Thread by @PhotogDina, Last week, I took a look at a potential $1.1MM fiscal budget [...]

Last week, I took a look at a potential $1.1MM fiscal budget deficit in Mercedes.

This week, I’ve taken a look at how Weslaco’s budget has only become more robust in the face of numerous challenges, from a pandemic, to bonds, to overcoming a fraud scandal.

1/20 A thread: https://twitter.com/photogdina/status/1298059388578660354">https://twitter.com/photogdin...

https://twitter.com/photogdina/status/1298059388578660354

2/20 Weslaco is proposing a nearly $1.5 million reduction in its FY 20-21 budget compared to FY 19-20.

That’s a 4.8% decrease.

Despite that, it’s grown its operational reserve by 17 days. What does that mean? https://www.themonitor.com/2020/09/01/weslaco-proposes-trimmed-healthy-budget/">https://www.themonitor.com/2020/09/0...

Weslaco proposes trimmed down, but healthy budget - The Monitor

Like many other municipalities, the city of Weslaco has had to rethink its finances in the wake of COVID-19; however, despite the unexpected expenses wrought by the pandemic, city officials are...

https://www.themonitor.com/2020/09/01/weslaco-proposes-trimmed-healthy-budget/

3/20 It means if incoming revenues completely stop for some reason, the city still has enough cash on hand to keep running for 4 months — 120 days. Most financial advisors will tell you you’re doing great if you have a 90-day reserve on hand. Weslaco has an extra month of cash.

4/20 Last year, Weslaco approved a ~$30.9M budget, but now expect for expenditures to come in at just $29.2M by the time the 2019-20 fiscal year ends on Sept. 30.

For the coming fiscal year, the city is proposing a ~$29.4M budget.

5/20 Though the proposed budget is slightly more money compared to the city’s estimated actuals for 19-20, it’s still less than what the city initially approved for 19-20. Part of that is because city administration is being cautious due to COVID-19 unknowns.

6/20 Unknowns in terms of how long the virus will last/will continue to affect the economy, and unknowns in terms of the potential (or lack thereof) for future rounds of relief funding from the feds. (More on that later).

7/20 Like most municipalities, public safety accounts for the bulk of Weslaco’s budget. In this case, 53%.

Police & fire are the 2 largest budgets at $8.86M & $6.63M, respectively.

Next biggest budgets are streets, planning & code enforcement, IT, and the library.

8/20 Public safety spent a LOT on overtime in the latter half of the fiscal year, because of Covid. An entire firefighter shift (22 people) was out for 2 weeks, as were 15 police officers.

Other big expenses including buying disinfectants, PPE & ambulance retrofitment.

9/20 Most of those Covid expenditures are being covered under CARES Act relief. Speaking of: Hidalgo Co. fronted the city $900K right away — or 20% of total estimated relief. The city expects another $900K this week, City Manager Mike Perez said.

10/20 Despite temporary shutdowns of non-essential businesses, Weslaco didn’t see a sales tax slump. Perez said that’s due in large part to 3 big box hardware stores & Walmart being located in the city. Folks spent time during stay-home orders doing home repairs.

11/20 As a result, the city is on target to surpass its sales tax for FY 2019-20 projections by ~$100K to $10.1M, though, as is customary for Perez, the revenue estimate he included in the budget is more conservative: just $10M.

12/20 The city also has some big ticket projects on the docket: a new police station, new fire station, library expansion, 40-acre multiuse park.

That’s on top of the “normal” stuff: street repairs, drainage improvements, equipment replacement.

13/20 Right now, the park project is over budget & has been rebid to lower costs. But all the capital improvement projects are being taken piecemeal to make them doable. One thing stuck out to me in that part of the budget: $8M vaguely listed as coming from “other sources.”

14/20 Turns out it harkens back to an issue Perez & I had spoken of LAST budget season: the expected retirement of millions of dollars in debt.

The city has been paying down some certificates of obligation for several years.

15/20 Perez expects the debt to be completely retired within the “next couple of years.” But, once that debt is gone, it can affect the city’s credit flexibility. And its tax rate.

So, once it’s retired, Weslaco plans to issue another $8M in debt via a new series of COs.

16/20 That allows it to keep the tax rate flat (sorry, no tax cuts) & gives the city a reliable source of revenue to fund projects. It’s through debt, but the city has been handling its debt service well for the past several years.

17/20 Weslaco’s current S&P municipal bond credit rating is AA-. Not only is that the highest credit rating in the city’s history, but it comes after several former elected officials were federally indicted for fraud, alleged to have fleeced Weslaco of millions.

18/20 The scheme allegedly involved a $38.5M overhaul of city’s water treatment facilities—a project some 4 times more expensive than comparable projects in other municipalities. Weslaco is still paying down that debt & is suing for recovery of those funds.

19/20 There’s more to analyze in the city’s budget. But those are the big takeaways: Weslaco has a VERY robust operational reserve, its debt is well-managed, sales tax revenues are positive, & public safety budgets account for the bulk of expenditures.

20/20 Not all of these more granular details made it into the story, but there’s only so much of a 157-page budget & a 45-minute conversation with a city manager that you can squeeze into a 28-inch newspaper story. Hence this thread. Hope you enjoyed it.

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