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Debt woes fuel Crandall's 24-cent tax rate hike
By Michael Gresham
CRANDALL — An investment gone awry that has now been compounded by rising infrastructure costs and the everyday pains associated with a growing community has forced Crandall city leaders to face some hard truths and make some tough decisions.
Looking to pay down a seemingly insurmountable amount of debt, Crandall City Council is proposing to raise the city’s tax rate from 65 cents to 89 cents for the upcoming fiscal year.
“It’s a worst-case scenario,” said Heath Kaplan, who took over as Crandall’s city manager earlier this year. “But we’re doing the best we can to fix it.”
A 9.5-cent increase to the city’s maintenance and operation tax rate will produce $758,373.25 in revenue, up approximately $143,000 over the current operational budget. The big increase, though, comes on the debt service side where the rate will jump from 16 cents to a little more than 30 cents, producing approximately $401,000 (up from $226,000 in the current budget).
A public hearing on the proposed tax rate is scheduled for 7:30 p.m. Sept. 4 at the Crandall/Combine Community Center, located at 500 W. Lewis Street in Crandall.
According to Kaplan, a few past decisions have combined to create the city’s financial woes. At the top of that list is the city’s purchase of the Creekview Golf Course in 1999.
“When they bought this golf course, the city had the notion it would be a good economic development tool for this community,” Kaplan said. “Obviously, it has not turned out as they hoped.”
The reason for that is the market for municipal golf courses, which Kaplan said was already in decline in 1999, has just gotten worse over the years.
In an attempt to improve its investment in the golf course, in 2003, Crandall renovated the course, placing the city even further into debt.
“Since 1999, the city has not been able to move forward in paying down principal and interest on our debts,” Kaplan said. “Instead, the city has been moving backwards and adding more debt to it.”
To compound that problem, in 2004, the city sold about $3.8 million (roughly the same amount of debt owed on the golf course) in more debt to expand water and sewer utilities.
“When the city did that, the principal and interest payments with those two large notes combined was too much for the city to handle financially, especially with its current tax rate,” Kaplan explained.
While Kaplan understands and even applauds the idea of planning for the city’s expected growth, the city manager believes the purchase of the golf course, its renovation and the aggressive expansion of utilities should have never happened at the same time.
“They should have been separated,” he said. “It’s just more than a community this size can handle at one time.”
It’s for that reason, Kaplan believes Crandall taxpayers are being hit by surprise by the increase.
“Crandall has been moving along with a combined tax rate of 65 cents since 1999-2000, and now all of sudden we’re taking this huge spike up to just under 89 cents,” Kaplan said. “People want to know why, and they have a right to know why.”
Kaplan believes people should have been seeing incremental tax increases along the way.
“At the time the golf course was first renovated in 2003, the first notice of tax increase should have happened right then and there,” he said.
But it didn't, and the city has struggled to cover debt expenses ever since.
“It’s kind of like robbing Peter to pay Paul just to get by,” Kaplan said. “In my opinion, it was really unnecessary. Based on my observations, if the city would have fully disclosed the debt service portfolio with expected revenues to complement, the need for tax support would have been more readily apparent.”
To help curtail its current budget woes, the city has eliminated three full-time positions, meaning layoffs for some its employees.
“We’ve done everything we can operationally to make our budget leaner to help cut down on this deficit,” Kaplan said.
But that simply is not enough to stem the tide, Kaplan said.
At a public meeting last Thursday, 52 people showed up to voice their concerns about the increased rate. According to Kaplan, most citizens wanted to know why it was needed and how things had gotten to where they were.
“After that, the comments were pretty much that they understood the need for the tax increase, they just wanted to know if there was a way to phase in the increase over the years,” Kaplan said.
Unfortunately, the Crandall city manager said phasing in the increases just isn’t plausible now.
“Given our current cash position, there is not a resource available to me to lessen this tax burden in the upcoming years,” Kaplan explained. “We just don’t have the cash to supplement the phase in of an incremental increase. If we don’t do it now, we’re talking about a budget deficit.”
While the issue at hand may be unpleasant, Kaplan said he is confident it can be fixed.
“I’m going to fix it,” Kaplan promised. “It’s just going to take time to do it.”
According to Kaplan, the first step to correcting the city’s financial woes is getting the tax rate up to a manageable level where the city is at least providing relief to its cash reserve to make principal and interest payments.
The second step is something Kaplan believes the city should have done some time ago: sell the golf course.
“This city is aggressively trying to sell that golf course,” Kaplan said. “We’re very motivated to sell it. If we can sell that course, we really feel that the debt position of this city will really improve to the point where we can start slowly bringing down that tax rate.”
Achieving that final goal, a reduction in the tax rate, is something Kaplan said will be his highest priority.
