes and 38.3% said no.

His survey questions, particularly Q3 and Q5, were leading, limited in scope, and very telling in what information was omitted in the narrative. Unsurprisingly, his survey was tailor-made to get him the responses he wanted.

Notice that Q3 provided a supposed positive of the airport--$3M in property tax benefits to the city and MISD--without mentioning the other factors involved in the complicated funding structure of the airport:

•  Not a mention that while bankrolling the entire airport, the city gets only about $800,000 of that $3M property tax benefit. That number has barely changed over the years, no matter how many new hangars the city builds. Why?
• Not a mention that taxpayers put over $100 million into the airport since 2013.
• Not a mention that the airport and surrounding commercial businesses are kept in a reinvestment zone (TIRZ2) while all city services inside the zone are paid for by the city. The potential tax benefit might be a wash after the city pays the liabilities for the TIRZ2 zone.
• Not a mention that MISD is considered a tax-rich district with a large share of tax revenue it collects sent to the state due to recapture anyway.

Q5 fails to mention that taxpayers would possibly continue paying for commercial airport infrastructure and more through other means: general fund payments, payments through excess fund balances, draining the MEDC and MCDC of sales tax money that could be going to other high priorities for the city. What would the respondents have said if they had been given the complete picture in that question?

Armed with a carefully crafted survey done by Mayor Fuller, city leadership appears to feel justified in taking advantage of any taxpayer-funded source available to pay for the commercial airport (as long as it isn't GO bonds). Without skipping a beat, they will now ask the MEDC and MCDC (with members appointed by the city council) for undisclosed funding for undisclosed airport expenses using collected sales tax dollars. It is a stretch to use the MCDC, McKinney Community Development Corporation, money to pay for anything related to an airport. Community-related expenses that could be paid with MCDC will now have to be paid by other funds taxpayers have paid into.

How many commercial airport expenses does city leadership think the taxpayer will be paying to ready the site for an airline? When will the payments end for McKinney's taxpayers?

 

After bond fails, McKinney looks at other ways to improve airport (dallasnews.com)
McKinney voters pass five of seven bond propositions | Community Impact

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.

An Airport Bond Failed, Again

Results are in, and the airport bond of 2023 failed worse than the last failed airport bond of 2015. 

Saturday's failed final bond vote (not official) showed a total of 21,846 votes cast. Of those votes, 41% were cast for the bond, and 58% were against the bond. It looks like a doubling of voters in an off-year election too!

Here are the results from the failed $50M airport bond election from November 2015 48% for the bond and 51% against the bond. A total of 10,473 votes were cast in that election.  

In this particular election, there were 7 propositions on the ballot:

Prop 1 Passed - street projects

Prop 2 Failed - airport improvements for land acquisition and hangar construction

Prop 3 Passed - public safety facilities

Prop 4 Passed - municipal building improvements for a library expansion

Prop 5 Failed - downtown parking structure

Prop 6 Passed - flood protection in some areas

Prop 7 Passed - to revoke $13M in park bond capacity (MCDC pays instead)

See the Community Impact article about the 2015 bond election

Citizens Should Track Streams of Influence in City Politics, Part 1

Note: Using influence within the law is not wrong. Using money to affect politics within the law is not wrong. Using our taxpayer dollars to help certain people and businesses without transparent or fair processes is a murky mess that should be avoided at all costs. 

Useful websites, like OpenSecrets.org, track federal-level campaign contributions to federal candidates. Political action committee (PAC) donations, lobbying group donations, and dark money donations meant to influence politicians should be out in the open. Most people want to know who is donating to whom and whether those donations could be leading to any paybacks that include beneficial legislation, government contracts, public/private partnerships, or other tangible rewards. We want to know—and we should want to know—if our federal dollars are benefiting certain people over others. 

Why do we suddenly stop wanting to track streams of influence in our own cities? Or worse, why do some get offended if questions are even asked about who is influencing whom and to what end? Is it less polite to want transparency closer to home because people we know might start to get uncomfortable or offended? 

Below is an illustration of how campaign contributions and connections among various people, politicians, and groups could lead to, at the very least, problematic optics. 

Tupps is a small brewery that has been open for business for five years in McKinney, Texas. At the time of their most recent application to the local community development corporation in July of 2020, Tupps had about 18 full-time employees and 20 part-time employees that were self-reported on their application. So far in our illustration, Tupps looks like any struggling five-year-old small business. 

 

What makes Tupps a perfect case study right now is because of all the questions about the deal and all the defensiveness as to why there would even be questions. It could also be because it is city council election time. These sorts of disagreements generally bubble up at these moments. 

