Marfa mayor’s budget: More revenue or more cuts

After Marfa completed its first 2019-2020 budget workshop at around 11pm on Tuesday, Dan Dunlap, city accountant, offered a blunt assessment.

“Nobody’s happy with the budget as it currently stands,” he said. “There is going to be a lot of thought and sweat and work put into this budget before it is finalized.”

Council members on Tuesday went through the proposed numbers with a fine-toothed comb, examining Mayor Manuel “Manny” Baeza’s narrowly balanced budget. But the mayor did not offer up much justification for his budgetary choices — nor did he offer any statements about a broader vision for the city’s government and finances.

If anything, Baeza himself also seemed disappointed with the results.

“We either need to generate more revenue or cut back on expenses,” he said at the beginning of the discussion Tuesday, criticizing the budget plan he had just handed over to council.

Council could only discuss the budget Tuesday — not make changes. But officials are already planning to make edits to the proposal tonight, at a 6 p.m. budget workshop in the Casner Room at City Hall.

On Tuesday, council members agreed to discuss the various department budgets first and then address salaries. By the end of the night, the council had surmounted 35 pages of budget spreadsheets but had not yet analyzed any of the city employees’ salary changes.

Narrowly balanced budget

Dunlap says he helped Mayor Baeza put together the proposed budget this year. It was submitted August 27, giving officials just over a month to review, revise and pass it before October 1.

Baeza and Dunlap heard input from all of the department heads and ultimately proposed a $7,343,022.46 budget that would be covered by a combination of city revenues and banked funds. In the proposal, nearly $2.1 million of that expense is allotted to cover increased payroll and benefits this coming year, almost one-third of the entire budget.

The budget left the city narrowly in the black, with a positive $23,388 balance. But that figure was diminished further during the meeting after two errors in the spreadsheet were corrected, dropping the city’s surplus down into the low thousands.

Ideally, the city would try to cover 50% of depreciation expenses, Dunlap said. But the $23,288 would only cover 3.46% of the city’s depreciation of its assets.

Setting aside money to cover depreciation means it can later be spent to refurbish current city assets that wear out over time, including roads, water infrastructure or vehicles. The funds can also be spent to purchase new assets.

After Dunlap discovered more clerical errors Wednesday evening, the budget provided a little more optimism. Coming in at a higher $7,368,883.21, the updated budget provided coverage for 9.09% of depreciation.

Not so HOT taxes

The HOT Committee — tasked with doling out thousands in tax funds to fund events that draw tourists to stay in the city’s hotels — could lose most of its responsibilities under the new budget, which removes all funds for Arts and Culture grants. Local nonprofits of all sizes have in the past relied on these funds to support events that “put heads in beds” at the local hotels.

Meanwhile, the budget proposed $70,000 for Historical Preservation grants, which are already line itemed in the budget. Of that money, $50,000 of it would be allotted to the Marfa and Presidio County Museum’s building and $10,000 to the museum’s operations. The last $10,000 would go to the Marfa Lights Festival — the longest running festival in Marfa.

During the budget discussion, though, new and relevant information about the museum came to light: Joey Benton, a contractor and adobe restorer, had estimated it would cost half a million dollars to repair the decrepit museum building. Baeza and Councilmember Johnston both emphasized the importance of the museum but said that repair estimate was untenable.

Deirdre Hisler, chair of the HOT Committee, spoke against the proposed change.

“If you start reading the language about how the HOT grants are supposed to be dispersed, if certain things can be paid out of general operating, you should not be using HOT funds unless they really put heads in beds,” she said.

Dunlap then dove deeper into the current year’s HOT revenue and revealed that the hotel tax income was not as robust as the city had expected. At less than $450,000 for the year, tax revenue has fallen well below the $600,000 officials had optimistically projected in the 2018-2019 budget.

Upon learning this, council members expressed alarm and disbelief. Perhaps the city’s tourism economy had “peaked already,” Mayor Baeza said.

Some hotel, motel and short term rental owners pay their taxes monthly, so the city can expect a little more HOT income before the 2018-2019 fiscal year ends at the end of September. Dunlap said he is “hoping to snuggle up a little closer to $500,000 before it’s all said and done.”

“Hopefully we can bring in another $50,000 or $60,000 more this month,” he added.

Councilmember Johnston worried that the city may not be successfully collecting all of the HOT taxes on short term rentals like Airbnbs in the city. Tracking new rentals and collecting taxes on them has proven time-consuming for the city.

As confusion mounted, Dunlap vowed to investigate further.

“I’m going to go in and analyze our revenue,” he said. “I can split out the short-term rentals and the hoteliers and compare it to the previous year to see if it is any different.” When all is said and done, Dunlap hopes the city only lands about $40,000 short of its $538,000 benchmark from last year.

“Wow,” Johnston said as the HOT discussion drew to a close.

“We need to have some real conversations here. This is gonna be tough.”

“It’s a reality check,” Baeza said.

“We’re not rich,” Dunlap added. Council seemed to agree.

Baeza responded, “We were for a little bit!”

From salary to hourly

As Dunlap scrolled through spreadsheets, city council moved on to employee overtime.

“A number of staff have asked to get off of salary and prefer to get back to hourly, so overtime has increased,” Dunlap said. In Baeza’s proposal, some city staff could switch away from salaried pay. Instead, they would be paid hourly, but maintain their benefits.

Currently, staff like City Secretary Rachel Whatley are given what is called “flex time,” where officials take off normal work hours to compensate for overtime — for instance, time spent at Tuesday’s extra-long budget meeting.

Under an “hourly” system, Dunlap explained, a staffer would have their salary divided across 40 hours. They would receive that rate up to 40 hours a week, and then receive time and a half beyond that.

Whatley and other staff are hoping to instead be paid overtime, since those who currently earn flex time rarely take advantage of it, Dunlap said.

Councilmember Yoseff Ben-Yehuda asked the mayor if any employee would be able to make a choice to change to hourly.

“It would be a decision, ideally,” Baeza responded — leaving unclear who, precisely, would be making that decision.

But Ben-Yehuda stressed the salary system was “easier,” whereas overtime was “less predictable.” Baeza said the overtime costs included in the budget were just estimates, so council will have to determine how much money they will allocate for employees if they allow them to switch their pay methods.

More expenses

Even with its tight margins, though, most of the other changes proposed by council members were increases — not cuts. Ben-Yehuda proposed to increase the fire department’s capital outlay from $42,000 to $82,000.

Councilmember Johnston suggested a small increase in funds to the Marfa Activity Center to pilot a month-long extension of the swimming season. But even that conversation soon led to more budget headaches, as the pool may need a new $8,000 swimming pump.

By 10:30pm, council was eager to head home. “I know we’re all slightly disappointed, but we need to make some modifications,” Baeza told the council members.

Ben-Yehuda asked the mayor point-blank: “This is your proposed budget — but if we pass this budget, are you happy?”

“No,” Baeza said.

“Do you have a vision to get us there?” Ben-Yehuda asked.

“We’ll discuss that Thursday,” Mayor Baeza said.

Those future discussions are open to the public and are currently scheduled for September 5, 9, 16 and 23 at 6pm in the Casner Room at City Hall. The council hopes to approve the final budget, along with the new tax rate, on September 27. If Tuesday’s meeting was any indication, though, Marfa officials could be in for some more late nights.