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EDINBURG — The city council here is proposing a 1-cent decrease to the property tax rate in an effort to bring some relief to taxpayers as appraisals and inflation continue to skyrocket.
But the proposed tax rate of 63 cents per $100 valuation goes against the recommendations of Edinburg city administration, who have spent the last several months making budget calculations under the assumption that the tax rate would be 64 cents.
The 63-cent proposal came during a meeting here Tuesday evening, when the Edinburg City Council needed to propose a rate ahead of state-mandated deadlines to hold hearings for the public to provide their input.
“Mayor, I’d like to set the tax rate, drop it a penny, at 63 cents,” Place 4 Councilman David White, who made the motion, said.
That kicked off a lengthy discussion amongst the councilmembers and city administration over how the one penny decrease would affect budget planning, which must be wrapped up by the end of the month.
White said the decrease would result in the loss of approximately $600,000 in tax revenues, but that the city won’t suffer any funding shortfalls due to the unique, one-time windfall that is post-pandemic relief funding from the federal government.
“If we’ve done everything we’ve talked about with moving some monies around and (if) … ARPA pays for it, the money is there. We’re not going to be hurting. We should be in good shape right now with 63 cents,” White said.
The councilman was referring to the American Rescue Plan Act, a $1.9 trillion economic stimulus package passed by Congress in 2021 in the wake of the COVID-19 pandemic.
The bill pumped hundreds of millions of dollars into the Rio Grande Valley, including Edinburg, where the city’s COVID relief coffers still hold about $16 million, according to Mayor Ramiro Garza Jr.
The city also has access to other pots of money outside its general fund.
“We have another $5 million in capital lease. And we have over $50 million in unused bond monies that, yes, there’s projects for them, but we still have balances for,” Garza said.
It’s because of that that I can’t support maintaining the same tax rate. We’ve gotta give some relief to our residents. It’s just, to me, the right thing to do,” the mayor added.
But the tax relief isn’t here yet. The council must first hold a public hearing before officially adopting the 63-cent tax rate. They are scheduled to do both on Sept. 19.
The one penny decrease also goes against the recommendation of the city’s own administrative leaders.
“What is the staff’s recommendation on the tax rate after analyzing all the numbers,” Place 2 Councilman Jason De Leon asked.
“To maintain it at the point-64,” Edinburg City Manager Myra Ayala said.
The city manager cautioned that, though the city has access to additional funding sources this year, that fact is the exception and not the norm.
“For the future, the funding will not be in place. We would have to take that into consideration at that time based on the development and growth of the city, the property valuations. So, we would have to look at that again,” Ayala said.
Garza also reminded residents that part of the reason taxes have gone up in previous years is because of debt obligations incurred by former elected officials.
“In the last three years, unfortunately, previous political leadership issued a lot of debt for the city. So, we have to take that into account,” Garza said.
If the council approves the decrease, it would be the first time since 1991 that the city’s tax rate has been that low. And, it would be the second time in as many years that the city council has voted to lower the tax rate.
Last September, the council lowered the rate by 4 cents — from 68 cents to the current 64 cents.
Part of the reason the council did so then — and is considering doing so again now — is because of skyrocketing property appraisals.
During last year’s budget discussions, the city was looking at a 10% jump in its valuations. This year, that upward trend has continued, with appraisals rising another 12.89%.
That essentially means that taxes are going up, even with the one penny decrease. As valuations rise, the amount of tax revenue a property generates also rises.
At a tax rate of 64 cents, a $100,000 home would owe $640 in property taxes.
But, if the appraisal has gone up by 12.89% this year, then the home is now valued at $112,890.
If the tax rate stays the same, the homeowner will now owe $722.50 in property taxes.
However, if the tax rate goes down one penny to 63 cents per $100 valuation, the homeowner would still owe $711.20 in taxes, which represents a $71.20 increase from the previous year.
All of that math is part of the city’s tax rate calculations and by law, taxing entities must inform taxpayers of three factors:
>> What the proposed tax rate is and how much revenue it will generate compared to the previous year;
>> What tax rate is needed to generate the exact same amount of revenue as the previous year. This is known as the No New Revenue tax rate, and;
>> The maximum tax rate that an entity could levy which would automatically trigger a tax rate election. This is called the Voter Approval Rate.
Appraisals in the city have climbed so high that Edinburg’s No New Revenue tax rate is 0.5754 per $100 valuation.
But for Place 1 Councilman Dan Diaz, that figure doesn’t take into account that operational costs also go up.
“The No New Revenue tax rate, that never considers the cost of doing business the following year, which is always up, correct,” Diaz asked during Tuesday’s meeting.
“That’s correct, sir,” Edinburg Finance Director Ascencion Alonzo replied.
Meanwhile, the original 64-cent tax rate proposal would generate 4.03% more revenue compared to last year, according to the city’s budget book.