In the span of five short years, Tupps has benefited from multiple city funding opportunities that other small businesses most probably have not gotten: 

• $27,000 loan and forgiveness if they hire 11 full time workers. This deal was from the McKinney Economic Development Corporation (MEDC) using sales tax dollars. Contract was signed in November of 2014. See here for info 
  
  
• $20,000 loan and forgiveness if they hire 6-8 full time workers. Again, this deal was from the MEDC. Contract was signed July of 2015. See here for info
  
  
• $600,000 loan and forgiveness from the MEDC for equipment in 2020 paired with a larger incentive listed below 
  
  
• $11.3 million lease with option to buy deal with the McKinney Community Development Corporation (MCDC), funded with our sales tax dollars, to relocate and build a very expensive brewery center with no parking lot (see next incentive below) on land the city bought in 2019 (so they could most likely sell it to the MCDC for this deal). Tupps is not required to put any of its own money into this deal. Tupps is only required to create around 5 full time jobs by the end of the forty year lease. Since the land is owned by the MCDC, there will be no property tax revenue. See here for info
  
  
• ~$3.5 million from the Tax Increment Reinvestment Zone #1 (TIRZ#1) so the city could use its eminent domain powers to take away affordable housing and pay for the relocation of the low-income occupants. This was done so Tupps could have a parking lot. Look in the plans for Tupps, there is no parking lot on the site plan. See here, here, and here  

How many other incubating businesses have gotten this kind of long-term monetary hand-holding from the city of McKinney? If not, why not? 

Tupps, it turns out, is well-connected. Three of the board members of Tupps are prominent business owners and residents of McKinney. We do not know how long they have been board members or how much of a stake they have in Tupps because the MCDC does not require those sorts of relevant details in their application packets. 

If any city is giving a business large amounts of citizen money and is going into a long-term lease agreement with them, the board members of the business, how long they have been on the board, and what their stake and/or investment is in the business should be a mandatory part of the application process. 

Those three board members are also members of municipal PAC that has been in operation for as long as Tupps has had its doors open—since 2015. Their PAC, the McKinney Team, is focused on endorsing city council candidates and school board elections. 

To be continued in part 2

TIRZ #1 Funds to Pay for TUPPS Parking Lot?

On January 5th, 2021, the city of McKinney, City Council, and the TIRZ #1 board (made up mostly of City Council members) will most likely approve the use of nearly half of TIRZ #1 available funds for the new TUPPS brewery parking lot--$3.5 million dollars of the $6.8 million dollar TIRZ #1 fund balance. 

It has taken nearly ten years for the TIRZ #1 to amass its current balance minus paying administration fees and helping to pay for smaller downtown business repairs, etc.  Is a parking lot for a brewery (please see the trailer park eminent domain action here) worth it? Several other major city-led economic development deals didn't use TIRZ #1 funding that should have, like the downtown parking garage and the apartments/shopping with city garage parking underground. 

Here is the cost breakdown from the legislative text:

FINANCIAL SUMMARY: · The City is requesting up to $3,500,000 in TIRZ funds for the East Louisiana Parking Project. These funds will cover the following costs: 

• o Property Purchase - Approximately $1,900,000 
• o Relocation Expenses - Estimated $500,000 
• o Parking Lot Design - Estimated $115,000 
• o Parking Lot Construction - Estimated $985,000 

· TIRZ #1 Fund Balance - 

• o The TIRZ #1 Fund currently has a balance of $6.8 million

Here's the plan for the east side of downtown including the very expensive parking lot:

McKinney’s Airport/Downtown Reality

City of McKinney 2019 Community Opinion Survey regarding commercial airport flights

The results of the 2019 National Citizen Survey for McKinney and city Budget Survey show that citizen opinion on the airport is conflicted. However, the new City Council goals for 2019 show the airport continues to stay as a top 5 priorities. This means more and more money will be put into the airport. 

In the annual Budget survey on the city of McKinney's website, the airport has been listed as the bottom priority of 10 priorities for at least the past two years. For the 2019 National Citizen Survey, 48% of paper survey respondents and 38% of online respondents strongly favor offering commercial airline services in McKinney (out of about 340 who actually responded). About 70% of those who support commercial service would be fine with low-budget carriers like Spirit or Frontier (see p. 27 of the opinion survey). Maybe those who support commercial airline services believe we would all benefit financially from such an arrangement. 

The complex revenue bubbles (TIRZ traps) the airport, downtown, and their surrounding areas are under mean that the general fund will not see the tangible results of any success in any of those areas past the low amounts the general fund already gets each year as long as the two TIRZ remain in place:

• No matter how successful the downtown TIRZ #1 area gets, that area will only give the general fund about $2.6M in sales, use, and property taxes a year maximum.
• No matter how business explodes, the airport TIRZ #2 area will only give the general fund about $1.2M in sales, use, and property taxes a year maximum.

TIRZ1 & TIRZ2 on the right and left of Hwy 5

The rest of the profits in the downtown and airport areas stay in their TIRZ funds to be used only on their respective TIRZ areas for very specific projects (not for things like fire, police, or other city services). The TIRZ funds are controlled by appointed City Council members and representatives of the county and ISD.

