Low City Property Taxes
We know maximizing your discretionary income is incredibly important to you, which means the cornerstone of Sugar Land’s financial management is minimizing the property tax burden on residents. And we don’t just talk the talk, we walk the walk:
- Sugar Land has lowered its property tax rate over 18 cents since 1993 and now boasts the second lowest tax rate in the State among cities our size.
- Over the last 15 years, the average value home has increased by about 5% annually, while the average tax bill has only increased by about 3% annually over the same time period.
- The City of Sugar Land makes up only 15% of the average residential tax bill.
Have you ever wondered what the term “effective tax rate” means? The terminology is actually required by state law, but we know it can be confusing. The concept is simple though: the effective tax rate is really just the rate that is required to raise the same amount of revenue this year from properties already on the tax roll as was raised last year. Annually, the City forecasts no more than a 3% growth in the effective tax rate.
Tax Rate Adoption
The City must adopt an annual budget before it can adopt a tax rate. The tax rate may only be adopted after the City follows the truth in taxation process described below.
Once the City receives the certified value reports from the CAD, the process of setting a tax rate for the year begins. The City has 60 days after receiving the certified tax roll or until September 30th (whichever is later) to adopt a tax rate. However, there are strict time constraints and processes that must occur in order to adopt the tax rate.
The City receives its total Certified Taxable Valuation from the Fort Bend Central Appraisal District (CAD). The CAD is charged with establishing values for all properties in the County as of January 1 of each year and certifying the taxable values to each taxing entity. The City receives a preliminary taxable value report from the CAD in April based on valuation notices sent to property owners.
Under the Tax Code, the value must be certified by July 25 of each year. However, 95% of property in the county must be approved before the Chief Appraiser can certify the values.
Since the City Charter requires the City Manager to file a proposed budget no later than July 30 of each year, the budget is based on assumptions of property tax revenues.
The tax rate needed to generate the revenue in the budget is dependent on the certified taxable value.
Truth in Taxation Process
Once the City receives the certified values from the CAD, the effective tax rate and rollback rate must be calculated.
The effective tax rate is the tax rate that generates no additional revenue for the City and is sometimes referred to as the "no new taxes rate". The City is allowed to exclude new value to the tax roll from this calculation.
The rollback rate is the tax rate that generates the revenue needed to meet the City's debt service obligations, and a maximum 8% increase in revenue for operations and maintenance. If a tax rate is adopted that exceeds the rollback rate, voters may petition for an election to reduce the tax rate. If the election passes, then the rollback rate becomes the tax rate for that year.
Notice and Public Hearings
Once the effective and rollback rates are calculated, the City Council must determine a proposed tax rate and set times and dates for public hearings. A notice of the proposed tax rate must be published and posted on the City's website.
Two public hearings must be held on the proposed tax rate. The first hearing can be no sooner than 7 days after publication of the notice. The second hearing can be no earlier than 3 days and no later than 7 days after the first hearing. The tax rate must be adopted no sooner than 3 days and no later than 14 days after the second hearing.