AGENDA CAPTION:
Title
Receive a Staff presentation and hold a Public Hearing to receive comments for or against Ordinance 2022-76, setting the Tax Rate for the 2022 Tax Year at 60.30 cents on each $100 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, 2022, and ending September 30, 2023; providing a sinking fund for the retirement of the bonded debt of the city; including procedural provisions; and providing an effective date; and consider approval of Ordinance 2022-76, on the second of two readings.
Body
Meeting date: September 20, 2022
Department: Finance, Finance Director Jon Locke
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Fiscal Note:
Prior Council Action: Budget Policy Statement, Budget Workshops
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Background Information:
The City’s current tax rate is 60.30 cents per $100 valuation. On August 18, 2022, City Council set a maximum tax rate for Fiscal Year 2023 equal to the City’s current tax rate of 60.30 cents. The City’s 2022 Tax Rate Calculation Worksheet was prepared by the Hays County Tax Assessor-Collector and is available on the Hays County website and in the City’s Fiscal Year 2023 Proposed Budget. The required ‘Notice about 2022 Tax Rates’ was also prepared by the Hays County Tax Assessor-Collector and published on the City’s website on August 19, 2022.
Since the maximum tax rate of 60.30 cents exceeds the lesser of the No New Revenue Tax Rate of 54.59 cents and the Voter Approval Rate of 72.70 cents, state law requires a public hearing before its adoption. The public hearing is required even though the maximum tax rate is the same as the City’s current tax rate of 60.30 cents. Notice of the public hearing scheduled for September 6th and September 20th was published in the San Marcos Daily Record on August 30, 2022.
Senate Bill 2 changed the minimum votes required to adopt a tax rate that exceeds the no-new-revenue tax rate. The change increased the votes required from a majority vote to a minimum of 60 percent of City Councilmembers. A 60 percent vote requires five City Councilmembers vote in favor of the ordinance. The approval of five City Councilmembers is required, regardless of the number of City Councilmembers present at the meeting.
The Fiscal Year 2023 Proposed Budget, as presented to City Council on August 18th, is based on a tax rate of 59.30 cents per $100 valuation, which is one-cent below the proposed maximum and current tax rate of 60.30 cents. This allows City Council the flexibility to add the one-cent to the budget to be used specifically for the addition of public safety personnel. At the September 6, 2022 City Council meeting, staff was given direction to prepare the tax rate ordinance equal to the City’s current tax rate of 60.30 cents.
The ultimate tax rate adopted by City Council may be equal to or lower than the City’s current and maximum tax rate of 60.30 cents. As mentioned earlier, in order to adopt a tax rate that exceeds the no-new-revenue tax rate of 54.59 cents, the vote to adopt the tax rate must have a minimum of five votes in favor of the ordinance or the ordinance will not pass.
If a tax rate is not adopted by September 30, 2022, state law dictates the tax rate for the upcoming year will be the lower of the no-new-revenue tax rate or the City’s current tax rate. The City’s current tax rate of 60.30 cents is higher than the no-new-revenue tax rate of 54.59 cents. That means if a tax rate is not adopted by September 30, 2022, the City’s tax rate for Fiscal Year 2023 will be 54.59 cents by default. As discussed at the Budget Workshop and last City Council meeting, the no-new-revenue tax rate would generate $3.3 million less revenue than what is in the Fiscal Year 2023 Proposed Budget.
THE MOTION TO ADOPT THE TAX RATE ORDINANCE ON SECOND READING MUST BE MADE IN THE FOLLOWING FORM:
“I MOVE THAT THE PROPERTY TAX RATE BE INCREASED BY THE ADOPTION OF A TAX RATE OF 60.30 CENTS, WHICH IS EFFECTIVELY A 10.5 PERCENT INCREASE IN THE TAX RATE”
It is important to note that state law requires the motion be made with this specific language even though the tax rate is not increasing.
Council Committee, Board/Commission Action:
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Alternatives:
Modify ordinance to reflect a tax rate that is less than 60.30 cents per $100 valuation.
Recommendation:
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