The Houston City Council voted 12-3 to keep the same tax rate of 51.9 cents on each $100 of taxable value as last year.
At the heart of the debate was whether to increase the city’s tax rate to balance the budget the council passed in June or to keep it at the same rate and face a budget shortfall.
Mayor John Whitmire insisted that raising taxes or fees should be the city’s last resort, even as city officials acknowledged that holding the tax rate steady will leave Houston roughly $227 million short of its approved budget, which could grow into $463 million in 2030.
Last year, the city did not see a property tax increase, 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.
“I’m down here to fix Houston. Financing is critical. The tax rate and the budget is not just about dollars and cents, it’s about trust and credibility…we’re not going back.”
Mayor John Whitmire
Whitmire has been staunchly opposed to raising tax rates, arguing that the public does not expect the city to raise taxes and fees.
“I made a commitment when I ran that we wouldn’t raise taxes or fees until we cut out waste, duplication and corruption,” Whitmire said. “We still have some work to do.”
Whitmire iterated that when he was sworn in after former mayor Sylvester Turner’s term, he inherited a $160 million deficit and nearly exhausted federal American Rescue Plan Act (ARPA) relief funds.
“Do we have challenges? Yes,” he said. “I listen to the citizens on Tuesday. I get call letters. I live in Houston. We want to improve services, but we can’t hurt our credibility…People’s utilities are higher. People say, ‘Please do not raise taxes or fees. Take other measures.’”
Councilman Edward Pollard disagreed with Whitmire.
“Why are we using a different tax rate today than what was proposed in the budget? I’m not sure if that’s just smoke and mirrors to get the vote,” he said. “If you’re gonna have an administration that is transparent, then you can’t present to the public just to get satisfaction during the budget debate.”
Council member and Chair of the Budget and Fiscal Affairs Committee Sallie Alcorn added that other Texas cities bring in additional revenues through higher rates, taxes, trash fees, utility transfers and other measures, but Houston has the lowest tax rate of other large Texas cities and the lowest composite tax rate combined.
Last year, she introduced a Proposition A proposal to increase the city’s tax rate, but withdrew it when Whitmire announced the $50 million recovery funds.
“The numbers tell the tale. It’s not emotional or political, it’s just math,” said Alcorn. “The city’s revenue growth does not keep up with spending to support the vital services provided by our property and sales tax-supported general funds, police, fire, trash and parks. The police and fire contracts raise costs by 36.5% and 34% over the next five years.”
Alcorn warned that stopgap measures, like unfilled positions, temporary cuts and one-time savings, create instability.
“I’m a little weary because it’s been three mayors now that have said similar things and nobody’s really done anything,” she said. “It’s a swing and a miss to not bring in the revenue. We need to cover our budget.”
A balancing act under the revenue cap
At issue is whether Houston should adopt a higher tax rate allowed under the city’s voter-imposed revenue cap or keep the rate flat at 51.92 cents per $100 of property value.
Finance Director Melissa Dubowski said during a Budget and Fiscal Affairs Committee meeting that the flat rate would generate $1.45 billion in property tax revenue, which is approximately $53 million less than the budget projected when it was passed in June.
“This means that we’re gonna have to draw about $53 million out of fund balance to make up the difference,” Dubowski said. “In order for us to collect our budgeted amount of revenue, the property tax rate would have to be 53.79 cents, which is roughly 2 cents higher than our prior year tax rate.”
The state-capped rate under the law, without going to voters, is 55 cents, which would allow the city to bring in about $43 million above the budgeted amount.
The current budget shortfall would need to be covered by the city’s reserves, reducing its fund balance from 14.7% to 12.7% of expenditures. This is still above the city’s 7.5% target but trending downward.
City Controller Chris Hollins warned that the deficit represents “a self-inflicted shortfall.” His office advised the mayor that the city needs to pad its general fund reserves for emergencies. He added that keeping the tax rate flat would do the “exact opposite” of that advice, leading to the second-largest deficit in Houston’s history.
“This budget counts on a tax increase. Revenue projections exceed what the current tax rate would generate to meet this projection.”
– City Controller Chris Hollins
“It means collecting substantially less revenue than the city needs to meet the budget that you all passed in June,” Hollins said. “To cover that gap, we’ll have to draw down our reserves even further. The same reserves that we depend on during hurricanes, freezes and economic shocks.”
Hollins emphasized that the council knew this scenario was coming months ago.
“This budget counts on a tax increase,” Hollins added. “Revenue projections exceed what the current tax rate would generate to meet this projection.”
He further warned that repeated reliance on reserves “is unsustainable” and could threaten the city’s credits if left unaddressed.
Whitmire defended his decision, saying he is focused on reorganizing city operations rather than raising taxes. The administration is also exploring new revenue options, including water utility transfers and solid waste fees.
