The city of Sherman closed out its annual budget season Monday night as it set a new tax rate for the upcoming fiscal year. With Monday’s approval, the city is slated to move forward with a property tax rate of $0.489 for each $100 of assessed value.
Here are five things to know about the new tax rate:
1. The rate is going up for 2020
The rate the council approved is just over a six cent increase over the rate set for the 2018-2019 fiscal year. For comparison, the effective rate — the rate the city would need to set to maintain funding — is $0.394606 and represents growth in the city’s tax base.
The rate approached but did not pass the rollback rate of $0.489951. If the city had passed this rate, it would have required a rollback election in order to set the rate.
2. Tax reform spurred the increase
City officials previously said the increase was partially in reaction to recent regulations passed by the Texas legislature aimed at providing relief to property owners. One of the key components of the reforms is a reduction on the cap on the revenue a municipality can collect without the need for a rollback election.
Prior to the reforms, the cap had been 8 percent, but the reforms will lower this to 3.5 percent starting in 2021. The 2019-2020 year represents the last year the city can adjust its tax rate to collect the 8 percent revenue.
3. City includes relief from tax increases
Following a request by City Council Member Shawn Teamann, the city did include tax relief in the latest budget that will offset the increase in city taxes. The budget calls for a $6 per month reduction in the city’s residential solid waste collection fees. Through this, city officials said residents should see no increase in their total payment to the city.
4. The taxes will fund the city’s debt and operations
The approved tax rate is made up of two separate tax rates: one for the city’s debt payments and a second for the city’s maintenance and operations. The maintenance rate for 2019-2020 will be about $0.338444 while the debt rate will be $0.150556.
City officials previously said the setting the tax rate represents setting a balance between the two rates. However, as the city takes on bond debt, it forces the city to lower its M&O funding.
5. The rate will support a $94.8 million budget
This represents a nearly $4.6 million drop in the budget over the previous year.