TOMBALL, Texas — City staff told the Tomball City Council on Monday that a provision in a recently passed state bill could prevent the city from adopting a tax rate above its no-new-revenue rate if the city’s annual audit is finalized more than 180 days after the fiscal year ends.

The city’s staff member Jessica, addressing the council at a July 7 workshop, quoted the new language: “the municipality may not adopt an ad valorem tax rate ... if the city has adopted its financial audit more than 180 days beyond the end of its fiscal year.” She said Tomball’s fiscal year ends Sept. 30, and 180 days after that falls around March 27 or 28.

Why it matters: Jessica said the council’s proposed fiscal 2025 budget was built on the voter-approval (voter-approval) rate. Had the council been required to adopt the no-new-revenue rate instead of the voter-approval rate in FY25, the difference to the general fund would have been about $2,300,000; she estimated the exposure for the current budget process could be roughly $2.5 million to $3 million.

Staff presented the penalty’s mechanics and legal uncertainty. The bill (referred to in the meeting as SB 18 51) becomes effective Sept. 1, 2025, and does not explicitly state whether the penalty applies to tax-rate adoptions later in the calendar year for the same fiscal year. Jessica told the council the Texas attorney general has not yet issued guidance on whether missed audits from prior fiscal years will trigger the penalty for tax-rate adoptions this year.

Staff-proposed mitigation: To preserve the council’s option to adopt a voter-approval rate this year, staff proposed an accelerated calendar that would finalize the budget and tax-rate process before Sept. 1. The outline Jessica provided would: hold the first budget workshop July 21; add a second workshop in late July (options offered: July 23–25 or July 30/31 depending on availability); conduct the budget public hearing and first reading in early August; hold second reading of the budget and first reading of the tax rate on Aug. 18; and schedule a special called meeting on Aug. 25 to complete tax-rate adoption. Jessica said the accelerated schedule complies with state notice and public-hearing requirements but would compress staff and council review timelines.

Audit timing and contracting: Jessica said meeting the 180-day audit deadline is partly within the city’s control and partly dependent on audit firms’ schedules. She said the city’s FY24 audit was adopted after the 180-day deadline and that the city included a clause in its FY25 audit request-for-proposals requiring the selected auditor to complete audits in accordance with SB 18 51 going forward.

Council discussion and staff concerns: Council members and staff discussed scheduling constraints and the practical burden on staff and auditors of the compressed timeline. Several council members expressed concern about the operational load on department staff if the accelerated schedule is adopted; Jessica acknowledged the workload but said the current budget cycle has relatively few new program requests and is focused on capital and ongoing operations, which makes streamlined review more feasible.

Uncertainty from state: Jessica read TML (Texas Municipal League) guidance noting ambiguity about how and when the attorney general will enforce the new penalty, and that many Texas cities are split roughly 50-50 on whether they met the deadline this year. She told council: “It’s not clear whether the new penalty will apply to a city adopting its tax rate for the 25-26 fiscal year if the city has already missed the deadline to file the financial statement for the 24-25 fiscal year.”

Next steps: Staff asked the council to confirm availability for the accelerated schedule and to consider moving some workshop start times earlier to provide adequate discussion time. No formal motion or vote was taken at the July 7 workshop; staff said it will post notices and material quickly if the council confirms the accelerated calendar so the city can preserve the option to adopt a voter-approval tax rate this year.

(Ending) The council is expected to confirm workshop dates and availability in coming weeks; staff said it will publish required notices and, where possible, include new contract language to require timely audit completion.