It’s Good To Know What’s Going On! – February 3rd

Never a dull moment in New Fairview! As always, here is a bulleted executive summary of the newsletter, but please scroll down to read and learn more. Here is a link to the February 1st, 2021 City Council presentation and agenda packet for the meeting.

• Next week, the City Administrator will be holding an open house to update the community and answer any questions they might have. Please take a minute to complete this survey to let the staff know what date and time works best for you. The meeting will be both in-person and virtual, so please take some time to join in the conversation.

• The Council approved the sale of $3,000,000 in bonds to fund the streets improvement project. The city’s bond rating of A+ allowed the bond issue to obtain bond insurance, granting an overall rating of AA. The total interest cost, that the city will see on these bonds, is approximately 1.3%, which is a fantastic rate for the first issue of any city. The repayment of these bonds fall within the amount of money the Council appropriated in the FY 2020-2021 annual budget. Here is a copy of the report provided by Hilltop Securities regarding the bond issue.

• Glacier Realty, a commercial realty company with a strong presence in Northlake, Justin, and the Alliance area, made a presentation to the Council regarding economic development in general as well as specifically in our region. They told the Council that FM 407 is anticipating 28,000 new residents in the next five-to-ten years. This supports the Northwest ISD report stating that over the next five-years, they anticipate seeing an additional 10,000-to-12,500 homes built.

• Rockhill Capital & Investments made a presentation to the Council about a proposed master planned community, consisting of 1,806 acres located at FM 407 and County Line Road. This development, as presented, would include approximately 4,000 new single-family homes, a Town Square including local shopping, a city hall, a public safety facility, as well as mixed-use nodes on FM 407 and County Line Road. The Council approved a professional services reimbursement agreement, to fund the cost of city consultants in reviewing the proposed development. Further, the developer delivered a check for $50,000 as a deposit against the future bills.

• In a recent phone update from Pacheco Koch (PK), regarding the streets improvement project, staff was notified that the survey company has pushed their deliverables by approximately 30 days, due to Covid-19 spread among their team. Staff is working with PK to mitigate this through use of additional personnel on their design and engineering team, but staff is still waiting on a updated timeline. Worst case scenario, this would push the construction start date into May 2021.

• Staff made a presentation on general homestead exemptions, their potential financial impact on the homeowners, as well as the city finances. The Council tabled the item for further discussion during the 2021-2022 budget development process.

• The Council has been discussing the implementation of an ordinance that provides the city authority to conduct annual safety inspections of commercial operations, to ensure the safety and health of public. Staff has been working with the largest commercial operator, BKV, to develop a fee and inspection schedule that will meet the city’s requirements. City staff will also be reaching out to the other commercial operations in the city to discuss how this will impact them. The increased revenues, which will generate hundreds-of-thousands-of-dollars each year, from the safety inspections are anticipated to improve the ability of our first responders and their levels of service in New Fairview.

• The Council approved a three-year agreement with William C. Spore, P.C. to conduct the annual audits for the fiscal years ending September 30, 2021, 2022, and 2023.

• The Council called the general election in May, as city hall has received multiple applications for the seats that will be on the ballot, Place 2, Place 4, Place 5, and the Mayor.

Bond Sale and Streets Improvement Project

There is not really a whole lot more to say about this, but to thank the Council, both the current and previous, for creating the necessary revenue source, adopting fiscally responsible financial policies, and providing clear direction to staff on the importance of FIXING the roads.

The plan that staff has developed and Council has approved for implementation provides significant increases in value, meaning the final number of linear feet of roads actually being improved, through chunking what was anticipated to be three-to-four discrete projects, into one larger project, avoiding excessive mobilization and financial advisory/bond related fees. This will also help to mitigate some of the roads that are not completely exhausted and stretch their useful life until New Fairview can create enough new tax base to support the cost of additional streets improvements in New Fairview.

While the engineering firm believes that they will be able to help mitigate the delay from the survey company, one of their suggestions was to bid out smaller parts of the project, as they are completed, but we do not want to dilute the value of the overall project by increasing the mobilization costs.

