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Royse City goes from financial crisis to small surplus in just 2 years

Remember the Royse City financial crisis back in Aug. 2008, when the City Council unexpectedly learned that the previously fast-growing city was $2.3 million in debt with no money to pay its employees or vendors?

Well, fortunately, thanks to a lot of hard work by a good number of City employees, consultants and citizen volunteers, the financial crisis is becoming a thing of the past.

In fact, according to new City Manager Bill Shipp, in just two years the City is recovering so well that it is now operating with a small budget surplus.

Back in 2008, the economy had suddenly slowed to a screeching halt and new move-ins were unexpectedly scarce, leaving Royse City with little revenue to operate, after growth had exploded in previous years from just 2,900 people in the 2000 census to nearly 11,000 in 2010.

Budgets for 2008 and 2009 had been set expecting such growth to continue. But when the economy hit the tank, the crisis hit the City hard.

Shipp praises Royse City Economic Development Director Larry Lott for beginning the turnaround, and Lott credits Shipp for keeping it going since being hired in April, 2009.

“Larry did all the hard work,” said Shipp.

After the City Council learned the City was deeply in debt with virtually no money to operate, and City Manager Karen Phillipi left, Lott and City Attorney Jason Day were appointed by Council members as co-city managers.

Lott explained within just a few days it became clear that the only solutions were to immediately lay off many of its employees, raise the tax rate significantly and borrow funds. About $850,000 in debt service was due in Nov. 2008.

“We had to take drastic measures,” he remembered.

All three measures were approved and implemented swiftly by the City. One-third of its workforce was laid off – 27 employees; the tax rate was increased by a third – from 49 to 65 cents; and a method was found to borrow funds.

Although raising the tax rate was difficult, Lott explained that it had not been raised in such a  long time that an increase was due anyway. Shipp agreed it was “long overdue.”

With the help of Southwest Securities, a strategy was devised to sell tax anticipation notes for $1.2 million for operating expenses, using 2009 property taxes as collateral.

Lott said a “real thin” budget was then required in 2009, and the City operated “very close to the vest.”

Many citizens from across the community volunteered to help, as well.

“During our financial crisis we had volunteers step up and help,” said Lott. “For instance, the Methodist Church in Royse City sponsored a cleanup day and had several church members spend a weekend painting and doing other things to clean up the downtown area.”

“Local businesses also helped. For instance, OMI Crane assisted financially with repairs to police vehicles.  These actions by volunteers reflect an attitude that you only find in rural America.  It was very heart-warming to experience.”

Shipp agreed. “Everybody understood what needed to be done. This was absolutely essential to the City’s long-term financial health.”

Because the tax anticipation note was repaid in a timely fashion from property taxes paid in Feb. 2009, Shipp explained the City was then able to re-borrow $350,000 in the same fashion in Oct. 2009. It was repaid from property tax revenues in Feb. 2010.

Last fall, it was not necessary to borrow any funds. In fact, Shipp said sales tax revenues were strong enough that the City was able to set aside $350,000 in cash reserves before the end of fiscal 2010.

If current conditions continue, he predicted the City will be able to set aside an additional $250,000 in cash reserves over the course of the current year.

Royse City’s recovery has involved a good many people. Lott said he is “proud of the people who carried the load.”

“They had to do more than their job description.”

In May, 2009, former Mayor Jim Mellody and three Council members declined to run for re-elecction again. Current Mayor Jerrell Bailey and three new Council members were elected:  Bill Bell, James Branch and Janet Nichol.

In May, 2010, two more Council members chose not to run again and Brooks Williams and Tom Crowley were elected, leaving Clay Ellis as the lone Council member to remain in office since the financial crisis first hit.

After Shipp, the former City Manager in Commerce, was hired out of retirement – he said because of his “good looks” – new City Chief Financial Officer Joe Stegall was hired just four months ago.

Shipp said he and the Council wanted a CFO because they “can do so much more” and “explore many options that we couldn’t before.”

The City has hired one full-time and one part-time employee during the past year. In all about 50 people are now employed.

Summarizing the situation, Shipp said, “We are not where we want or need to be, but are headed in the right direction. It depends upon  the economy. In three or four years, we should be halfway there.”

“I believe growth will happen. All we have to do is guide that growth,” he added.

By J.J. Smith, Publisher.

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