Title
Consider adopting Ordinance No. 3959 accepting the Tax Year 2025 Certification of Appraisal Roll in accordance with Section 26.04(b) of the State Property Tax Code and to levy and adopt the tax rate for Fiscal Year 2025-26 (Tax Year 2025) in accordance with Section 26.05(b); and take appropriate action.
Body
REQUESTOR:
City Management
BACKGROUND:
Property owners have the right to be informed about increases in their appraised value and to receive notification of the estimated taxes that may result from the new value. This is accomplished by following Truth-in-Taxation requirements to ensure the public is informed of any increases. Truth-in-Taxation is a concept embodied in the Texas Constitution, and the Tax Code requires local taxing units to inform taxpayers of tax rate proposals.
DISCUSSION:
Proposed Ordinance No. 3959 accepts the Tax Year 2025 Certification of Appraisal Roll prepared by the Dallas Central Appraisal District (DCAD), which sets forth the estimated taxable value, after qualified exemptions, for residential and commercial real property and business personal property in the City of Farmers Branch at $10,131,204,784 (ten billion, one-hundred thirty-one million, two-hundred four thousand, seven-hundred eighty-four dollars). This amount includes new construction, but excludes properties still under protest.
A certified roll is crucial for providing the City with a level of certainty regarding the appraised values on which to base its property tax setting decisions and, therefore, its budgeted property tax revenues. On July 31, 2025, City Administration submitted the Proposed Fiscal Year 2025-26 Operating & Capital Improvement Program Budget to the City Council based on the Tax Year 2025 Certification of Appraisal and no change to the current tax rate of $0.5435 per $100. If this rate is adopted, it is essentially a tax rate reduction of $0.088295 from the calculated rate the City is allowed to approve without calling for an election.
For deliberation purposes, however, the City Council passed a motion on August 19, 2025, to consider a proposed tax rate of $0.631795 as the maximum rate for discussion purposes. Property Tax Code Section 26.05(b) and Texas Local Government Code, Chapters 102 and 111, have requirements, notices, and/or motions that must be followed related to the budget and tax rate process. These requirements, notices, and/or motions vary depending upon whether or not a proposed property tax rate exceeds the lower of the no-new-revenue tax rate or the voter-approval tax rate, and/or whether this year's tax levy to fund maintenance and operations expenditures exceeds last year's maintenance operations tax levy.
This year's proposed maximum tax rate exceeds the no-new-revenue tax rate, and the levy to fund maintenance and operations expenditures exceeds last year's maintenance and operations tax levy. The vote on the ordinance setting the tax rate must be a record vote, and 60% of the governing body must vote in favor of the adoption of the tax rate. Legislation requires that the motion to adopt this ordinance must be made in a specific form and that the ordinance contain the following language: "This year's tax rate will raise more taxes for maintenance and operations than last year's tax rate. The tax rate will effectively be raised by 15.44% and will raise taxes for maintenance and operations on a $100,000 home by approximately $83.60. If the proposed maximum tax rate were to be adopted, it would be distributed as follows: $0.57287 for general fund maintenance and operations and $0.058925 for debt service distribution per $100 assessed value. [Note: The debt service rate may not be changed.]
If the current tax rate is maintained, this year's tax rate will raise less taxes for maintenance and operations than last year's tax rate. The tax rate will effectively be lowered by 2.36% and would lower taxes for maintenance and operations on a $100,000 home by approximately $4.69 due to the change in distribution between the M&O and I&S rate. If the current tax rate were to be adopted, it would be distributed as follows: $0.484575 for general fund maintenance and operations and $0.058925 for debt service distribution per $100 assessed value.
The City has complied with all requirements governing the budget and tax rate process. A copy of the required tax notice is attached to this agenda item. State law requires that this ordinance be passed after the passage of the City's fiscal year budget and after a record vote to ratify the property tax increase reflected in the budget. This ordinance supports the core principle to "be good custodians of taxpayer dollars."
FISCAL IMPACT:
Based on a maximum rate of $0.631795, the financial impact would be approximately $64,008,445, including debt service, which has been impacted by $283,768 in excess debt collections from the prior year. Based on the proposed budgeted rate of $0.5435, the financial impact would be approximately $55,063,098 or a difference of $8,945,347, which has also been impacted by $283,768 in excess debt collections from the prior year. Each one-cent in the tax rate is equivalent to $1,013,120. This does not include the Net Estimated Taxable Value under Protest of $230,732,377, which would add $1,254,030 (or $23,073 for each one-cent in the tax rate). The Net Estimated Taxable Value is the remaining protested values with DCAD, and 70% is estimated to be upheld. [Note: The financial impact does not include reductions for tax increment financing payments or tax refunds.]
DISTRICT:
Citywide
POSSIBLE COUNCIL ACTION:
1. If adopting the proposed maximum rate of $0.631795, the following motion requires a record vote and at least 60% of the members of the governing body voting in favor of the ordinance. The motion must be made in the exact form: "I move that the property tax rate be increased by the adoption of a maximum tax rate of $0.631795, which is effectively a 21.71% increase in the tax rate." [Fill-in ordinance to reflect M&O rate of $0.57287; tax rate will effectively be raised by 15.44%; will raise taxes for maintenance and operations on a $100,000 home by approximately $83.60.]
2. If adopting the proposed budgeted rate of $0.5435, the following motion requires a record vote and at least 60% of the members of the governing body voting in favor of the ordinance. The motion must be made in the exact form: "I move that the property tax rate be increased by the adoption of a tax rate of $0.5435, which is effectively a 4.70% increase in the tax rate, and to modify Ordinance No. 3959 accordingly." [Fill-in ordinance to reflect M&O rate of $0.484575; tax rate will effectively be lowered by 2.36%; will lower taxes for maintenance and operations on a $100,000 home by approximately $4.69.]
ATTACHMENT(S):
1. Truth-in-Taxation Calculation Worksheet
2. Notice of Tax Rate 2025
3. Notice of Tax Rate Public Hearing 2025-26
4. Ordinance No. 3959 (to be completed after vote)