TITLE
Consider an ordinance calling the May 2, 2020 Special Election amending the Sales Tax Rate.
SUMMARY
DATE: January 21, 2020
TO: Kent Cagle, City Manager
FROM: Traci Briggs, Interim City Attorney
SUBJECT: Calling for the May 2, 2020 Special Election to Consider Amending 0.5% of the Sales Tax Rate from Property Tax Relief to General Government Purposes
BACKGROUND AND FINDINGS:
The Texas Election Code, Chapter 3, provides for the ordering of an election not later than the 78th day before the election date.
The Texas Legislature passed Senate Bill 2, also known as the Texas Property Tax Reform and Transparency Act of 2019, during the 2019 legislative session. The primary means that Senate Bill 2 will affect the City is by reducing the tax rate that may be adopted without voter approval (rollback rate), and the requirement to hold a mandatory election if the rollback rate is exceeded. For FY 2020, the City was able to raise up to 8.0 percent more maintenance and operations tax revenue as the year before after taking into account increases in appraisal valuations. This 8.0 percent ceiling will be reduced to 3.5 percent beginning in FY 2021 because of Senate Bill 2.
If the reduction in the tax rate ceiling to 3.5 percent had been in effect in FY 2020, the estimated impact would have been a loss of $1.1 million in property tax revenue. Senate Bill 2 was not designed to reduce year-to-year property tax revenue. The intent of the bill is to reduce the ceiling for year-to-year increases. The estimated loss in revenue is due to a portion of the City’s sales tax being dedicated to property tax relief.
Since 1990, the City’s local sales tax has been 1.5%, comprised of 1.0% for General Governmental Purposes and 0.5% for Property Tax Relief, referred to as an additional sales and use tax in the Tax Code. The Property Tax Relief portion of the City’s local sales tax reduces the rollback rate ceiling by approximately 13 cents. In FY 2020, this 13 cent reducti...
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