City of Eagle Pass Sales Tax Revenues decrease sharply, affects City Budget
By: Jose G. Landa, Eagle Pass Business Journal, Inc., Copyright 2016
The Eagle Pass City Council unanimously approved to amend their 2015-2016 fiscal year budget at their Tuesday, May 17, 2016 special meeting due to a significant and sharp decrease of approximately $189,000 in retail sales taxes collected by the City during the period from July 2015 through April 31, 2016 than previously projected. The Mexican peso devaluation and the fall of the Eagle Ford Shale oil and gas play in Maverick County and South Texas has caused local retail businesses to lose over $2 Million in retail sales during this July 2015 through April 2016 period. The net result of this sharp decrease of sales tax revenues to the City of Eagle Pass’ budget is a shortage which requires to be offset from other City sources or budgetary items in order to balance the City’s budget.
Under agenda item No.8, City Council sought possible approval of an ordinance amending the 2015-
2016 Budget adopted by Ordinance No. 2015-24 in order to adjust City-wide revenues and appropriations to fund current year commitments. In other words, to balance the 2015-2016 City Budget which is showing a deficit due to the loss of almost $189,000 of sale tax collections during this July 2015 through April 2016 period.
Local retail stores and businesses have taken a steep decrease in sales due to unfavorable economic conditions caused by the devaluation of the Mexican Peso monetary unit and the plummeting global prices of oil and gas affecting the Eagle Ford Shale oil and gas economy in South Texas.
The devaluation of the Mexican Peso has caused a loss of retail sales in Eagle Pass and Maverick County as Mexican retail customers now receive less for their peso compared to the dollar.
Currently, the Mexican Peso Exchange Rate is $17.50 pesos for every dollar compared to $14 pesos per dollar a year ago. The less retail sales in the community means less sale tax revenues for the City of Eagle Pass.
The global oil and gas prices fall has also contributed to the loss of thousands of jobs and billions of retail sales in Texas, including Maverick County. Many Maverick Countians have lost good paying jobs in the Eagle Ford Shale oil and gas industry, causing loss of retail sales in the community and a decline of sales tax revenues for the City of Eagle Pass.
During April 2016, former City Manager Hector Chavez, Sr. signaled to City Council the budget shortfall due to loss of sales tax revenues and the need for the City of Eagle Pass to have to take measures and adjustments to balance the budget deficit.
Also at a May 3, 2016 City Council meeting, Council member Luis E. Sifuentes expressed his concerns and questioned City Finance Director San Juana Garza what could the City of Eagle Pass do to tackle the City’s budget impending deficit due to the loss of retail sales tax collection.
City Finance Director San Juana Garza stated at the May 3, 2016 City Council meeting that: proceeded to discuss the ongoing issue. “The sales tax has been in a downward trend since July of 2015. We believe that its attributed to some of the layoffs from the oil wells and a combination of the decrease of the Mexican peso. Its a dual situation and its been a steady drop ever since July. There hasn’t been one month since that it has come up higher than the prior year.”
Garza added that the City of Eagle Pass was looking at certain steps to balance the budget deficit:
“What we will be doing at the next city council meeting is come with the budget amendments that we normally do as part of the first six month review. Most of the managers have received their individual financial statements at this point. We asked them to look at areas of expenditures that can be decreased to make up for the shortfall in anticipated revenues.”
Although Garza failed to mention an exact amount of how much the actual shortfall of sales tax revenues to the City of Eagle Pass, the Eagle Pass Business Journal reviewed the Texas Comptroller of Public Accounts to determine the total amount of loss of sales tax revenues the City of Eagle Pass is expected to have lost during this period: approximately $173,873 to $189,000. For the City of Eagle Pass to lose this much money in sales tax revenues means that local retail businesses lost approximately $2 Million in sales during this same period than the prior year.
If the City of Eagle Pass is losing sales tax revenues, so is the County of Maverick, which the Eagle Pass Business Journal will look at in a future article.
