Proposed cap on property taxes could have powerful impact on Liberty Hill



After the Texas Senate passed a property tax cap bill last week, Liberty Hill’s city government could be facing a substantial budget crunch next fiscal year.

The bill drops the threshold for property tax revenue growth from 8 percent to 5 percent. Previously, exceeding that mark allowed residents to submit a petition for an election letting voters decide whether to roll back the tax rate. The proposed legislation automatically triggers an election.

Bill proponents say that the automatic election would help curb continued increases in property taxes, and deliver more control to local voters.

Opposition from Liberty Hill city administrators joins a choir of municipal governments across Texas.

Liberty Hill’s Chief Financial Officer Amber Lewis said that Senate Bill 2 would essentially cut the property tax revenue in half, which, she wrote to The Independent in an email, “is the price of about two full-time police officers. Obviously, this is a significant impact to LH (Liberty Hill).”

Last week, the City of San Antonio sent out an email saying that, if the bill had been in effect for the past decade, the average homeowner would have saved $4.30 a month, but the city this year would have lost $58 million.

“Is a $4 cup of coffee worth 580 police officers?” the city asked in its email.

In Liberty Hill, Lewis said that for someone with a home valued at $100,000, the proposed cap would save them $3.72.

She wrote that using last year’s certified property value of $187,440,245, the 5 percent cap means a reduction of revenue nearing $100,000.

The threshold in question does not strictly refer to tax hikes or any active effort on the part of the city. Instead it refers to how much tax revenue the city actually collects from properties from one year to the next.

This means that cities where the total amount of property value is rapidly increasing—such as Liberty Hill, where subdivisions are popping up and housing prices are increasing—a rapidly increasing property value heightens the risk for exceeding the threshold.

The tax rate in Liberty Hill stands at $0.50 per $100 property value.

The case in Liberty Hill is complicated, Lewis said, because $0.41 of the $0.50 taken by the property tax goes toward debt service, which does not count toward the cap.

The rest of the property tax goes toward what is called, “operations and maintenance,” or, the basic minimum functions of a city, such as public safety or building new parks.

For Liberty Hill, all operations and maintenance funds go to the police department, who has hired most of its six full-time officers in the past year. They also recently moved to a 24-hour patrol, which was not possible with their previous numbers.

The small revenue margins in question for a comparatively smaller town like Liberty Hill are why Texas Municipal League Executive Director Bennett Sandlin said that the legislation could have an unequal effect across towns, “although it’s across the board in that it affects any town that wants to fix potholes, prevent disasters, or pay police.”

While a large city might be able to afford the election and still retain an amount of added revenue, he said, for a small town with smaller margins, the costs for an election could make irrelevant whatever gains were at question for voters.

Lewis said that there is precedent for such a situation in Liberty Hill.

A little over three years ago, the city’s revenue from property taxes jumped over 8 percent from the year before, although the rate had not been increased. Former Mayor Jamie Williamson circulated a petition to call an election. Though no election was held, internal projections by the city anticipated the election process to cost around $8,000, roughly half the $16,000 in revenue under question at that time.

“If the election fails, the city would not only not get the $16,000, it would lose the $8,000,” Lewis said.

The bill has not yet been discussed with corresponding legislation in the House, where it could be killed before becoming law.