Although aldermen have directed City Administrator Kim Foutz to draft the 2016-17 general operating budget with no property tax increase, property taxes will increase dramatically next year due to the increased cost of retiring the debt of $8.8 million sewer bond.
To pay the $576,080 in fiscal year 2016-17 will require a debt service tax rate of $0.34264 based upon the certified appraisal of $168,130,780 in total freeze adjusted taxable values for the Village of Salado.
This is almost a 19 cent increase in the debt service property tax, which could bring the total property tax rate to $0.54254 per $100 valuation provided there is no increase in the maintenance and operation (M&O) rate.
The Village has the most generous local exemptions for homestead owners. Every homestead can claim a $5,000 deduction from the valuation and an additional 20 percent from the valuation. For example, a $200,000 home would be lowered to a taxable value of $156,000.
At the possible tax rate of $0.54254 this would result in a tax of $846.36 rather than $1,085.08, a savings of more than $200.
For those who are over age 65 or who are disabled, they can stack the local homestead deduction with a second deduction of an additional $50,000 from the taxable value.
The owner of a home valued at $200,000 who claims the homestead exemption and the over 65 exemption would see the taxable value of their home lowered to $106,000.
At the $0.54254 tax rate, that homeowner would pay city property taxes of $575.09.
Further, those claiming the over 65 or disabled exemptions have their taxes frozen at that amount, regardless of natural increases in the value of their home or increases in the tax rate.
According to the Texas Municipal League, the local municipal tax freeze was passed by the legislature, HJR 16, and a constitutional amendment in 2003. The measures authorize a freeze on city, county, and junior college property taxes for the homesteads of persons over the age of 65 and the disabled.
The freeze is at the option of the local governing body, except that an election is required if the city receives a petition signed by five percent of the voters.
“Numerous cities have already enacted the freeze, and other cities are currently being pressured to do so by senior groups,” according to the TML Revenue and Policy Book for 2014 produced by the TML Legislative Policy Committee on Revenue and Finance.
When Salado first approved a property tax in 2008, aldermen set in place very generous exemptions for all homesteads, as well as the over 65 exemption and freeze and the disabled exemption and freeze. Salado gives larger exemptions than every other municipality in Bell County. Three of the 10 minuicipalities give no local exemptions and do not freeze the taxes of those over 65 or disabled.
With an incredibly low initial property tax rate of $0.05 per $100 evaluation in 2008, many residents were able to lock in their total city taxes at about $78.00 per year for a home valued at $200,000.
Bell County Tax Appraisal District informed the Village that it had total appraised values of $289,774,823.
However, due to the local exemptions allowed, it had a net taxable value of $218,735,821.
The tax freezes for over 65 and disable homeowners lowers that another $50 million to the freeze adjusted taxable value of $168,130,780.
This loss in taxable values results in a loss of M&O income of more than $240,000 based upon the M&O rate of $0.1999 per $100.
The Village budget in 2015-16 had revenue of $350,181.63 in local property taxes based on the tax rate of $0.1999. If there were no local exemptions or freezes, the M&O tax rate to generate $350,181.63 would be $0.1210 per $100 evaluation.
Further, the debt service rate for the next fiscal year to retire $576,080.00 in debt would be $0.1990 per $100 valuation, rather than the $0.34264 per $100 valuation that it will require.