City of DeSoto sees decline in new home construction

by Daphne Brown of DeSoto TODAY

DeSoto city staff is cautioning the council of a noticeably projected decline in the number of houses to be built in DeSoto.

This trend could plague what has become a healthy and consistent revenue-generator for the city, as council ponders the city's 2008 fiscal year budget.

The DeSoto city manager and finance director led the council in a three-day intensive budget workshop this week, detailing the need to be even more forward thinking than it has in previous years.

Staff is not recommending a tax rate increase from the city's current 48 cents per $100 of valuation, but council was told to be mindful of the anticipated decrease in the city's future housing starts. As of Jan. 1, there were 475 new single family homes under construction, an increase of 7.3 percent over the previous year's figure. The level of growth in the city's assessed valuation was “very positive” as the housing market in 2006 leading up to the first of the year continued to be strong, according to information presented to the council during a July 26 preliminary workshop on the budget.

“We have, however, seen a weakening in that market in 2007, which is reflected in the fiscal year 2009 revenue figures,” staff presented to the council.

As the number of houses fall, so goes revenue generated from property taxes, which is projected to decline from previous years, staff presented.

“We are anticipating only 250 new houses on the tax roll on Jan. 1, 2008,” staff presented. “This represents an increase of 2.9 percent, which is half the growth we have budgeted in previous years.

Property tax, one of the city's two major revenue generators, is projected to increase just shy of $1 million for the 2008 budget, which council must vote on and have in place when the city's fiscal year begins on Oct. 1. The yield from property tax is projected to increase by $983,450 over the fiscal year 2007 budget.

Staff is projecting a need for $837,000 more in expenditures than revenue for the 2009 budget.

“This gap will obviously have to be closed as we present the fiscal year 2009 proposed budget to you next year,” staff presented.

The city's sales tax, according to staff, continues to show modest gains.

“We are optimistic that we will make the fiscal year 2007 estimate and have projected a 5 percent increase for fiscal year 2008 and the same for fiscal year 2009,” the information presented to staff read.

Projected revenue and expenditures are expected to balance at $28,784,343 and $28,780,117, respectively, staff told the council. Maintaining salary and benefits according to market standards will account for an increase of $661,451 over last year's budget.

“This amount is split 64 percent to the protective services (fire and police) and 36 percent for the balance of the workforce,” staff said.

Other increases include the city's health insurance coverage with Blue Cross/Blue Shield, set to increase by $78,739 and a monthly car allowance increase for employees who utilize their own vehicles for city business, totaling $14,400.

“For the past 10 years or more, the monthly car allowance has been set at $400 per month. While this amount presented a fair compensation for employees use of their own vehicles for city business, which has diminished in the face of increased gasoline prices and other vehicle-related expenses. The proposed budget increases that allowance from the current $400 to $500 per month,” staff presented.

One-time budget items totaling $273,136 includes $100,000 as the city's matching contribution toward the restoration of the city's recently acquired Nance Farm.

The council will meet to review the budget Aug. 2-4, after which time it will vote on a resolution to accept the certified tax roll, discuss the tax rate and schedule a public hearing. A public hearing on the budget and tax rate are tentatively set for Aug. 28 and Sept. 4 and adoption of the budget and tax rate are set for Sept. 18.