Maverick County’s unemployment rate has spiked from 11% to 13%, among the highest in the State of Texas and the United States. Texas’ unemployment rate is 4.4 %while the United States unemployment rate is 4.7%. Both the City of Eagle Pass and Maverick County have been unable to attract significant economic development to the community such as the City of Laredo, Texas to lower the unemployment rate as well as increase the overall collection of sales tax revenues and economy.
During the 2015-2016 Fiscal Year Budget, the City Council and administration added five new administrative positions totaling approximately $ 188,400 in salaries. The City’s solution to the current loss of sales tax revenues is to not fill these positions in order to balance the budget.
City Council member Gloria E. Hernandez at the May 17, 2016 meeting raised concerns regarding the City’s practice and custom of adding job positions within the proposed City Budget annually and later not filling these positions to balance the budget. Hernandez noted that this practice and custom of padding the City Budget annually through new job positions but not filling them has have to stop.
It is a little trick used by seasoned City Council members, Mayor, and administration every year to approve a higher City Budget but later not filling the new job positions and using that funding to pay for an actual budget deficit to balance the budget.
Hernandez noted that the problem with this budget trick or maneuver used by the City is that the City’s Budget continues to grow every year instead of remain steady or decrease. The City uses this trick by asking City Council during the fiscal year to approve amendments to the budget to pay the cost overruns. The use of proposed new job positions in the budget give the City a cushion or reserve of funds to pay for any budget overruns (deficits) during the year. City taxpayers are left having to pay higher taxes each year to pay for the City’s Budget tricks to cover its losses.
During discussion at the May 17th meeting, Council member Gloria E. Hernandez brought up her concerns over fiscal irresponsibility and the way that the amendments are being derived to fill holes in the budget shortfall. Hernandez stated that she did not agree with the way City administration uses budget amendments to remedy the budgetary shortfall.
Eagle Pass Mayor Ramsey English Cantu quickly jumped in and attempted to explain to City Council the position and what was being looked at as far as where the funds were being taken from to balance the budget at mid-year.
Mayor Cantu stated: “Its no secret that we’ve seen a decrease because of the sales tax and we need to make sure that we’re covering that. We have to adjust ourselves and we need to make sure that everything is flowing properly. We’re not taking monies to add to the budget, we’re just simply balancing the budget.”
“I get that Mayor, but what we’re doing is inflating the budget because we continue to have positions year after year that are now filled and it think that their should be a policy that if we don’t fill positions they need to be removed,” replied Council member Gloria E. Hernandez.
“We’re going around circumventing something, being fiscal irresponsible because there’s money anyways. But then by next year we’re going to have this expense , plus the positions.”added Hernandez.
“And, this keeps going because there is always these positions that are giving us the wiggle room.” said Hernandez.
Mayor Cantu stated that it was something to look into as the city is in preparations for next year’s budget.
“Start evaluating where there’s a need to remove positions.” said Mayor Cantu.
“I want to know where we found $1.5 million dollars? Does it say here where its coming from?” asked Hernandez.
City Finance Director San Juana Garza gave a brief explanation of where the monies in the budget were to be allocated from including certain unfilled positions.
“We didn’t create those positions to inflate the budget.” said Garza.
“I’m not saying that. I’m saying that its just comfortable to have those positions there year after year. Those positions that are needed but they don’t get filled.” said Hernandez.
“Its also incumbent upon our directors/ administration to go over every position and see where there could be a savings.” said Hernandez.
Interim City Manager Roberto Gonzalez then stated that as council and administration get close to the new yearly budget process that a thorough inventory of every position and department should be conducted to ascertain a need or not on the positions that are on the budget but have not been filled.
“If you didn’t fill it , obviously you didn’t need it.” said Gonzalez.
City council agreed to look further into the issue and set the corrective measures needed.
Agenda item No. 8 was approved unanimously.
