Council reviews budget proposal including 1¢ tax-rate bump, 3% COLA and TMRS increase to 7%

City staff on July 30 presented a draft budget for fiscal 2025–26 that would raise the property tax rate by one cent, pay a 3% cost-of-living adjustment to employees and increase the Texas Municipal Retirement System contribution rate to 7%.

The proposed change to the city's property tax rate would move the rate from 0.4617 to 0.4717, Fred, a staff member presenting the budget, told council. "We're asking for a tax rate increase of, 1¢ from 0.4617 to 0.4717. We're requesting a 3% COLA for all employees," he said. Fred also outlined a request to increase the municipal retirement withholding and city match, saying the city is currently at 6% and wants to move to 7% to help recruit police and fire staff. "We are probably maybe 1 of 2 of all the cities in the area that are still at 6%," he said.

Why it matters: the tax-rate change would raise estimated property-tax revenue in staff's draft to $3,891,000; staff said the final number depends on the appraisal district's certified values, expected in mid-August. Fred told council the appraisal district will also provide the city's "no-new-tax-rate" figure; if a proposed rate increase exceeds that threshold, state law requires an election.

Details and next steps: Fred said the TMRS change requires a council ordinance and would take effect Jan. 1 if adopted. He told council the city contributes a match under TMRS and that increasing the employee contribution rate would raise the city's matching cost: "So it cost us 2 and a half percent to raise that 1% because we have to match it." He recommended moving first to 7% with the possibility of later consideration of 8%.

Other possible revenue options flagged by staff included sales-tax growth, annexation and other revenue measures. Council members asked clarifying questions about the mechanics of TMRS, how the no-new-tax-rate calculation works and the timing for the appraisal district's certification. Fred said staff will return with the appraisal district's figures and that any tax-rate ordinance would be brought forward in time to meet statutory notice requirements.

Ending: The council did not take a final vote on the tax rate or TMRS at the July 30 workshop; staff requested direction and said formal ordinance(s) and public notices would follow if the council directs staff to proceed.