Tax rate election seems likely this November

During the City Council Audit & Finance Committee meeting Tuesday, Kerri Lang, director of the city’s budget office, laid out the steps the city would take in deciding whether to submit a request to voters for a property tax increase on the November ballot. At least seven members of Council must vote in favor of the election for it to be placed on the ballot. On Tuesday, the discussion appeared to lean in favor of the prospect.

Last month, Council learned that staff was projecting a $33.4 million deficit for the upcoming fiscal year.  If Council does not vote to have the election — or if voters reject a proposed tax increase — the city would have to cut programs.

Because the Texas Legislature has imposed a 3.5 percent cap on yearly property tax increases without voter approval, a tax rate election is necessary in order to raise taxes beyond that point. The Legislature imposed that limit in 2019. But this is the first year that the city has faced a deficit—although city financial planners have predicted it for some time.

Lang told Council that staff would present a balanced base budget, asking Council and the public what to add to that base. She specifically referenced enhanced services from the Homeless Strategy Office, but that is not the only department looking for more funding, especially in light of cuts to federal funds.

At the suggestion of Mayor Kirk Watson, the committee adopted Lang’s recommendations as policy. Among those recommendations, the committee agreed that tax rate elections, informally referred to as TREs, should not occur more than once every four years. However, they agreed there should be an exception if the city needs to respond to a natural disaster or “a significant and unexpected reduction in funding resulting from Federal or State legislative action that would result in the cessation of critical grant-funded programming.” As Watson noted, considering an election will be part of the city’s budget process.

Lang recommended that the city identify the level of programming or services funded with the additional revenue and “provide an accounting of the expected level of services should the election fail.”

Another important recommendation from Lang was that the election “not be used to address base cost drivers, but can be proposed to address identified gaps in service and new or expanded services.”

“We may have disagreement over what our needs are,” said Watson.

Watson emphasized that the Council would be building a budget including the possible tax rate election funds. But they should focus on the budget, not the election, he said.

That election would have to be in November, explained Lang, as it would set a tax rate for the following year. In addition, Lang noted the election shouldn’t coincide with a potential bond package.

In terms of how much of an increase might be needed, Lang explained that a one-cent tax rate increase would generate $21 million and a two-cent hike would generate $42 million. So, Council will have to decide what a majority of voters would agree to vote for.

Prior to any decisions, there will be numerous budget meetings where the public will be allowed to address their concerns about the tax rate, the election and what their money should pay for.

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