Houston will not see a property tax increase this year, thanks to the approval of a $50 million fund for debris removal in counties impacted by Hurricane Beryl and the derecho storm that hit Houston in May 2024.
For now, the city’s tax rate will remain at its current level of 51.9 cents per $100 of assessed value, instead of $104 a year for homeowners. The City Council is expected to vote on the flat tax rate next week, on Oct. 16.
Houston Mayor John Whitmire was opposed to a tax increase, pushing for the tax rate to remain under 52 cents per $100 of a property’s assessed value. But, Council members Sallie Alcorn, Joaquin Martinez, Letitia Plummer, and Mario Castillo proposed, under Proposition A, a tax rate raise of under 6% to 55 cents on each $100 of taxable value.
The council members’ proposal aimed to use the funds from the tax increase to address the need for disaster relief after Hurricane Beryl and the May Derecho left behind a trail of destruction in the city.
Gov. Greg Abbott’s announcement of the $50 million fund for 122 affected counties, administered by the Texas Division of Emergency Management with assistance from the Texas Commission on Environmental Quality, helped table the agenda item and gained support from council members who were for the tax increase.
“As Southeast Texas recovers from devastating severe weather this summer, Texas continues working to support local communities as they rebuild and move forward from Hurricane Beryl and the Derecho Storm,” said Abbott. “As many across the country experience a lack of and delayed funding from the Federal Emergency Management Agency, Texas is providing $50 million in emergency funds to assist impacted communities in their ongoing efforts to remove debris.”
Alcorn, chair of the city’s Budget and Fiscal Affairs Committee, withdrew the proposal entirely after the state’s funding announcement. However, she reiterated why the proposal was important. Later, Mayor Whitmire said her research was important to take the city’s finances forward.
“While complete and total structural imbalance in municipal government is difficult to achieve, Houston can and must do better. Our city’s future depends on it,” Alcorn said during the council meeting. “When our budget goes out of whack, we have two options: we rein in spending, or we bring in more money, and sometimes we have to do both. And it’s no different for the city facing a $230 million budget deficit in July.”
How did we get here?
Last week, City Controller Chris Hollins warned the council that Houston must address its financial condition as it faces the risk of its credit rating falling and an increase in borrowing costs. S&P Global and Fitch Ratings, the “Big Three” credit rating agencies, recently announced the city’s rating outlook falling from “stable” to “negative,” owing to its debt service costs without a plan to bring in more revenue.
Houston has not raised its property taxes in recent years due to state and local voter-imposed revenue caps.
Property taxes remain controversial in Texas, because they are higher than in other states, including New York, Michigan, Ohio and California. According to a Rocket Mortgage analysis, Texas has the sixth-highest property tax rate in the country. This is partly because of the state’s no-income-tax policy, although other southern states with no income tax have lower property taxes, per a Rice University study. A voter-imposed revenue cap, passed in 2004, caps the annual growth of property tax revenue to the combined rates of inflation and population growth or 4.5%, or whichever is lower. Texas’ property tax reform law limits increases to its property tax revenue to 3.5% without a vote, beyond which the city would have to get voter approval.
During the press conference, Whitmire reiterated his stance on a property tax rate increase. He tried every other method before proposing it.
“Houstonians do want better services, better law enforcement, but in my judgment, we’ve got credibility. I don’t think the public understands some levels of government running out and raising taxes before they’ve done their review of waste, duplication, and corruption,” he said. “People have been indicted for missus and city funds. I think we have to clear the air and have a one-on-one conversation, and I’ll incorporate the council members that were bold enough to use Prop A to come forward.”
Why Prop A was introduced
Prop A came about after a September Budget and Fiscal Affairs meeting revealed a $211 million estimate in damage from the storms. Despite reimbursements from the state, Houston had to cover the remainder of $52 million, $40 million of which would have to come out of the general fund. With the same tax rate without state funding, that would have meant a deficit of $86 million.
However, Houston might still struggle with funding for other issues, including $20 million in other storm-related costs and a $40 million budget shortfall. Whitmire said he wants to wait for reports on the city’s department spending and efficiencies before opting for a tax increase. Ernst & Young is conducting an audit, although Whitmire does not believe it will “solve our problem.” An early snapshot says there is both overstaffing and understaffing, with 40% of directors managing teams of three people or less.
“This [relief funds] covered the debris pickup. The good news is our share and matching from the FEMA is being covered by the notice we got today. There are other issues that we have to deal with and we’re getting resources from other agencies,” he told reporters after the meeting. “We’re billing METRO for some of the services that we provide, so there’s going to be additional revenue coming to the table.”
He applauded Austin state leadership for the funds.
“They listen, I had credibility with them. They don’t wanna raise property taxes. Austin has worked in recent sessions to do everything they can to lower the property taxes. So they certainly agreed with me that we need to maintain the tax rate proposal that we adopted today,” he said.
