The summer season is the budget season for cities and other government entities around Texas and Galveston County.
After a legislative session in which state leaders, after years of attempts, passed a property tax reform bill, the reaction of local budget writers on what the changes will mean were uniform:
We’re still trying to figure it out.
Texas Gov. Greg Abbott signed Senate Bill 2 into law June 12. One of the legislature’s signature accomplishments, the bill aims to curb property taxes by adding a new hurdle cities must clear before they increase revenue from property tax by more than 3.5 percent in a year.
If a city or other government entity wants to raise its property tax revenue by more than 3.5 percent, the increase must be put to a vote. The bill does not count property tax revenue from new construction in calculating the cap amount.
There also is a provision that allows taxing entities to “bank” unused revenue growth, so in some years, entities might go beyond the cap without a vote.
Cities and counties had already been constrained by an 8 percent cap, though that requirement only allowed for the possibility of a vote, not a requirement on one.
The requirements of the bill don’t go into effect until Jan. 1, 2020, but local budget writers are already considering the implications of the bill as they begin preparing budgets for the coming fiscal year.
Local government entities generally begin their budget writing process in the summer, and approve budgets before the start of the new fiscal year in October.
While the new law doesn’t go into effect right away, the city of Galveston will work any expected changes from the bill into its five-year outlook, said Mike Loftin, Galveston’s finance director.
The 3.5 percent cap is near the revenue growth Galveston has experienced in recent years, Loftin said. If that stays consistent, the city wouldn’t have to change much about its budgeting plans, Loftin says.
If revenue projections fall short, the city would probably start with cuts to “soft services” in the city’s administrative divisions, like its parks and planning departments, he said. The city might also need to consider changing its charter, which promises to fund the Rosenberg Library with a fixed rate from the general fund every year, Loftin said.
Loftin did have one prediction about how most cities would handle the new law.
“You’ll never have a tax increase election in November, period,” he said.
If a government proposes a 3.5 percent revenue increase or higher, it would need to hold a vote in an election month after the start of the fiscal year, Loftin said. Risk averse city leaders will likely rather opt to approve an increase below that mark, rather than risk losing an election for more revenue, he said.
Leaders from the county’s other large cities weren’t ready to predict major changes to their budgets.
League City City Manager John Baumgartner, through a spokeswoman, said it was too early to say what the effect of the bill would be on his city’s budget and that the city was still analyzing its effect on the city.
Texas City Mayor Matt Doyle criticized legislators for passing a bill he thought would burden some cities, but said he thought the effect of the bill on Texas City, and its substantial tax base created by industrial plants, would be limited.
“Take a $5 billion tax base, and give you 3.5 percent on that taxable value, that’s an awful big number,” Doyle said.
On Tuesday, Galveston County Judge Mark Henry, a Republican, said he had no concerns over the bill, noting that the county had decreased its tax rates every year since he’d been judge.
The effects of those tax cuts on overall revenue varies from year to year, but in last year’s approved budget the county did plan to bring in $827,607 less than it did the year before.
“It’s got nothing to do with Galveston County,” Henry said. “The growth in Galveston County shows no signs of slowing down, so I don’t know how it would ever come to impact us.”