Page 18 - ANALYSIS.XLS

Rate Increases
The property tax rate adopted a decrease to 49.5600¢ per $100 valuation. All other charges for services
remained at the same level.

Impact of Capital Improvement Projects on Operations & Maintenance Expenditures
As a part of the approval process for capital improvement projects, management considered the impact
on operation and maintenance expenditures. Major projects for which funding was provided through the
issuance of bonds, generally has a ten-year financial plan prepared in conjunction with the presentation to
the credit rating agencies. The more significant improvements included in the Capital Improvement Fund
have been evaluated for their impact, as presented on pages 141-142. This year such improvements will
have minimal impact in operating and maintenance expenditures in the amount of $316K in the General
Fund. Additional projects undertaken by other funding sources will have an additional impact in operating
and maintenance of $131K. Refer to pages 165-175 for those projects that will have an impact on operating
and maintenance.

THE FY 2020-21 BUDGET – AS A WHOLE

Overall Budget Basis of Accounting
The budget basis that the City has adopted by past practice is the modified accrual basis for all
governmental fund types. The accrual basis has been adopted for the proprietary fund types, with some
modifications; principally the inclusion of debt principal payments and capital outlay as expenses and not
making provision for depreciation expense. This budget has been prepared in accordance with this legal
basis of accounting.

The City’s overall budgeted resources to be generated this year aggregate $425M. Of that amount,
transfers-in account for $48M with the balance of $377M related to revenues. Expenditures and transfers-
out are budgeted at $469M of which $48M are transfers-out and $21M for debt—leaving $400M in
expenditures/expenses. Almost 41% of the budgeted expenditures are capital projects related. City fund
balances and/or working capital as of September 30, 2021 are estimated to total to $190M—a $45M
decrease due to spending down debt and undertaking more capital projects.

A detailed financial analysis of this year’s budget appears in the Executive Summary, following this
message.

LONG-TERM CONCERNS AND ISSUES

Impact of Covid Pandemic & Mexico Trade on City’s Economy
The City’s economy has maintained an excellent financial position even with the pandemic-related drop
in Sales Tax revenues. Those revenues, to date, have been less impacted than the City originally predicted
and have exceeded 2019-20’s budget, as amended mid-year. The City’s economy has historically been
linked to that of Northern Mexico and its shoppers. But with all international land ports-of-entry closed
to “non-essential” trade – including Mexican shoppers – our retailers have suffered. The City will carefully
await the pandemic’s end so that we better understand which businesses will, and which will not, survive.
The City’s many construction projects were noted by a rating agency as a major reason for continued
economic stability. These projects will continue for some years into the future. Additionally, the pandemic
created high levels of demand for single-family residences nationwide, statewide and in McAllen. This
created seldom seen increases in median home sales prices in McAllen and drastically reduced the
inventory of available homes to levels not seen in decades which is likely to increase assessed values.

2020-2021 Budget Message vi