On the heels of two other taxing entities in Montgomery County granting optional homestead exemptions this spring, The Woodlands Township provided an analysis on the topic during Wednesday’s board of directors meeting.
Although governmental entities in the state of Texas can approve optional homestead exemptions for homeowners—which do not affect rental and commercial property—The Woodlands Township has instead concentrated on lowering its tax rate as a form of property tax relief.
As taxable values rose over the last five fiscal years from $12.6 billion to $19.5 billion, the township lowered its tax rate during the same period from 32.5 cents to the current rate of 23 cents, said Monique Sharp, township assistant general manager for finance and administration.
“Back in 2013, [a] property owner was paying $1,070 in property tax to the township, and today they’re paying $1,027,” Sharp said. “They’re actually paying less in township tax than they were five years ago.”
If the township were to approve an optional homestead exemption, the loss in revenue would need to be offset by a similar amount elsewhere in the budget, Sharp said. A 5 percent exemption would result in a $1.8 million budget adjustment, while a 20 percent exemption would require a $7.2 million adjustment, according to township data.
Although taxable values in the township have risen this decade as the master-planned community nears residential build-out, there has also been a fundamental change in the amount of property tax revenue collected in the past few years, resulting in slower growth compared to other revenue sources. For example, while property tax revenue increased by 8.2 percent between 2012 and 2017, events tax revenue increased by 49 percent and sales tax increased by 24 percent, according to township data.
“Current conditions do not indicate that increases in sales and use tax revenue will be significant enough to offset the annual loss in property tax revenue resulting from a homestead exemption,” Sharp said. “In years past, that might have been a way to pay for that, but in this current year and environment, this does not appear to be the case.”
Township Director John Anthony Brown said when compared with Montgomery County, which is not close to being built out, unlike The Woodlands, the county’s revenue pool will only grow.
“With that and the obscene inflation of appraisals, you can get a 20 percent homestead and then in the next four years, you’ll have 40 percent inflation in your property tax,” he said.
Township Director Bruce Rieser said he believes the township has done an outstanding job of spending as little taxpayer money as possible.
“I think it would be really easy to sit up here and grant a 20 percent exemption; it would be the easiest thing in the world, politically,” he said. “I just think it would be irresponsible as a township director.”
Of the five taxing entities in The Woodlands, the township is the only one that has managed to keep its tax rate down below the effective rate for the last five years, township board Chairman Gordy Bunch said.
“I’m also open to the concept as we go through our budget process of looking at these various levers we haven’t looked at in the past,” he said. “This is a tool we have at our disposal we can incorporate into our planning process.”