Thanks to massive, unanticipated additional revenue flowing to the city from CPS Energy, the utility’s customers may see a credit on their power bills this fall.
CPS Energy’s contributing revenue came in at $75 million over the city’s 2022 budget, City Manager Erik Walsh told reporters Wednesday during a briefing on the proposed 2023 budget.
The city plans to utilize $25 million to help support existing city programs, and will recommend to City Council that $45 million be returned to CPS Energy customers as a discount off their October bills.
The amount of the discount would be 13.3% of the customer’s bill for July — when energy usage soared due to high temperatures. The average resident’s bill in the month of July was $230, meaning a $31 credit would be applied to the customer’s October bill.
“This is not going to wipe away anybody’s outstanding balances, it’s not going to pay anybody’s complete utility bill,” Walsh said. “It is the city, as the owner of CPS, recognizing the extraordinary position everybody finds themselves in and doing our part.”
The unusual move comes as city staff is recommending an overall $3.4 billion budget — a 10.9% increase from the 2022 budget — for the upcoming fiscal year, which begins Oct. 1.
Walsh framed that increase, which includes boosting pay for city employees and funding for major infrastructure improvements, as a return to projects and priorities that had been neglected throughout the pandemic.
“It is a renewed investment in the basics of what the city does,” said Walsh.
City Council was set to receive its first briefing on the proposed budget Thursday morning. Council is scheduled to vote on the spending plan Sept. 15.
The community also will have the opportunity to weigh in on the budget proposal, through a series of town hall meetings throughout the city in the coming weeks.
The return of CPS Energy funds to ratepayers will need to be approved by the City Council by Sept. 1, but some members have already expressed reservations about the plan.
Record windfall from CPS Energy
As a city-owned utility, CPS Energy returns 14% of its gross revenues to the city every year directly into the city’s general fund.
This year, that amount totaled about $436 million — roughly $75 million over the budgeted amount of $361.2 million — due to extraordinarily high summer bills spurred on by record-breaking heat this summer, Walsh said.
If approved by City Council, about $45 million would be credited back to customers, even if they are behind paying their energy bills, Walsh said. Another $5 million would be set aside as an injection into CPS Energy’s Residential Energy Assistance Program, Walsh added.
About $10 million would go into the Edwards Aquifer Protection Program, $6 million would be used for sidewalk construction and $9 million would go toward the construction and stocking of an emergency warehouse, Walsh said.
At least one council member had other ideas for the extra CPS Energy revenue.
Councilman Mario Bravo (D1) told reporters via email Wednesday that he’d like to see those funds be used to boost the city’s fight against climate change.
“It’s easy to say, ‘This is your money — let’s give you some back,’” Bravo said. “I think it takes leadership to say, ‘We recognize a problem here, and we can invest these funds in a way that will make everyone in our community better off.’ I hope to bring colleagues along with me on this.”
Budget by the numbers
The city’s $3.4 billion budget includes a general fund of $1.5 billion, $641 million for capital projects, and $1.2 billion in restricted or single-use funds.
Roughly $391 million of the budget will come from CPS Energy. Another $156.4 million comes from federal pandemic relief, which must be spent by the end of 2026.
Far from the budget holes the federal government intended to address with that money, cities are experiencing budget surpluses due to inflation and rising property values.
Walsh said San Antonio was using the federal money to take on new projects, such as a domestic violence program, that could eventually be transitioned into the city budget if successful.
Walsh credited the city’s decision to make immediate budget cuts in response to the pandemic in April 2020 with creating budgetary “breathing room” to use that money for already planned priorities.
“It gave us an opportunity to be thoughtful about how we spend [the federal pandemic relief money] and then more importantly, to spend the money” within the deadline, he said.
While the federal government has pumped money into city budgets through pandemic relief, Texas has worked to cap cities’ budgets by limiting the amount of revenue they can collect through property taxes.
A 2021 Texas law says cities’ property tax revenue can’t grow more than 3.5% over the previous year, forcing San Antonio to find ways to reduce its property tax revenue, or comply with the law by holding an election to allow voters to weigh in on the tax rate.
Council passed several measures earlier this year to reduce its property tax revenue, including raising the standard homestead exemption. It did so with the intention of lowering the overall property tax rate later this fall, so that nonresidential property owners also would see some relief from rising property tax bills.
City staff is recommending lowering the property tax rate to $.54161 per $100 of valuation, from $.55827.
“[Deputy Chief Financial Office Troy Elliott] and his staff go through the formula that the state requires to recalculate the tax rate needed for only a 3.5% percent increase,” said Walsh, adding that the recommended lower rate would keep growth just within the state’s limitations.
Raises for city employees
The 2023 budget proposal includes major changes to salary and benefits for the city’s 7,000 non-uniformed employees. The proposed budget includes a 5% across-the-board raise for city employees, as well as an additional 2% to 7% raise depending on the position. Starting salaries would begin at $17.50 per hour, up from $15.60 per hour.
Walsh said positions receiving the highest salary increases would include electricians, plumbers, nurses and public health outreach workers.
Additionally, the city will reduce the health care premium contribution for most employees by 20%.
Walsh said increasing compensation is critical for the city to maintain competitiveness as an employer in a tough labor market.
“We’re preparing to make sure we’ve got the [labor] capacity to be able to deliver the [city’s] largest bond program,” he said. Yet earlier this year, the city saw a major increase in the number of employees leaving for jobs elsewhere.
As of Wednesday, the city had 840 vacant positions. The proposed budget includes 38 new positions across eight departments to assist with bond projects.
In response to what city staff said was community input on the budget priorities, the budget proposal includes $116 million for street improvements, $21 million for sidewalks and $1 million for bike facilities. It also includes $7.7 million for parks and recreation improvements across 17 parks.
The budget would provide $35.3 million to start what’s expected to be a six-year, $160 million improvement and maintenance program for the Henry B. González Convention Center and the Alamodome.
Eight libraries would share $3.2 million for renovations and improvements, while $1.5 million would go toward library materials and $74,000 would go toward expanding the Texana Resource Center.
CPS Energy is a financial supporter of the San Antonio Report. For a full list of business members, click here.