Pearland City Council on Monday took official steps to shore up a recently uncovered valuation blunder resulting in a $10 million shortfall.
“This is step one to address the immediate impacts of the property tax reevaluation,” interim City Manager Trent Epperson said Monday. “The next steps will be worked on over the next few months as we better understand the long-term impacts and how to address those impacts.”
According to the city, the budget shortfall occurred after data provided by the Harris County Appraisal District was incorrectly input on a tax rate calculation worksheet in Brazoria County, and that worksheet was used by Pearland city staff to create the city’s current budget and tax rate.
“Thankfully we caught this evaluation issue one month into our budget, not five or six months,” Mayor Kevin Cole said. “We have some opportunity to adjust on the front end of it.”
He compared the city’s situation with finding oneself in an emergency room after an accident.
“We sustained a hit, and we’ve got to do what’s appropriate to stabilize and ultimately find out a course of action, a treatment scenario,” he said.
Approved at Monday’s meeting was the first reading of budget amendments for the current fiscal year that include using the city’s fund balance, lowering equipment and vehicle lease transfers into the city’s motor pool fund, and delaying a scheduled $300,000 update to the city’s Unified Development Code.
Also applied to the budget gap is the city’s expected interest earnings are estimated at $478,000 more than budgeted, and PEDC reimbursement for the Lower Kirby Regional Detention System will increase revenues by $622,513 more.
The impact of the shortfall, particularly on the city’s debt service fund, remains unclear.
“We may have to look at delaying certain projects — certainly there are projects like Smith Ranch Road that have funding in place and need to move forward,” Cole said.
Councilman Alex Kamkar maintained that he did not support the budget when it was passed, emphasizing that it was the city’s largest to date. He continued to express frustration that the budget amendments brought forward to close the gap don’t address ballooning recurring expenses.
“These kind of solutions get us through a moment, but don’t address the long-term structural issues,” Kamkar said. “There’s two ways to address a hole; Stop spending money or bring in more money. We can control the spending piece.”
Before the council’s 6-1 approval of the budget amendments, Kamkar made a motion that the council ask city staff to cut $4.7 million in recurring expenses from the existing budget. His motion died for lack of a second.
“If you have a plan, offer the plan,” Cole said. “Staff has a plan. It does address the immediacy of the shortfall.”
A second reading of the budget amendments will be held this Monday, Dec. 12.
More information and documents regarding the budget shortfall are available at the city’s site at pearlandtx.gov.
