The city of El Paso has introduced a “no-new-revenue” rate to fund next year’s budget – although the change may not mean a tax break for thousands of homeowners.
The no-new-revenue rate will fund the city’s proposed general fund budget, supported primarily through property and sales taxes, of about $579 million – an increase of about $66 million over the prior year.
The El Paso City Council voted unanimously Monday to introduce the no-new-revenue rate of 83.2 cents per $100 of valuation, which is the rate needed to collect the same amount of property tax revenue for the upcoming 2024 fiscal year on the same properties last year.
The proposed rate will have a varied impact on individual homeowners.
While the rate is viewed in state law as a no-increase tax rate, the impact on the city’s portion of a property tax bill will depend on how much a homeowner’s taxable valuation increased. The tens of thousands of homeowners who’ve seen valuations increase by more than 10% a year over the past couple of years will see their tax bills go up even with the no-new-revenue rate.
“It would depend upon the value of your house,” Chief Financial Officer Robert Cortinas said during the council meeting Monday. “When we publish the notification that we’re required to publish, it’s going to say that the tax rate being introduced by the City Council is a tax rate that would not increase property taxes for the city of El Paso.”
Cortinas said the city could increase revenue by about $7.8 million in property tax annually by dissolving Transportation Reinvestment Zone 2.
The designated areas known as TRZs are meant to encourage development and capture tax increments of property within the zone to help fund improvements to highways, roads and other transportation infrastructure. TRZ 2 includes five corridors along Interstate 10 and Transmountain Road up through Americas Avenue and North Zaragoza Road from the Zaragoza Port of Entry to Montana Avenue.
To capture the additional tax revenue, however, the TRZ had to first be dissolved by paying off about $47 million in debt owed for projects within the zone. The council approved using a current year surplus of anticipated year-end revenue of about $38 million, combined with up to $11 million of the unassigned reserves.
Paying the debt early will also save the city $20 million in interest, Interim City Manager Cary Westin said in a statement.
Cortinas said staff had to recalculate the proposed tax rate by including the revenue the transportation zone was generating. The city late last week had posted a proposed tax rate of 81.9 cents per $100 of valuation on a presentation that was to be shared with council on Monday.
“What that ends up doing is your adjusted revenue is now higher, which means your no new revenue rate is a little bit higher,” Cortinas said.
The El Paso city government routinely adopted tax rates above the “no-new-revenue” rate until last year. But City Council and other officials would misleadingly claim to be holding the line on taxes because rates were the same as the previous years, allowing the city to take in millions of additional dollars in property taxes as valuations rose.
City Council members this year instructed the staff to create a budget with a no-new-revenue rate.
The budget will fund increases to police and fire collective bargaining agreement pay raises, pay raises for non-uniformed employees, street repairs, operations and maintenance for quality of life bond projects including those anticipated to open next year such as the children’s museum and the Mexican American Cultural Center as well as vehicle replacements, among other priorities.
Cortinas said $18.8 million of the additional revenue will go toward various priorities such as public safety, streets, compensation increases for non-uniform employees and city facilities.
City staff will return to the City Council with recommendations on how to prioritize about $11 million to allocate toward street projects and facility improvements.
Introducing the ordinance for the proposed tax rate is the next step in the city’s budget and tax setting process after receiving certified tax rolls from the El Paso Central Appraisal District.
A public hearing on the budget and tax rate will be held Aug. 14. City Council will vote whether to adopt the budget and tax rate Aug. 15.