I remember the first year I voted in an election in Allen. In addition to some city council seats, the 2016 bond was on the ballot. I had just moved here and hadn’t even bought a house yet, and I didn’t know much about taxes other than I would have to pay them.
I recall reading up on the bond. The different projects and improvements all sounded good, and the city projected it wouldn’t have to increase the tax rate even with the new spending. The city said its tax rate had been going down for years, along with every taxing entity in the area. More services in Allen for no tax increase? How could I say no?
But then I bought a house and got a big education in the great fallacy of tax rate decreases: They don’t always correlate with tax bill decreases. Despite the tax rate going down by a few cents each year, my bill kept going up—each time by hundreds of dollars. Something didn’t add up.
“We lowered the tax rate,” while factually accurate, seemed deliberately misleading without additional context. Most people, myself included, thought it meant the amount we were paying would be going down when, in reality, it could be the exact opposite.
Apparently, a lot of folks around the state thought the same thing. Senate Bill 2 and House Bill 3, property tax reforms passed by the Texas Legislature this year, put the onus on taxing entities to justify increases by way of revenue increase caps that trigger automatic elections. I was thrilled when these passed, but it seemed just about every taxing entity in the state was concerned about its ability to maintain funding, including Allen.
I listened in on city council workshops and meetings with worried city staff and council members discussing the options. I wanted to understand what I was missing that could cause this anxiety on the part of the city.
Allen’s final proposed tax rate for 2019 is $0.489, just shy of the effective tax rate of $0.4866180. Note that property tax reform doesn’t take effect until next year, so the city could have raised the rate to over $0.51 without triggering an election. Instead, they chose about a 1-cent decrease compared to 2018’s tax rate.
But, as we all know, a tax rate decrease does not necessarily correlate with a tax bill decrease.
The city determines the tax rate based on appraised values received from the county appraisal district. The average home in Allen is appraised at $367,638, up 3.7 percent from 2018. The average homeowner is looking at a $32.17 increase in their tax bill, or 1.82 percent. Had the city adopted the effective tax rate, there would actually still be an increase of $23.41 (1.33 percent).
One interesting thing to note is the city will collect $1.2 million less in tax revenue from homes and properties that paid taxes in 2018. Budget growth will be driven by properties that didn’t pay taxes last year.
As spending is what drives taxes, one thing I did this year is consult with members of city council and staff about the budget process, what the drivers were for the tax rate, and why it couldn’t be the effective rate. City officials receive the certified total taxable value from the central appraisal district before they make the budget, so they’re able to determine exactly what the effective rate (also called the no-new-revenue rate) is (in fact, they’re required by state law to calculate and publish it).
If the city isn’t increasing services, and new property provides new revenue to expand existing service coverage, why would it cost more to run the city?
One major driver is inflation, mainly the cost to replace things. As infrastructure, buildings, and equipment age, they need to be replaced. Often these items cost more than they did a few years ago. Even maintenance and upkeep increases as labor and product costs increase.
Another big driver is staff salaries. In order to provide raises each year to outpace cost-of-living increases and remain competitive with other municipalities, more revenue has to be generated.
I also learned about Senate Bill 1152, which prevents cities from charging telecommunications companies “access line fees.” This was done to prevent the telecom companies from passing those costs on to consumers, but it had the effect of taking away $1.4 million in revenue from Allen—equivalent to a 1-cent change in the tax rate. I’m told the state often imposes these “unfunded mandates” on municipalities; in response, officials look to property taxpayers to fund more of the city’s spending.
My next question was: Are there places the city can cut spending or find savings? The answer depends on who you ask. Some staff and council members believe the city should never decrease its budget. If there are savings in one part of the budget, the money should be spent somewhere else. Others believe there are savings to be found, and they should be passed on to property taxpayers to decrease the total budget. Right now, a majority of council members believe savings should be passed on to taxpayers, but elections could always change that in the future.
A major budget line item in Allen is Parks and Library, which makes up 27 percent of the entire operating budget. For comparison, Plano spends 14 percent of its budget on parks and libraries, while McKinney spends 9 percent. Allen has excellent parks and trails, so for many residents, the money spent is justified. But that doesn’t mean there isn’t wasteful spending. Many projects carry very high price tags that may not provide an equal value to the community for the amount spent. Some council members believe there should be a more deliberate understanding of how money is spent in the Parks budget.
We shouldn’t rubber-stamp any and all spending, whether on parks or other budget items.
I also asked about the anxiety on SB 2, the property tax reform bill. The general impression I get is that the city will need to issue more short-term debt to finance unexpected costs.
After all my research, I am comfortable with how the city currently determines its budget. While some cities are raising taxes right up to the 8 percent rollback rate, to grab as much revenue as possible before SB 2 takes effect, Allen proposes a tax rate that takes into account taxpayers as well as maintaining city services and actually decreases the amount of revenue taken from existing property.
But there is always room for improvement. The city was very close to the effective tax rate and could have looked deeper into finding savings in departments like Parks. Allen also needs to take the tax burden off residents by encouraging a strong commercial tax base, which is part of the reason why Plano was able to propose an effective tax rate.
So, now I turn the question to the citizens of Allen: Do you think $0.489 is a fair tax rate?
If so, take some time to thank the city staff and city council for doing the right thing, and encourage them to continue.
If not, let the city council know as well. But I challenge you to not just ask for an effective rate; cite examples of how the city could save money or find alternate sources of revenue. Taking the time to understand the city budget process and proposing concrete ideas can be very effective in changing minds.
The last thing I ask is very important: Make sure to vote in municipal elections! The city’s way of creating a budget and proposing a tax rate could change in just one election if taxpayer-unfriendly candidates gain just a few seats.
Local politics is important—in many ways, far more important that what happens in Washington, despite media attention largely given to the latter. Decisions made every other week in Allen City Council meetings have the potential to affect your everyday life, from the amount of taxes you pay to the quality of the streets you drive on. Make your voice heard! Vote and engage with your city council.
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