Wichita Falls homeowners brace themselves for a higher tax bite after property valuations soared this year – but the Wichita Falls city tax rate could fall.
“I think there is a pretty good chance that we will have to lower the tax rate,” said City Manager Darron Leiker.
This is due to the new laws on property taxes that the Texan law passed in 2019.
Under the old law, local governments could see their annual property tax revenues increase by 8 percent year over year before residents could request a vote to lower the tax rate.
Under the new law, a local government can get a mere 3.5 percent increase before a rollback becomes mandatory and automatic the following November. The residents don’t have to ask for it.
Leiker said preliminary numbers from the Wichita Appraisal District show real estate values up about 5 percent. That means the city would have to lower its current tax rate to stay below the 3.5 percent cap for increasing revenue.
The income from the new building will only be offset against the upper limit in the following year.
There are exceptions to the 3.5 percent rule. If a city does not generate the full revenue that it allows, it can use that amount up to three years later. In addition, a local government can exceed the cap if it generates costs from certain disasters.
Leiker said he thinks the legislation changed the law because explosive growth cities used the 8 percent rule to take huge sums of property tax revenue from their citizens.
“That was what state legislation had in mind because it did not want it. Many of the high-growth cities went up to 8 percent and participated in all of the new growth, and they (legislators) wanted to lower that number, ”Leiker said.
While the 2021 real estate appraisals baffled many Wichita Falls homeowners, the 5 percent increase is modest overall when compared to many other cities in Texas. But it is enough to stop the city from raising its tax rate.
“I can’t see a scenario where our tax rate will increase. We’d blow this cap, ”said Leiker.
The city has increased its tax rate from around 70 cents per $ 100 valuation on a property in 2017 to around 76 cents in the current fiscal year 2021. The rate was not increased beyond 2020.
Property tax makes up a large portion of the city’s revenue – but not the largest. These are service fees that include everything from water and garbage collection to tattoo parlor fees.
Sales tax revenues are another big piece of cake and have stayed strong through COVID-19. Grants and other sources of income also flow into the pot.
- So it broke down for the current budget:
- Service Fees – $ 83,264,202
- Ad Valorem (Property Tax) – $ 38,829,595
- Sales Tax – $ 23,097,309
- Other Taxes – $ 11,079,486
- Other Income – $ 28,168,952
The city will also benefit from the federal government’s American Recovery Act. The first installment of $ 31 million is due this month. The money is earmarked for COVID-19 aid, but the government leaves a lot of leeway in how it is used. Leiker said the city will wait for better guidelines from the Treasury Department before issuing them and risk having to repay some of it.
Although the revenue picture is good, city councils will face challenges. According to Leiker, the cost of self-insured health insurance for employees in the city is increasing. The city also received results from a study calling on leaders to improve wages for underpaid workers.
“We’re still pretty early in the process,” said Leiker.
Staff and council members will grapple with the budget throughout the summer before voting on the final numbers on September 21.
District and school district leaders will do the same.
Right now, real estate owners can take comfort in knowing that their higher assessments do not automatically translate into higher tax burdens.