Sugar Land Approves Increase to Homestead Exemption

SUGAR LAND, Texas – In an effort to continue to limit the tax burden on residents, Sugar Land City Council has approved a 2 percent increase in the homestead exemption, raising it from 5 to 7 percent for the 2008 tax year.

Sugar Land’s Financial Management Policy Statements, most recently updated and approved by City Council in 2007, direct the City to annually consider a homestead exemption increase rather than an adjustment to the ad valorem tax rate to compensate for revaluation. The policy is intended to minimize the impact of the increased value due to revaluation by the appraisal district, with the ongoing intent to limit the tax burden on Sugar Land homeowners.

The policy utilizes the homestead exemption to offset increases in residential revaluation before reaching the 20 percent maximum allowed by the state tax code.

The 2008 tax bill on a home of average value in Sugar Land with a 7 percent homestead exemption is $740, an increase of 6.2 percent from last year’s average home tax bill of $696.95. When approving the increase in the homestead exemption, the City Council considered the impact that new home value was having on the citywide home values. The average value of new homes is $397,198. This is causing a large portion of the increase because if the new home values are excluded, the City’s average home value would be $259,289. In comparing the tax bill from 2007 to 2008 excluding the new home value, there is an increase of 3.8 percent with the 7 percent homestead exemption.

Action on the homestead exemption was taken after a careful analysis of current and future economic considerations, including sales tax collections in 2008 that have fallen short of anticipated levels.

Benefits of Sugar Land’s focus on the Homestead Exemption for tax relief include:

• Most residents have a homestead exemption.
• Homeowners will see the benefit of the increased exemption.
• Increasing the exemption encourages property to be owner-occupied.
• New development, including commercial value pays for the additional service demands placed on the City.

Past practice of the City has been to lower the tax rate each year to offset the impact of increasing property values. Since 1993, the City has lowered the tax rate 38.7 percent, giving Sugar Land one of the lowest tax rates in the state.