“I will not sleep until this tax rate comes back down,” he said. “It’s my No. 1 priority.”
Looking to pay down a seemingly insurmountable amount of debt, Crandall City Council is proposing to raise the city’s tax rate from 65 cents to 89 cents for the upcoming fiscal year.
“It’s a worst-case scenario,” said Heath Kaplan, who took over as Crandall’s city manager earlier this year. “But we’re doing the best we can to fix it.”
A 9.5-cent increase to the city’s maintenance and operation tax rate will produce $758,373.25 in revenue, up approximately $143,000 over the current operational budget. The big increase, though, comes on the debt service side where the rate will jump from 16 cents to a little more than 30 cents, producing approximately $401,000 (up from $226,000 in the current budget).
A public hearing on the proposed tax rate is scheduled for 7:30 p.m. Sept. 4 at the Crandall/Combine Community Center, located at 500 W. Lewis Street in Crandall.
According to Kaplan, a few past decisions have combined to create the city’s financial woes. At the top of that list is the city’s purchase of the Creekview Golf Course in 1999.
“When they bought this golf course, the city had the notion it would be a good economic development tool for this community,” Kaplan said. “Obviously, it has not turned out as they hoped.”
The reason for that is the market for municipal golf courses, which Kaplan said was already in decline in 1999, has just gotten worse over the years.
In an attempt to improve its investment in the golf course, in 2003, Crandall renovated the course, placing the city even further into debt.
“Since 1999, the city has not been able to move forward in paying down principal and interest on our debts,” Kaplan said. “Instead, the city has been moving backwards and adding more debt to it.”
To compound that problem, in 2004, the city sold about $3.8 million (roughly the same amount of debt owed on the golf course) in more debt to expand water and sewer utilities.
“When the city did that, the principal and interest payments with those two large notes combined was too much for the city to handle financially, especially with its current tax rate,” Kaplan explained.
While Kaplan understands and even applauds the idea of planning for the city’s expected growth, the city manager believes the purchase of the golf course, its renovation and the aggressive expansion of utilities should have never happened at the same time.
“They should have been separated,” he said. “It’s just more than a community this size can handle at one time.”
It’s for that reason, Kaplan believes Crandall taxpayers are being hit by surprise by the increase.
“Crandall has been moving along with a combined tax rate of 65 cents since 1999-2000, and now all of sudden we’re taking this huge spike up to just under 89 cents,” Kaplan said. “People want to know why, and they have a right to know why.”
Kaplan believes people should have been seeing incremental tax increases along the way.
“At the time the golf course was first renovated in 2003, the first notice of tax increase should have happened right then and there,” he said.
But it didn't, and the city has struggled to cover debt expenses ever since.
“It’s kind of like robbing Peter to pay Paul just to get by,” Kaplan said. “In my opinion, it was really unnecessary. Based on my observations, if the city would have fully disclosed the debt service portfolio with expected revenues to complement, the need for tax support would have been more readily apparent.”
To help curtail its current budget woes, the city has eliminated three full-time positions, meaning layoffs for some its employees.
“We’ve done everything we can operationally to make our budget leaner to help cut down on this deficit,” Kaplan said.
But that simply is not enough to stem the tide, Kaplan said.
At a public meeting last Thursday, 52 people showed up to voice their concerns about the increased rate. According to Kaplan, most citizens wanted to know why it was needed and how things had gotten to where they were.
“After that, the comments were pretty much that they understood the need for the tax increase, they just wanted to know if there was a way to phase in the increase over the years,” Kaplan said.
Unfortunately, the Crandall city manager said phasing in the increases just isn’t plausible now.
“Given our current cash position, there is not a resource available to me to lessen this tax burden in the upcoming years,” Kaplan explained. “We just don’t have the cash to supplement the phase in of an incremental increase. If we don’t do it now, we’re talking about a budget deficit.”
While the issue at hand may be unpleasant, Kaplan said he is confident it can be fixed.
“I’m going to fix it,” Kaplan promised. “It’s just going to take time to do it.”
According to Kaplan, the first step to correcting the city’s financial woes is getting the tax rate up to a manageable level where the city is at least providing relief to its cash reserve to make principal and interest payments.
The second step is something Kaplan believes the city should have done some time ago: sell the golf course.
“This city is aggressively trying to sell that golf course,” Kaplan said. “We’re very motivated to sell it. If we can sell that course, we really feel that the debt position of this city will really improve to the point where we can start slowly bringing down that tax rate.”
Achieving that final goal, a reduction in the tax rate, is something Kaplan said will be his highest priority.
“I will not sleep until this tax rate comes back down,” he said. “It’s my No. 1 priority.”
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