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"Planning is bringing the future into the present so you can do something about it now."
Author Alan Lakein
In late 2019, the Texas Comptroller proposed a change to the way that sales tax revenues are allocated throughout the State of Texas. Under the proposed rule, Coppell's sales tax income would be reduced by approximately 60 percent.
Then, in mid-March 2020, the full effects of the COVID-19 pandemic became apparent. As businesses closed and residents took shelter in the safety of their homes, the City's sales tax revenues were further reduced.
Together, these two unrelated events pose one of the biggest financial challenges Coppell has ever faced. Years of conservative spending and sound planning practices have prepared the City of Coppell to meet these challenges head on.
Meeting the Challenge
Long-term planning has always been a cornerstone of Coppell's success. Thanks to the conservative fiscal policies of the current and past city councils, the empowerment of city staff to identify and proactively address potential problems, and the support of residents, the City of Coppell is well-positioned to meet these challenges while maintaining the qualities and high service levels that continue to make the community unique.
While the City did not – and could not – specifically plan for revenue reductions due to a global pandemic, planning in other areas has allowed the City to maintain high-level services and necessary staffing levels with minimal impact to the community.
The City of Coppell staff and Council recognized that changes to how the State of Texas distributes sales tax revenue could lead to a potential $6 million loss of revenue beginning in April 2020. In early March, when the COVID-19 pandemic's impacts began to reverberate in North Texas, this expected revenue loss jumped $9.6 million for 2019-2020 budget year.
Beginning in December 2019, city staff began scrubbing the budget line-by-line to determine how to conserve revenue while maintaining the high level of quality city services Coppell has come to represent. Major steps included: freezing hiring for approximately 30 positions ($2 million savings), reducing expenditures ($2.4 million reduction), and reducing capital spending ($1.2 million reduction).
Additionally, decisions by the current and past City Councils provided flexibility to address the revenue shortfall. The City analyzed existing fund balances to determine the best strategy to mitigate the impact of the expected remaining revenue loss. The City identified two fund balances that will be used to cover the revenue reduction that cannot be accounted for through reduced expenditures: funds that City Council had previously set aside in the City's designated fund balance until designated for use should an issue such as this arise, and a fund that Council had previously set up to be used in case of revenue threats. Transfers from the Water/Sewer Fund and allocations from other fund balances are also being used to mitigate revenue reductions.
While the City is currently in a strong position, these significant budget challenges are not over. That is why the city staff, under the direction of the City Council, has begun a comprehensive process of analyzing every budget expenditure with the goal of maintaining the quality of life and unique character of Coppell.
The focus of this work will be in several specific areas:
Revenue Generation – Are there ways to generate additional revenue to make up for the shortfall? This will include evaluating City fees for services to ensure they accurately reflect the cost of providing the service and are in line with similar charges in neighboring communities.
Capital Expenditures – Can the timing of capital expenditures be changed to lessen the impact on the City budget in any given year while continuing to maintain and improve the City's infrastructure? This evaluation includes issues such as fleet replacement schedules, technology upgrades, and other items.
The Most Efficient Ways to Deliver Community Services – A data-driven approach will help determine if there are opportunities to make delivery of City services even more efficient. This could mean reducing hours at City facilities to high-demand times.
Salaries and Benefits - Dedicated City employees are at the forefront of delivering services to residents. The City's goal is to maintain the full-time staff and the high quality of life in the community. The proposed FY 20/21 budget does not currently include any merit/COLA or step increases for any employee. Given the economic uncertainty being faced by residents and businesses, combined with the City's commitment to keeping its existing team intact, it would be unreasonable to introduce any proposed increases in salaries in next year's budget.
Where We Are Right Now
The adopted FY 19/20 budget listed approximately $72 million in expenditures. With the reductions that have been made, the current budget reflects approximately $66 million in expenditures. Plans for next year's budget include a reduction in revenues – from the current $73 million to $62 million. Planned expenditures are valued at approximately $62 million.
"I am proud of the fact that no one has suggested kicking the can down the road or putting off doing the hard work that will help us make the best data-driven decisions," said City Manager Mike Land. "Coppell is special because we work together as a diverse community to understand issues and make thoughtful decisions based on a shared community vision. These are difficult times, but we will work through them – together."