Proposed FY2013 budget

The Texas Local Government Code (Section 102) requires that a budget hearing be held no sooner than 15 days after the proposed budget is filed with the municipal clerk. Using August 6 as the filing date, a hearing August 21 meets this requirement.

A second budget hearing is scheduled for the August 28 Council meeting. After this hearing, the budget and tax rate are scheduled for action at the September 4 City Council meeting.

The proposed FY2013 budget of $44,275,593 is 2.9% larger than the adopted FY2012 budget of $43,027,730.  The budget maintains the current 27.845 property tax rate and presumes rate increases for water and sewer service. 

The University Park Public Library is included as a City department for the first time, with an initial budget of $600,000 and three full-time positions. 

A 3% pay raise is included for all full-time City employees. Details on the proposed budget's expenditures and revenues are provided in the attached City Manager's budget memo and line-item detail.

The Finance Advisory Committee met August 9, 2012, to review the proposed budget and recommended its adoption as proposed. Two other advisory committees -- Employee Benefits and Property, Casualty, and Liability Insurance -- are meeting in August to review the budget and make a recommendation to the Council. 

Proposed property tax rate

The property tax is the General Fund's primary source of revenue. In the current FY2012 budget, $15,504,342 of the $26,758,000 General Fund revenue is derived from current year property taxes.

The 2012 certified tax roll rose 1.12% in market value and 0.35% in taxable value compared to last year. This is the first year since 2009 that property values have risen in the city.

The distinction between a tax revenue increase and a tax rate increase can be confusing, especially in the present case – even though the City is not increasing its tax rate (by maintaining the 27.845 cent rate), tax revenues will rise, by $53,842, because of the rise in the overall tax base.

At the same time, the market value of the average single-family home in University Park fell slightly, so that the average single family homeowner would pay $1 less in City property taxes ($2,434 in 2012 vs. $2,435 in 2011), as the table below demonstrates:
 

Comparison of tax base, tax rate, and tax levy
	2011 (FY2012)	2012 (FY2013)
Citywide certified tax base	$5,568,088,524	$5,587,424,812
City tax rate per $100	$0.27845	$0.27845
Total tax levy	$15,504,342	$15,558,184
Avg single-family home (market)	$1,093,015	$1,092,539
Avg single family home (taxable)	$874,412	$874032
Avg single-family home tax bill	$2,435	$2,434

Truth in Taxation impact

The Texas Tax Code (Section 26, Truth in Taxation) requires the calculation and publication of the effective tax rate (ETR), a number intended to “enable the public to evaluate the relationship between taxes for the preceding year and for the current year, based on a tax rate that would produce the same amount of taxes if applied to the same properties taxed in both years” (2012 Truth-in-Taxation Guide, Texas State Comptroller).

The Dallas County Tax Assessor-Collector performs the effective tax rate calculation. The ETR formula is:

Prior year taxes minus taxes on property lost this year: $15,405,122

divided by

Current value of property taxed last year: $5,518,092

times $100

equals Effective Tax Rate: $0.279174

As can be seen, the ETR formula uses different numbers for last year’s taxes and tax base than the proposed budget uses. Consequently, even though the proposed $0.27845 rate will raise more revenue than last year, the ETR calculation says it actually represents an effective tax decrease.

The ETR is significant because it drives the notice and hearing requirements a city must meet per the Texas Truth-in-Taxation law. Cities proposing an effective tax increase over the prior year must hold two separate public hearings about the tax rate. 

For FY2013, even though the proposed $0.27845 rate is lower than the ETR of $0.279174, so that notices and hearings are not required, City staff has chosen to publish notices and schedule hearings out of an abundance of caution.   This will provide an opportunity for residents to give input before the City Council approves a final tax rate.