Agenda Information Sheet
DEPARTMENT: Finance
ACM: Bryan Langley
Date: August 9, 2016
SUBJECT
Title
Consider approval of a resolution of the City Council of the City of Denton, Texas placing a proposal on the September 20, 2016, City Council public meeting agenda to adopt a 2016 Tax Rate that will exceed the lower of the rollback rate or the effective tax rate; calling two public hearings on a tax increase to be held on August 23, 2016, and September 13, 2016 and calling a budget public hearing on the Fiscal Year 2016-2017 Annual Program of Services of the City of Denton to be held on September 13, 2016; requiring publication of notices of the public hearings in accordance with the law; requiring the posting of the notices of the public hearings on the City’s Internet website; requiring the posting of the notices on the City’s public access channel; and providing an effective date.
Body
BACKGROUND
The Texas Constitution and Texas Property Tax & Local Government Codes require taxing units to comply with specific guidelines in adopting tax rates. The guidelines are related to a concept known as truth-in-taxation. This concept is a way to make taxpayers aware of tax rate proposals and allow taxpayers in certain circumstances, to rollback or limit a tax increase.
The truth-in-taxation guidelines require taxing entities to calculate and publish their effective and rollback tax rates. The effective rate is the calculated rate that would provide the taxing unit approximately the same amount of revenue it received in the previous year on properties taxed in both years. This rate excludes taxes on properties no longer in the taxing unit and also excludes any growth due to new property values. The City of Denton’s 2016 effective rate is $0.663366/$100 valuation.
The rollback rate divides the total property tax revenue into support for maintenance and operations (M&O) taxes and debt service taxes. It provides approximately an eight percent increase in revenue from the previous year for maintenance and operations expenses, plus the necessary debt service tax rate. If a taxing unit adopts a tax rate higher than the rollback rate, the voters have the option to petition for an election to limit the size of the tax increase. The City of Denton’s 2016 rollback rate is $0.720790/$100 valuation.
The City Manager’s FY 2016-17 Proposed Budget recommended a tax rate of $0.684750 per $100 of valuation, and this rate is above the effective rate. In order to consider a tax rate above the effective rate, state law requires the publication of the attached notice and that two public hearings be held on the proposed tax rate with the meeting to adopt the tax rate occurring three to 14 days after the second public hearing. While the City Council is able to adopt a tax rate lower than the proposed tax rate, it is not able to exceed the published tax rate unless the required notice is republished and the public hearings are held again per state law. Therefore, staff is recommending that the prior year’s tax rate of $0.689750 be published in order to provide flexibility to the City Council while it deliberates on this matter.
In addition to the state requirements for the truth in taxation legislation, the City Charter and Chapter 102 of the Texas Local Government Code require the City Council to hold a public hearing on the FY 2016-17 Annual Program of Services. In compliance with the City Charter and Chapter 102, we are also required to publish a notice of the public hearing in the Denton Record Chronicle not earlier than the 30th day or later than the 10th day before the date of the public hearing. The attached “Notice of Public Hearing on Budget” would need to be published in the Denton Record Chronicle. It would also need to be posted on the City of Denton’s website, <http://www.cityofdenton.com> and air on the public access channel.
RECOMMENDATION
Staff recommends approval of the resolution.
ESTIMATED SCHEDULE OF PROJECT
August 23, 2016 Hold First Public Hearing on Tax Rate
September 13, 2016 Hold Second Public Hearing on Tax Rate
September 13, 2016 Hold Public Hearing on the Budget
September 20, 2016 Adopt Tax Rate
PRIOR ACTION/REVIEW (Council, Boards, Commissions)
On June 14, 2016, the City Council was provided information regarding the FY 2016-17 Preliminary Budget.
On July 18, 2016, the City Council held a work session to discuss budget priorities for the FY 2016-17 Budget.
On August 4, 2016, the City Council held a budget workshop on the FY 2016-17 Proposed Budget, including the proposed tax rate.
STRATEGIC PLAN RELATIONSHIP
The City of Denton’s Strategic Plan is an action-oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family-Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal:
Related Key Focus Area: Organizational Excellence
Related Goal: 1.1 Manage financial resources in a responsible manner
EXHIBITS
1. Resolution and Required Notices
Respectfully submitted:
Chuck Springer, 349-8260
Director of Finance
Prepared by:
Antonio Puente, Jr.
Assistant Director of Finance