MAJOR REVENUE SOURCES

PROPERTY TAX

FY 2021-22 General Fund Budget $ 5,946,140 Debt Service Fund Budget $ 2,795,545 Total Property Taxes $8,741,685

Property taxes (ad valorem) attach as an enforceable lien on property as of each January 1st. The city’s property tax is levied each October 1st on the assessed value listed as of January 1st for all real and business personal property located in the City. Assessed values are established by the Central Appraisal District of Brazoria County at 100% of the estimated market value and certified by the Appraisal Review Board. Pursuant to state law, individual residential values cannot increase more than 10% annually.

The City sets a tax rate on the basis of cents per $100 of valuation. The tax rate is comprised of two components– the operations and maintenance (O&M) rate and the debt service rate. The O&M rate provides for the operation and maintenance of general government functions such as Police, Humane, Fire, EMS, Code Enforcement, Building Permits, Drainage, Streets, Parks, and Recreation. This portion of the tax rate is recorded as revenue in the General Operating Fund.

The other component is the debt service rate. Revenue generated by the debt service rate is recorded in the Debt Service Fund. The debt rate is based on generating revenues sufficient to pay the principal and interest due on general obligation bonds. The issuance of all General Obligation Bonds are approved by the voters. All citizens are made aware of the projected increase in the tax rate generated by the issuance of bonds.

Although there is no statutory debt limit for small municipalities, truth-in-taxation criterion does specify a maximum tax rate that a city may assess. Debt service requirements must be met first, followed by operation and maintenance. The property tax rate to meet these needs cannot exceed $2.50 per $100 of assessed valuation.

Ad Valorem Tax Revenues

Fiscal Year 2017 2018 2019 2020 2020-21Proj. 2021-22Budget General Fund $3,773,881 $3,979,475 $5,208,352 $5,401,992 $5,561,700 $5,946,140 Debt Service Fund $2,087,252 $2,112,160 $2,276,697 $2,766,535 2,781,518 2,795,545

Total $5,861,133 $6,091,635 $7,485,049 $8,168,527 $8,343,218 $8,741,685

SALES TAX

FY 2021-22 General Fund Budget $ 6,900,000 Economic Development Fund Budget 3,450,000 Total Sales Tax Revenue $10,350,000

The sales tax rate in the City of Lake Jackson is 8.25% of taxable goods or services sold or delivered within the boundaries of the City. The tax is collected by businesses making the sale and is remitted to the State Comptroller of Public Accounts.

1.00% is used for the City’s general operating purposes, and is the largest revenue source of the General Fund, accounting for approximately 30% of General Fund revenues. 0.50% is allocated to the Lake Jackson Development Corporation (LJDC), the City’s 4B Economic Development Corporation. Voters approved adding this additional ½ cent to the sales tax on May 6, 1995. As specified on the ballot, the use of this revenue is limited to payment of the costs of land, building, equipment, facilities, improvements and maintenance and operation costs for public park purposes, recreational facilities to be used for sports and entertainment, and for infrastructure improvements for development of new or expanded business enterprises. The LJDC provides financing services entirely to the City. The LJDC is considered a blended component unit for financial reporting purposes and is reported as if it were part of the City’s operations. The ½ cent (0.50%) of sales tax revenue and expenditures are accounted for in the Economic Development Fund. 0.50% is imposed by Brazoria County. 6.25% is retained by the State Comptroller of Public Accounts. 8.25%Total Sales Tax Rate

Sales Tax Agreements affecting the General Fund: Additionally, the State of Texas allows cities to enter into incentive agreements for companies to locate to the City and report sales tax collections from the City for local collections. In return, the City grants a portion of the collections to the company in the form of an incentive payment. The City currently has two incentive agreements in place and the City’s net receipts from companies under these agreements are estimated to be $180,000 in fiscal 2021-22.

Sales Tax Revenues

Fiscal Year 2017 2018 2019 2020 2021 Proj. 2022 Budget General Fund $6,300,736 6,685,000 6,833,831 6,797,225 6,800,000 6,900,000 Econ. Devlp Fund $3,188,958 $3,337,500 $3,451,000 $3,398,613 3,400,000 3,450,000

Total $9,489,694 $10,022,500 $10,284,831 $10,195,838 $10,200,000 $10,350,000

FRANCHISE FEES

FY 2021-22

General Fund Budget

$ 1,730,645 PEG Fund Budget 65,250 Total Franchise Fee Revenues $ 1,795,895

The City of Lake Jackson maintains franchise agreements with utilities that use the City’s right-of-ways (ROW) to conduct their business. The agreements contain a franchise fee clause, which requires the utilities to compensate the City for use of ROW. Generally, the fees are based upon a percentage of a utility’s gross receipts or a per-unit of usage charge (generated by customers located within the City’s corporate limits that range from 2% - 5%). These revenues are accounted for in the General Operating Fund.

• Electric Franchise fees are charged for use of City streets and ROW’s. These fees are received monthly and are based on kilowatt hours delivered within Lake Jackson city limits.

• Gas Franchise fees are charged for use of City streets and ROW’s. This fee is based on a percentage of gross revenue.

• Telecommunication Franchise fees are received from Certificated Telecommunications Providers based on the number of lines within the municipality and the rate for each category of line calculated monthly.

Fee-per-access line is regulated by the Public Utility Commission.

