2017 Property Tax Presentation
Understanding Southlake Property Taxes
Work Session – Item 5
Good evening Mayor and Council,
Lately there has been considerable discussion about property taxation, including deliberation by the Texas Legislature on potential modifications to
the property tax system in Texas. Additionally, budget preparation has begun and soon Council will be reviewing staff’s submission.
It seemed like an appropriate time to share some
basic facts about Southlake’s property taxes.
No presentation on this topic is complete, however, without a discussion of school finance. So, CISD Superintendent David Faltys his here
as well and will providing information when I conclude my part of the presentation.
1
Local Property Tax Distribution
Property taxes – as we all know – are used to fund local government, including the City, County, and school district.
As we begin the discussion, I wanted to point out that less than
20% of the property taxes paid by Southlake residents and businesses go to the City of Southlake.
The remainder goes to Tarrant County and local school districts. For residents and
businesses located in the Carroll Independent School District, the City’s portion is 19%.
2
Southlake Property Tax Allocation
Here is some general information before we dive into more specific information.
The property tax is one source of revenue for local governments like Southlake, accounted for in the
General Fund budget.
It is used to pay for basic city services like police, fire, engineering, public works operations, planning & zoning, financial management and others.
Property
taxes are used for day-to-day operations, and well as to pay back money borrowed to build roads and other capital projects.
In Southlake, about 78% of the property taxes collected goes
to operations (36 cents). The remaining 22% (ten cents) is dedicated to retiring the City’s tax-supported debt.
It is an important source of revenue for the City, but not the only.
In Southlake, property taxes constitute 51% of the total revenue collected for operations in a fiscal year.
3
Property Valuation & Cap
EXAMPLE: Mr. Jones' home appraised value for 2015 was $100,000. Mr. Jones has made no changes to his home. In 2016, the appraisal district determines the market value of Mr. Jones' home
to be $140,000. Mr. Jones' value for property tax purposes will be the lesser of:
$140,000 (the market value of the home); or
The 2015 appraised value of $100,000 Plus 10%
Mr. Jones'
appraised value for 2016 will be $110,000 = ($100,000 x 10%) + $100,000.
4
Property values are established each year, and taxes are applied to the new value.
This slide shows how taxable value is established under the property tax system. CLICK The property
has an established value from the previous year.
CLICK The Tarrant and Denton Appraisal Districts determine the value of all properties and establishes a property’s market value
as of January 1 of every tax year. Prices of new and used homes can increase substantially year-to-year as shown on the slide. This example shows a 40% increase when compared to 2015.
CLICK In order to prevent sharp increases in home property taxes from year to year, Texas voters in 1997 approved a constitutional amendment to limit increases in the appraised/taxable
value of a qualified residence homestead.
CLICK The 10% cap is applied by the appraisal district and can be seen on THE FINAL tax notices.
General information if needed
To qualify,
property must be a residence homestead, and the property owner must have received a homestead exemption in his/her name in both the current and previous years.
Under this law, the value
for tax purposes (appraised value) of a qualified residence homestead will be the LESSER of:
the market value (what the property would sell for on the open market); or
the preceding
year's appraised value
+ 10%
+ the value of any improvements added since the last re-appraisal.
Note: The calculated value is often referred to as a "capped" value.
Protesting Your Value
Protest form on the back of the appraisal notice
File protest by May 31
Tarrant Appraisal District will mail needed information
Appraisal Review Board
Further appeal available
Property owners who are unhappy with the valuation of their property may file a protest with the Tarrant Appraisal District, seeking to reduce the value assigned to their property.
There
was a great article in the Star Telegram at this point last year, giving tips to property owners seeking to protest.
The key thing to remember is that the deadline to file a protest
is May 31.
5
Applying Exemptions
6
The previous slide reference APPRAISED value.
Exemptions are also applied before setting the taxable value that will be used to determine their property tax responsibility.
CLICK
The City of Southlake has adopted local option exemptions of $75,000 for over 65 and disabled taxpayers.
CLICK The general homestead exemption is another local option for providing
tax relief, especially when targeting relief for residential property taxpayers. Since 2009, Southlake has steadily increased this exemption, while simultaneously managing the cost
of growth. Under State law the maximum exemption is 20%. We expect to increase this exemption to 20% in FY 2018.
CLICK Southlake adopted the senior tax freeze in 2003 with a effective
date of January 2004. This means that, once eligible, a senior resident's tax bill becomes frozen at its current amount.
These property tax relief tools complement the 10% appraisal
cap.
Homestead Exemption History
*Planned
This slide shows Southlake’s history of providing tax relief through homestead exemptions, an approach we have settled on as commercial values have increased and thus creating an opportunity
for us to move toward the goal of achieving the full 20% exemption.
The City has implemented a general homestead exemption six times since 2009 as we have worked our way towards the
maximum percentage exemption.
Because this exemption is adopted as a percentage, it is very likely that this benefit will continue to grow for homeowners – even though we’ll hit
the cap in 2018 -- since property values will probably continue to increase in Southlake.
