Council hears finance team analysis showing long-term capital gap; options include tax-rate tradeoffs and additional grants

A consultant and city finance staff told the Lago Vista City Council that, under current assumptions, planned capital projects and recent debt could produce a multi‑year shortfall unless the city increases debt‑service tax revenue, secures additional grant funding, or reduces planned capital spending.

Thomas, a financial adviser engaged to model tax‑rate and debt scenarios, presented updated projections that included a no‑growth scenario and a hypothetical 7% decline in assessed values followed by 2% annual growth. The model showed that without changes—either higher I&S (interest and sinking) tax collections or supplemental utility transfers—bonding capacity for additional capital projects would be limited.

Thomas and council members discussed typical levers: increasing the I&S portion of the property tax (the council can offset that with a lower M&O—maintenance and operations—rate to keep total tax rate unchanged); making a larger transfer from utility fund unrestricted surpluses into debt service; pursuing low‑cost State Revolving Fund (SRF) or Water Development Board financing; or staging and delaying projects in the CIP.

Finance Directorate and the city manager said the city currently holds meaningful reserves: roughly $18 million in utility reserves and about $6–7 million in general fund reserves, and that transfers from utility to other funds have ranged from $1 million (assumption in one model run) to $3.5 million in recent years. Councilors and staff noted that the city used $2.0 million annually historically and $3.5 million most recently, but warned that continued reliance on reserves reduces financial flexibility and credit strength.

Councilor Norman and others asked for a clearer, regular forecast and suggested monthly or quarterly financial dashboards. Councilor Roberts and others proposed an aggressive review of operating expenses to tighten non‑personnel spending; Councilor Som proposed setting formal department targets based on recent actuals and making exception requests for additional funding only when justified.

On water treatment specifically, staff said newer engineering estimates for Treatment Plant No. 3 reduced projected capital costs compared with earlier figures; council asked staff to return with comparative estimates (type‑1 vs. type‑2 treatment) and with the economic and operational tradeoffs for effluent reuse and sales. Staff also said SRF and Water Development Board programs remain options under active review.

Ending: Council directed staff to refine the five‑year and 10‑year fiscal forecasts, tighten departmental expense targets for the upcoming budget and return with a CIP prioritization and a schedule for bond issuance and grant applications.