This year's property tax levy will raise more revenue from property taxes than in the preceding year. The Local
Government Code requires the governing body to hold a separate vote to ratify the property tax increase reflected in the budget. This vote must be in addition to and separate from the vote to adopt the budget or the vote to set the tax rate.
Texas Local Government Code Sec. 102.007. ADOPTION OF BUDGET. (c) Adoption of a budget that will require raising more revenue from property taxes than in the previous year requires a separate vote of the governing body to ratify the property tax increase reflected in the budget. A vote under this subsection is in addition to and separate from the vote to adopt the budget or a vote to set the tax rate required by Chapter 26, Tax Code, or other law.
The state has required language for the motion to adopt the tax rate and verbiage that must be included in the ordinance. The FMPS effective plus 3% calculation is based strictly on the effective tax rate as calculated per the truth in taxation law, plus a 3% increase overall. Language for the budget cover page is based on an overall increase in tax revenue as compared to adjusted revenue from 2016 tax year (FY17 budget), including refunds and lawsuit settlement, so the percentage increase is less than the actual tax rate percentage increase. That statement also recognizes the increase in revenue from new property added to the 2017 tax roll. Finally, the language mandated in the ordinance reflects only the maintenance and operations increase; since we are changing the allocation of the tax rate between debt and operations, the operations increase is greater than the overall increase. Although the tax rate is 3% over the effective rate, the operating increase is 6% compared to the effective maintenance and operations rate and the debt portion is a 5% decrease compared to the prior year. While this can be confusing, the recommended tax rate is consistent with the City's Financial Management Policy Statement and the language used in the ordinance is compliant with state law.
Under Chapter 26 of the Tax Code, and following the explanation above, the statement below must be included on the cover page of the budget in 18 point font or larger:
THIS BUDGET WILL RAISE MORE TOTAL PROPERTY TAXES THAN LAST YEAR’S BUDGET BY $574,002 OR 1.43%, AND OF THAT AMOUNT, $361,023 IS TAX REVENUE TO BE RAISED FROM NEW PROPERTY ADDED TO THE TAX ROLL THIS YEAR.
To ensure compliance with Texas Local Government Code section 102.007(c), staff requests a vote by City Council to ratify the tax revenues that are included in the FY18 budget, which are more than those included in the FY17 budget.