Why the city's general fund is decreasing

The city of Graham is working through its budget discussions to restructure the general fund budget, with four departments being moved into separate funds.

The Graham Municipal Airport, Young County Arena, Library of Graham and Convention and Visitors Bureau will be transferred into separate special purpose funds, accounting for a $1.7 million shift in the proposed budget and an inevitable decrease in the general fund.

City Manager Eric Garretty said when he saw a restructuring was required, he requested it be done all in one year.

“The way the budget is structured is not really telling you how much money you have to spend in the general fund because it's not structured properly,” he said. “There were four major movements that are changes from the number that you see for the budget in the current fiscal year and the number you see for the budget in the proposed.”

Graham Municipal Airport

The Graham Municipal Airport special purpose fund is being used to segregate revenue generated from the airport, primarily from fuel sales and hanger lot leases, and reinvest those funds into the recapitalization of the airport.

The new fund is balanced, with $537,000 proposed for both revenue and expenses.

Revenue items include $11,000 in hangar leases, $356,000 in fuel sales, and $170,000 in city transfers.

Expenses are $78,100 for personnel, $337,200 for materials and supplies, $34,400 for contract services, $74,400 for capital outlay which could be offset by grants, and $12,900 for debt service.

“Of this budget... most of it is fuel costs and the cost that it takes to pump fuel, just short of $400,000. The rest of it is keeping it up, keeping everything paid, keeping the lights on, all that kind of stuff. So that's not really costing half a million dollars to run an airport,” Garretty said.

Young County Arena

The Young County Arena special purpose fund is being used to segregate revenue generated from the arena, primarily from facility and amenity rentals, and reinvest those funds into the operation of the facility.

The new fund is balanced, with $660,550 proposed for both revenue and expenses.

Revenue items include $391,500 in sales, rental and other, $134,500 from the Graham Economic Investment Corporation and $134,500 from Young County support.

The expenses are $207,500 for personnel, $133,000 for materials and supplies, $160,500 for contract services, $150,550 for capital outlay, and $8,950 for debt service.

Hotel Occupancy Tax

The Hotel Occupancy Tax Fund contains the 7% in HOT funds collected from the city.

The $200,000 in revenue from this fund is transferred to the CVB to support and fund tourism events and cultural-related activities. Expenditures for HOT funds are restricted to culture and tourism per state law.

“That $200,000 is the monies that we collect from the hotel/motel (tax). …Marci (Bueno) and the folks (at City Hall), they collect that money. They deposit it into the general fund of the city... where it looks like that money is available for the city to spend on fixing streets. That money is required in part by law, and in part by policy, because we're a city that established a Convention and Visitors Bureau. Every dollar of that money is immediately transferred to the Convention and Visitors Bureau. It's never paid for a single expense in the city's general fund,” Garretty said.

Library of Graham

The Library of Graham special purpose fund is being used to segregate grant funding acquired by the library from private, non-profit, local, state and federal sources and transfers funding from the city of Graham general fund.

“So (for example) a nice person came in, they donated $500,000 and they wanted to spend $250,000 this year and $250,000 next year. I can deposit that into their fund. I can show them where the $250,000 is reserved for this year, the $250,000 is reserved for next year. I can show how many expenses they had and there's no other noise (from the general fund), it is just the library,” Garretty said.

The new fund is balanced, with $342,900 proposed for both revenue and expenses.

Revenue items include $76,900 in donations, $10,400 in other fees and $255,600 in city transfers into the fund.

Expenses are $205,500 for personnel, $70,850 for materials and supplies, and $66,550 for contract services.

Other general fund expenditures

Due to almost $1 million more being spent across various departments and line items, the bottom line on the proposed general fund only shows a difference of $720,394, instead of the $1.7 million being transferred out.

“On the other side of the equation, all the stuff that I talk about in the budget in brief, the 2.5% increase in cost of living adjustment for employees, and the $200,000 for vehicles, all that chips away at that number as the actual increase, which in a normal year it would be easy to see. What's throwing this off is the fact that we're pulling that ($1.7 million) out,” he said.

A 12% increase in the property and liability insurance and a 1.75% increase in the city share’s of the Texas Municipal Retirement System premium accounts for $116,000 in increased costs to the general fund. The proposed 2.5% cost of living adjustment for all employees to aid in retention and mitigate inflation is proposed as a $106,000 increase.

Additional funding is being provided for the Memorial Auditorium and the Graham Municipal Swimming Pool for structural repair, equipment repair and limited facility rehabilitation. The pool fund is additionally being proposed with base rate pay for lifeguards at $11 per hour with a scale change for the pool managers and the pool superintendent.

“The pool is one of those big true increases, because we're trying to do a major project to update the decking where the concrete is scaling over there, and that's the reason why they got this big 33% increase,” Garretty said. “In addition, we're looking at increasing the hourly rate for the lifeguards a little more, paying for their Red Cross certification so they don't have money out of pocket to come be a lifeguard for Graham.”

There is an increase in the police department budget in the proposed budget of $286,483 which includes the cost of three new vehicles and a new lieutenant position for the department.

Additional vehicle purchases are also being proposed, with one for the code enforcement officer, two for the parks department, three for the streets department, one for the water department and two for the sewer department. The budget for all vehicle replacements is proposed at $242,000, with $194,000 from the general fund and $48,000 from the water fund.

“This year’s effort replaces mostly aging vehicles that are starting to exhibit increased maintenance costs,” the budget's general fund highlights state. “The City will recover some of the lease cost in the first year through the sale of the replaced vehicles.”

Graham Fire Rescue shows a $108,597 decrease in the proposed budget, but Garretty said this is due to other factors.

“Fire Rescue looks like it is going down. It's really holding even. We flowed some equipment purchases through there that we were doing jointly with the county so we had to add that into our budget and the county is going to reimburse us for this year that caused a little bit of a variance,” he said. “The fire department is not being cut and then there's no major increase. We moved some money around. The insulation has fallen off inside just because it's getting older. I put, I think, it was $40,000 to redo that and fix that, but we were able to balance that with another line item in the fire department.”

An additional $74,000 was added to the general fund health and welfare fund for a mobile mental health team for Young County to assist with mental health in the community and for intervention in mental health crises. The funding was placed as an allocation for two years and will be amended in the next budget cycle.

“In next year's budget, that line item in the budget will say $37,000. What we've done is we've legally said, ‘We're reserving the full amount, and then we will appropriate it in each year,’” Garretty said.

Tax rate

Property tax revenue accounts for 40% of the revenue required for the $8 million general fund budget with the remaining amount obtained from sales taxes, franchise fees, management fees, fines and miscellaneous revenue sources.

The city is proposing a tax rate of $0.635 per $100 valuation, which is 3 cents over the current rate of $0.605 per $100 valuation. Garretty said this increase is being proposed due to a number of factors.

“Over the past four or five years, as property values have increased the taxpayers appraised values have gone up. The increased revenue to the city... without raising the tax has been enough (and) we (are) keeping our head above water. What's happened now, COVID and post COVID, the inflation rate and just the upward pressure on prices for everything, the increase in assessed values from this year... which is about 7%... it's just not enough to keep up with it,” he said. “(The city has a) laundry list of stuff that the bill's due and it's now time to replace it. At some point, we can't be paying $10,000 a year to fix a $20,000 vehicle. ...It’s not any one thing, but the combination of the cost of doing what we're already doing, going up the curve with inflation, and the cost of the bills are coming due for stuff that we needed to replace, or a lieutenant position that we needed to add. It just all caught up to us in this year.”