Truth-in-Taxation for Taxing Units
Frequently Asked Questions
- If our taxing unit wants to adopt a tax rate that is equal to or lower than our effective tax rate, are the two public hearings required?
No. Simply adopt the tax rate at a regular meeting (assuming that the rollback rate is higher than the effective rate). The adoption of the tax rate must be a separate agenda item. The M&O and I&S rates must be adopted separately. 1
- What constitutes an unencumbered fund balance?
The term means the estimated amount of maintenance and operation or general fund balances remaining at the end of the current fiscal year that are not encumbered with, or by, corresponding existing debt obligations.2
- How do you calculate the percent of increase?
Subtract the difference between the proposed rate and the effective tax rate. Then divide the difference by the effective tax rate to get the percent of increase.
- Do we have to post public hearing notices on our website?
Tax Code Section 26.065 and Local Government Code Section 140.010 require certain notices be posted on a website that the taxing unit owns, operates or controls.
- Why is my rollback rate lower than my effective tax rate?
The rollback rate can be lower than the effective tax rate when there has been a substantial reduction in debt owed by the taxing unit.
- Can we adopt a lower debt rate than what we published in the newspaper?
Taxing units other than school districts, water districts and small taxing units must adopt the published debt rate.3 School districts may adopt a rate lower than the published rate if the calculated rate decreases after publication.4
- How can I determine if I qualify as a small taxing unit?
A small taxing unit is one that sets a tax rate lower than $.50 and raises less than $500,000 when multiplied by the current taxable value. Small taxing units have a special notice process.5
- If the same tax rate as last year is proposed, are public hearings and quarter page ads required?
Last year’s tax rate is not relevant to the current year’s Truth-in-Taxation requirements. If the tax rate proposed by the governing body does not exceed the lower of the effective rate or the rollback rate, two public hearings and quarter page ads are not required.6
- What happens if a taxing unit adopts a tax rate over its rollback rate?
A taxing unit, other than a school district, that adopts a tax rate over the rollback rate is subject to a petition process that could result in a rollback election.7