Dissecting SOPAC’s Proposed Revenue

In the meeting held at the Waterwood Clubhouse on July 8th, many items were discussed.  One of the most important was that of revenue.

Now that Waterwood and surrounding areas have incorporated into the City of Sandy Oaks, there needs to be revenue to pay for what the city needs.  The entire point of having a local government is for that government to service the community.  Becoming a city means creating a government body that takes on responsibilities and those responsibilities will require money to make things happen.

Art Martinez de Vara, mayor of Von Ormy and consultant to the Committee to Incorporate Sandy Oaks (CISO) and SOPAC, led most of the discussion about what happens after the city council is elected.  When asked, he explained the outcome of a preliminary financial assessment done for the area.

3 Sources of Revenue

These 3 areas were described by Martinez de Vara.

• $100,000 from Franchise tax
• $100,000 from Commercial sales tax
• $300,000 from Residential tax

Franchise Tax

Franchise tax comes from companies that provide services.  For example, AT&T requires use of roads to reach customers.  So they pay a franchise tax that, up till now, went to the county.

To reach the number of $100,000, Martinez de Vara said they took what Von Ormy brings in and tripled it since Sandy Oaks is three times the size.

Commercial Sales Tax

Commercial sales tax would come from an increased 2% tax that the City of Sandy Oaks could place on local businesses.

To reach the number of $100,000, Martinez de Vara said they looked at “comparable businesses in Von Ormy.”  He also said a large portion of the revenue comes from tax made on internet sales.  They took what they brought in through commercial sales tax in Von Ormy on internet purchases and tripled them.

The Problem

The problem with this assessment is that is assumes too much about the residents of Sandy Oaks.

1. Not everyone in the community has access to the internet.  Many who do still use dial up, with amazing speeds of 20kbs, half the maximum limit.  Less internet = less revenue from commercial tax online.

2. The average property value in Von Ormy is double than that of Sandy Oaks.  This would suggest that people in Von Ormy have more purchasing power and thus are able to spend more money on internet purchases.  Less money to spend = less revenue from commercial tax.

3. There are only 4 businesses in Sandy Oaks (that are on actual commercially zoned properties).  Jack’s Corner Store, Dillon’s Trucking, Valero, and the Super Express.  The trucking yard serves as a place to park trucks, so no revenue will be coming from it.  The other 3 businesses are mostly used by residents of the community.  This means residents will be double-taxed.

If the future Sandy Oaks City Council imposes a 2% sales tax this doesn’t mean that Jack’s or Valero will be digging into its own pockets and coughing up the money to the city.  Instead, the consumers, the residents, will be paying that extra 2% on all goods.

For Von Ormy, commercial sales tax equated to 63% of their proposed 2013 revenue.  But they benefit from having the location of 2 major intersecting highways which means much of their commerce comes from outsiders driving through.

Residential Tax

Martinez de Vara stated that $300,000 could come in from residential tax.

Let’s nail down the exact tax per $100

According to what Jim Clement said on the day of the vote to incorporate as a city, Bexar County Appraisal District (bcad.org) values the area of Sandy Oaks (the city, not the original Sandy Oaks 3 miles away) at $64 million.

64,000,000 divided by 100 (to find how many 100’s) = 640,000.

So to find the tax per $100 one simply needs to divide 300,000 by 640,000 which = 46.88 cents.

This tax is 1 penny less than the Elmendorf tax rate of 47.7 cents.  But even at such a high tax rate, Elmendorf still has horrible roads, horrible animal control, and only one police officer.

To be fair, Martinez de Vara did point out a flaw in the critique, though could not go into detail considering the noise level of the room once it was explained that taxes would be so high.  He did say something along the lines that what is taxable needs to be looked at.  As an example, if only something in the value of $50 million is taxable and Jim Clement and Pedro Orduno still want to bring in a revenue of $300,000, then Sandy Oaks will have a tax rate of 60 cents per $100.

The Challenge

In order for the City of Sandy Oaks to offer basic services (the purpose of having a city) and to survive, it must have stable revenue.  But a high tax rate will hurt the community.  What are other forms of long term revenue?  Revenue is one of the biggest  issues the future city council will have to face.   It is an issue that all candidates should be addressing to the community. This is especially true for those who were involved with the incorporation process through CISO/SOPAC, including Dale Burmaster, Doug Tomasini, Pedro Orduno, Joel Ortega, and Earnest Gay.

If candidates, including Micki Ball, Cathleen Lamoureaux-Recio, and David Trembley, cannot answer the question of creating and maintaining long term revenue and show leadership through this problem, then perhaps they should not be elected and perhaps the community should rethink if it wants to be a city with no leadership.

Edit August 12, 2014:

BCAD places value of land at $66.4 million.  This would change the tax to slightly more than .45

Thanks to Micki Ball for the correction.