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.
- The house will be built in Cypress Forrest at an amount not to exceed $550,000 plus closing costs ($6,500).
- The house belongs to the city, not the city manager.
- The city manager will lease the house from the city in the form of a salary reduction.
- The lease amount is equal to the purchase price of the home amortized over 30 years at 3.45% interest (~$29,500 annually).
- All city property, including this house, is exempt from property tax.
- The insurance for the home is covered under the city’s umbrella policy and the premiums are roughly $83/month.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.