PRIOR CITY COUNCIL ACTION:

None

BACKGROUND:

The State Tax Code defines steps that taxing entities must follow in adopting their tax rates. This "Truth-in-taxation" requires most taxing units to calculate two rates after receiving a certified appraisal roll from the chief appraiser: the no-new-revenue tax rate and the voter-approval tax rate.

The no-new-revenue tax rate (NNR) is the tax rate which would produce the same amount of tax revenue if applied to the same properties taxed in both  years. The calculated NNR rate for the 2025 tax year is $0.5005.

The voter-approval tax rate (VAR) is the maximum rate allowed by law without requiring voter approval. It is the calculated sum of the NNR operations rate plus 3.5%, the calculated l&S rate and any unused increment from the prior 3 years. The calculated voter approval tax rate for the 2025 tax year is $0.5226 and is the rate on which the proposed FY 2026 budget is based.

If the proposed tax rate exceeds the lower of the NNR or voter approval tax rate, the governing body must take a record vote*, publish required notices, and schedule a public hearing on the tax rate.

State law requires that the vote to adopt a proposed maximum rate must be a roll call vote, indicating any absences from the dais. Even though the Council votes to consider a proposed tax rate above the No New Revenue tax rate, the Council may, as a result of deliberations, adopt a tax rate at or below the rate stated in the published notices.

STAFF RECOMMENDATION:

City Manager recommends setting the maximum property tax rate at $0.5226 for tax year 2025.  This proposed rate exceeds the lower of the No New Revenue Tax rate or the Voter Approval Tax rate.  Therefore, the City Council is required to publish notices and conduct a public hearing - proposed to be held on September 18th, 2025. 

The decision involves voting to establish a maximum property tax rate of $0.5226 per $100 of property valuation. A special meeting will be scheduled to conduct public hearings and take action on the FY26 budget, and the adoption of this tax rate will be considered during the City Council meeting on September 18, 2025, at 6:30 p.m. in the City Hall Council Chambers. The proposed tax rate of $0.5226 is anticipated to generate approximately $19.2 million in property tax revenue. Of this amount, approximately $12.4 million will be allocated for Maintenance and Operations (M&O), while the remaining $6.8 million will be designated for debt service payments. In the fiscal year 2025, the City's tax rate of $0.4990 generated about $18 million, with $11.5 million allocated for M&O.

* This is a record vote, meaning the voting record for this item will be published with the required notices. This item only sets the item to be voted on and  does not commit Council to adopting the maximum proposed rate on September 18th.

FINANCIAL IMPACT:

To be determined based on Council's direction.

MOTION(S):

I move to set a maximum 2025 tax rate of $0.5226 [or other rate] and set a special meeting for September 18, 2025, at 6:30 p.m. in Council Chambers.