City cuts tax rate for ninth time in 10 years
Houston cut its tax rate for the ninth time in 10 years Wednesday, in order to remain under the revenue cap put in place by voters in 2004.
Property tax bills for residents likely will still rise, due to increasing home values. The city accounts for about 20% to 25% of the typical property tax bill.
City Council held a public hearing and vote Wednesday to lower the tax rate from 53.36 cents per $100 of taxable value in 2023 to 51.92 cents for the 2024 fiscal year. This is a 2.7% decrease from 2023.
The motion passed, 11 to 4, with Councilmembers Mary Nan Huffman, Michael Kubosh, Amy Peck and Mike Knox voting against the motion. Councilmember Karla Cisneros was absent from Wednesday’s meeting.
The tax rate cut will save homeowners about $35 on a $300,000 home valuation, with the standard 20% homestead exemption, though that does not account for any annual increase in home valuation.
“We are lowering the tax rate to collect what we have put forward and our fiscal year 2024 budget and not anymore,” Mayor Sylvester Turner said in Wednesday’s meeting.
If the tax rate had not decreased from the last fiscal year, the city would have taken in an additional $38.2 million in revenue, Turner said.
Houston voters approved a measure in 2004 that caps growth in property tax revenue to a formula that combines inflation and population growth, or 4.5%, whichever is lower. The city hit the former number this year, and it must cut the tax rate to avoid collecting more revenue than it is allowed.
The city first hit this cap in 2015, and has subsequently reduced the tax rate nine times in 10 years. Since 2015, the revenue cap has cost the city $1.9 billion in operating funds due to the reduction of the tax rate, Turner said.
Turner campaigned in 2015 on a plan to amend the cap to hire more police officers, and he pledged in 2017 to ask voters to repeal it entirely, but neither proposal made it to the polls.
In 2019, the Texas Legislature also implemented a law that property tax revenue for cities, counties and school districts cannot grow by more than 3.5% per year without voter approval. If an entity wants to go above that amount, it must ask for approval from voters.
The 2019 law also sets what is called a “no new revenue rate,” meaning the city does not take in any more revenue than the year before, which in 2024 would be 48.46 cents per $100 taxable valuation. If the city decides not to meet that rate, they must include a notice in the Houston Chronicle stating that they will be increasing the tax rate, despite the fact that they are still lowering the rate from 2023.
If the city decided to meet the no new revenue tax rate, the budget for 2024 would have to be adjusted to account for a loss of $91.4 million dollars, Turner said.
Councilmember Dave Martin said he would support this item, but he took issue with the other side of tax calculations: increasing appraisal values.
“The State of Texas requires us to lower our property tax rate, yet they don’t put in any cap to keep the appraisal values in check. That should be a mandate,” Martin said. “Because while we’re lowering the 20%, they’re raising the 80% thus, you’re gonna pay more in tax dollars.”