As inflation hits South Texas residents hard, city leaders in Hidalgo County’s largest city are telling McAllen residents they are cutting their property taxes. But the truth is they are planning to raise taxes.
McAllen City Council has proposed a property tax rate of 0.4799 cents per $100 valuation. On its face, this is lower than last year’s tax rate of 0.4956 cents, which is why city leaders are telling taxpayers they are providing tax relief. However, the proposed tax rate is actually higher than the no-new-revenue rate.
The no-new-revenue rate is the tax rate a city can adopt that would raise the same amount of revenue as the prior year. This no-new-revenue rate for 2022 is 0.4551 cents. Were the City of McAllen to adopt this tax rate, it would raise the same amount of property tax revenue in 2022-2023 that it did in 2021-2022. However, the property tax rate McAllen city leaders are proposing is more than 2 cents higher than this no-new-revenue rate.
Any tax rate higher than the no-new-revenue rate is a tax increase.
Moreover, this proposed tax rate is just shy of the voter-approval rate. The voter-approval rate is the limit to which a city can raise its taxes before it has to receive voters’ approval. This voter-approval limit is 0.4869 cents. Because the proposed tax rate is less than the voter-approval rate (by less than a penny), they avoid having to hold a referendum.
Over the past year, the average homestead taxable value increased by more than $21,000. As a result, the tax on the average homestead will increase by $77 under the proposed tax rate.
Texas Border Business reported that City Manager Roel “Roy” Rodriguez, P.E. characterized the tax rate as one that would “provide relief during this unprecedented time.” Notably, Mayor Javier Villalobos (who made headlines in 2021 as the first Republican mayor of McAllen since 1997 and a candidate who ran on a platform of fiscal conservatism) expressed his support for the budget and what he called “relief for taxpayers.”
“I was confident that the City of McAllen management team would put a solid plan together, that would not only prioritize public safety and capital improvement is projects, and advance quality of life and economic investment, but also would include a lowered property tax rate, providing relief for taxpayers,” said the mayor, according to Valley Central. Regarding the effect of rising property values on tax bills, Villalobos told Texas Border Business, “If we can reduce it a little bit and do our part, it will benefit the community.”
At a city meeting on August 22, Villalobos expressed his displeasure that the state Legislature required McAllen to publish in a public notice when the proposed tax rate is higher than the no-new-revenue rate. “We’re reducing the tax rate by two, yet based on the law, we need to say it’s a tax increase even though it’s not necessarily a tax increase. … It confuses the public.” The City of McAllen expects to raise more than $3,777,960 in new revenue under the proposed rate.
The City of McAllen has scheduled a public hearing where taxpayers may voice their opinion regarding the tax rate on Monday, September 26, at 5:00 p.m. at McAllen City Hall.