Page 238 - Grapevine Budget FY21

STATUTORY REQUIREMENTS
TRUTH-IN-TAXATION

The single most important financial resource of the City is the ad valorem tax, better known as
the property tax. It is important for all citizens to fully understand the makeup of the taxes levied
against their properties. The following synopsis provides a basic working knowledge of property
taxes and how they are determined.

Much of what taxing authorities such as cities, school districts, counties, and special districts are
allowed to levy for property taxes is determined by the State of Texas. Several years ago, the
state legislature provided for the establishment of county appraisal districts. The purpose of these
appraisal districts is to determine fair market values of all taxable property within a specific
county. The taxable value of property is determined as of January 1 of each year.

The appraisal district generally notifies taxpayers of their assessed valuations in March and
allows for them to challenge the valuations if the taxpayers believe them to be in error. A tax
appraisal review board hears all tax protests and determines if the original valuation is correct or
in error. On May 25 of each year, the appraisal district is required to provide taxing authorities
with a certified estimate of total appraised value. This preliminary estimate is used by the City to
help project what revenues will be available in the next fiscal year. The preliminary estimate,
while providing indications of an increasing or decreasing tax roll, is subject to fluctuations
because of possible tax protests mentioned above.

The most important date relating to the appraisal district is July 25. On that date a certified
appraisal roll must be provided to all taxing authorities. This certified roll provides a basis upon
which a tax rate can be applied to produce necessary revenues for the operation of City services.

After determination of a tax rate for the upcoming budget year there are several procedures and
tests that must be applied to the rate in order for state law to be met. They include:

♦ Calculation and publication of the effective tax rate.

The effective tax rate is the tax rate that, when applied to the taxable assessed valuation,
would produce the same total taxes as last year when properties taxed in both years are
compared. The objective of the effective tax rate is to generate equal tax revenues using
taxable valuations from different years.

♦ Determination of whether the proposed tax rate is more than 3% over the effective tax
rate.

Texas state law requires that if a taxing authority raises the tax rate more than 3% over
the effective tax rate there must be published notices of the increase and a public
hearing must be held. This is true even if the tax rate does not change. For example, for
FY 2001, the City's tax rate was reduced by $.005, yet state law required the City to
advertise a tax increase because of the growth in the assessed valuation.

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