Four city council members are proposing a 5 percent increase in Houston’s property tax rate they say would enable the city to avoid $86 million in spending cuts and bring in enough revenue to cover $40 million in cleanup costs left by the May derecho and Hurricane Beryl.
The increase, pitched by At-Large Councilmembers Sally Alcorn and Leticia Plummer, District H Councilmember Mario Castillo and District I Councilmember Joaquin Martinez, is one of two proposed rates on next week’s council agenda.
Mayor John Whitmire is proposing to keep the tax rate at its current level of 51.9 cents per $100 of assessed value.
The rate being pushed by the four council members is 55.2 cents per $100 of assessed value.
The difference between the two proposals for the owner of a home valued at $300,000 with a standard 20 percent homestead exemption is about $78.
The proposals come less than a week after City Controller Chris Hollins warned officials to develop a plan to raise revenue or risk a downgrade in the city’s overall credit rating.
Hollins said Friday he recommended the city publicize a plan to create a structurally balanced budget.
“This means cutting costs, bringing in more revenue, or some combination of both,” Hollins said in a statement. “We also need to ensure that we are maintaining our reserves at levels comparable to those of other major cities. These reserves are critical when unexpected emergencies like Hurricane Beryl or the derecho storm impact Houston and the City has to quickly respond.”
RELATED: Will your property taxes go up next year? Use this simple calculator to find out.
Following his remarks to council last week, members debated the merits of raising the tax rate, with Alcorn, Castillo and Martinez advocating for an increase.
The city’s tax rate has decreased in nine of the past 10 years, but residents have not always felt that savings because of rising property values. Even with the same rate, some residents have paid more.
Council members have argued in previous meetings that the current tax rate is out of proportion for city needs and does not allow for the expansion or improvement of city services.
Under a 2004 voter-approved revenue cap, the city cannot increase its property tax collections more than 4.5 percent a year. A 2019 state law imposed a cap of 3.5 percent. The city would have to get voter approval to exceed that. The state cap, however, can be lifted to as high as 8 percent during periods of declared disasters.
The council members placed their proposed rate on the council agenda under the authority of Proposition A. The charter amendment approved by voters last November allows three or more council members to put items directly onto the agenda, a power previously reserved only for the mayor. Their proposed raise mandates a public hearing, which will be Oct. 16.
Whitmire publicly has opposed raising the tax rate without first making cuts to duplication and waste in the budget. He has not announced what those changes may be.
Whitmire spokesperson Mary Benton said the mayor has been clear that his priority was not to raise taxes.
Finance Director Melissa Dubowski said in a statement Friday that an upcoming third-party audit will outline cost-saving recommendations to make the city work more efficiently. The administration also will seek recurring revenue streams from county, state and federal levels, she said.
The council members placed their proposed rate on the council agenda under the authority of Proposition A. The charter amendment approved by voters last November allows three or more council members to put items directly onto the agenda, a power previously reserved only for the mayor.
The council has until Oct. 28 to set the city’s tax rate.
The city recently received a “negative” ratings outlook from S&P Global and Fitch Ratings because of the growing amount of debt service without an increase in revenue. If the companies downgraded the city’s credit rating over the next two years, it could increase the city’s overall borrowing costs.
Alcorn, Plummer, Martinez and Castillo have scheduled a virtual town hall community meeting Sunday to talk about their proposal. Attendees can register online to receive a meeting link and submit questions ahead of the event.
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