Southlake council sets public hearing to consider tax rate above no-new-revenue threshold

The Southlake City Council on Aug. 5 voted to set a public hearing for Aug. 19 to consider adopting a property tax rate above the state-defined "no new revenue" rate.

City staff presented two rate options and the financial trade-offs before the vote. A proposed rate of 0.295 per $100 of assessed value would be a one-cent reduction from the current rate and would reduce city revenue by about $1.4 million compared with keeping the current rate, while remaining above the no-new-revenue threshold. The no-new-revenue rate, 0.273677, would reduce city revenue by about $4.02 million compared with the current rate, staff said.

The council heard a step-by-step explanation from the city's finance team about how state "truth in taxation" rules require a public hearing if the council intends to consider a rate that would produce more revenue from existing property than in the prior year. Chief Financial Officer Sharon Jackson summarized historical trends in property values and revenues and showed how the two rate options would affect the average homeowner's bill and the city's cash funding available for the capital improvement program (CIP).

"If this item is approved tonight, it is not setting a final tax rate, but rather establishing the ceiling for the tax rate considerations through the budget process," the city manager said during the item.

Jackson told the council that, based on certified values the city received in July, taxable value rose about 4% year over year, with roughly 30% of that increase attributable to new construction and the rest to value changes on existing property. She said the average taxable value in Southlake is just over $900,000 and the average appraised home value is just over $1,000,000.

On the two options presented, Jackson said the 0.295 rate would leave the city with the ability to cash-fund part of its five-year CIP (reducing planned debt issuance to about $11.7 million) and keep planned transfers to facility maintenance, vehicle replacement and technology funds. Adopting the no-new-revenue rate, she said, would eliminate CIP cash funding for FY2026, push roughly $13.2 million of that CIP to debt, and require reductions to transfers for facility maintenance, vehicle replacement and technology.

Council members asked questions about the practical meaning of "no new revenue" versus a lower rate that still reduces the total tax levy relative to the current rate. "No new revenue means that we're still collecting additional revenue," Jackson explained, describing how valuation changes on existing property can produce more revenue even at a lower nominal rate.

Several council members voiced support for the 0.295 option as a balance between tax relief for homeowners and preserving funding for maintenance and capital needs. "I absolutely want to cut the rate," one council member said, noting the importance of maintaining CIP funding rather than increasing debt. Another said the one-cent reduction would provide relief while avoiding excessive debt for capital maintenance.

Councilmember motioned and the motion to set the required public hearing carried 6-0. The hearing will be held at the council's Aug. 19 regular meeting; the motion does not set a final rate.

The council also heard staff warnings about other revenue pressures: Jackson noted an anticipated audit adjustment from the Texas Comptroller that would reduce future sales-tax receipts by about $1 million, and she reiterated that personnel costs and maintenance of city infrastructure remain the largest budget drivers.

The staff presentation and council discussion will be part of the formal public record leading into the Aug. 19 public hearing and subsequent budget adoption process.