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PEÑITAS—The Peñitas City Council held its second public hearing Tuesday to address

a possible 10 cent tax rate increase. This would be 27 percent higher than the current tax

rate of $0.3625 per $100 valuation.

The council is scheduled to vote on the proposed tax rate increase at a meeting on Sept. 25 at 1320 S. Main St. at 6 p.m.

City Finance Director Oscar Cuellar said Tuesday that the proposed 10 cent tax rate increase would go to an interest and sinking fund (debt service) to help pay off loans the city has for the new sewer project that is currently nearing completion.

However, after concerns were voiced by the public over the tax increase, City

Manager Noe Cavazos said in a Thursday morning phone interview (yesterday) he plans to recommend a five cent tax increase to the council instead. He said Thursday that the city would likely use reserve funds to pay the loan interest this year and use the tax increase—possibly five cents—to pay for additional city services, such as additional police officers.

The 2011-2012 tax rate was $0.3625, and originally the proposed rate for 2012-2013 was $0.4620. This is the maximum rate the city could adopt without holding a tax rollback election according to the Hidalgo County Tax Office.

For every cent added to the tax rate the city receives $14,000. The city manager believes the city could use the revenues from a five cent tax increase to hire more police officers rather than on the debt service.

Without the proposed 10 cent tax rate increase, Cavazos added, they will use funds from the city’s reserves for the sewer project loans and later reimburse that account with sewer revenue.

“Five cents would give us $70,000. If we hire two police officers, that is $52,000,” Cavazos said. “Those two officers would still need insurance…that’s the whole $70,000,” he explained.

The Peñitas Police Department has a total of six officers, and the department has only recently implemented 24-hour service to the city.

Mayor Marcos Ochoa believes implementing even a small tax increase would help all city services including those provided by the Peñitas Public Library.

The total appraised value for properties in Peñitas is $14 million.

According to a legal notice published by the City of Peñitas in the Sep. 14 issue of the Progress Times, the total tax revenue proposed to be raised last year at last year’s tax rate was $514,000. The total tax revenue proposed to be raised at the proposed rate of $0.4620, including tax revenue to be raised from new property added to the tax roll this year, is about $678,000. If new property added to the tax roll this year is excluded from the calculation, the total tax revenue that would be raised at the proposed higher tax rate would be $656,000. This is $142,000 more than last year’s revenues, and comes to a 27.6 percent increase in taxes from residents and property owners in the city.

New Wastewater Treatment Facilities

To keep up with the growth in Peñitas and surrounding areas, the city received grant funds and loans from the U.S. Department of Agriculture (USDA) to build a new sewer plant, septic tank projects and sewer connections.

Cuellar said the grants and loans given to Peñitas are separated into four phases of construction. For phases one through three, the loan portion totals to just over $3.4 million and the grant portion is nearly $6.5 million.

All of the monies provided by USDA will be used to build of the wastewater treatment plant, the collection system, house service connections and an expansion.

“Usually people would have to pay for house service connections, but they don’t have to pay for anything because of these grants,” Cavazos said. “We are also expanding our connection lines to include Tierra Blanca and up to Mile 3.”

Peñitas has also been approved for up to $9 million for phase four of the grants and loans process with the USDA, but will not know a definite number until all details are finalized for upcoming projects.

The phase one portion of the loan from the USDA has collected interest, or debt service.

The city is obligated to re-pay those loans to USDA, but due to construction delays, still has no revenues coming in from the services to be provided by the sewer project.

“At this time we have to identify approximately $140,000 of debt because we have not yet connected the houses…we are in the process of doing that now,” Cavazos said. “Once we connect those residents and businesses we will start collecting revenue and we are going to pay that loan to the USDA.”

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