El Paso's Proposed Unnecessary Tax Increase

El Paso’s citizens could be asked to cough up more of their hard-earned money to the city, because the city’s proposed budget for Fiscal Year 2015 includes a tax increase of 2.3 cents per $100 valuation.

The city manager defended the tax hike to KVIA news, saying that “it’s cheaper than having a cell phone.” But such an increase would not be necessary if the city exercised the same budgetary discipline as hard-working El Pasoans. The city manager’s introduction to the proposed budget states that it “is a prudent and realistic plan that focuses resources in the area of greatest need.”

Yet in spite of the pledged focus on need, the budget increases taxes to pay for a great many wants.

Consider the tax increase necessary to pay for the recently announced certificates of obligation slated for August. Certificates of obligation, or COs, are debt instruments that, unlike traditional bonds, are not voted on by taxpayers.

A large part of the FY 2015 tax increase, 1.21 cents, is going to pay for the new debt service necessitated by the city’s proposed issuance of $73 million in COs.

The new debt is being issued to fund a slate of projects including $12.6 million for Sun Metro, $5.3 million for land acquisition for Environmental Services, and $9.9 million for transportation, among others. Some funds are budgeted for renovating the San Jacinto Plaza. These may be nice projects, but are they truly necessary? Should taxes be raised to go deeper into debt burdening El Pasoans in the process?

According to the Bond Review Board, the City of El Paso owes over $1.5 billion in principal and over $634 million in interest. The total obligation for taxpayers, adding principal and interest, is over $2.1 billion. Considering the 2013 Census population estimate of 674,433, that is over $3,100 in debt service per El Paso resident. The addition of $73 million in CO debt will add another $108 in debt per person, not including interest.

More debt service will come from other projects approved by voters in 2012 as part of the $470 million “Quality of Life” bond, including the construction of a massive 35 foot by 6 foot interactive digital video display wall named “Digie” at the El Paso Museum of History. Digie costs $3 million, not including the hiring of two new employees for nine months at a cost of $60,473.

Although El Paso’s Museums and Cultural Affairs Department is expanding its range of services, it is not a fiscally sound department. For FY 15, operating revenues, including donations, for facilities and programs in the department is projected at $875,516, with another $568,470 proposed to come from federal, state, and local grants.

Meanwhile, the department’s expenditures are proposed to be slightly less than $5 million for FY 15. The entire department is projected to run a deficit of well over $3.4 million in the coming year. In spite of losing such a substantial sum, however, the department’s appropriations are increasing by 13 percent for the FY15 budget.

Another area of the budget seeing a big increase in 2015 is the travel budget.

Elected officials’ travel budget is proposed to increase by 31.7 percent to $40,180, while the employee travel budget is proposed to rise by 43 percent to $238,732. Why might travel expenditures increase so much in the proposed budget? It may have to do with the increase in training costs.

The budget item labeled “Seminars Continuing Education,” which includes such things as training seminars, is proposed to increase by 11.4 percent to $663,158. Presumably, travel expenses increase as the number of training seminars increases.

It is understandable that El Paso wants its employees to be well-trained. Similarly, one cannot doubt the city’s benign intentions in trying to provide quality of life services. But those things are discretionary wants, not essential needs.

When the city government is raising taxes to pay for wants, El Pasoans must question where the city’s priorities really lie.

Jess Fields is the senior policy analyst for the Center for Local Governance at the Texas Public Policy Foundation. He may be reached at jfields@texaspolicy.com.