Lakeway City Council discussed potentially adopting a de minimis tax rate for fiscal year 2026-27 at an August 3 council meeting.
The overview
The city of Lakeway is projected to have a $1.6 million shortfall for the upcoming fiscal year as revenues are down by 5.5% and expenditures have increased by nearly 6%, per previous reporting from Community Impact.
In order to work towards eliminating the projected shortfall, Lakeway city staff recommended that council approves a de minimis tax rate for fiscal year 2027.
A de minimis rate is a rate designed to give smaller cities—cities with a population of less than 30,000—flexibility to adopt a tax rate that generates $500,000 more in property tax revenue than the previous year without triggering the voter-approval rate, according to the Texas Comptroller.
The details
Under the de minimis rate, revenues are projected to grow from $20.2 million in FY 2026-27 to $23.5 million in FY 2030-31, whereas the no-new-revenue rate shows operating expenditures beginning to outpace recurring revenues, Lakeway City Manager Joseph Molis said. He also said the city is not receiving the same revenue from permits it once did.
The de minimis rate is expected to increase property taxes by approximately $80 per year, or $6.67 per month, on the average home value in Lakeway, which is projected to be $857,615 next fiscal year, according to city documents.
“That’s cheaper than a Starbucks ... staff definitely recommends that you adopt the de minimis rate,” Molis said.
Something else to note
The shortfall will likely require City Council to approve budget-related policies as well, Molis said.
Some of these policies may include maintaining a 25% general fund balance minimum, a sales tax cap, an annual depreciation transfer from the general fund to capital reserve and a hiring freeze.
What’s next
City Council will continue reviewing the proposed budget and tax rates at an Aug. 17 meeting.
