AGENDA CAPTION:
Title
Consider approval of Resolution 2020-112R, directing the Interim Director of Finance of the City of San Marcos to calculate the voter-approval tax rate of the City of San Marcos in the manner provided for a special taxing unit by using an 8% threshold for new revenue instead of 3.5% as authorized by Texas Tax Code Section 26.04(C-1) due to the Governor’s State-Wide Declaration of Disaster in response to the COVID-19 Pandemic; and declaring an effective date.
Body
Meeting date: June 2, 2020
Department: Finance
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Background Information:
SB2 provides disaster relief where City Council may direct the designated officer or employee to calculate the voter-approval tax rate in the manner provided for a special taxing unit (8 percent) if any part of the City is located in an area declared a disaster area during the current tax year by the Governor or by the President of the United States. TEX. TAX CODE § 26.04(c-1). The designated officer or employee shall continue calculating the voter-approval tax rate using 8 percent instead of 3.5 percent until the earlier of:
1. the second tax year in which the total taxable value of property in the city exceeds the total taxable value of property taxable by the city on January 1st of the tax year in which the disaster occurred; or
2. the third tax year after the tax year in which the disaster occurred.
The proposed resolution would allow the City to exceed the 3.5% cap, but not exceed 8%. The City’s prior year tax rate of 0.6139 per $100 of valuation is within the 8% limit. No increase to the prior tax rate is recommended.
Preliminary estimates reflect $1.5M difference in Property Tax revenue between 3.5% cap and 8%. The annual tax bill for the average home ($230K value) will increase approximately $100 using the current tax rate of 0.6139.
Tax Rate Calculation Disaster Relief*:
The calculation of the Voter-approval tax rate for special tax unit:
(No-new revenue rate * 1.08) + Debt Service = Voter Approval Tax Rate
Where no-new revenue rate was formerly known as the effective tax rate.
Tax Rate Calculation 3.5% Tax Cap*:
The calculation of the Voter-approval tax rate:
(No-new revenue rate * 1.035) + Debt Service = Voter Approval Tax Rate
Where no-new revenue rate was formerly known as the effective tax rate.
*Note the tax rate calculations above have been summarized. Other factors impacted tax rate calculations are: maintenance and operations, sales tax relief, TIRZ contributions.
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Recommendation:
Staff recommends approval of the resolution to allow the city to calculate the tax rate up to 8%.