AGENDA CAPTION:
Title
Receive a staff presentation and hold a Public Hearing to receive comments for or against Ordinance 2025-37, setting the tax rate for the 2025 tax year at 67.69 cents on each $100.00 of taxable value of real property that is not exempt from taxation; levying taxes for the use and support of the municipal government of the city for the fiscal year beginning October 1, 2025 and ending September 30, 2026; providing a sinking fund for the retirement of the bonded debt of the city; including procedural provisions; and declaring an effective date; and consider approval of Ordinance 2025-37, on the second of two readings.
Body
Meeting date: September 16, 2025
Department: Finance
Amount & Source of Funding
Funds Required: N/A
Account Number: N/A
Funds Available: N/A
Account Name: N/A
Fiscal Note:
Prior Council Action: On March 18,2025, City Council passed Resolution 2025-53R, approving the FY 2026 Budget Policy Statement. The Budget Policy Statement provided guidance for the property tax rate to be kept between the current rate and voter-approval rate. On August 19, 2025, City Council passed Resolution 2025-150R, setting the maximum proposed tax rate at 67.69 cents. City Council approved the first reading and held a public hearing on setting the tax rate September 2, 2025.
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Background Information:
At the August 19, 2025 City Council meeting, the maximum proposed tax rate was set at a rate of 67.69 cents. The Texas Tax Code requires a public hearing on the tax rate if the maximum proposed tax rate (67.69 cents) exceeds the lower of the no-new-revenue rate (62.78 cents) and voter-approval rate (69.41 cents). The City scheduled two public hearings that will be held September 2, 2025 and September 16, 2025. A notice for the public hearings was published in the San Marcos Daily Record on August 27, 2025. The notice was also published on the City’s website and aired on the public access channel.
The City’s tax rate has been 60.30 cents since Fiscal Year 2022. The Fiscal Year 2026 Proposed Budget, as presented to City Council on August 19, 2025, is based on the no-new-revenue tax rate of 62.78 cents. During the last budget workshop current and future needs were discussed that cannot be met with the No-New-Revenue rate of 62.78. Passed and pending state legislation would severely hinder the City’s ability to raise the tax rate to address these needs in the future. City Council adopted the maximum proposed tax rate of 67.69 cents per $100 valuation.
A tax rate that exceeds the No-New-Revenue rate (62.78) requires the approval of at least 5 Councilmembers. If City Council does not adopt a tax rate then the lower of the NNR (62.78) or current rate (60.30) will become the City’s tax rate for Fiscal Year 2026. That would make the City’s tax rate 60.30 cents, which would require a $2.2 million budget cut from the proposed budget.
The tax rate is comprised of two components, 1) operations and 2) debt. The operations component of the tax rate is 51.22 cents and the debt component is 16.47 cents. In 2022, City Council approved a local homestead property tax exemption of $15 thousand and increased the local senior and disabled property tax exemption by $10 thousand to $35 thousand. In Fiscal Year 2026, these local property exemption amounts remained the same and provided residents with $1.6 million in property tax relief.
Council Committee, Board/Commission Action:
N/A
Alternatives:
The maximum proposed tax rate is 67.69 cents per $100 valuation. City Council may set a tax rate equal to or less than 67.69 cents per $100 valuation.
Recommendation:
City Council approve the ordinance setting the tax rate at 67.69 cents per $100 valuation.