Economic Development

Local governments, including municipalities, counties, school districts, and special districts all have a vested interest in encouraging private persons and businesses to generate new as well as support existing business ventures in our area. These economic opportunities should align with the values and characters the community wishes to maintain as it continues to grow and develop.

Economic partnerships are strategic and happen at different times in the development stages of a community. There are numerous stakeholders, including residents, property owners, businesses, and multiple levels of government agencies. Here is some additional information that the Texas Municipal League has published on economic development.

Why should a community focus on economic development?

• There’s a need for good jobs, with good wages. These directly impact the quality of life of our residents, visitors, as well as the success of local businesses.

• A city’s primary sources of revenue, include property taxes, sales and use taxes, and fees. Over-dependence upon anyone of the primary revenue sources creates a significant weakness in the financial stability of the city and its ability to function as needed. As seen in New Fairview in 2013, a change in the law regarding sales taxes on gas well production, decreased the only significant source of revenue the city had by 86%.

• Commercial entities, retail operations, and other businesses are significant economic resources. City’s have tools to help attract and retain local businesses. When they do well, it benefits everyone in the city.

• Commercial entities are not eligible for homestead exemptions, which means that if the city were to expand homestead exemptions, much of the revenue generation could be shifted from residents to these commercial entities. Further, the value of commercial entities are generally much greater than those of residential properties.

• Commercial entities are dependent upon city infrastructure and resources, such as water, sewer, roads, internet, work force, public safety, etc. Currently, the city has 12 local businesses that generate sales tax revenue.

General Homestead Exemptions

Much of this information is a repeat from the last communication, but the Council reviewed the materials and decided to table this conversation until we enter into the budget development process later this year.

Currently, the city has adopted ordinances for a tax freeze (ceiling) for over 65 and disabled, a $10,000 exemption for over 65 and disabled, as well as a tiered exemption for disabled veterans:

• $5,000 of assessed value for 10% but less than 30% disabled; or
• $7,500 of assessed value for 30% but less than 50% disabled; or
• $10,000 of assessed value for 50% but less than 70% disabled; or
• $12,000 of assessed value for 70% or greater disability.

The Council has requested that the staff prepare and present an ordinance that would provide a general homestead exemption. The statute governing the ability of a municipality to offer this type of exemption allows for an exemption up to 20% of the assessed value, but no less than $5,000.

What are homestead exemptions used for?
Homestead exemptions are generally used as a tool to shift the cost of city operations from defined groups, such as elderly, disabled, or residential homeowners to business and commercial properties. Due to the lack of business and commercial entities in New Fairview, there is no real shift of the cost, just a reduction in overall revenue to the city.

A general homestead exemption would effectively reduce the property tax rate of residential homeowners from $0.30 to around $0.24 per $100 of valuation, at the full 20% exemption level.

How much would this save the average household?
The average assessed value of a property in New Fairview is just under $100,000. With a property tax rate of $0.30 per $100 valuation, that means that the average tax bill for residents in New Fairview is around $300 per year. Further, this means that if the Council chooses to offer the full 20% exemption, the average taxpayer in New Fairview would see a savings of around $60 per year, or $5 per month.

How does this impact the budget?
Using the current year’s assessed value, approximately $140 million, this exemption would reduce the city’s annual property tax revenue by approximately $80,000, over half the annual cost of the streets repair program, for the first three years.

How does this impact the street’s improvement?
The streets program is budgeted to cost the city around $0.10 of the $0.30 property tax rate. Currently, the cities revenues and expenditures are fairly evenly matched. If the city increases revenue in other areas, that offsets the loss of this revenue, then it will have little impact.

Currently, it appears that building permits and other revenues may exceed budget but these are one-time revenues that best practice states, cities should not generally consider these one-time revenues when taking on long-term financial obligations.

If the other revenues do not materialize, the city would have to look at reducing services levels to offset the loss of revenue or the most conservative approach would be to proactively reduce the scope of the streets project by around 60% to match revenues to expenditures.

How does this impact the city financially?
The city adopted a budget that adds money to the General Fund balance. This was intentional, as it impacts our bond rating, making the cost of borrowing money go down as we issue debt to reconstruct streets or do other capital projects. One of the big items that the rating agencies look at is trends in the city’s financials.

