Waco's 2025 preliminary budget forecasts fee increases, slowing tax revenue growth (2024)

City leaders are formulating Waco’s fiscal year 2025 budget that could increase some fees, boost funding for street maintenance and reduce subsidies for local nonprofits.

The preliminary proposals were presented to the Waco City Council in a budget committee Tuesday. All are subject to change before city management submits its formal budget draft to the council July 2, followed by council adoption Aug. 27.

Waco’s tax revenue growth is expected to slow significantly in the upcoming year, according to Tuesday’s budget development presentation, which assumes no change to the property tax rate of 75.5 cents per $100 of property value. The city estimates a modest 2.7% increase in combined sales and property tax revenue for the general fund in fiscal year 2025, reaching $173.2 million. This contrasts with an 8.6% increase in the current year, when tax revenue rose from $155.2 million in 2023 to a year-end estimate of $168.8 million in 2024. Waco’s fiscal year 2024 ends Sept. 30.

The city is expected to adopt a general fund budget of $202.5 million for the next fiscal year, about $1.2 less than the city adopted for the 2024 budget. It would be the first time in at least five years the general fund has not increased.

A majority of the city’s general fund will continue to be allocated to employee salaries and benefits. Waco is estimated to spend $120.2 million on employee salaries and benefits in fiscal year 2025, about $5.4 million more than last year. This accounts for a 3% raise for civilian employees, higher raises for police and fire staff, a 9.7% increase in health insurance costs and less-conservative estimates for overtime expenses.

Fees and funding changes

Waco residents might face a new monthly fee for street maintenance, along with slight increases to water, wastewater, drainage and solid waste fees.

The current combined monthly bill for the average residential customer using Waco’s services is $129.06. This monthly bill includes an average of $46.77 for water, $56.88 for wastewater, $6.30 for drainage and $19.11 for solid waste. The city calculates that an average customer uses 8,000 gallons of water and 5,000 gallons of sewer per month.

In the 2025 budget proposal, the combined monthly bill for the average customer would increase by $7.38 to $136.44. The 5.7% increase includes 60 cents more for water, $3.12 more for wastewater, 25 cents more for drainage, $1.42 more for solid waste and $2 more a new street fee.

Assistant City Manager Paul Cain said he believes his office’s approach to fee increases is reasonable considering the improvements the city is making to service operations, like adding a new landfill and transfer station. The total cost for all rates in 2025 would still be less than the 2021 rates if adjusted for inflation, he said.

In 2021, the combined monthly bill for services, which did not include drainage or street fees, was estimated at $111.27. Accounting for inflation, that 2021 bill would equate to $137.57 today.

“We’ve added two fees and still stayed under inflationary costs overall,” Cain said.

The water, wastewater and solid waste fees are set with a goal of those operations, which are not directly funded by tax revenue, breaking even.

The new street fee is designed to charge properties for street maintenance according to the amount of traffic they generate. According to the city website, demands for street repairs have continued to exceed available revenue, and funding needed for streets has increased over the last five years from $3 million to between $25 and $30 million per year.

The $2 street fee would be the average for single-family detached housing. Other properties that attract more traffic would be subject to higher fees. For example, fast food restaurants would pay about $32 a month and high-cube parcel hub warehouses, such as Amazon, would pay about $1,700 a month in street fees.

“It’s not where we want to be long-term on the street fee,” Waco City Manager Bradley Ford said at Tuesday’s budget and audit committee meeting. “It doesn’t really fund the program that we maybe want, so in future years we’ll seek your guidance on where you want to be with that.”

Tuesday’s presentation included a proposal to gradually increase street fees over the next five years, making the monthly street fee for single-family detached housing $9.26 by fiscal year 2028 to 2029. If the street fee increases over time, it would allow general funds that currently go toward street maintenance to be reallocated to street capacity improvements.

The presentation Tuesday also referred to 661 fee schedule changes. The changes include 34 new fees, 19 revised fees, 21 decreased fees and 587 increased fees. Despite inflation, a majority of fees will remain unchanged. Cain said his office suggested departments revaluate their fees to address inflationary increases, but many chose not to for various reasons. Some exceptions include inflationary increases for the Texas Ranger Museum and select services from the parks and recreation department, like facility rentals.

“Our expenses go up every year, and all of these fees are designed to recover costs,” Cain said.

The presentation also detailed possible ways to cut city funding for local nonprofits. Waco currently subsidizes 16 outside agencies, such as Creative Waco, Waco Family Medicine, Keep Waco Beautiful and the Greater Waco Chamber of Commerce. Waco contributed almost $3.4 million to the nonprofits last year. This year, the agencies requested a 25% increase in funds, asking the city for about $4.2 million in total.

The presentation outlined multiple options to reduce funding for outside agencies. The city could cut all budgets equally by a fixed percentage, adopt a three-year reduction plan for non-priority agencies, have the city take on certain services currently provided by the outside agencies or undertake a combination these options.

District 2 Council Member Alice Rodriguez requested more information on each agency to better evaluate their bids for funding. Ford is expected to submit a total amount of funding for all agencies, and council members will later evaluate how to allocate funding across the agencies.