The 'Not a Tax Increase' Tax Increase

Last week, the Round Rock City Council unanimously voted to increase the property tax rate for the second year in a row.  Prior to the vote I had expressed my concerns about raising taxes in the current economy, but was stunned when one proponent replied, "Now Holly, you know it isn't actually a tax increase, it's just adopting the effective rate." 

What he meant by "adopting the effective rate," (or sometimes "balancing at the effective rate,") is that the city is adjusting the property tax rate so that they will have the same amount of revenue as the previous year.  According to the city, overall property values are down slightly, so if the rate remains the same, they would have less tax revenue.  Therefore they are raising the rate from 41.728 to 42.321.

This is obviously a war of semantics.  Yes, if a resident's property value falls, he/she would have a lower tax bill.   But what about all of those residents whose property value increased?  Many of us saw our property values jump dramatically this year, and both the County and the Round Rock School District have reported
overall property value increases.  It would be interesting to know in which price range Round Rock home valuations dropped and why.  But the bottom line is that the city readily admits that the tax bill for the average-valued home will increase in 2012.

Although my aforementioned friend assures me that my higher Round Rock property tax bill is not really a tax increase, I find it interesting that this 'adopting the effective rate' will result in more revenue for the city and allow them to increase spending.  The FY2011 budget was $134.7 million, but the FY2012 budget is $137 million.  The city's website says the increase is for street maintenance, but are less forthcoming about the raises they are giving city employees.

Despite the condescending assurances that 'adopting the effective rate' is not a tax increase, here is what the city was required to post on its official website:

CITY OF ROUND ROCK ADOPTED A TAX RATE THAT WILL RAISE MORE TAXES FOR MAINTENANCE AND OPERATIONS THAN LAST YEAR'S TAX RATE. 


"But Holly, but Holly, it's not really a tax increase."

Right.  "These aren't the droids you're looking for."

In the course of my aforementioned discussion the 'adopt the effective rate' proponent said to me, "I know this is all very confusing." 

Seriously?  I may look like a dumb blond, but I assure you I am not the least bit confused about the increase on my tax bill, nor am I confused about the fact that the city will have more revenue than last year and will increase city spending.  They can call it what they want, but the fact is that the City of Round Rock is increasing taxes to cover an increase in spending.  They can hope that the focus will remain on federal issues, but this local taxpayer is paying attention.