Waco eyes first general fund budget reduction in years

The preliminary proposals were presented to the Waco City Council at a budget committee Tuesday. All are subject to change before city management sends its formal draft budget to council on July 2, followed by council adoption on August 27.

Waco's tax revenue growth is expected to slow significantly next year, according to Tuesday's budget development filing, which assumes no change in the 75.5-cent property tax rate per $100 of property value. The city estimates a modest 2.7 percent increase in combined sales and property tax revenue for the general fund in fiscal year 2025, to $173.2 million. That contrasts with an 8.6 percent increase in the current year, when tax revenue rose from $155.2 million in 2023 to a year-end estimate of $168.8 million in 2024. The Waco's 2024 fiscal year ends on September 30.

The city is expected to adopt a general fund budget of $202.5 million for the next fiscal year, about $1.2 less than the city adopted for the 2024 budget. It would be the first time in at least five years that the general fund does not increase.

The majority of the city's general fund will continue to go toward employee salaries and benefits. Waco is projected to spend $120.2 million on employee salaries and benefits in fiscal year 2025, about $5.4 million more than last year. That's a 3 percent raise for civilian employees, higher raises for police and fire personnel, a 9.7 percent increase in health insurance costs and less conservative estimates of overtime expenses.

Waco residents could face a new monthly fee for street maintenance, along with a slight increase in water, sewage, drainage and solid waste rates.

The current combined monthly bill for the average residential customer using Waco services is $129.06. This monthly bill includes an average of $46.77 for water, $56.88 for wastewater, $6.30 for drainage and $19.11 for solid waste. The city estimates that an average customer uses 8,000 liters of water and 5,000 liters of sewage per month.

In the 2025 budget proposal, the combined monthly bill for the average customer would increase by $7.38 to $136.44. The 5.7 percent increase includes 60 cents more for water, $3.12 more for wastewater, 25 cents more for drainage, $1.42 more for solid waste and $2 more for a new street rate.

Assistant City Manager Paul Cain said he believes his office's approach to raising fees is reasonable given the improvements the city is making to service operations, such as adding a new landfill and a transfer station. The total cost of all fees in 2025 would still be lower than in 2021 if adjusted for inflation, he said.

In 2021, the combined monthly utility bill, which did not include drainage or street fees, was estimated at $111.27. Adjusted for inflation, that 2021 bill would equal $137.57 today.

“We added two fees and still stayed below inflationary costs overall,” Cain said.

Water, wastewater and solid waste rates are set with a goal of those operations, which are not directly financed by tax revenues, until balance.

The new street fee is designed to charge properties for street maintenance based on the amount of traffic they generate. According to the city's website, street repair demands have continued to outpace available revenue, and the funding needed for streets has increased over the past five years from $3 million to $25 million to $30 million annually.

The street rate of $2 would be the average for single-family homes. Other properties that attract more traffic would be subject to higher fees. For example, fast food restaurants would pay about $32 a month, and high-cube package central warehouses like Amazon would pay about $1,700 a month in street rates.

“It's not where we want to be long-term on the street fee,” Waco City Manager Bradley Ford said at Tuesday's audit and budget committee meeting. “It doesn't really fund the program that we might want, so in the next few years we'll be looking for your guidance on where you want to be with this.”

Tuesday's filing included a proposal to gradually increase street rates over the next five years, bringing the monthly street fee for single-family homes to $9.26 in fiscal years 2028 to 2029. If the street rate increases over time, it would allow the general funds that currently go to the maintenance of the streets to be reallocated to the improvement of the capacity of the streets.

Tuesday's filing also referred to 661 changes in the fee schedule. The changes include 34 new fees, 19 revised fees, 21 reduced fees and 587 increased fees. Despite inflation, most rates will remain unchanged. Cain said his office suggested departments reassess their fees to deal with inflationary increases, but many chose not to for a variety of reasons. Some exceptions include inflationary increases for the Texas Ranger Museum and select Parks and Recreation Department services, such as facility rentals.

“Our expenses go up every year and all of these fees are designed to recover costs,” Cain said.

The presentation also detailed possible ways to reduce city funding for local nonprofits. Waco currently grants grants to 16 outside agencies, including Creative Waco, Waco Family Medicine, Keep Waco Beautiful and the Greater Waco Chamber of Commerce. Waco contributed nearly $3.4 million to nonprofits last year. This year, the agencies asked for a 25 percent increase in funds, asking the city for about $4.2 million in total.

The presentation outlined multiple options for reducing funding from outside agencies. The city could cut all budgets equally by a fixed percentage, adopt a three-year reduction plan for non-priority agencies, have the city take over certain services currently provided by outside agencies, or undertake a combination of these options .

District 2 Council Member Alice Rodríguez asked for more information about each agency to better evaluate their funding bids. Ford is expected to send a total amount of funding for all agencies, and then board members will evaluate how to distribute the funding among agencies.