In a 4-3 vote, the Lampasas City Council last week approved a 2010- 2011 fiscal-year budget that includes a one-cent property tax rate increase and 3 percent pay raises for most municipal employees.

Mayor Judy Hetherly, and council members John Cole, Les Gerhardt and TJ Monroe voted for the new budget, set to take effect Oct. 1. Councilmen Jerry Grayson, Brad Neely and Evan Stubbs voted ‘no.’

Because the average taxable value of Lampasas property increased this year, Stubbs said he wanted to keep the tax levy at its current rate — 39 cents per $100 value. In addition, although he said he would not oppose pay increases specifically, Stubbs said the 3 percent raises included in the budget are “not necessarily justified.”

City Manager Michael Stoldt, who noted during budget workshops that Lampasas’ tax rate is substantially lower than many nearby towns’, said a one-cent inwould crease likely won’t impose much of a burden on property owners.

“As a whole, values are going to have gone up very little,” the city manager said of appraised values, which — along with the tax rate — determine a taxpayer’s bill.

The city tax hike will cost the owner of a $100,000 home an extra $10 a year compared to the 2009- 2010 tax levy, Stoldt said. The upcoming decreases in the county tax rate and the Lampasas Independent School District’s tax rate, Stoldt added, should minimize city property owners’ tax increases.

Noting that a tax hike will provide needed revenue for the city, Stoldt said he prefers to raise the tax rate a cent in the upcoming year rather than postponing the increase until 2011-2012.

In the spring of 2011, voters will decide the fate of several debtfunded capital projects, including a Lampasas Public Library expansion and construction of a civic center. If a tax hike for general fund revenue were delayed until fiscal year 2011-2012, that increase take effect at the same time as the separate tax increase needed to pay for bond-related projects.

Although he had hoped not to increase the tax rate in the fiscal year that will begin Oct. 1, Cole said the city needs to raise the rate slightly now. Otherwise, the councilman said, city officials might discover at some point soon that an increase all the way to the rollback rate is needed to generate sufficient revenue for operations.

“If we don’t bump it a penny, then one of these years we’re going to have to do the maximum [increase] a few years in a row,” Cole said. “It’s a lot easier to do it a penny at a time. It’s harder on people when you raise it significantly in one year.”

Also at the recent meeting, the council voted unanimously for city staff to take over operation of Lampasas’ water and wastewater systems, which have been managed for several years by OMI Inc. As part of the vote, the council opted for lease-purchases of capital equipment, which will create a surplus in the 2010-2011 water fund.

Part of the surplus will be used to reduce the planned water and sewer rate increase. As a result, with all utility rate adjustments calculated, city officials predict the average residential utility customer will pay $2.72 less for service in the upcoming year. Projected annual savings for small general, large general and municipal customers are $2.43, $152.14 and $3.84, respectively.

A public hearing about the proposed tax rate will take place today at 5:30 p.m. in Council Chambers. After the hearing, council members will discuss several items, including possible adjustments to a health care coverage agreement.

A second vote on the budget will be held Sept. 13.