Harvey affects tax rates for proposed budget

Published 8:55 am Wednesday, August 15, 2018

By Dawn Burleigh

The Orange Leader


Hurricane Harvey is the storm which will not end. Months after the initial damage from the storm, Harvey returns to reek havoc with the property tax values.

With property values down, the city was forced to consider worse case scenario for the proposed tax rate for the upcoming budget.

Orange City Council set the projected 2018 Rollback Tax Rate at .8304 per $100.

“We will not go near that number,” Mayor Larry Spears Jr. said. “We are working to be below that number.”

Councilman Bill Mello added the council would work for numbers below the .8034.

City Manager Dr. Shawn Oubre also confirmed the vote on Tuesday morning was not the final vote and the council had to set a rate to be flexible as once the rate has been approved, it could not go up by law.

“We have spoken to the staff to cut every project they could,” Spears said. “By no means do we want to raise taxes.”

The recent proposed budget, available online at http://www.orangetexas.net/?s=budget includes every project and request of the staff and council. It is a tool for determining the final, yet to be approved, budget.

The rollback tax rate calculation splits the tax rate into two separate components – a maintenance and operations (M&O) rate and a debt service rate. M&O includes such things as salaries, utilities and day-to-day operations. Debt service covers the interest and principal on bonds and other debt secured by property tax revenues.  The rollback tax rate is the sum of M&O and debt service rates. In most cases, the rollback tax rate exceeds the effective tax rate, but occasionally decreases in a taxing unit’s debt service will cause the effective tax rate to be higher than the rollback tax rate, according to the Texas Comptroller website.

The effective tax rate enables the public to evaluate the relationship between taxes for the prior 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.

To do this, several adjustments must be made. Those adjustments are found in section 1 one of the Comptroller’s sample tax rate calculation worksheets. The formula assumes that if values increase, the tax rate should decrease to create the same amount of revenue as it did the year before, or if values decrease, the tax rate must increase to produce the same amount of revenue.

The calculation process starts after the chief appraiser delivers to the taxing unit the certified appraisal roll and the estimated values of properties under protest. The taxing unit’s tax assessor determines the following information:

  • the total appraised and taxable value of property in the taxing unit;
  • the total appraised and taxable value of new improvements; and
  • the total taxable value of property annexed since the prior year.

The tax assessor submits all of this information to the taxing unit’s governing body or to the school board. The governing body or school board designates an officer or employee (often the tax assessor-collector, but not necessarily) to calculate the effective tax rate and the rollback tax rate.

Calculating the effective tax rate requires the prior year’s taxes and the current year’s taxable value for property taxed in both years. Dividing the taxes by the value (and multiplying by 100 to convert to a rate per $100 of value) produces the effective tax rate, according to the Texas Comptroller’s website.