Flower Mound Town Council gave direction to town staff June 5 on how they should move forward on determining homestead property tax exemptions along with other types.

What you need to know

In 2018, council approved a homestead tax exemption that stated the owner of a residence homestead is entitled to an exemption from Flower Mound ad valorem taxation in an amount equal to the greater of $5,000 or 2.5%, according to a city agenda memo. In 2021, council approved an increase to $5,000 or 5%. In 2022, council approved an increase to $5,000 or 10%.

Also of note

The town provides a $100,000 exemption for over-65 and disabled residents. That exemption began in 2006. The high exemption amount is in place of a freeze for the other exemption. Any changes to an existing exemption must be approved by June 30 each tax year to go into effect the next fiscal year, the memo stated, and staff wants direction for any changes to exemptions. If requested by council, an ordinance would be brought to council at the June 19 meeting, the agenda memo stated.

Town Manager James Childers said staff is early in the process, but he could safely say the tax rate will go down in the next budget year because of the 3.5% revenue cap.

The 3.5% revenue cap requires cities and other taxing entities to hold an election if they seek to raise 3.5% more property tax revenue than the previous year, and that 3.5% cap is on a year-to-year basis, said J.P Walton, strategic services manager for Flower Mound, during a conversation later with Community Impact. He said it becomes challenging for budgeting because municipalities' costs to maintain services normally correlates with the consumer price index.

“What we've seen over the last couple of years is those costs to maintain current services are coming in way higher than the 3.5% cap to our ad valorem revenue, and I think that's just a challenge for cities across Texas,” he said.

Childers said at the meeting that if council decides to have exemptions go into effect, then the tax rate will rise. He thinks, though, that taxpayers will see some level of tax relief.

“But it’s ultimately a policy decision as to how you want to tackle this, be it a homestead or a senior exemption and things of that like,” he said, explaining that at this meeting, staff wanted to get some feedback. He said staff hopes for more clarity from the state in the next two weeks.

Tammy Wilson, chief financial officer for the town, talked to the council about their requests for information. Deputy Mayor Pro Tem Ann Martin said it was reasonable to make a decision June 19 and that she wanted more data, telling Wilson she wants to see modeling and some different scenarios. She wanted to see how the math works, explaining, for example, how current dollars—in an inflation-adjusted amount—would compare to the $100,000 over-65 and disabled exemption amount from 2006. She wanted to know whether the amount would be, for example, $125,000 or $150,000 now. Other council members asked for other data, such as how many people are over 65 and how many homes are homesteaded as far as percentages. Wilson said 15% of residents are over 65. Wilson also was asked to find out how Flower Mound compares to other municipalities’ homestead exemptions and tax rates as well as determining Flower Mound’s median home price.

Wilson said she will try to form some models, but numbers change every week because of property owners’ protests of their tax bills. Around 40% of properties are estimated to be in protest, Walton said.

Quote of note

“It’s a challenge because it’s fairly early in our process,” Childers said about implementing exemptions. “We don’t have a lot of hard data that we use to calculate our tax rate. But we wanted to get in early in this conversation this year.”