• Cable Television Franchise fees are paid to the City for use of city streets and ROWs. Payments are made quarterly and are based on a percentage of the cable operator’s gross receipts. The General Operating

Fund receives payments equivalent to 5% of the cable operator’s gross receipts. An additional 1% of the cable operator’s gross receipts for cable television are restricted –by law -- for capital cost related to public, educational, and governmental (PEG) programming. These revenues are accounted for in the PEG Special Revenue Fund.

• The City’s sanitation department provides for the removal of all trash and rubbish. Each residential unit in the City receives regular collection service twice per week and special collection of large items and brush twice per month. The City annually transfers funds ($200,000) from the Utility Fund to the

General Fund to reimburse the General Fund for solid waste franchise fees that would be collected if a private company was contracted for these services.

INDUSTRIAL DISTRICT

General Fund Budget FY 2021-22 $ 5,280,000

With the Cities of Clute and Freeport, Lake Jackson entered into an industrial district contract with Dow Chemical Company, BASF Corporation, and the Brock Interests. The contract calls for industry to make payments to the Cities in lieu of being annexed and paying the full tax rate. In exchange, this relieves the Cities from having to provide full City services, such as police and fire, to the industrial complex.

The industrial district contract was renegotiated in December, 2011, and ends December, 2026. Starting in fiscal year 2013-2014, the payments were calculated in accordance with the application of a percentage

growth factor, based on the Consumer Price Index – All Urban consumers (“CPI-U”), or on a value based formula, whichever is greater.

OPERATING TRANSFERS

General Fund Budget FY 2021-22 $ 1,300,000

The City’s water, wastewater, and sanitation operations annually reimburse the General Fund for administrative services provided during the year. These include general administration, computer services, personnel services, purchasing services, engineering services, and the like. These transfers insure that the Utility Fund is self supporting and self sufficient. The total of the transfers from the Utility Fund equate to $900,000.

The General Fund also receives a $400,000 transfer from the ½ ¢ optional sales tax (Economic Development Fund) to help offset the operating costs of the Recreation Center.

COURT FINES

General Fund Budget FY 2021-22 $ 487,000

Court fine revenues fluctuate in relation to the number of citations issued and the amount of court fines collected.

RECREATION FEES

General Fund Budget FY 2021-22 $ 662,500

Over 85% of the recreation revenues are comprised of admissions and memberships. The other 15% of recreation revenues are primarily comprised of fees collected from the youth and adult programs, as well as the rental of facilities. Membership revenue is contingent upon the number of memberships, and admission revenue is contingent on the number of times non-members utilize the Recreation Center.

CIVIC CENTER REVENUE

General Fund Budget FY 2021-22 $ 246,000

Civic Center revenues fluctuate in proportion to the number and type of rented rooms.

LICENSES & PERMITS

FY 2021-22 General Fund Budget $ 481,300 Utility Fund Budget 20,000 Total Permits $ 501,300

Building Permit revenues include fees for the construction, alteration, removal, or demolition of buildings within the City. Building Permit revenue fluctuates based on the amount of building construction and the square footage of the structure.

Electrical Permit revenues also include fees for inspection of installation or changes made in the electrical wiring or fixtures for use in connection to the production of electrical light or heat for power. Electrical Permit revenue fluctuates based upon the type of electrical work.

Building and Electrical Permit revenues are accounted for in the General Fund.

Plumbing Permit revenues include fees for plumbing work connected with or intended to be connected with the sewer system. Plumbing Permit revenues are accounted for in the Utility Fund.

Permit revenues have normalized after back to back years of large projects such as such as the new A.P. Beutel Elementary, Courtyard by Marriott, Staybridge Suites, and the build out of the R&D Buildings at the Dow Texas Innovation Center and Brazos Mall expansion.

WATER FEES

FY 2021-22 Utility Fund Budget $ 5,057,955

This rate is set based on generating revenues to cover the cost of purchasing water from the Brazosport Water Authority (BWA), operating 12 water wells, maintaining the water distribution system, and related portions of debt service requirements.

We will continue to provide a discount (40% of the base monthly bill) for senior citizens, which is applied to their base water and sewer bill. The City distributes an average of 3 million gallons per day to the water system. Our contract with BWA requires the City to purchased 2 million gallons of water per day on a take or pay basis. The difference is made up with well water.

SEWER FEES

FY 2021-22 Utility Fund Budget $ 5,209,115

This rate is based on covering the cost of maintaining the city’s wastewater collection and treatment system, which includes 39 lift stations, a 5.89 million gallons per day Wastewater Treatment Plant, as well as any debt service and administration costs allocated to the wastewater system.

SANITATION FEES

FY 2021-22 Utility Fund Budget $ 4,541,225

These fees are set based on covering the cost of providing residential customers twice weekly garbage collection, once weekly co-mingled recyclable collection, and twice monthly heavy trash collection. Heavy trash collection includes appliances and furniture.

Commercial and apartment customers are provided with side loading dumpsters, which are serviced based on a set schedule.

These revenues are based on the following sanitation rates Residential Garbage/Trash $19.00 per month Residential Recycling $ 3.00 per month Apartment Garbage/Trash $19.00 per unit per month Apartment Recycling: $ 2.00 per unit per month

General Fund Lake Jackson TEXAS

Ind. Dist. Revenue 23%

FY 2021-22 Revenues

Operating Transfers 6% Franchise Fees 8% Fines & Court Fees 1%

Sales Tax 30%

Property Tax 24%

General Government 20% Other 8%

FY 2021-22 Expenditures

Public Works & Eng. 18%

Miscellaneous 1%

Public Safety 42% Jud./Legal 1% Parks & Recreation 18%