Post on 13-Oct-2020
A Look at the Tax Rate Setting Process Martie Simpson
Executive Director
Government Finance Officers Association of Texas
Key Players
• Submits a Budget with a Recommended Tax Rate
City Manager/City Staff
• Adopts Local Tax Rate
City Council
• Sets Property Values
Appraisal District
• Adopts and Governs the Tax Rate Adoption Process
State
• Collects Tax Revenues
Tax Assessor’s Office
Property Tax Process
Tax Rate Must be Adopted After Annual Budget is Adopted – by September 30th or 60 Days After
Receiving the Certified Roles
Law Dictates:
Calculations, Terminology
Adoption Processes & Timelines
Public Notice Wording & Requirements
Ad Valorem Tax Rate Process Governed by State Law
“Truth in Taxation”
Property Tax Terms
• Assessed Valuation • Establish Value of Property that is Subject to
Taxation • Set January 1 • Determined by “Market Value” • Subject to Protest by Property Owners and
Review by Appraisal Review Board
• Central or County Appraisal District (CAD) • Responsible for Establishing Property Values • Independent of All Taxing Entities • Does not Set the Tax Rate • Establish a Process for Review of Protests
/Appeals
Tax Terminology
• Estimates of Value Provided by the CAD
• Subject to Change Based on Protests and Appeals
Preliminary Tax Roll
• Tax Roll Used in Calculations Required Under Truth in Taxation
• CAD Certifies Tax Roll When 95% of Value in the County is Final
• CAD Provides an Estimate of Value for Effective Tax Rate Calculations for ARB Review Properties
Certified Tax Roll
Exemptions & Abatements
Taxing Entities can Offer Exemptions and Abatements to Reduce Individual Tax Bills
• Typically Used to Incent Commercial Development
• For a Specific Period of Time
• Granted by Taxing Entity on a Case by Case Basis
• Performance Requirements
Abatements:
• Typically for Residential Property
• Do not Expire as Long as Property Qualifies
• Apply at Appraisal District
Exemptions
Types of Residential Exemptions
All Residential Exemptions are Optional and MUST be Approved by the City Council
Homestead
• A Percentage of Appraised Value is Deducted
• Maximum HS = 20%
• Minimum Exemption of $5,000
• Changes to the HS Exemption MUST be Approved by the End of June to be Applicable that Year
Over 65
Disabled Person
100% Disabled Veteran
• Spousal Exemption
Elements of Property Tax
Rate
• Operations and Maintenance (O&M)
• Funds On-Going General Fund Operations
• Interest and Sinking (I&S)
• Funds Payments on Debt for General Government Improvements
• Tax Rate = O&M rate + I&S Rate
• Calculation:
• Tax Rate x Taxable Value/$100 = Your City Tax Levy ($ Paid to City)
Debt Supported by I&S Rate
• Voter Approved
General Obligation
Debt
• Do not Require Voter Approval Unless 5% of Qualified Voters Petition for an Election
Certificates of Obligation
Debt
• Shorter Terms Limited Tax
Note
Property Tax Definitions
Effective Tax Rate
Rollback Tax Rate
Property Tax definitions
• Tax Rate that Generates the Same Revenues as Last Year’s for Properties Taxed in Both Years
• Accounts for Prior Year Refunds
• Excludes New Value
• Excludes Value in a Reinvestment Zone
Effective Tax Rate (ETR)
• Debt Rate Included in this Notice MUST be the Debt Rate Adopted
• Required for ANY Proposed Tax Rate
Effective Tax Rate Calculation- Publication
Property Tax Definitions
• Rollback Tax Rate
• Provides an 8% Increase in Revenue Over the ETR in M&O Tax Revenue from Last Year
• Includes Revenue from Sales Tax for Property Tax Reduction, if Elected
• If the Tax Rate Exceeds, Voters Can Petition for a Rollback Election
• If Election Passes, Tax Rate “Rolls Back” to the Lower of the Effective Tax Rate or Rollback Rate
Truth In Taxation
Requirements
• If the Proposed Tax Rate Generates More Revenue than the Effective Tax Rate, the City MUST do the Following:
• Take a Record Vote on Tax Rate
• Must do Even though this Notice is not Published if you Follow LCG 140.010
• Publish Notice of Proposed Tax Rate
• Hold Two Public Hearings
• Vote to Ratify Increase in Tax Revenue
• Separate from Budget & Tax Adoption
POSTING REQUIREMENTS FOLLOWING THE TEXAS TAX
CODE section 26.06
Effective Tax Rate Notice
Last Year’s Tax Rate is the Actual Tax Rate the Taxing Unit Used to Determine Property Taxes Last Year
This Year’s Effective Tax Rate would Impose the Same Total Taxes as Last Year if You Compare Properties Taxed in Both Years
This Year’s Rollback Tax Rate is the Highest Tax Rate the Taxing Unit can Set Before Taxpayers Start Rollback Procedures
In Each Case these Rates are Found by Dividing the Total Amount of Taxes by the Tax Base (the Total Value of Taxable Property) with Adjustments as Required by State Law
Effective Tax Rate Notice
Effective Tax Rate Notice
• Statement of Increase/Decrease
• Schedule A - Unencumbered Fund Balance
Effective Tax Rate Notice
Schedule B- Debt Service
• Schedule of each bond paid from property taxes • Principal & interest due in the next year
• Schedule C- Additional Sales Tax
POSTING REQUIREMENTS FOLLOWING THE TEXAS LOCAL GOVERNMENT CODE SECTION
140.010 (d) and (e)
Notice of Proposed Property Tax Rate • Beginning with 2014 Tax Year, Local Government Code Chapter 140.010 Provides a Simplified
Public Notice and Hearing Process.
