Katy adopts new process to calculate tax rate

At its Aug. 10 regular meeting held via Zoom, Katy City Council unanimously approved a new method to calculate the city's property tax rates for fiscal year 2020-21

The new method is due to Senate Bill 2, which was passed into law during the 2019 legislative session and requires cities over 30,000 in population to have a rollback rate reduction from 8% to 3.5%, according to state documents.

"It used to be called the rollback tax rate, and it's basically the same," Director of Finance Andrew Vasquez said. "What we used to do, and still do, is take the prior year revenue that we see from our taxes and divide it by the current taxable value from our property here in Katy, and that is basically the effective tax rate."

Senate Bill 2 makes an array of changes to the property appraisal and tax systems. New requirements, including that tax rates and other information be posted in an online database, are meant to make the process more transparent and easier for taxpayers to understand, according to a Texas Tribune report published June 12.

But the measure includes one controversial provision that requires many cities, counties and other taxing units to hold an election if they wish to raise 3.5% more property tax revenue than the previous year. The growth rate excludes taxes levied on new construction and can be averaged over three years, allowing taxing units to exceed the 3.5% threshold in some of them, per the June 12 Texas Tribune report.

Vasquez said it is more of a procedural change that could result in a slight decrease in the tax rate.

The new calculation will factor the city's total property value, population and current budget, and the city could see up to a 3% decrease this year, Vasquez said, nothing has yet been determined but a tax rate election will be necessary under the change if the city raises taxes.

The Texas Tribune contributed to this report.

To learn more about SB2, see below.