Denton Could Knock 27 Cents Off The Property Tax Rate In 2018

Dated: 06/13/2018

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The Denton city manager’s office began rolling out 2018-19 budget information, including publicly releasing a preliminary property tax rate for 2018: 61.0738 cents per $100 valuation.

City Manager Todd Hileman told the City Council during a work session Tuesday afternoon that he is building the budget again using the “effective tax rate,” a special but complicated calculation that collects the same amount of tax properties year over year. Last year’s tax rate was 63.7856 cents per $100 valuation.

This is the second year for Hileman to use the calculation. Although it’s designed to collect the same amount of money overall, some individual taxpayers may still feel the pinch. Property tax values have risen sharply in recent years.

Up through 2015, City Hall kept a property tax rate of 68.975 cents per $100 each year for several years running. The city budget grew through rising property values, without city leaders having to “raise” property taxes.

For example, the average 2015 home value was $179,149, with a city tax bill of $1,235. In 2018, the new average home value is about $234,351 (the data isn’t final yet, staff said). If the city had kept the old tax rate, the average homeowner likely would pay $1,616 in city taxes in 2018.

Instead, thanks to the use of effective tax rate calculations, this year’s bill should be closer to $1,431.

The Texas Legislature doesn’t require cities to use the effective tax rate calculation to set the property tax rate. But it does require cities to publish the effective tax rate so that property owners can know the difference.

Hileman told council members the finance department now prepares long-term budget projections with a projected effective tax rate.

Chief Financial Officer Tony Puente presented the projections Tuesday afternoon, pointing out that the city’s fund balance appears to stay healthy through 2023.

Mayor Chris Watts said he was concerned that the projections were too optimistic about the city’s growth, making it difficult to cope with another financial downturn.

Hileman said there was a risk in being conservative, too. When a city ends up with a lot more money at the end of the year, taxpayers complain that the city assessed more money than it needed.

This year, the city already has collected over $4 million more than expected, he added.

The City Council still has the final say on the tax rate and budget, which won’t be adopted until September. Hileman said he plans on bringing some projects to the table as part of the budget talks. City department heads have proposed more than $47 million in additional spending, about $41 million of which are capital projects. That spending could tick the tax rate upward.

Council member Keely Briggs pushed for more property tax relief by raising the homestead exemption to $10,000. The city currently has a graduated exemption with homeowners of the most valuable homes able to reach the maximum exemption of $5,000.

“The rise in values has taken a toll on homeowners,” Briggs said. “I’ve seen comments in my neighborhood about this.”

Council members agreed to take the matter up again, but said they needed more information.

Several council members said they wanted to know more about how the first year of the “tax freeze” was going to affect the city’s revenue. Last year, voters approved a proposition that freezes property taxes for homeowners with disabilities or who are age 65 and older.

Puente said the city was still gathering information on the impact, but didn’t expect to have full information until August.

If the city is to make changes to the homestead exemption this year, the City Council needs to vote on that before July

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Josiah Ford

Josiah is the founder of JFI Brokerage. He is a very driven individual with over 13 years’ experience in buyer, seller and tenant representation of residential and commercial properties. Josiah has ....

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