NOTICE OF 2018 TAX YEAR
PROPOSED PROPERTY TAX RATE
FOR CITY OF WEBSTER, TEXAS
A tax rate of $0.34794 per $100 valuation has been proposed for adoption by the governing body of City of
Webster, Texas. This rate exceeds the lower of the effective or rollback tax rate, and state law requires that
two public hearings be held by the governing body before adopting the proposed tax rate.
The governing body of City of Webster, Texas proposes to use revenue attributable to the tax rate increase
for the purpose of making annual payments on additional debt that was issued during 2018.
PROPOSED TAX RATE $0.34794 per $100
PRECEDING YEAR'S TAX RATE $0.31725 per $100
EFFECTIVE TAX RATE $0.32488 per $100
ROLLBACK TAX RATE $0.39106 per $100
Notice of Proposed Property Tax Rate
The effective tax rate is the total tax rate needed to raise the same amount of property tax revenue for City of Webster, Texas from the same properties in both the 2017 tax year and the 2018 tax year. The rollback tax rate is the highest tax rate that City of Webster, Texas may adopt before voters are entitled to petition for an election to limit the rate that may be approved to the rollback rate. YOUR TAXES OWED UNDER ANY OF THE ABOVE RATES CAN BE CALCULATED AS FOLLOWS: property tax amount= (rate) x (taxable value of your property)/100
Notice of Proposed Property Tax Rate
• Includes Contact Information and Public Hearing Dates & Times
For assistance or detailed information about tax calculations, please contact:
Ann Harris Bennett
Harris County Tax Assessor-Collector
1001 Preston, Houston, TX 77002
713-274-8000
tax.office@tax.hctx.net
www.hctax.net
You are urged to attend and express your views at the following public hearings on the proposed tax rate:
First Hearing: September 18, 2018 at 06:00 PM at Council Chambers, Webster City Hall, 101 Pennsylvania,
Webster, Texas.
Second Hearing: September 25, 2018 at 06:00 PM at Council Chambers, Webster City Hall, 101
Pennsylvania, Webster, Texas.
ADOPTING THE TAX RATE
Must be a Separate Item on the Agenda
Adopt Budget Before Tax Rate
Adopt by Official Action in a Written
Resolution Ordinance or Order
ADOPTING THE TAX RATE
• If the Proposed Tax Exceeds the Effective Tax Rate, the City MUST Do the Following:
• At Least 60% of the Governing Body MUST Vote in Favor of the Resolution or Ordinance
• Record Vote
• Taxing Units with Both M&O and Debt Service MUST Adopt the Rate as Two Separate Components
Taxes and the Average Home
2018-19 Adopted Tax Rates
Home Value $250,000 Tax Rate $ Amount %
City of New Braunfels 0.48822 1,221$ 22.07%
NBISD 1.3658 3,415$ 61.75%
Comal County 0.295191 738$ 13.35%
Lateral Road 0.06273 157$ 2.84%
Total 2.211941 5,530$ 100%
Current Law
• Rate Needed to Produce Same Revenue as Prior Year on Property Taxed in Both Years • Excludes New Properties • Excludes Values in Reinvestment Zone • Adjusted for Prior Year Refunds
Prior Year’s Taxes
÷
Current Value of Property Taxed in the
Prior Year
X
$100
=
Effective Tax Rate
• Highest Rate a Taxing Unit can Adopt Without Possible Petition for Election
• Successful Election Sets the Tax Rate at Rollback Rate
Effective Tax Rate
-
Debt Rate
X
1.08%
+
Debt Rate
=
RollbackTax
Rate
Senate Bill 2
• “Effective Rate” replaced with “No-New-Revenue”
• “Rollback Rate” replaced with “Voter-Approval Rate”
• Mandatory November Election if Rate Set Above “Voter-Approval Rate”
• Lowers the Voter-Approval Rate (Rollback Rate) from 8% to 3.5%
• Added Unused Increment to the Formula
• “De Minimis Rate” for Small Cities
• Effective January 1, 2020
Prior Year’s
Taxes
÷
Current Value of Property Taxed in the Prior Year
X
$100
=
No-New-
Revenue Tax Rate
NO-NEW-
REVENUE TAX
RATE
-
DEBT RATE
=
NO-NEW-REVENUE
MAINTENANCE &
OPERATIONS RATE
NO-NEW-
REVENUE
MAINTENANCE
& OPERATIONS
RATE
X 1.035
+ CURRENT
DEBT RATE
+ UNUSED
INCREMENT
=
VOTER-
APPROVAL-
TAX RATE
Unused Increment Rate
• 3-Year Rolling Sum of Adopted Amount Less than 3.5% Voter-Approval Rate
• Beginning in 2020 Tax Year • 2020 – 3.0%
• 2021 – 2.5%
• 2022 – 3.0%
• In 2023, the City Could Add up to 2% to Voter-Approval Tax Rate
Small Cities – Less Than 30,000 in
Population
• De Minimis Rate
• Rate That Will Generate $500,000 in Tax Revenue
• 3% of Registered Voter’s Can Petition an Election If:
• De Minimis Rate Exceeds Voter-Approval Rate
• Adopted Rate is Equal to or Lower than Voter-Approval Rate
• Greater than 8%
De Minimis Rate – Cities Less than 30,000 in Population
No-New-Revenue Maintenance and Operations Rate
+
The Rate Applied to
Current Value That Will Impose a Rate Equal to
$500,000
+
Current Debt Service
Senate Bill 2 - Summary
• Mandatory Election for Cities with Population of 30,000 or more if Adopted Tax Rate Exceeds Voter-Approval Rate
• De Minimis Rate for Cities Less than 30,000 in Population
• Numerous Calendar Changes to Property Tax Appraisal, Collection and the Tax Rate Setting Process
• Prohibits Decreasing Total Compensation for First Responders