The council voted 10-3 Wednesday against a resolution that would have allowed the city to raise the city's property tax increase cap under S.B. 2, which Texas Republican Gov. Greg Abbott signed into law last year. S.B. 2 specifies that municipalities are allowed annual property tax increases up to 3.5%; they must obtain permission from voters for larger increases. However, the bill allows municipalities to cap the property tax rate increase at 8% during years when a statewide disaster is declared.
Residents do not need to face large tax increases after the pandemic, Council Member Lee Kleinman told his colleagues.
"Keep in mind that 3.5% is also a tax increase," he said. "If we're really looking out for the best interests of our residents, we should be looking at how to decrease taxes."
Kleinman added that the council should instead look at ways to cut costs and reduce services.
Elizabeth Reich, the city's chief financial officer, said the resolution would preserve the city's right to raise taxes but would not oblige the council to raise property taxes by 8%. The council, in September, would still have to set a final tax rate, Reich noted.
"It simply preserves all of your flexibility and options," Reich said. "At this point, we don't know what the revenue situation is that we're going to be facing. … I don't have an indication of a hole we'll be trying to fill next fiscal year."
Reich said that increasing the property tax increase cap to 8% would raise the tax by approximately $150 a year for the average home. The average home value in Dallas was $303,000 in 2019, she noted.
Council Member Tennell Atkins, who voted in favor of the resolution, said raising the cap would give the city options as it faces the economic effects of the pandemic.
"We don't know if we need the tax rate or not," Atkins said. "It's in place so that just in case we do need it, we can go and raise that tax rate or we can lower it under 3.5%."
But those opposed to the increase prevailed, including Council Member Cara Mendelsohn, who told the council the city didn't 't need the option to raise the property tax cap, adding that a higher property tax would be passed down to Dallas renters.
"Renters don't pay the property tax directly, but every single renter is paying property tax through their rent check," Mendelsohn said. "I want to take this option off the table."
--Editing by Vincent Sherry.
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