Why we invested in a house for the Kyle City Manager

On Tuesday, 12/6, my colleagues and I approved a contract extension for the Kyle City Manager through 2025 that included a housing component. That component has been under scrutiny from the public after articles were written in the Hays Free Press and on KXAN.com. Social media has had a field day with the story. More media coverage will surely follow as I have been interviewed today by KXAN and the Austin American-Statesman. Considering the nature of how this contract has been perceived, I want to explain the facts of the deal and the rationale I used in making the decision.

Here are the facts of the housing component to the contract extension.

  1. The house will be built in Cypress Forrest at an amount not to exceed $550,000 plus closing costs ($6,500).
  2. The house belongs to the city, not the city manager.
  3. The city manager will lease the house from the city in the form of a salary reduction.
  4. The lease amount is equal to the purchase price of the home amortized over 30 years at 3.45% interest (~$29,500 annually).
  5. All city property, including this house, is exempt from property tax.
  6. The insurance for the home is covered under the city’s umbrella policy and the premiums are roughly $83/month.
  7. The city manager will pay for all utilities and routine upkeep of the property, but the city will pay for any substantial repairs – in other words, a standard lease agreement.

And here are the reasons why I happily supported the contract.

  1. The investment of $550,000 will generate $235,000 in lease payments against the asset during the contract period (through 2025), with estimated expenses during that period of less than $15,000. That does not factor appreciation but straight cash flow against the investment.
  2. The $220,000 in net cash flow is a direct savings to the taxpayers because it reduces our operating expenses by that amount and therefore the tax burden to tax payers.
  3. The housing component was in lieu of a pay raise which the city manager has earned based on performance and pay parity. By purchasing this house, instead of increasing our expenses, we decreased them.
  4. By reducing the city manager’s salary the city is also saving on payroll taxes and other marginal expenses associated with factors in his existing contract that carried forward.
  5. The house will conservatively appreciate over time and can be liquidated relatively easily. From that standpoint, it will be the best investment the city has on its books.
  6. The house will be used as a recruiting tool for future city managers. Instead of paying a higher salary, we can offer a lower salary with an executive level house. The city manager is required by charter to live in the city limits. Kyle has very few executive level housing options in Kyle, and this will solve that dilemma in the recruiting process.
  7. Should a future city manager not participate in the housing, or should the city decide to forgo that option, the home can be sold and the investment in the property will likely be fully recuperated and then some.
  8. The cost of the house, while slightly higher than what I hoped, is on par with what an executive of an organization the size of Kyle would live in. The city manager oversees 250 employees, an $80,000,000 budget, and navigates incredibly complicated opportunities and situations daily. To denigrate his salary or value to Kyle is not easily justified.
  9. Our city manager has done an extraordinary job of leading us since coming to Kyle. When he arrived in 2014, Kyle was approaching $100,000,000 in debt and had no way to pay for a new wastewater treatment plant other than borrowing. Through creative developer agreements, the city manager has generated enough money to pay for the $17,000,000 plant in cash and by the end of this fiscal year Kyle’s debt will be down to $90,000,000. Just this month the city manager facilitated the city receiving a $900,000 grant to coincide with a new business coming to Kyle that will create over 200 jobs. That money doesn’t come here without him.

With all of that said, I understand how perception works. I know that many people are fundamentally opposed to this deal. But the criticism is rarely founded in sound fiscal reasoning. This is a good deal for the city manager, but a far better deal for the city.

And to be clear, I filter every vote on council through a financial lens. Just like my business, I ask hard questions and do research to determine how to efficiently spend money. I invest in the future and empower talented people. I do not vote for political gain, and I try very hard not to waste tax dollars. I vote what I think is in the best interest of our city and its residents. To vote another way would be dishonest and is not why I ran for city council.

13 thoughts on “Why we invested in a house for the Kyle City Manager”

  1. I’m a fan. My father in law built a very comfortable profit into his own business through leasing group home he decided to purchase. It works well!

