Budget retreats were held last Thursday and Friday as the Council discussed a variety of items in the City Manager’s proposed budget. But what was discussed very little is the reality that the Council is poised to increase the amount of property taxes paid by residential owners and businesses this year. The only question is—how much will they increase your property taxes?
To get some insight into that question, there are five foundational blocks of taxation to look at:
- The Effective Tax Rate (Currently $0.542963 per $100 of valuation)
- The Proposed Tax Rate (City Manager’s proposed tax rate is $0.55000)
- The Not-To-Exceed Tax Rate (Which Council approved at $0.5700)
- The Rollback Tax Rate (Which is $0.551854 per $100 valuation)
- The Adopted Tax Rate (Which will be voted on in September)
With the effective tax rate for this coming year set at $0.542963 per $100 of valuation, it would raise the identical amount of property tax revenue from the same properties as it did for the current fiscal year ending September 30, 2017.
The City Manager’s budget proposes that a tax rate of $0.550000 per $100 valuation be set instead. That constitutes an increase of $0.007307, or three-quarters of one penny per $100 valuation compared to the effective tax rate. With each penny of tax generating approximately $455,000 in property tax revenue, this three-quarters of a penny increase could bring in approximately $332,465 in additional tax revenue. That doesn’t include any additional residential property tax due to any increase in valuation determined by the Dallas Central Appraisal District.
The not-to-exceed tax rate adopted by the Council last week is $0.5700 per $100 valuation. A vote to set the not-to-exceed tax rate is mandated by state law. But, the not-to-exceed rate established by the Council is not the final number. That final tax rate number will be decided and voted on by the Council in September.
The rollback tax rate is $0.551854 per $100 valuation and is the highest tax rate that the Council can adopt before voters are entitled, by state law, to petition for an election to limit the rollback rate. Even the rollback rate would increase property taxes above the effective rate by almost one full penny.
With the Council setting a rate of $0.5700, it implies that there is some extra spending that they have in mind that is not included in the City Manager’s budget. For example, there is nothing included in the current budget to compensate for the pending results of a compensation study, which won’t be completed until November. There is also no funding included for a Cost of Living Allowance (COLA) for retired employees and future retirees. That big dollar issue is also compounded by the fact that if a COLA is funded, will it be increased on a year-to-year basis or will it be made on an automatic annual increase which would require budgeting for annually?
It’s all rather complicated and rarely discussed in detail, which is why often when the tax rate is lowered some think that equates to lower taxes, when in fact that is not the case. So, if you have concerns about higher taxes you may want to attend the tax rate public hearings which are scheduled for Tuesday, August 29 and the following Tuesday, September 5 at 6 p.m. in the Council Chambers at Town Hall.
Budget Discussion Involved Charitable Support
There was considerable discussion at Friday’s Budget Retreat regarding the money allocated for non-profits—nearly one whole hour. The Mayor questioned how many Addison citizens the service organizations serve but that information was not known. Considerable discussion revolved around the fact that the Arbor Foundation solely impacts Addison, thus several Council members felt the foundation’s request for additional funding was appropriate. Councilman Braun noted that a lot of their money has been used for public art. “Doesn’t it qualify for tourism?” he asked. The City Manager explained that it [art] doesn’t put heads in beds, thus the answer would be “no.” “It’s a nice amenity,” Councilman Duffy added, “But people don’t stay at the hotel because of the art.” Duffy saw no reason to add money to any of them at this time. Rather he expressed that he prefers to get the fountain running again in Addison Circle.
With all the varying comments the Mayor suggested going item by item for an approval but instead a motion was made to approve all recommendations and it passed unanimously.
The next topic of discussion revolved around employee compensation. Councilman Walden wanted to discuss what he understood to be resistance from the City Manager’s perspective with a proposal from the fire association that differed from the proposed compensation. Pierson explained, “If you take away merit and just focus on market, you don’t recognize the performance. I think we have a good plan in place. How we fund the plan needs to be done in a way that’s sustainable. My recommendation is that we stick with the plan,” he said.
Duffy said, “I hear from Wes that he wants to maintain that [referring to the proposed 4% merit pool]. Hopefully we will have directors who will truly allocate money based on performance and comply with as a group what we have established we wanted. I think every year you’re going to have a merit and market component.”
Walden continued to express differing views suggesting that we may face “some very difficult decisions if we don’t solve the marketplace issue and it languishes another year. I’m just concerned we not languish that we’re behind the average,” he said. But Duffy didn’t let it sit there. He said, “We’ve moved forward in the last few years. We never said to anyone that we’d close this gap in one year. We agreed to move towards that. We can’t solve this in one full swoop. The point being you’re [Walden] trying to project something we don’t know today. I saw Abilene or somewhere gave an 8% raise. We can’t afford that. We just can’t do that.”
Walden then changed the subject to current expenditures for Addison Grove, critically indicating that the [infrastructure] money was coming from a fund that it is not. Pierson had to correct him, saying, “No. That’s coming out of the stormwater and utility fund.”
This wasn’t the only point of confusion during the discussion, which mostly involved Walden, Duffy, Hughes and the Mayor. Angell contributed occasionally, but Braun and Ward rarely commented or asked questions.
The final topic of conversation revolved around COLA, with Pierson having to explain that TRMS is the only option for the Town’s retirement plan. Again, there were varying ideas but very few questions. Duffy pointed out, “You can’t ignore a potential actuarial change which would drive numbers up.” In the end Pierson recommended that if the Council intends to do a COLA that they do it on an annually funding basis at a level that the Town can afford.
It’s interesting that for a Council that appeared for the most part to make promises of reduced spending, it doesn’t look like that’s going to be the case.