DALLAS After weeks of controversy, the Fort Worth city council this week approved a $407.2 million budget for fiscal 1995 that calls for a 2.5 % increase in the property tax rate and limited capital improvements.

The budget, adopted on a 6-to-2 vote. Tuesday night, calls for increasing the tax rate to 97.35 cents from 95 cents per $1130 valuation, well below the rise initially proposed by city manager Bob Terrell.

In early August, Terrell recommended an increase of 8.4%, or eight cents, and an overall budget increase of 6.2%, to $412 million from $387.8 million.

Instead, the city council demanded budget changes to reduce the tax hike, which would have given Fort Worth the highest tax rate among large Texas cities.

"They thought the tax rate increase was too big," city spokesman Patrick Svacina said. They felt that in today's economy that the eight-cent tax increase was not what we should be doing as a community."

To bring the proposed budget down by about $5 million, officials cut some recommended expenditures and boosted some revenue estimates forthe 1995 fiscal year, which begins Oct. 1. The economies include reducing salary increases for the more than 4,700 city employees and pruning the money to be spent for vehicles and equipment replacement.

Police and fire department employees will now get a 5% pay raise, and other employees will get an average of 4%. Terrell had proposed a 6% increase for police and fire staff while other employees would have averaged about 5 %.

Officials said, however, that no change was made in the capital program, which has been limited to help the city hold down expenses as it recovers from the effects on its economy of defense cutbacks and energy industry slumps.

"The council has adopted an informal policy that we will strive to retire more debt than we will issue in the foreseeable future," assistant city manager Charles Boswell said last month. "We issued all this debt in the early to mid-1980s, butt he assessed value sumed decteas'mg and we found ourselves strapped with a high percentage of our budget going for debt service."

To cope, Boswell has said :the city will issue only limited amounts of bonds this year. More than $10 million in general obligation bonds are expected to be sold during the fiscal year to continue the four-year street improvement program approved by the city's voters last year.

The city' s GO bonds are rated double-A by Moody's Investors Service, Fitch Investors Service, and Standard & Poor's Corp.

In addition to the general obligation debt, a $30 million to $50 million revenue bond issue is expected to be sold in late fall to upgrade water and wastewater treatment facilities. The issue would be part of a more than $100 million program over the next several years to bring the operations in compliance with Environmental Protection Agency standards.

Fort Worth is one of many large cities that have curtailed capital programs and have faced budget troubles as their assessed valuation declines. This past year, the city's property appraisals fell by 4%, and the tax rate increases were proposed to cope with the declining tax base.

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