FAIR OAKS RANCH -- With budget season in full swing, City Council is reviewing its primary revenue source, property taxes, and residents may be seeing a slight uptick in tax bills despite tax rate reduction.
Neighborhood buildouts have given a boost to city revenues, according to city officials. Interim Finance Director Summer Fleming recommended reducing the city’s tax rate from nearly 33 cents per $100 of property value to just over 30 cents.
“This year, the total taxable certified value is $2.38 billion, which is up 11.8% from the prior year’s valuation. This does include new properties,” Fleming said.
This new rate would increase the city’s overall levy, adding to city coffers by roughly $1.43 million.
This tax year is expected to procure $6.94 million while the proposed rate would increase city bank accounts by $7.09 million.
This rate reduction would cause the average home in the city – valued at $626,093 – to see a roughly $17 increase in their property tax bill.
However, should the city choose to adopt the no-new-revenue rate – a rate which could be adopted by council without voter approval – the average city dweller could see a tax bill increase upward of $50.
Place 2 City Councilman Keith Rhoden questioned the no-new-revenue rate presented by Fleming, wondering why a rate with that name would result in a revenue increase.
Trying to simplify a complicated tax concept, Fleming explained the total is based on net new properties which would cause an increase. The rate is based on taxing the same amount as the previous year, with new developments.
City officials would have to tack on $364 to the average homeowner’s bill to trigger an election – a voter- approval tax rate of nearly 36 cents per $100 valuation would warrant voter input.
Although city officials are no stranger to budget surpluses come year-end – something that’s happened frequently in Fair Oaks – Fleming said property tax exemptions have increased year over year.
“Looking at the change from exemptions from year over year, exempted values for disabled and over 65 increased by almost $1 million. And the number of over-65 homesteads generally has been increasing year over year,” Fleming said. “However, we did look at the percentage of over-65 homesteads to total properties, and that did decrease .7% from last year.”
Since 2020, Fleming said the city has seen a regular property tax rate decrease lead to growing revenue as the tax rate and revenue changes are impacted by growing property valuations.
“You can see how the rate and total revenue is not necessarily synonymous,” Fleming said, pointing to charts showing the relation between tax rates and revenues. “As we’ve seen with increased property valuations these last couple of years, while the tax rate has decreased, the city’s property tax revenues have increased.”
She said this increase in revenue has allowed officials to combat growing inflation rates, improve infrastructure across the city and “service delivery expectations.”
While city staff proposed a nearly 3 cent drop in the tax rate, the council set a maximum tax rate of 30.5 cents per $100.
This grants the city leaders some wiggle room should they decide budget constraints are too narrow with the lower rate.
The city council will not be able to go above the maximum rate, which would increase the average tax bill by roughly $50.
“As we’ve seen with increased property valuations these last couple of years, while the tax rate has decreased, the city’s property tax revenues have increased.”
– Summer Fleming, Fair Oaks Ranch interim finance director
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