Truth-in-Taxation FAQs for Taxing Units
- 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 and the quarter-page ads 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. - Do we have to use the special wording in Tax Code Section 26.05 if we are not exceeding the effective tax rate?
No. The wording is only required if the proposed tax rate exceeds the effective rate. - 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. - 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 put the Public Hearing Notices on the Web?
Yes.
How long do they have to stay there?
The law does not specify a time frame. - 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?
Recent legislation created changes in Tax Code Section 26.05 (a) for school districts and other taxing units. The new law provides that school districts must adopt the published debt rates as calculated by law, not lesser amounts than what was published. For all other taxing units, legal advice is needed. - 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. They are exempt from the required public hearing and notices. - 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 or quarter page ads are not required. - What happens if a city adopts a tax rate over its rollback rate?
A taxing unit that adopts a tax rate over the rollback rate is subject to a petition process that could result in a rollback election.