Introduce Sharen to discuss specifics of the impact of the homestead exemption.
7
How to Apply For Exemptions
Residential homeowners should ensure that they are receiving the homestead exemption that is being provided by the City.
The Denton or Tarrant Appraisal Districts have forms and are
willing and able to assist homeowners to ensure they receive this tax relief.
8
Financial Analysis
*Planned
Sharen
FY 2009= $110,606,060 value….approximately 7,373 homes out of 8,954 residential properties
FY 2013= $124,292,323 (3%) estimated value
FY 2014= $130,874,986 (3%) estimated
value
FY 2015= $139,698,703 (3%) and $325,963,639 (7%) estimated value total exemption value $465,662,342 (tax rev $2,151,360)
FY 2016= $147,988,847 (3%) and $443,966,541 (9%) estimated
value total exemption value $591,955,387
FY 2017= $169,350,267 (3%) and $733,851,158 (12%) estimated value total exemption value $903,201,426
FY 2018= $
9
Residential Tax Relief
85%
77%
Here is another way of looking at the City’s application of the General Homestead exemption.
CLICK In 2012, the taxable value made up 85% of the assessed value.
CLICK In 2017,
the taxable value comprises about 77% of the total assessed value.
The gap reflects the City’s economic growth over the past few years as well as the increasing homestead exemption
relief approved by the City Council. The City has essentially returned the value growth for existing properties to the homeowner – new value has been captured to pay for needed new
services, or to cover their fair share of City operating expenses.
If the City chose to lower the tax rate, relief would be spread over residential and commercial property. A penny
decrease in the tax rate would save the owner of an average valued home in Southlake about $52 per year. Decreasing the tax rate a penny would result in a reduction of $636,890 in revenue
for the City for the fiscal year.
10
Use of City Property Tax
As noted previously, the City uses it’s property tax revenue stream for two purposes: First, to support the general operations of the City. Second, the taxes are used to retire debt
that has been issued for capital projects.
This slide contains a general look at the uses of property taxes for operations. Property tax makes up just over 50% of the total revenue
stream for the City’s general fund. Other sources of revenue include sales taxes, franchise fees for the use of city row, charges for services, etc.
As you will notice, the largest
use of operational property tax dollars is for public safety, including police, fire, and Emergency Medical Services. The public safety budget includes the cost of personnel as well
as equipment, and facility operations.
We also use property taxes to pay for a large portion of the maintenance of the City’s award winning parks.
GF Revenue = $22.3 million for
FY 2017
TOTAL Revenue= $43.5 million
DPS Expenditures = $15.0 million for FY 2017
11
Value of City Services
For an average-valued home, the total property tax paid to the City for 2017 was $2,384. This equates to just under $200 per month.
For two hundred dollars per month in property taxes,
Southlake residents get the following:
Outstanding EMS service – American Heart Association says 11% chance of survival if you have a heart attack outside a hospital environment; in
Southlake your chances of survival under these circumstances is over 70%
<Note: leaving the hospital walking and talking (quality of life before incident) – 8%; COS at 38%
Nationally
accredited Fire and Police Departments – rapid response rates;
ISO = 1 (highest rating, highest score ever received) - Assesses risk associated with a department’s ability to suppress
a fire
31 parks, with many of those having award-winning designs
A Finance Department that has successfully achieved two AAA bond ratings, the highest rating possible
Award winning
master plans, and strong zoning processes
Roads covering 21.5 miles of city jurisdiction, with a pavement quality index score of 8.2 out of 10
These are just a few of the quality
services provided through property taxes.
When compared to other personal expenses, and given the quality of the service provided, the value of city services offered for the monthly
cost is high.
12
Sources of Property Taxes
But property taxes aren’t just about residential properties. Commercial businesses pay property taxes as well.
As shown on the screen, the Southlake split is 70.03% of taxable is attributable
to residential property , with 27.64% is attributable to commercial entities. The balance is paid on undeveloped property.
In 2008, the commercial portion of the tax revenue was 22%.
Commercial values have grown during this period.
13
What about property tax-supported debt?
As mentioned previously, property tax payers also help retire debt that has been issued to build infrastructure like roads and sidewalks.
The City Council has worked with staff to ensure
that this debt is carefully managed and that the City does not overextend itself.
For the past several years, the City has opted to pay cash for most General Fund capital projects,
and has worked to refinance certain debt packages to save interest costs or reduce the amortization period. As a result, property tax-supported debt has been reduced by 45% since 2003.
This, in spite of ongoing infrastructure development.
91% of the City remaining property tax-supported debt will be retired in 10 years.
(Moved a penny from debt service to operating
budget in FY 2016) – Total property tax-supported debt totals $59.4 million.
14
Southlake Property Tax Facts
Of course there are many details about City property taxes that haven’t been covered here tonight, but more information can be found on the City’s website as shown on the screen.
Sharen
and I are happy to answer any questions you may have about property tax.
Once City questions completed, introduce David Faltys for his presentation.
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Questions?
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I am happy to answer any questions City Council may have for staff.
Thank you