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Imposing a narrow statewide cap on city budgets will not provide homeowners and businesses with meaningful tax relief because it doesn’t address the real cause of high property taxes – the state’s failure to address school financing in a meaningful way. Property owners know that the highest portion of their property taxes goes to funding schools and only a small percentage actually goes to the City. In Sugar Land in 2016, school district taxes accounted for up to 65 percent of your tax bill while city taxes represented only about 15 percent. Restricting city property taxes may sound good, but it won’t lower your tax bill in a significant way.
In fact, had the City relied on the legislature to provide “tax relief” in 2016 through a 4 percent revenue cap rather than the City Council approved 2 percent increase to the Homestead Exemption, Sugar Land residents would have ended up paying $12 MORE on their tax bill in 2016.
Additionally, the City would have lost its flexibility to respond to economic conditions, and with that, its ability to keep taxes low. Sugar Land is different from every other city in Texas. State restrictions on cities have to be broad and flexible enough to take into account the vast differences between cities across the state.
While that statement might sound concerning, comparing the growth in median household income to total tax levies is very misleading. You cannot compare an average to a total. Median household income mainly increases due to inflation while total property tax collections mainly increase due to growth such as annexation or new construction.
For example, when Sugar Land annexes the New Territory and Greatwood communities later this year, the City will grow its tax base and revenues; however, looking at the demographics, these communities have a similar median household income. Therefore, the tax collections will increase while the median household income essentially shows no growth at all. For anyone to say that those two growth rates should be the same is just inaccurate and misleading. Commercial property development does not impact median household incomes or population, but still places significant demands for services on the City.
State officials have no responsibility to provide local services or to meet unfunded state and federal mandates on cities. Applying a one-size-fits-all solution does not work as cities have unique characteristics due to differing mixes of tax base, age and demographics of the community, and economic activity. Elected city officials have constituents to represent. If an elected city councilmember acts contrary to the will of the citizens, that councilmember is not reelected. City officials are in the best position to make decisions on local property taxes because they interact with city residents every day, spend hours reviewing city budgets, and are personally familiar with the priorities of their communities. Each Sugar Land voter elects four of seven city council members – one mayor, one district council member and two at-large council members. Contrast that with one senator and one representative of the 181 members of the Texas Legislature, and you can see how local government is the government closest to the people.
Putting narrow statewide restrictions on city budgets will limit the City’s ability to do the things citizens want and expect. About half of the City’s General Fund budget, which is supported primarily by sales & property taxes, goes to funding for police, fire fighting, and emergency medical services. Comparing public safety funding to the total City budget is misleading, as the other funds such as water utilities and capital improvements are specific to those funds and are not available to support these departments. Narrowing restrictions will impact the City’s ability to hire quality personnel, offer competitive salaries and benefits, upgrade technology and replace outdated equipment.
It hasn’t, it’s actually gone down a lot! Sugar Land has the second lowest tax rate in Texas for a city of similar size. For an average tax bill of $1,100, or only $3 a day (less than a tall latte), you get one of the safest and best places to live in Texas. Sugar Land voters approved a half-cent local sales tax for property tax reduction which has helped to lower the tax rate from 50 cents in 1993 to 31.595 cents in 2016. The City has found that the most effective way to provide relief from rising valuations has been to increase the homestead exemption which targets tax relief directly to homeowners and results in a higher savings to residents compared to additional decreases to the city’s tax rate. Since 2007, the homestead exemption has been raised from 1 to 10 percent – the equivalent of 3 cents on the tax rate. Additionally, the City offers a $70,000 exemption for over-65 or disabled homeowners, and these taxpayers are also eligible to defer taxes owed on their property.
Over the past two decades, the state has demanded ever increasing financial contributions from local governments for state highway construction projects. Revenue caps will force cities to focus their restricted funding on local street improvements and curtail discretionary spending on state projects.
Commercial property development provides increases to property tax collections that do not affect household incomes or tax bills; in fact, commercial property helps to buy-down residential tax bills. Revenue caps will reduce the ability of cities to offer the services, amenities and infrastructure improvements that have been crucial to closing the deal in many corporate relocation decisions that create jobs for our citizens.
The legislature has the power to provide meaningful property tax relief by changing the way education is financed in Texas but has chosen not to do so. The largest burden of school funding has been pushed down to the local level by Texas lawmakers over many years in an effort to cut the state’s budget. The more you pay to the school district in property taxes, the less the state must spend on education. The proposed revenue caps do not apply to school districts, the largest part of your tax bill, so homeowners will find no meaningful tax relief. Despite this, language in the 2018-2019 state budget requires a 13 percent increase in school property taxes. The language in the 2018-2019 state budget bill (SB 1) reads, “Property values, and the estimates of local tax collections on which they are based, shall be increased by 7.04 percent for tax year 2017 and by 6.77 percent for tax year 2018.”