Title
Consider adopting Ordinance No. 3881 accepting the Tax Year 2024 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 2024-25 (Tax Year 2024) in accordance with Section 26.05(b); and take appropriate action.
Body
REQUESTER:
Finance, Fleet, and Facilities Department
BACKGROUND:
Property owners have the right to know about increases in their appraised value and to be notified of the estimated taxes that could 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. 3881 accepts the Tax Year 2024 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 $9,927,205,747 (nine billion, nine-hundred twenty-seven million, two-hundred five thousand, seven-hundred forty-seven dollars). This amount includes new construction, but excludes properties still under protest.
A certified roll is crucial to providing the City with a level of certainty with regard to the appraised values on which to base its property tax setting decisions and, therefore, its budgeted property tax revenues. On July 31, 2024, City Administration submitted the Proposed Fiscal Year 2024-25 Operating & Capital Improvement Program Budget to the City Council based on the Tax Year 2024 Certification of Appraisal and a reduction in the tax rate of $0.0255 or a tax rate of $0.5435 per $100 - the largest reduction in 41 years. If this rate is adopted, it is essentially a tax rate reduction of $0.060575 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 20, 2024 to consider a proposed tax rate of $0.604075 as the maximum rate for discussion purposes.
Property Tax Code Section 26.05 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.
Although the budget was developed with a tax rate less than the no-new-revenue rate, the proposal to consider a maximum tax rate equal to the voter approval rate of $0.604075 triggers the legislative requirements mentioned above. In this case, legislation requires that 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 because if the proposed maximum tax rate were to be adopted the City’s tax levy to fund maintenance and operations expenditures would exceed the no-new-revenue rate and this year’s levy to fund maintenance and operations expenditures would exceed last year’s maintenance and operations tax levy. Legislation also requires that an ordinance to levy the tax rate include the following statement: “This tax rate will raise more taxes for maintenance and operations than last year’s tax rate. The tax rate will effectively be raised by 3.5% and will raise taxes for maintenance and operations on a $100,000 home by approximately $29.48. If the proposed maximum tax rate were to be adopted it would be distributed as follows: $0.549840 for general fund maintenance and operations and $0.054235 for debt service distribution per $100 assessed value. [Note: The debt service rate may not be changed.]
The City has complied with all requirements governing the budget and tax rate process, and 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 $0.604075, the financial impact would be approximately $59,924,014, including debt service, which has been impacted by $43,754 in excess debt collections from the prior year. Based on the proposed budgeted rate of $0.5435, the financial impact would be approximately $53,910,609 or a difference of $6,013,405, which has also been impacted by $43,754 in excess debt collections from the prior year.
Each one-cent in the tax rate is equivalent to $992,720.57. This does not include the Net Estimated Taxable Value under Protest of $73,987,960, which would add $7,398.80 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.
DISTRICT:
Citywide.
POSSIBLE COUNCIL ACTION:
1. If adopting the proposed maximum rate of $0.604075, 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 $0.604075, which is effectively a 10.13% increase in the tax rate.”
2. If adopting the proposed budgeted rate of $0.5435: “I move to approve a property tax rate of $0.5435 and to modify Ordinance No. 3881 accordingly.” [Ordinance to be modified to remove the language about tax increase as stated in Section 26.05(b) of Property Tax Code and rate to be split to $0.489265 for Maintenance & Operations (M&O) and $0.054235 for Interest & Sinking Fund (I&S) Debt Service. Option 2 ordinance attached.]
ATTACHMENT(S):
1. Truth-in-Taxation Calculation Worksheets
2. Notice of Tax Rates
3. Section 26.05(b) Steps for Determination of Tax Rate
4. Ordinance No. 3881 (Option 1)
5. Ordinance No. 3881 (Option 2)