By law, City Council had to come to a consensus on a proposed tax rate for fiscal year 2021-22. This would allow the city to post formal notice before the true property tax rate is voted on and approved in September.
Staff proposed the rate at $0.475526 per $100 valuation, which is the no-new-revenue rate and is $0.039 lower than the existing tax rate of $0.515. The no-new-revenue rate is the rate at which the city would bring in no new property tax revenue in FY 2021-22 compared to the existing fiscal year.
Many council members were not satisfied with passing the new-no-revenue rate; with new developments coming to the city and property values rising, they wanted the rate lowered even further.
Council Member Nick Long proposed a rate of $0.435526—$0.04 lower than the city’s recommendation. Long mentioned the FY 2021-22 budget includes a reserve fund of 116 days, which is six days more than League City’s policy calls for and a full 26 days more than required by state law.
That six extra days of reserve funds equates to nearly $1.3 million, which is sitting in a checking account earning no interest. That money should either be removed from the budget to lower the tax rate or be used to pay down debt, Long said.
Long implied there is some waste in the FY 2021-22 budget, such as new vehicles and staff positions.
“We don’t need as many employees as we’re hiring,” he said.
Council Member John Bowen also said the extra days of reserve are not necessary.
“I don’t agree with holding citizens’ money any more than we have to,” he said.
Budget Director Angie Steelman said whatever the council agreed to be the proposed rate could be lowered by the September vote but could not be raised.
Council Member Larry Millican said setting the tax rate ceiling at $0.435526 would cause unintended consequences in future years when the tax rate needs to be raised again. He amended Long’s motion back to the city’s recommended rate of $0.475526 to make sure the tax rate-setting process continued.
The vote to amend failed, as did the following vote on Long’s proposed rate of $0.435526.
Mayor Pat Hallisey said if it were up to him, he would lower the tax rate a full $0.10 to $0.375526. The community needs to drill down on its budget priorities, Hallisey said.
“We spend on whims,” he said. “We gotta find some common ground.”
Council Member Hank Dugie made a motion for a tax rate of $0.475, a fraction of a cent lower than the city’s proposed rate. He later amended it to $0.465526, which is $0.01 lower than the city’s proposed rate.
Long said by cutting a penny from the no-new-revenue rate knowing the six days of reserves can cover that, council and staff can later debate where to trim the budget to make the $0.465526 property tax rate work.
The vote passed on a proposed property tax rate of $0.465526, which is now the maximum League City property tax rate for FY 2021-22, with Hallisey and Millican opposed. The final tax rate, which could end up lower, will be voted on in September.
Hallisey said city staff does a good job of pointing out what it takes to run this city, but the council’s job is to say what the city can afford, and the tax rate is the only place to do that. The budget has increased 40% over the last six years, Hallisey said.
“What happened tonight is an attempt to right the ship,” he said.