While there may be enough excess revenue coming into the budget from other sources, such as new home building permits, as well as increased tax base revenue in future years, from new home construction, it is in the best interest of the city to slightly increase the fund balance each year to establish a positive trend.

Finally, the General Fund balance acts as a “shock fund”, allowing the city to tackle tough financial years if something happens in the future that reduces city revenues, such as when the legislature changed the sales tax laws on natural gas production.

How does this impact the city long-term?
The legislature previously passed a law that did not allow a taxing entity to change/repeal this optional homestead exemption once adopted. This expired in 2019, but there is a very good chance that this will be addressed or renewed in the current legislative session that just started, meaning that if the Council adopts this, then it may become permanent.

Annual Safety Inspections

Municipalities are granted regulatory authority to ensure public health and safety. Certain business and commercial operations in the City, due to the nature of the operation, carry with them the risk for the occurrence of dangerous incidents, including fire, explosion, nuisance or other catastrophe, and for that reason present a threat to the health and safety of the city.

The city was not enforcing safety inspections to ensure that commercial entities within the city limits are in compliance with applicable federal, state and local regulations to protect the health, safety, and welfare of the city.

The Council approved an ordinance that provides staff the authority to implement an Annual Safety Inspection Program to ensure that business and commercial operations within the City are operating in compliance with these regulations. Staff will be bringing back the updated fee schedule to the Council for approval in the March meeting.

Shoop Ranch – Master Planned Community

The 1,806 acre Shoop Ranch, which is generally located north of FM 407 and South County Line Road to AA Bombarger Rd and is illustrated in the image below as the area shaded light green. This tract of land has portions of the project in both Wise and Denton County. They will be presenting their concept plan to the City Council in the February 1, 2021 Council meeting.

This development provides a number of opportunities to improve city operations. A few of the major impacts for our community, include:

• Another funding source (Constellation Lakes) that will help bring surface water to New Fairview; driving down the overall cost for everyone
• Develops a water system and infrastructure that can provide fire protection services, improving the city’s ISO rating and reducing the cost of every homeowner’s insurance policy in the city
• Installation of sewer treatment facilities
• High-speed internet
• Activation of around 700 acres of open space, parks, sports fields, and 13+ miles of major trails
• Funding for transportation improvements
• Funding for public safety improvements
• Adds approximately $1.3 billion in tax base to the city or around $4 million in property tax revenue at the current rate of $0.30 per $100 valuation

The project proposes to develop a Town Square for the city which ties into a community amenity center, sports fields, and a 13+ mile trail system. The Town Square would feature a grocery store, drug store, and variety of retail and office space for local business.

When traveling on FM 407 and passing the Shoop Ranch on the north side of FM 407, travelers and residents would see something that looks like the images below. A ridgeline, running east to west, would only allow a small section that includes the entry monument, some retail shops and a few homes to be viewed from the road. Heavy vegetation, berms, and trees will further improve the overall beauty, as well as minimize the impact of viewing development.

The development includes over 700 acres of parks, sports fields, and open space that allows someone travelling through the development consistently see acres of open space with substantial berms and vegetation screening of the existing hydrocarbon well sites. Currently included in this plan are seven parks that will be programmed and developed as neighborhood and community parks, with each having unique amenities for residents.

Community Development Block Grant (CDBG)

To participate in this Texas Department of Agriculture’s grant program, the city is required to solicit requests for proposals to act as the grants administrator for the $350,000 CDBG funds the city is seeking.

The city received two proposals from firms, Traylor and Associates, and GrantWorks, to act as our grants administrator. Both applicants were well qualified for the role but staff recommended to Traylor and Associates due to previous work experience with their firm.

The city is still seeking people to complete the community survey so that we can obtain the 80% participation rate to successful complete our grant application. These funds will be used in streets repair and reconstruction in low-to-moderate-income areas of the city.

To complete your survey, please contact Brooke at city hall, 817-638-5366 extension 1004. She can take your info over the phone or you can access digital version of the form here or an online form here.