04-14-18 Special Meeting of the La Porte City Council - Budget Retreat

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REQUEST FOR CITY COUNCIL AGENDA ITEM Budget Agenda Date Requested: April 14, 2018 Source of Funds: Requested By: Councilmember Danny Earp Account Number: Department: Administration Amount Budgeted: Report: ___ Resolution: _____ Ordinance: _________ Amount Requested: Exhibit: Penny on the Tax Rate slide Budgeted Item: YES NO SUMMARY & RECOMMENDATION This item has been placed on the agenda at the request of Councilmember Danny Earp. For the past 30 years, the City Council for the City of La Porte has held the total property tax rate of $71 cents per $100 of assessed valuation. The City of La Porte tax rate is broken down into two pieces: 1. Maintenance & Operation (M&O) rate, which is $0.605 and provides the funding for personnel costs, materials & supplies, contracted services and capital for General Fund expenditures. M&O rate is 85% of the total property tax rate. 2. Interest & Sinking (I&S) rate, which is $0.105 and provides the funding for principal and interest payments for debt obligations for governmental fund type projects. I&S rate is 15% of the total property tax rate. It is important to note the IDA payments are based on the Based upon current property assessed valuations, One Cent on the Tax Rate = $502,812 (both ad valorem taxes and industrial payments in lieu of taxes. According to Harrris County Appraisal District, the average home value in La Porte is $116,109. Once the Homestead Exemption of 20% in applied, an average homeowner will be assessed property tax on $92,887. At the current tax rate of $71 cents per $100 portion of their property tax bill. Councilmember Danny Earp has requested staff consider a $5 Cent property tax reduction, which would reduce the total tax rate from $71 Cents to $66 Cents. This $5 Cent reduction would save an average homeowner $46.44 per year in their City taxes. Industrial District Companies (on aggregate) will save $200,044 per penny or $1 million for a $5 Cent tax reduction. In total, a $5 Cent property tax reduction will reduce revenue to the City approximately $2.5 million fiscal year 2018-19. A property tax reduction of this significance is not sustainable; therefore, there would need to be discussion about possible General Fund expenditure reductions related to programs and projects.