SETTING THE PROPERTY TAX RATE Micki Rundell, CFO City of Georgetown TML Presentation June 5, 2015

Property Tax Basics Tax revenue based upon value of property Determined by outside agency –Appraisal District determines “market value” City does not determine value of property Appraisal District does not set the tax rate

Property Tax Terms Assessed Valuation –Establish value of property subject to taxation –Determined by “market value” –Subject to protest by property owners and review by appraisal review board Central or County Appraisal District (CAD) –Responsible for establishing property values –Independent of all taxing entities –Establishes process for review of protests/appeals CAD does not set the tax rate

Elements of Property Tax Rate Operations and Maintenance (O&M) –Funds on-going General Fund operations Interest and Sinking (I&S) –Funds payments on debt for general government (not utility related) improvements Tax Rate = O&M rate + I&S rate Calculation: –Tax rate x taxable value/$100 = your City tax levy ($ paid to City)

Tax Terminology Preliminary Tax Roll –Value estimates provided by CAD –Subject to change based on protests/appeals “Certified” Tax Roll –Used for calculations required under “Truth in Taxation” –Appraisal District: “Certifies” Tax Roll when 95% of value is Final Also provides “Estimate of Value” for properties under ARB Review Usually at 60% of Appraised Value

Exemptions & Abatements Taxing entities can offer options to reduce individual tax bills Abatements - t ypically used to incent commercial development For a specific period of time Granted by taxing entity on a case by case basis Performance requirements Exemptions - t ypically for residential property Do not expire as long as property qualifies Apply at appraisal district

Residential Exemptions All are optional & must be approved by City Council Homestead –A percentage of appraised value is deducted –Maximum HS = 20% –Minimum exemption of $5,000 –Changes to the HS exemption must be approved by the end of June to be applicable that year Over 65 Disabled Person 100% Disabled Veteran Can’t receive both

Truth in Taxation (aka TNT) State laws that regulate public hearings & published notices for taxing entities Requires “Effective Rate” calculation be published If proposed tax rate is = or < then Effective Rate No further action is required prior to adoption If proposed tax rate > then Effective Rate –Notices and Public Hearings are required Some exceptions for smaller cities or districts

Effective Tax Rate (ETR) ETR is the tax rate… that generates the same amount of revenue as prior year for properties taxed in both years Accounts for Prior Year Refunds Excludes New Value Excludes Value in a Reinvestment Zone ETR Rate Calculation must be published! –MUST include the Debt Rate to be Adopted –Required for ANY proposed tax rate

“Rollback” Tax Rate “Rollback” rate risks… Taxpayers may petition for rollback tax election if proposed tax increases above “rollback rate” “Rollback” rate = sum of: –8% increase over the “effective” O&M rate, + I&S rate (currently) Any increase in O&M rate > 8% could trigger rollback election If successful – Rollback election “rolls” back tax rate to “Effective Rate”

Effective Tax Rate Notice Presents information about 3 tax rates. PY Actual Tax Rate taxing unit used to determine property taxes for prior year CY Effective Tax Rate would equal same total taxes as PY if comparing properties taxed in both years CY Rollback Tax Rate is highest tax rate taxing unit can set without risking rollback process Each rate determined by dividing the total amount of tax revenue by the total value of taxable property with adjustments as required by state law

Truth In Taxation Requirements If proposed tax rate generates more revenue than the effective tax rate… Take a Record Vote on Tax Rate Publish “Notice of Proposed Tax Rate” Hold Two “Public Hearings” Hold a separate vote to “Ratify” increase in tax revenue Separate action from Budget & Tax Adoption

Tax Rate Adoption Language If proposed tax rate > then effective tax rate, the vote on the ordinance, resolution, or order setting the tax rate must be a record vote Motion to adopt the ordinance, resolution, or order must be made in the following form –“I move that the property tax rate be increased by the adoption of a tax rate of , which is effectively a 6.9 percent increase in the tax rate”

1 st Pages of Budget Must Include Results of council vote on the tax rate (by name) –Ordinance number & date approved Property tax rate comparison- this year & last –Adopted tax rate including Debt Tax Rate –Effective tax rate –Rollback tax rate Total debt obligations secured by property taxes Statement on revenue from property taxes “This budget will raise more revenue from property taxes than last year’s budget by an amount of $_______, which is a x.xx% increase from last year’s budget. The property tax revenue to be raised from new property added to the tax roll this year is $_______.”

Questions? Contact info: Micki Rundell, Chief Financial Officer City of Georgetown Micki.