Houston to consider tiny tax rate hike to comply with cap

Mayor Sylvester Turner has proposed a nominal increase in the city’s property tax rate, the first rate hike at City Hall in two decades.

The proposed increase of less than 1 percent will allow the city to comply with the voter-imposed cap on property tax collections.

Voters OK’d the revenue cap in 2004, amending the city charter to limit the annual growth of property tax revenue to the combined rates of inflation and population growth, or 4.5 percent, whichever is lower. Voters tweaked the cap in 2006, allowing the city to raise an additional $90 million for public safety spending.

Houston exhausted that breathing room in 2014, and, with property values still on the rise, typically has had to trim its tax rate each fall to avoid collecting more revenue than allowed.

The rate was able to rise this year because property values rose by only 1.1 percent while inflation and population growth combined to record an increase of 2.4 percent, Assistant Finance Director Melissa Dubowski said.

“I’m sure someone will say it’s a tax increase, but we’re complying with the revenue cap,” Dubowski said. “We’re doing what the proposition told us to do.”

City officials set the budget for the current fiscal year, which started July 1, expecting this year’s population estimate to show Houston had grown by 30,400 people, but the May estimate from the Census Bureau came in at just 9,200. Houston successfully challenged its 2006, 2008 and 2010 Census counts, but the city’s current appeal is pending, forcing Houston to propose a tax rate that incorporates the lower figure. As a result, Turner said, the city will need to pull a projected $17 million from reserves to make up the difference.

The proposed rate is 58.8 cents per $100 in assessed value, up from 58.4 cents a year ago, an increase of less than 1 percent.

The council on Wednesday voted to place the proposed rate on its agenda for adoption Oct. 10.

The rate is 5 cents, or about 8 percent, lower than it was during most of former mayor Annise Parker’s tenure, when the revenue cap first began forcing the city council to adjust the rate to avoid collecting more revenue than the cap allows.

Though the proposed tax rate would decrease, that does not mean residents’ taxes would. That is because the rate is applied to the value of each property and most Houstonians’ home values have been rising.