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City analysis: SB2 property-tax caps and conservative modeling could produce multi-year shortfalls
Summary
City staff told the Richardson City Council that Texas’ SB2 property-tax cap has created a compounding revenue effect and, under conservative assumptions, the city could face multi-year deficits without new revenue or program cuts; staff asked council to prioritize core services and prepare outreach to state legislators.
City Manager Don Magner and Budget Officer Bob Kleinmire presented the city’s year-end financial results and a multi-year fiscal model showing the impact of the Texas Property Tax Reform and Transparency Act of 2019 (SB2) on Richardson’s long-term revenue picture.
Kleinmire reported the general fund finished FY25 with $183.6 million in revenue, about $2.9 million above the original budget, driven by sales tax strength; property-tax collections were $3.2 million below the budgeted amount. He said total general-fund expenditures finished roughly $5.7 million below budget, largely from personnel and professional-services savings, leaving a fund balance of about $54.6 million (approximately 91 days).
Magner then walked the council through a multi-year model that staff said assumes conservative revenue growth under SB2’s 3.5% cap, modest sales-tax growth and aggressive expenditure restraint. Using those assumptions, Magner said Richardson “has essentially lost $21,000,000 of new revenue as a result of SB 2” over a six-year comparison and that restoring budgetary items such as frozen positions and Fire Master Plan operations would create structural pressure in FY27 and beyond.
Magner told the council the model also tests what would happen if the cap were reduced further to 2.5%: with the same conservative assumptions, the city would run deficits sooner. He urged the council and staff to review program scope, prepare a prioritized list of potential program reductions or alternatives, and consider coordinated outreach to state legislators about the local impact of SB2.
Councilmembers responded by urging outreach to state representatives and asking staff for a top-20 list of programs and services that could be candidates for reduction or closer review. Councilmember Justice framed the problem as regional and statewide, not a Richardson-only issue, and urged residents to speak with their state lawmakers.
Next steps: staff will keep the council updated during the FY27 budget process, provide requested program-priority materials, and seek opportunities to brief state legislators on the modeled local impacts of any proposed changes to SB2.
