Pflugerville adopts annexation fiscal tool for future requests; study highlights county roads and MUD debt as main cost drivers

City staff and consultants presented an annexation study and a custom fiscal-impact model at the July 8 Pflugerville City Council work session and recommended using the tool to evaluate future annexation requests.

The presentation, led by Matthew Cross of Economic and Planning Systems (EPS), described a two-part model: an input page staff or applicants use to enter a proposed development's program (unit counts, commercial square footage, new and existing road lengths, dedication of parkland and other factors) and an output page that summarizes the net annual general-fund impact, capital implications and a 30-year net fiscal impact.

Why the tool was developed

City staff told council that recent legislative changes restrict unilateral annexation and make it more important to analyze the fiscal implications of any request. Staff noted that Pflugerville still has substantial vacant land within city limits (approximately 2,500'2,900 acres, staff said) that should be considered before extending services outward.

What the model measures

The EPS model uses the city's audited financials to derive nexus factors that tie new residents and jobs to service costs. It estimates: - Ongoing annual general-fund impacts (revenue minus operating costs); - Capital implications, notably the cost to upgrade and maintain county roads the city may take over; and - A 30-year net fiscal impact that combines the two.

The tool compares capital costs to funding sources such as roadway impact fees and the interest-and-sinking (I&S) portion of the property tax and provides visual gauges showing relative fiscal impact.

Illustrative scenarios and findings

EPS presented prototype scenarios. One hypothetical produced about a $52,000 annual net positive impact to the general fund but a negative $13 million 30-year net fiscal impact because the capital cost of roadway upgrades and maintenance outweighed revenues from impact fees and I&S property tax over time.

The study's main findings were consistent across scenarios: the closer proposed development is to existing infrastructure and water/wastewater service areas, the lower the fiscal impact; taking over and upgrading county roads is often the largest capital driver; and outstanding MUD debt can make annexation financially unviable. EPS provided a rule of thumb: if annual MUD debt payments exceed the I&S property-tax revenue that annexation would generate, the MUD is likely a nonstarter without additional mitigation.

Use in city policy and next steps

Staff told council the model has a simplified user interface for routine evaluations and a user guide for maintenance and advanced inputs. The council asked staff to apply the tool to specific existing neighborhoods in the extraterritorial jurisdiction (ETJ) such as Village of Hidden Lakes and others to determine if, when and how annexation could become feasible. Council members and staff discussed how phased or incremental annexation could improve fiscal outcomes by creating intermediate development that shares roadway and infrastructure costs.

Staff and EPS recommended adopting the model as a standard part of annexation packets so council receives a consistent fiscal calculation together with zoning, comprehensive-plan and qualitative policy analysis. EPS said it would return with a final package in August.

Speakers quoted in this article are restricted to the list of speakers below and are drawn from the meeting transcript.