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Posted on: July 2, 2018

City Council to Consider Two-Cent Tax Rate Reduction

Tax being cut with scissors

In the wake of increased Appraisal District valuations the past two years, the Rowlett City Council recognizes the need for tax relief. Therefore, the City Council is considering a proposal to reduce the ad valorem tax rate by two cents, from $0.777173 to $0.757173, as part of the City of Rowlett Fiscal Year 2018-2019 Budget. This means property owners would pay $0.757173 for every $100 of assessed property value. Taxpayers would save $24 annually for every $100,000 in value.  The proposed reduction continues the City Council’s commitment to providing tax relief, which began with a one-cent ad valorem tax rate reduction for this Fiscal Year, 2017-2018.


A message from Mayor Tammy Dana-Bashian:

"Approving the budget (and determining the resulting tax rate) is the most important function of your Council and we take it very seriously.  Please know that we are in the same situation as all North Texas residents in regards to increasing home valuations that have resulted in huge increases in property tax bills.   As a reminder, over 50% of your property taxes funds the school district, 20% funds the County/Hospital/Community College services, and the remainder (under 30%) funds the extensive city services that impact you day in and day out.  A real problem in our current system is that even though home valuations continue to climb at exorbitant levels, our school districts must continue to increase their tax rates to fund schools due to our broken school finance system. 


All tax rates are not created equal.  It is important to understand the real dollar amount households pay in property taxes compared to other cities and the services provided by each city.  For example, Highland Park has a tax rate of 22 cents per $100 of taxable value, but their average home value is $1 million.  After factoring in their 20% homestead exemption, the average homeowner in Highland Park pays annual city taxes of $1,760.  The average home value in Rowlett is under $200,000 and the average homeowner in Rowlett pays annual city taxes of $1,515.  Another example – the average home value in Frisco is $417,000 and the average homeowner pays annual city taxes of $1,676 (computed after their recent announcement of changes to their homestead exemption). 


Another factor that influences tax rates is the commercial base – how much the city is able to collect in commercial property taxes and thus shift some of the burden of property taxes from residential to commercial. Rowlett is 80% residential and is therefore heavily dependent on residential property taxes.  Yet another factor is how much of city operations is funded from other tax sources, such as sales tax.  Rockwall (population 44,000) collects about $16 million in sales taxes annually and Rowlett (population 62,000) collects $7 million in sales taxes annually.   And, yet another factor to consider is the cost of city services.  Rockwall has a tax rate of 42.36 cents per $100 of taxable value.  Rockwall is not a DART city like Rowlett. DART is collecting the second penny on the sales tax that Rowlett could otherwise collect.  That currently amounts to $7 million per year, which is equivalent to 18 cents on our tax rate. Also, Rockwall has a mixed staff of paid and volunteer firefighters and a separate district provides emergency medical services.   Rowlett provides those services for our residents at a cost of about 23 cents on our tax rate.

 

In addition, Rowlett is one of only seven cities in Dallas County that provides the senior tax freeze.  This is huge for our seniors as it means whatever tax amount they are paying to the City for their current home (once they reach age 65) can never increase in the future regardless of increases in tax values and/or city tax rates.   Rowlett also provides a $30,000 senior tax exemption and a $50,000 disabled person tax exemption.  


Frisco recently announced that they will NOT be reducing their tax rate but will instead increase their homestead exemption from 7.5% to 10%.  This will save Frisco residents approximately $12 annually per $100,000 in taxable value.  Our announcement of reducing our tax rate by 2 cents will save Rowlett residents $24 annually per $100,000 in taxable value.  Frisco has a larger commercial base than Rowlett thus increasing the homestead exemption vs. reducing the tax rate shifts some tax burden to the commercial base.  Also, even though I mentioned above that you need to look at the real dollar amount paid per household in property taxes, a city’s actual tax rate does influence decision making for residents and commercial enterprises moving to our area.  That is another reason why it is important for Rowlett to pass tax reductions to our residents through a tax rate reduction instead of a homestead exemption increase. Of the 31 cities in Dallas County, 14 provide no homestead exemption, 5 provide the same level as Rowlett, and 12 provide a higher homestead exemption.  On another point, only 11 (including Rowlett) of the 31 cities lowered their property tax rate last year. 

 
Rowlett runs an incredibly efficient and lean operation and provides an excellent level of city services.  Rowlett was recently ranked the 5th leanest local government (out of 38 north Texas Cities with populations over 30,000), with 77 employees per 10,000 residents.  The average for these cities was 98 employees per 10,000 residents and the range was 67 to 187 employees per 10,000 residents.  In most areas, Rowlett is running well below pre-recession headcounts despite significant growth across the city.  We have made a commitment to our current employees that we will pay them competitive wages and we must start investing in more personnel to manage our current operations and our growth.  Each penny reduction in our tax rate saves the average Rowlett homeowner $48 annually and reduces the funds available for the city operations by approximately $450,000.  


Please note that we are currently in the midst of budget preparations.  The assessed values we have received from the taxing authorities are preliminary and subject to change as protests occur and numbers are finalized.  The City Council has given our City Manager guidance to prepare a budget with an assumed 2 cent reduction in our tax rate.  There will be much more detailed information available to Council and the public during our budget workshops on August 14 and August 23.  The public is welcome to attend all public meetings, including these workshops."


Public Hearings on the ad valorem tax rate for Fiscal Year 2018-2019 will be held during the regular City Council Meetings beginning at 7:30 PM on Tuesday, August 21 and Tuesday, September 4.

Public Hearings on the proposed budget for Fiscal Year 2018-2019 will be held during the regular City Council Meetings beginning at 7:30 PM on Tuesday, August 21 and Tuesday, September 18.

The City Council will vote to approve an ordinance formally adopting the Fiscal Year 2018-2019 Budget during the regular City Council Meeting on Tuesday, September 18. If adopted, the new tax rate would become effective October 1, 2018.

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