AGENDA CAPTION:
Title
Receive a Staff presentation and hold a public hearing to receive comments for or against Ordinance 2026-38, setting the tax rate for the 2027 tax year at 65.1500 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, 2026, and ending September 30, 2027; 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 2026-38 on the first of two readings.
Body
Meeting date: September 1, 2026
Department: Finance
Amount & Source of Funding
Funds Required: N/A
Account or Project Number (C = CIP funds): N/A
Funds Available: N/A
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Fiscal Note:
Prior Council Action: On March 31,2026, City Council passed Resolution 2026-46R, approving the FY 2027 Budget Policy Statement. The Budget Policy Statement provided guidance for the property tax rate to be kept at the current (FY 2026) rate of 65.1500 cents. On August 18, 2026, City Council passed Resolution 2026-140R, setting the maximum proposed tax rate at 65.1500 cents.
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Background Information:
At the August 18, 2026 City Council meeting, the maximum proposed tax rate was set at a rate of 65.1500 cents. The Texas Tax Code requires a public hearing on the tax rate if the maximum proposed tax rate (65.1500 cents) exceeds the lower of the no-new-revenue rate (63.5574 cents) and voter-approval rate (68.3087 cents). The City scheduled two public hearings that will be held September 1, 2026 and September 15, 2026. A notice for the public hearings was published in the San Marcos Daily Record on August 23, 2026. The notice was also published on the City’s website and aired on the public access channel.
The Fiscal Year 2027 Proposed Budget, as presented to City Council on August 18, 2026, is based on the current (FY 2026) tax rate of 65.1500 cents. City Council adopted the maximum proposed tax rate of 65.1500 cents per $100 valuation.
A tax rate that exceeds the No-New-Revenue rate (63.5574) requires the approval of at least 5 Councilmembers. If City Council does not adopt a tax rate, then the NNR (63.5574) will become the City’s tax rate for Fiscal Year 2027. That would reduce the City’s tax rate by 01.5926 cents, which would require approximately a $1.6 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 51.2600 cents and the debt component is 13.8900 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 2027, these local property exemption amounts remained the same and provided residents with $1.6 million in property tax relief.
Council Committee, Board/Commission Action:
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Alternatives:
The maximum proposed tax rate is 65.1500 cents per $100 valuation. City Council may set a tax rate equal to or less than 65.1500 cents per $100 valuation.
Recommendation:
City Council approve the ordinance setting the tax rate at 65.1500 cents per $100 valuation.