Let’s say that the McKinney airport starts commercial low-budget flight services and commercial business multiplies in the industrial zones located all around the airport. One would think that our dreams of a higher commercial tax base that could lower our residential property tax burden would be realized. One would think that the whole city would directly benefit from successful downtown and airport areas. Unfortunately, the rest of the city will only benefit indirectly, if anything. Maybe more people rent apartments or go to the grocery stores outside of the TIRZ areas. Maybe there is a prestige that makes people feel good.

For more, click here.

The $2.5M "Ask" from Independent Bank to McKinney Residents

When the ask comes, McKinney’s City Council needs to vote no on a partnership with Independent Bank and their $2.5M request for the city, MEDC, and MCDC to help them build a new Medicare/Medicaid clinic building.

from Shippensburg University

Independent Bank leapfrogged over McKinney’s traditional routes of funding for community investment, like the Community Grants board, theMCDC, and the MEDC that already have specific budgets for giving. They also have transparent, easy to follow processes. Instead, Independent Bank got a straight shot to the City Council. Are other worthy charities and non-profits able or capable of that feat? Isn’t this why we are supposed to have processes for charities and non-profits with easy to follow funding routes?

A little over a year ago, Independent Bank's head of Corporate Responsibility, James Tippet, came before City Council asking for a Public Private Partnership (PPP) with us to help finance a health clinic in McKinney. There were two reasons presented by him and Mayor Fuller as to why the city would want to get involved in the health clinic business: 

1^st reason- This FQHC would be built along Highway 5 to revitalize the area and bring jobs to the east side of McKinney.

2^nd reason- This FQHC would serve uninsured/underinsured (the working definition of which was vague and a source of confusion) on the east side.

The February 2018 resolution of support was to show City Council’s support for the efforts of Independent Bank to build a new clinic. No money was ever promised. The resolution passed 7-0.

After a recent CCAD search, I found that the North Texas Family Health Foundation (the money-raising arm for the clinic) has recently purchased vacant land at 1620 W. Virginia Street, presumably as the home for the new clinic. That address is far from Highway 5 which was where it was supposed to be located to provide the needed revitalization, jobs, and direct access to the most needy of our city. 

At the City Council Work Session on April 2nd, two spokesmen from Independent Bank, Mr. Temple, an Executive VP, and Mr. Tippet, the Executive VP of Corporate Responsibility,  gave an update on their plans and asked for money unofficially. An official ask will happen soon at a City Council meeting. At this update, no mention of a location was made. No one mentioned Highway 5 or any revitalization. There was barely a mention of this clinic's "economic development" angle. 

The Independent Bank spokesman asked for a total of $2.5M. Of that total, $1.5M would come from the city directly.  The spokesman said they would be or were in the process of asking the MEDC for $150k to help pay for fees and $800k for horizontal building funding from the MCDC. Independent Bank has put in $2.5M and the spokesman said they are currently raising $2.5M from private donors. Residents of McKinney would be partners in the clinic for around a fourth of the total $9M cost. Even if the city, MEDC, and MCDC give the funding Independent Bank wants, the clinic will still be short $1.5M of the total $9M cost. 

Who will be serviced in this clinic on Virginia?

Mr. Temple said, “The model is not a free clinic.” Mr. Tippit clarified that this FQHC model operates on volume of Medicare/Medicaid patients.

The spokesmen for Independent Bank said they asked Collin County for $1M last year and they were turned down. They said Collin County Commissioners Court told them it is county’s mandate is to cover only the truly indigent and this clinic does not do that. The spokesmen said they would ask Collin County Commissioners Court for the $1M again soon.

James Tippet said that after its first year in operation at the Wysong Building, this clinic served 1,923 unique patients. Out of that total, 115 did not pay. The representatives said they won’t go after the patients for the cost of health services. If the patients who didn't pay for services were required to sign financing paperwork (which the clinic's website says is required), those patients may still think they owe the clinic money. There is no official indigent care program at this clinic.

This Medicare/Medicaid clinic would be a great project for Independent Bank and private donors to build--on their own. 

Avoidance of the processes already set up for such funding requests is troublesome and it will lead to many future “asks” that go directly to City Council from just about any group wanting a city partnership. The precedence will be established if City Council approves this request. After this, charity organizations will just need to talk up the economic development angle to get put on City Council’s agenda, right? How will the city budget for all the future Public Private Partnership requests?

The city and City Council both need to get back to enforcing our traditional routes of funding for community-type activities. If they do not, they need to establish and codify a process for non-profits and charities to ask the city directly for Public Private Partnerships. Transparent processes outline rules everyone must follow so every applicant gets a fair shake. 

For more information about Community Reinvestment Act requirements for large banks and how Independent Bank is choosing to meet its CRA requirements, click here.

Also, read Two Clinics: Is One of Them to Get Special Funding?
For examples of city processes in place already, look here or here.