Holding the Rate...Good Deal or Scam?

Updated April 30, 2004

By Ron C. West

One of the few issues raised by the challengers in the upcoming election that the NRH incumbents have commented on, relates to their proud claim that they have “held the rate on property taxes for the past 11 years”.   Further, they have announced that they plan to “hold the rate” indefinitely into the future.  You can find this information both on the City’s website and the Mayor’s re-election website.  The impression they hope that you get from this is that they are not raising your property taxes.  You know, blame it on Tarrant Appraisal District, they are the ones that are raising the values on your home by nearly 10% every year!  They are the bad guys aren’t they?  The sitting city council is trying to convince you that they haven’t raised your taxes in years – but the facts say otherwise.

Lets look at some documented facts first.  If we review the audited statements of NRH for the 2002-2003 fiscal year we find the following statistics:

1)                   Property tax revenue to the city has increased 95% in the last 10 years.

2)                   Population growth was 19.6% for the same period of time.

3)                   The property tax rate is set by the City Council each year and could have been

significantly reduced had the council seen fit to do so.

Every year for the past 10 years the City of NRH has published the effective increase of your tax rates in the Fort Worth Star Telegram as required by law.  Based on their claims of “holding the rate” they must safely assume that most folks don’t take too much time reading legal notices.  An example is provided for your reference.  (Exhibit A).  The publication of this information every year proves beyond doubt that they know they are raising your taxes by holding the rate.

Next let’s look at the two elements that make up the current property tax rate.  The first portion of the rate is the amount of money it will take for the City of NRH to pay all debt obligations plus interest.  This rate varies slightly from year to year and should go down as debt is paid off.  It is REQUIRED by law to go up to service all new debt incurred by the city.  There is no such thing as a bond issue that will not increase your taxes.  State law mandates that the debt service rate be increased to service all new debt.  For this article let’s assume that this rate is $.30 per $100 valuation on your property – less any exemptions such as homestead.  That leaves $.27 per $100 valuation for city expenses.  The two figures added together create the tax rate set by our local city government.    If total valuations 10 years ago were $100,000,000, the city would have received $300,000 for debt service and $270,000 for general operations.  If current valuations yielded a current total of $200,000,000 – then the city would receive $600,000 for debt service and $540,000 for general operations. 

But wait, in the above example, the city paid off a lot of debt and incurred a lot of new debt.  Because they had the power to do so, they only increased the debt payment requirement to $400,000 per year so the real numbers are $400,000 for debt service and $740,000 for general operations.  This example yields a whopping 174% increase in property taxes over 10 years for city operations.   Please also note that during the same period of time, sales taxes and all fees increased by nearly 100% also.  And folks, if you want to check it out for yourself, the real numbers are much, much, much larger than this simple example.

One other interesting fact is that the City of NRH leadership has announced opposition to the recent proposal by Governor Perry that would limit local governmental growth to the rate of inflation plus 3%.  This too is obscured by our Mayor Trevino proudly displaying photos of himself and Governor Perry on his re-election website.  Mr. Trevino is outspoken in his opposition to any type of cap on your taxes!

So what does the future hold if the incumbents are re-elected with their promise to you to “hold the rate”?

Assuming that the appraisal district continues to raise valuations at the current rate of approximately 10% per year, your property taxes will double over the next 7 to 10 years.  (Remember that each increase is compounded above the prior increase.)  You can also safely assume that all new tax revenue generated by all new business in the city will be spent by the council without relief for your taxes.   You can safely assume that all new sales tax revenue will be spent by your council without relief for your property taxes.

Holding the rate may be a good deal for the NRH City Council and City Government because they have an endless money bucket of yours to spend on whatever they want.  Fiscal accountability is limited only to the growth of funds that they plan to spend long before they get them.   Holding the rate is a scam, if they are able to convince anyone that it is a good deal for the property owner / taxpayer in NRH.   Holding the rate is definitely as SCAM if they are announcing it to make you THINK that they are not raising your taxes when they know full well that they are!

Footnote:   Comments or questions may be directed to Ron West at:  ron@peg-soft.com