Property tax rate may lower again over cap
The Turner administration is proposing to slightly lower the city’s property tax rate for the seventh time in eight years as it bumps up against a voter-imposed revenue cap.
The proposal would drop the ad valorem rate from 56.18 cents to 55.08 cents per $100 assessed value. City Council on Wednesday set a public hearing on the proposed rate for Sept. 22.
If adopted, tax bills likely will continue to rise despite the rate cut because of rapidly increasing property valuations. The city accounts for about 20 to 25 percent of property owners’ local tax bill, with a majority going to school districts.
For a $225,000 home with a standard 20 percent homestead exemption, the rate decrease would result in a savings of just under $20 a year.
The Harris County Appraisal District has not publicly released valuation data for this year. Home sale prices grew on average 18 percent year-over-year in July, according to real estate data company Corelogic. Those prices differ from appraisal values, which are capped at 10 percent
growth per year in Texas.
The city expects to take in an estimated $1.23 billion in property taxes, slightly down from $1.25 billion the year prior , according to the Finance Department. Property taxes are the city’s largest revenue source, accounting for about a quarter of its money, and nearly half of the operating budget that funds most city services.
The city operates under two revenue caps: one imposed by city voters in 2004 that ties growth to a combination of inflation and population growth or 4.5 percent, whichever is smaller; and one imposed by the Legislature in 2019 that caps growth at 3.5 percent. This year, the city’s cap was more stringent than the statewide one. The proposed rate is the highest allowed under that cap.
Had the city been able to reach the state cap, like other cities, it could have taken in another $34 million, according to finance.
As he has since taking office, Mayor Sylvester Turner railed against the city’s cap Wednesday, saying it has kept important revenue out of the city’s coffers and hamstrings city services. The Finance Department estimates the city has gone without more than $1 billion in cumulative property tax revenue since it first reached the cap in 2014.
“There are tremendous needs within our city,” Turner said, naming public safety, waste collection and infrastructure among others. “(The cap) makes it very difficult to meet all the needs or do even more.”
The cap’s backers often argue it is serving its purpose: The $1 billion-plus not collected by the city has remained in taxpayers’ pockets.
The city, though, argues the savings for homeowners do not match the services they lose from the city.
Turner zeroed in on Solid Waste, which operates on a shoestring budget compared to other cities that he called an “unsustainable model.” He said the $34 million could be put toward illegal dumping alone. The mayor previously has said the city soon will have to decide whether to charge a garbage collection fee, as other cities do.
“When more people move into the city, there are more needs, they’re growing,” Turner said. “At some point, the people in the city of Houston will have to address this issue.”
Charter amendment
Mayor Pro Tem Dave Martin, who serves as the council’s budget chair, went a step further. The Republican called Tuesday for the city to propose a charter amendment in the next election that would remove the cap. Doing so would put Houston on the same playing field as other cities, which only are subject to the newer state cap, Martin said.
Turner has suggested putting an item on the ballot asking voters to eliminate the local revenue cap, but never has offered a measure to do so.
“We have more restrictive revenue cap limitations that keep us from doing things we would like to do in the city of Houston,” Martin said. “We should be treated equitably with Dallas, San Antonio, Austin, El Paso, but we’re not. We’re treated very differently, so I would like to see the administration take on a charter amendment that talks about this inequitable treatment.”
At-Large Councilmember Sallie Alcorn echoed that. She said she visited some of the city’s animal shelter facilities recently, which brought the need for more resources and upgrades to bear.
“There’s wires hanging out of stuff, there’s people officing out of spaces I would not want my enemies to office in,” Alcorn said. “The needs of this city go on and on.”
That view is not unanimous on council. Four of the body’s more conservative members voted against last year’s rate cut, arguing for a steeper reduction.
The council is expected to vote on this year’s proposed rate Sept. 22.