From Pearland’s budget crisis caused by a worksheet error to the upcoming drainage bond, many major nancial moves can a ect a local city’s property tax rates. Here is a breakdown of what each rate is used for and how they are determined or changed. UNDERSTANDING TAX RATES
de cit and incorrect tax rates. On Nov. 22, City Council red City Man- ager Clay Pearson in an e ort to bring the city sta a change in leadership and seek accountability, promoting Deputy City Manager Trent Epper- son to the role in the interim. The city has since passed a variety of re nancing moves, such as adjust- ing spending and re nancing debt to cover the unexpected debt. A job posting for the open city manager position went live in mid-February on the website for SGR, the consul- tant group that will assist the city’s audit of its tax calculation process. “We’re going to be hiring a con- sulting group to help us understand even more clearly what happened,” Cole said. “But also, more impor- tantly, how could we have caught it? And what are our best practices mov- ing forward?” Road to recovery City sta gave a presentation at a Feb. 20 City Council meeting that announced a new plan to manage the city’s debt service tax rate in future years after the worksheet error caused an arti cial drop in the prop- erty tax rate. City sta announced in the pre- sentation that the city acquired a corrected version of the tax work- sheet from the Brazoria County Tax Assessor-Collector. The corrected sheet will allow sta to more accu- rately project the city’s future bud- gets and tax rates. “We’ve removed one of the big unknowns in our planning moving forward,” Epperson said. During the presentation, city sta and nancial adviser John Robuck proposed a plan that would transfer reimbursements from the Shadow Creek Ranch TIRZ to the city’s debt service fund. They said this would allow the city to reduce its
PAST AND CURRENT RATE PROJECTIONS
DEBT SERVICE RATE: • Pays the city’s debt obligations • A ected by voter-approved general obligation bonds • The upcoming May drainage bond would add approximately one penny to the rate • Worksheet error brought the debt service fund to a $5.6 million de cit
The city’s new nancial plan allowed for reduced projected debt service tax rates for the future.
New debt payment plan (with tax increment reinvestment zone funds)
Original debt payment plan
$0.60
$0.40
$0.40
$0.39
MAINTENANCE AND OPERATION RATE:
$0.36
$0.36
$0.34
$0.40
• Also known as the general fund rate • Funds the city’s general operations, such as city employee salaries and wages • Majority of expenditures in proposed 2022-23 budget go to public safety (59%) • Worksheet error brought the general fund a $4.7 million de cit BOTH RATES COMBINED: • Cannot be higher than the voter- approved maximum tax rate without holding an election • Can exceed the yearly no-new- revenue rate if it is less than the voter- approved maximum • Are per $100 of property valuation
$0.20
$0
FY 2024-25
FY 2025-26
FY 2023-24
NOTE: PROJECTIONS INCLUDE THE PASSAGE OF THE $181 MILLION DRAINAGE BOND
worksheet in November when evalu- ating a potential tax increment rein- vestment zone. The value of some Pearland properties in Harris County were recorded as $1.3 billion versus the actual value of about $30 million, according to city sta . City sta said the error occurred between the Brazoria County Tax O ce and the Harris Central Appraisal District, which is the o ce that provided Brazoria County the values. However, a statement from HCAD released to Community Impact by Chief Communications O cer Jack Barnett claimed the information HCAD provided was correct. “HCAD provides value information to all—over 600—the taxing jurisdic- tions in the county, and that informa- tion is required by the tax code and done in accordance with state law,” the
statement reads. “However, the [cal- culation] the jurisdictions must do is very complex.” District 11 state Sen. Mayes Mid- dleton, R Wallisville, previously acknowledged the complexity of the calculation process that led to the city’s nancial troubles. “One of the good news in all of this is … the city adopted a tax rate below the no-new-revenue rate, which is a really good thing,” Middleton said. “That means it actually was a tax cut, … but at the same time, we need to make sure that those calculations are done correctly.” The incorrect worksheet was dis- covered in early November after the city had already passed its annual budget in September, and the largely overvalued properties forced the city to reconcile with a $10.3 million
SOURCE: CITY OF PEARLAND COMMUNITY IMPACT
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State of the City event Feb. 9 in ref- erence to the November nancial crisis. Discovery and initial response City sta discovered a problem with a 2022 property tax evaluation
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