FULSHEAR, Texas (Covering Katy News) — Fulshear residents could see a higher city property tax bill next year as city officials confront a significant slowdown in the amount of new taxable property being added to one of the region's fastest-growing communities.
The Fulshear City Council on Aug. 18 moved forward with a proposed property tax rate of $0.19310 per $100 of taxable value, up from the current rate of $0.167903. The rate has not been finally adopted; council is scheduled to hold a public hearing Sept. 1 before taking final action on the tax rate.
For a home with a taxable value of $492,498, the proposed rate would generate a city property tax bill of about $951, compared with about $827 at the current rate, before accounting for any other changes affecting the taxable value.
The proposed rate remains below the city's voter-approval rate of approximately $0.20490.
During the meeting, Council Member Omar Peña moved to set the proposed rate at the higher voter-approval rate of approximately $0.20490. No other council member seconded the motion, so it died without a vote. Council instead moved forward in the tax-rate process with the lower $0.19310 figure. That rate remains proposed rather than finally adopted.
Fulshear's growth is changing
The proposed tax increase comes as Fulshear continues to add homes and businesses, but city officials say the extraordinary pace at which new development has expanded the tax base is beginning to slow.
New taxable property added to Fulshear's tax rolls totals approximately $180.2 million this year, compared with roughly $375 million last year.
Council Member Abhi Utturkar noted during the meeting that the $180.2 million in new taxable property represents only about 3.25% of the city's existing taxable value.
That matters because rapidly growing cities can generate substantial new property tax revenue without relying as heavily on existing taxpayers. Each new subdivision, commercial development and other taxable property adds to the tax base.
As that growth slows, however, the city must increasingly rely on its existing tax base to pay for police, streets, infrastructure and other municipal services.
Finance Director Angela Alvarado told council that Fulshear is beginning to reach that point.
“We are kind of reaching that point of maturation and that new growth will significantly slow down in the coming years,” Alvarado said.
The slowdown also has implications beyond property taxes. Rapid development generates revenue from building permits, inspections and other development-related activity that can decline as the pace of construction moderates.
Higher rate would support city budget
City staff has recommended the $0.19310 rate as part of Fulshear's preliminary budget.
The proposed rate consists of approximately $0.124809 for maintenance and operations and $0.068291 for debt service.
The maintenance-and-operations portion pays for the city's day-to-day services, while the debt-service portion pays principal and interest on bonds and other city debt.
The city's taxable value is approximately $5.55 billion, while its total appraised value is approximately $7.26 billion.
The city's no-new-revenue tax rate is approximately $0.159522. That is the rate calculated to produce roughly the same property tax revenue from properties taxed in both years, excluding new construction and certain other adjustments.
Because the proposed $0.19310 rate is above the no-new-revenue rate, the city would collect more property tax revenue from its existing tax base.
Final tax-rate vote still ahead
The $0.19310 rate is not yet the city's adopted tax rate and is not necessarily the rate Fulshear residents will ultimately pay.
The city is scheduled to hold a public hearing on the tax rate Sept. 1 before council takes final action.
The distinction between the proposed rate and the maximum voter-approval rate became an issue during the Aug. 18 meeting. Council Member Omar Peña moved to use the higher rate of approximately $0.20490, but no council member seconded it. Without a second, the motion died and the higher rate was not put to a vote.
That decision could become significant as council works through its final budget because it limits how much additional property tax revenue the city can generate without revisiting the legal and procedural requirements governing the tax-rate process.
For Fulshear taxpayers, however, the larger issue extends beyond this year's rate.
The city's tax base is still growing. But the Aug. 18 discussion provided one of the clearest acknowledgments yet from city officials that Fulshear is entering a new phase — one in which enormous amounts of new development may no longer generate enough additional revenue to keep pace with the cost of serving a larger city.
Keep up with what's changing in Fulshear
Fulshear is still growing, but the numbers behind that growth are changing — and those changes could affect homeowners' tax bills and city services for years to come. Subscribe to Covering Katy News for independent reporting that goes beyond the meeting agenda to explain what local government decisions mean for you. SUBSCRIBE HERE