1 Homestead Exemption Presented to the City Council by Horatio Porter, Budget Officer January 21, 2010

2 Ad Valorem Tax Levy Tax Rate * (Property Value – Exemptions) = Tax Bill

3 Comparative Tax Rate

4 Comparative Avg. Home Values Includes Homestead Exemption

5 Comparative Tax Bill

6 Property Tax Rates 1990 – 2009 $0.855

7 Housing Values in Fort Worth

8 City Tax Policies Historic - Tax freeze to exclude the increased value of property due to eligible improvements (10 Years) Neighborhood Empowerment Zones – Tax freeze to exclude the increased value of property due to eligible improvements (5 Years) Tax Increment Financing Districts – Dedicates increment of ad valorem taxes above base year within a defined area to public improvements including infrastructure (usually up to 25 years) 380-Agreements – May grant public money for development/diversification of the property, elimination of unemployment/underemployment, or development and expansion of commerce (temporary)

9 City Policies for Abating Taxes for Residential Properties Homestead Exemption - 20% of property value –Benefits Owner Occupant –Affects approx 130,000 residents –Widely disbursed throughout city –Many residents don’t receive this exemption Rent single family units Rent duplexes or multi-family units

10 City Policies for Abating Taxes for Residential Properties Over-65 Exemption – Exempts $40,000 from taxation Disabled Person – Exempts $40,000 from taxation Over-65 Tax Freeze – Freezes tax levy in place at the time of the application for exemption “Permanent”

11 Growing Number of Seniors Compared to Working Age Residents

12 Over - 65 property tax exemption Currently estimated at $8.9M in revenue Over - 65 Tax Freeze Currently estimated at $1.2M in revenue Foregone revenue: $10.1M in FY2010 With aging population, this amount will grow Expansion of Tax Exemptions

13 Homestead Exemption (Big Cities)

14 Homestead Exemption (Suburban Cities)

15 Homestead Exemption At 20%, total value of Homestead is $3.6B in exempted / property value Value equates to approx $31M in foregone revenue Eliminating the exemption impacts both –General Fund ($26M) –Debt Service Fund ($5M)

16 Homestead Exemption Citizen Impact

17 Process / Timeline City Council has authority to change the exemption Requires the adoption of an ordinance Change in ordinance must occur before April for Appraisal Districts

18 Options Maintain 20% homestead exemption and continue to forego $31M in revenue annually Reduce the homestead exemption from 20% to 10% and receive an add’l $15.5M Reduce the homestead exemption to 10% and phase out remaining 10% over 5 years, while also shifting tax rate to Debt Service Fund Eliminate the homestead exemption and receive an additional $31M

19 Questions

20 Presented by Horatio Porter, Budget Officer Budget Scenarios

21 Tax Rate Increase Considerations –Infrastructure Needs –Collective bargaining and General Employee wages –Avoid elimination of Neighborhood Services –Benefits (pension/healthcare) –……..

22 Scenario #1 Close budget gap by eliminating programs –Several Council priorities will go unfunded –Estimate 400 employees would be impacted –Ignore infrastructure investment…..for now

23 Scenario #2 Fund Most Council Priorities –Eliminate the homestead exemption Generate $31M –General Fund $26M –Debt Service Fund $5M –Invest in most General Fund programs –Invest in debt capacity for infrastructure –Increase in tax bill ($85 - $257 / year)

24 Scenario #3 Address Only Infrastructure Needs –Adopt transportation utility –Increase impact fee –Make significant reductions in General Fund –Several Council priorities would go unfunded

25 Scenario #4 Combined Approach –Eliminate lowest priority General Fund programs –Reduce Homestead Exemption to 10% Phase out the remaining 10% over 5 years –Address Infrastructure Needs Begin shifting a portion of tax rate to Debt Service Pursue transportation utility Increase impact fee

26 Questions