Early talks in June show residents will not see a property tax increase for the 2025-26 fiscal year, and town officials are expected to approve the budget in September.
What happened
At its June 24 work session, Prosper Town Council discussed the preliminary budget for fiscal year 2025-26 and how Prosper will adjust to slower growth and changes in sales tax revenue.
Chris Landrum, Prosper’s finance director, said the town is still in growth mode, but sales tax revenue is not increasing as fast as previous years because some of the sales taxpayers are moving out of town quicker than anticipated.
Prosper’s sales tax has slowed to about 5% in 2026 projections, which is a third of the rate it grew in previous years. That same revenue grew by 14.6% from 2023 to 2024. It started to see a decline from 2024 to 2025, according to city documents.
“This leadership group knew that was coming [and] knew not to count on just crazy growth, and so we were anticipating it,” Landrum said. “I think the sales tax [decreased growth] just happened maybe one year quicker than we otherwise anticipated.”
Landrum said Prosper is required by its town charter and policy to maintain a combined 21% reserve fund, meaning that as expenditures increase, reserve funding also must increase. Reserve funds act as a savings account for the town.
The projected budget currently shows Prosper falls $53,380 short of its minimum reserve, which the finance department is working to resolve to make up the difference, Landrum said.
“When you increase your expenditures by $5 million, that means ... you’re going to need a little over a million additional in fund reserve,” Landrum said. “What we have presented to council, it balances as far as revenues and expenditures go, [but] we still need to come up with a little additional to make up for the shortfall in the reserve requirement.”
Despite the slight projected shortfall, Landrum said property taxes are not expected to be affected, which means they will remain at the previous rate of $0.505 per $100 valuation.
Instead, Landrum said town staff are looking at adjusting other fees that will primarily impact the development community.
What’s being done
If Prosper officials want to fund more projects, Landrum also presented other cost-cutting options to reallocate spending for council to consider.
These potential options include slightly reducing the portion of the property tax rate set aside for capital projects, such as road construction, and the portion used for paying off debt.
Landrum said the council's top priority is to speed up public infrastructure projects, which has been helped by a previous decision to allocate part of the operations and maintenance tax rate to help offset costs from capital projects directly, instead of relying on loans or bonds.
After new state legislation went into effect in 2020, it set a cap of 3.5% on how much property tax revenue cities like Prosper could collect without holding an election, which led Prosper to adjust their revenue collection and spending strategy.
“The whole goal behind the capital dedicated is somewhat to deal with the 3.5% cap and to not rely so heavily on the growth that we’ve experienced,” Landrum said. “[Capital dedicated] is a very popular thing that we try not to touch as much as we can ... I think the reality is we're just going to have to move some of that over.”
Several steps remain before the budget is finalized, including the following key dates:
- August 12: Preliminary budget presentation
- August 28: Budget town hall
- August 29: Tax rate notice
- September 9: Public hearing/vote on budget and tax rate
