City Council trims Houston tax rate to comply with revenue cap

Oct. 21, 2014Houston Chronicle

The Houston City Council unanimously passed a nominal property tax cut Tuesday afternoon, the first rate reduction in five years, as the city for the first time runs into a revenue cap imposed by voters a decade ago.

The modest rollback equates to $12.27 a year for the owner of a $200,000 house with a standard homestead exemption. Many Houston property owners will not pay less in overall property taxes, however, as appraisals continue to rise.

The city’s new property tax rate is 63.108 cents per $100 of assessed value, a reduction of about three-quarters of a cent. State law requires the city to adopt its tax rate within 60 days of receiving the certified tax roll, so the approval came Tuesday rather than Wednesday, when the council typically votes.

Officials in Mayor Annise Parker‘s administration have said the rate reduction will not force immediate budget cuts because the spending plan the council passed for the fiscal year that began July 1 assumed property tax revenues would not exceed the cap.

However, the cut does mean the city will collect an estimated $12.7 million less than it otherwise would have, and will have that much less on hand to deal with a looming $120 million deficit for the fiscal year starting next summer.

The revenue cap is expected to have a larger impact on that coming budget, exacerbated by the rising cost of city debt and pension obligations.

Voters passed the revenue cap in 2004, amending the city charter to limit the growth of property tax revenue to the combined rates of inflation and population growth, or 4.5 percent, whichever is lower. Voters tweaked the cap in 2006, allowing the city to raise an additional $90 million above the cap for public safety spending.

Houston now has exhausted that breathing room, and was on pace to exceed its allowed property tax revenues if it did not lower the tax rate.

The vote was 16-0, with Councilman Michael Kubosh absent.