Salado could face loss of $165,195.65 in M&O tax revenues if voters approve exit
If approved by the voters in the Village of Salado May 6, the disannexation of a large — almost entirely residential — portion of the Village could result in the loss of just over $170 million in market value.
Bell County Appraisal District, at the request of Salado Village Voice, calculated the loss in market value, taxable value and freeze adjusted value to the Village of Salado should the disannexation proposal pass in May.
Marvin Hahn, chief appraiser of BellCAD, stated that the market value of the property in the proposed disannexation area is $170,082,524. The total Market Value for the Village of Salado, according to the certified appraisal for 2016 was $289,774,823.
The disannexation would leave a total market value of $119.6 million for the Village of Salado.
According to the 2016 certified values, the Village of Salado has a certified total freeze adjusted taxable value of $168,130,780. The total freeze adjusted taxable value for the disannexation area is $81,638,646.
That total freeze adjusted taxable value for the Village of Salado was budgeted to generate a total of $911,100.97 at the $0.5419 total tax rate for the 2016-17 fiscal year. Of that total in property tax revenue, $575,007.27 is for debt service ($0.542 per $100 tax rate) for the $8.2 million sewer bond.
The maintenance and operation tax is $0.199 per $100. It generates $336,093 in M&O revenues for the Village. The loss of $81.6 million in freeze adjusted taxable property would result in the loss of $163,195.65 in local revenue to the Village of Salado.
While the Village could face losing the local maintenance and operating revenue, the property owners in the disannexation area would continue to be liable for their pro rata portion of the bond indebtedness.
According to Sec. 43.143. (c) of the Local Government Code: “If the area withdraws from a municipality as provided by this section and if, at the time of the withdrawal, the municipality owes any debts, by bond or otherwise, the area is not released from its pro rata share of that indebtedness. The governing body shall continue to levy a property tax each year on the property in the area at the same rate that is levied on other property in the municipality until the taxes collected from the area equal its pro rata share of the indebtedness. Those taxes may be charged only with the cost of levying and collecting the taxes, and the taxes shall be applied exclusively to the payment of the pro rata share of the indebtedness. This subsection does not prevent the inhabitants of the area from paying in full at any time their pro rata share of the indebtedness.”
Hahn stated that homeowners whose taxes are frozen will not see an increase in taxes due to the disannexation election.
However, property owners whose taxes are not frozen will be taxed at the same rate for the I&S as other properties in the Village.
In addition, the property owners of the disannexed area will be responsible for the cost of levying and collecting the taxes. How much that might be has not been determined.
The potential impact upon the M&O budget of the Village of Salado is daunting, to say the least.
Faced with the loss of more than $163,195.65 in M&O revenues, aldermen will either have to drastically cut its budget for 2017-18 or increase the M&O to the remaining properties by a substantial amount.
In order to the same $336,093 in M&O revenues for the Village in 2017-18 as it did in 2016-17, the Village could face an increase in the M&O property tax to $0.3889 per $100 valuation. This estimate is based upon the loss of the disannexed area from the tax rolls and no other changes in property values.
However, the board of aldermen in setting the budget for 2017-18 could adopt a tax rate that is 8 percent more than the effective tax rate (the rate needed to retire the debt and generate the same amount of revenue as the previous year) without facing the possibility of a rollback election. This could raise the M&O rollback rate to $0.4200 per $100.
Coupled with the current I&S tax rate of $0.342 per $100 would bring the possible rollback rate to $0.762 per $100 evaluation, making the Village of Salado’s property tax the second-highest in Bell County behind Rogers’ tax rate of $0.7897 per $100.
Advocates of disannexation have stated that they will be protected from annexation by other municipalities such as Belton, because they will remain within the ETJ of Salado.
According to the minutes of the Aug. 25 2016 special called meeting of aldermen, the board took two actions regarding property that disannexes from the Village of Salado.
The board approved a Resolution that would authorize the “release or transfer of any disannexed areas from the extraterritorial jurisdiction of the Village and recognizing the statutory requirement that property owners disannexed or released from the extraterritorial jurisdiction of the Village will still be responsible for the indebtedness of the Village incurred while property was within the territorial limits of the Village, and authorize city administrator to take appropriate action, as presented. Fred Brown made the motion, which received a second from Frank Coachman. The motion carried unanimously.
Aldermen at that meeting also approved an “interlocal agreement transferring property located in the extraterritorial jurisdiction from the Village to the extraterritorial jurisdiction of a neighboring municipality” and “authorized city administrator to take appropriate action including negotiations with neighboring city.”
Then-city administrator Kim Foutz explained that this agreement would be put into use only if property is disannexed.
Coachman made the motion, which was also approved unanimously.
If the disannexation were to pass in a referendum, the incumbent members would retain their seats until a special election was conducted to replace them.
The disannexation election is on the same ballot as an aldermen election in which seven candidates are vying for three two-year terms on the board. Three of those candidates are incumbents: Fred Brown, Michael McDougal and David Williams. Challengers are Judy Fields, Andy Jackson, Linda Reynolds and Chris Tramel. Six of the seven candidates live in the proposed area for disannexation. Reynolds is the only candidate who does not reside in the proposed area of disannexation.
Furthermore, if the disannexation election passes, the remaining aldermen and mayor will have to vacate their offices because they live in the disannexed area.
The local government code states in Sec. 22.041. “VACANCY ON GOVERNING BODY IS CREATED. (a) If an alderman moves from the ward from which the alderman is elected, the alderman’s office is considered vacant.”
Because there is more than one vacancy at one time, according to Sec. 22.011 of the local government code: “FILLING VACANCY IN MUNICIPAL OFFICE UNDER SPECIAL CIRCUMSTANCES. If a vacancy occurs in a municipal office by a resignation or in another manner and if the vacancy cannot be filled as provided by other law, the commissioners court of the county in which the municipality is located shall order an election to fill the vacancy if the court is petitioned to do so by at least 26 taxpaying voters residing in the municipality.”
According to the certified values sent by Chief Appraiser Marvin Hahn, the Village had a total of 1,996 properties and a total Market Value of $289,774,823. The Village loses $121,644,043 in values due to exemptions and tax freezes. Of that decrease in taxable value, $32,055,692 is due to the 20 percent homestead exemption for 719 homeowners. Another $20 million is reduced in taxable values due to the over 65 exemption to 419 homeowners.
The state exemptions account for another $18 million decrease from market value to taxable value.
The tax freeze for over 65 and disabled accounts for another $50,318,767 reduction in assessed value. This reduction in taxable value is because of the numbers of eligible homeowners who froze their taxes when the tax rate for the Village was as low as $0.0492 per $100 valuation.