Houston residents will get their first glimpse Sept. 25 at the potential property tax rate they will be paying for the next fiscal year, which could reflect the first increase in almost two decades.
The overview
Houston City Council approved a $6.7 billion budget in June that included a $160 million shortfall and paying for a $1.5 billion contract and settlement with the city’s firefighter union.
Since then, city officials have debated the best way to increase revenue and cut expenditures to close the gap, fund the future cost of the settlement and meet other financial needs.
Suggestions have included adding a monthly garbage fee, consolidating department services and eliminating the locally imposed revenue cap.
The city was also recently hit by two natural disasters, including the derecho in May and Hurricane Beryl in July.
According to a presentation shared at the Budget and Fiscal Affairs Committee on Sept. 9, the cost of both disasters is approximately $53 million, including debris removal, emergency protective services, road repair and equipment use.
Houston Finance Director Melissa Dubowski said the city would need to raise its property tax rate by at least 3.2 cents per $100 valuation just to cover the costs accrued from the two recent natural disasters without needing to cut from the budget.
Zooming in
Residents have not seen an increase in property taxes in nearly two decades after voters approved a locally imposed revenue cap in 2004 that will not allow collected taxes to grow more than 4.5% each year.
The city has lowered the tax rate for the last nine years to remain below the revenue cap. According to Dubowski’s presentation:
- Houston has lost more than $2.2 billion in revenue since 2015 due to the cap.
- Without the restriction, the city would have been able to accrue an additional $400 million in fiscal year 2023-24.
- It’s projected to cost the city more than $321 million in fiscal year 2024-25.
Houston’s tax rate is $0.533 per $100 valuation, one of the lowest in the state, with the exception of Austin, compared to other major metros. According to Dubowski’s presentation, Austin, San Antonio, Dallas, Fort Worth and El Paso all have additional monthly fees for garbage, water and utilities.
Council member Sallie Alcorn said she is in favor of raising the tax rate to avoid seeing further decline to the city services.
“We can’t have great city services and the lowest tax rate in the state,” she said. “It’s not popular to raise the tax rate, ... but I think we have an opportunity here to address some immediate needs and beyond.”
What are the next steps?
City Council will propose a tax rate Sept. 25 with a public hearing scheduled for Oct. 9.
Alcorn said city officials will also look to schedule an additional public hearing in October outside of City Council hours to allow more residents to attend in the evening.
The city has until Oct. 28 to adopt a new tax rate.