    Meanwhile, my wife just got her brokerage license and works for JB Goodwin if you want to give a head start to a new real estate broker. Her name is Alison Southern and can be reached at 817-894-1551.

  2. Thanks Travis. Laid out beautifully. I appreciate the clear and sensible explanation and based on the information given can gladly support this decision. I still question the excessive value of the home for this area and in the Cypress Forest subdivision based on what their median home value home is.

    In the future I recommend that the City place issues that look questionable or could result in public scrutiny before Kyle’s citizens/taxpayers well in advance so reasonable thought can be applied and there is a clear sense of transparency between the City and its citizens.

    Thanks again,
    Dave Douglas

  3. I still don’t get it. How is this good for Kyle if we only take in just over half the purchase price by 2027. Who’s paying for the other half? Who knows what the market will be like (or what condition that home, or the subdivision will be in) in 2025? Why do we have to offer a city employee a free home in order to retain the employee? This can have a tendency to be an abuse/misuse of assets. It also opens the door to other tantalizing gifts to recruit other quasi-government officials. I don’t like this at all.

  4. Its hard to believe that a individual who sits in the chair of “City Manager” would even accept such a deal and have the nerve to consider himself a leader.
    Even harder to believe is that City Council approved such a move and believes it’s a good deal, dang folks it’s about perspective.
    Just how are those voters who work two jobs to make ends meet and pay taxes in Kyle suppose to accept this move as a financially solid deal for the good of the city and it’s tax payers?
    Geeze, is the fleecing of tax payers a phenomenon in Hays County that will not end?

  5. 1. If he were to purchase this home on his dime with 20% down (110,000), pay taxes, insurance, and upkeep the cost to him would be about 5,500 a month conservatively=66,000 per year. That is certainly not just 28,000 dollars a year offset of his salary as you claimed. Seems he’s getting a better “deal” if you look at real numbers. In addition, this takes the executive property off the tax roles-another loss for our community’s schools. And no, it’s not lease payments-it’s a reduction in the salary you would have paid him otherwise; not a revenue stream. If something were to happen to the property, the city tax payers will be left with a bill. There is too much uncertainty take this bet on whether this investment will save the city in the long run. I deeply resent perks for government employees for a job well done. We all work hard to own a nice home, pay taxes for good schools, and are expected to do a great job for the salary we earn. He should do the same.

  6. So the house is gonna cost $550,000 to build. The property tax revenue lost is about $15,000 a year. Possibly more if the value starts to rise. Mr. Sellers then gets a $28,000 pay cut. Mr. Sellers will then realize he is underpaid compared to other small towns and will leave because he is offered more money (like people do). The people of this town are going to blow a head gasket because we are going to have to offer the new guy a normal wage forgoing the $28,000 wage decrease offsetting any offset you guys are putting into place.

    That comes to just under $45,000 a year.

    Lets look at some other options instead of buying homes.

    I have a couple:

    1) What if you guys put that $550,000 into some of the HUD homes that are into shambles. The optics looks better for you guys because instead of buying one man a home 99% of this city couldn’t afford, you are putting value into homes for people who are one step from being on the street.

    2) What if we valued our city manager so much that we gave him a $25,000 raise. I think he would be at or around the ceiling for a city this big and would have no incentive to move. A win/ win for the city and its people who FUND it.

    3) Did nothing. Thats right. What if you told the city manager that the city’s business is not to provide housing to the city manager, but to be the best stewards of the City of Kyle’s money by investing in only infrastructure and ways keep its citizens safe.

    From reading Todd Websters quote to KXAN, he made the statement that there is a win/win. The city manager gets what he wants, and the city gets a investment property. I’m not convinced the city needs investment property and I’m even more convinced Mr. Sellers needs to conduct his personal business on his own time and dime.

  7. Though I agree with this idea it’s the price of the home. Why must it possibly be a $500,000 home not a $350,000 home? Why that builder and why weren’t bids put out to other area builders? Why didn’t we know this first? Our city manager is a good honorable man and good for Kyle, I’d hate to see us lose him! I hope something is ended up nicely done and it all works out because I understand he’s declined this offer now.

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