Homestead Exemption Presented to the City Council by Horatio Porter, Budget Officer April 6, 2010

2 Purpose ~ Provide additional information on the history and philosophy of the Homestead Exemption ~ Specifically answer questions on: 1.timeliness of the decision 2.original intention of exemption 3.inequity of the tax burden

3 Timeline May 1 st Appraisal Districts are required to mail property valuations May 15 th Appraisal districts provide preliminary valuations July 25 th Appraisal districts provide certified valuations (basis for budgeted revenue estimates)

4 New Information In conjunction with the Law Department, staff conducted some additional research Specific language from Tax code section (n) …..an individual is entitled to an exemption from taxation by a taxing unit of a percentage of the appraised value of his residence homestead if the exemption is adopted by the governing body of the taxing unit before July 1 in the manner provided by law for official action by the body….. Implication – allows more time for deliberation

5 Early Notification Advantages –Appraisal districts can make system changes –Residents receive a consistent valuation notice –Staff develops a budget with less draconian reductions Disadvantages –Less time for Council deliberation

6 Homestead Exemption History Prior to 1978, valuations were performed separately by the 50+ taxing jurisdictions –City of Fort Worth –Tarrant County College –Fort Worth Independent School District In 1978, the Peveto Bill was passed establishing Central Appraisal Districts throughout the State –Standardize the appraisal process –Eliminate inconsistencies –Give residents a single point of contact –Took many districts several years to become operational Chief Appraiser was hired in 1979 City employees were “transferred” to TAD

7 Homestead Exemption History Appraisal Districts issued Citywide valuations Appraisals by Districts “corrected” values –75% increase in total appraised tax roll from 1983 to 1984 –Valuations increased by 190% in some neighborhoods City Council implemented two significant policy changes to offset increased valuations 1.Reduced overall tax rate 2.Adopted the first general homestead exemption at 15% Tax bills were still 13% higher for homeowners

8 FWISD total valuation also increased by 75% Faced with budget pressures due to state mandates from House Bill 72 (“No Pass, No Play”) School district cut tax rate by 32% Net revenue increase of 20% Homestead Exemption Fort Worth Ind. School District

9 New appraisal districts also dramatically increased assessed values in Houston and Dallas Both cities adopted the maximum homestead exemption of 40% to offset the increased valuations State law lowered the maximum homestead exemption –30% for FY1986 –20% for FY1988 Homestead exemptions have remained at 20% Homestead Exemption Houston and Dallas

10 Homestead Exemption History At the time, commercial property was undervalued compared to residential property –Home owners carried a larger share of property tax burden Homestead exemption increased to 20% in 1986 –To lessen burden on residential property owners Appraisal Districts later began using “market values” for commercial and industrial properties Consistent appraisal process of residential, commercial and industrial properties

11 Property Tax Rates 1980 – : Council reduces rate and adopts 15% homestead exemption 1986: Council adopts 20% homestead exemption 1994: Rate peaks at $ : Current rate of $.855 adopted Tax rate per $100 / assessed value 1983: Rate $.925

12 Commercial vs. Residential Tax Contribution Source: Tarrant Appraisal District – 3/2/10

13 Existing Tax Exemptions

14 Commercial vs. Residential Tax Contribution Source: Tarrant Appraisal District – 3/2/10

15 Homestead Exemption

16 Homestead Exemption Resident Impact

17 Estimated Tax Bill at varying Homestead Exemption levels 10% 20% 0%

18 Preliminary Estimates ~ $35M Does not include: –Compensation increases for General Employees or Fire –CCPD Budget Gap –Full cost of pension and healthcare liabilities –Infrastructure maintenance (no new construction) –New training class for Fire Department –Potential decline in Property Tax Revenue –New departmental requirements (state mandates) –Other contractual increases Fire contract Jail contract Zoo contract FY2011 Preliminary Budget Gap

19 General Fund Budget by Priority

20 Scenarios Eliminate Positions Eliminate 490 Authorized Positions

21 Scenarios Close All Neighborhood Libraries Excludes Central Library

22 Scenarios Close Community and Recreational Centers

23 Scenarios Eliminate Services

24 Scenarios Illustration

25 Debt Service Capacity - Facts Impact of annual $5.2M towards Debt Service –Creates $54M of additional capacity for infrastructure –Allows completion of current programs –Accelerates Next Bond Program to 2012 (instead of 2015) Impact of annual $2.6M towards Debt Service –Creates $27M additional of capacity for infrastructure –Accelerates Next Bond Program to 2013 (instead of 2015)

26 Options / Next Steps Council can direct staff to draft an ordinance lowering the exemption for the May valuations Target April 27 th Council can continue deliberations and provide direction later Decision by June 8 th Adopt Ordinance by June 22 nd Council can decide the discussion is complete and no further information is needed Staff notify Appraisal District of no change in Exemptions

27 Questions / Comments

28 Homestead Exemption (Big Cities)

29 Homestead Exemption (Suburban Cities)

30 Tax Rate Allocation

31 Home Ownership Programs Administered by the City of Fort Worth Down Payment Assistance: up to $25,000 First-Time Homebuyer Assistance: up to $14,999 Homeowner Loan Program: up to $40,000 Housing Developer Fund: financing to build affordable housing in the Central City Housing Counseling: credit counseling, foreclosure counseling, and home ownership classes

32 Home Ownership Programs Federal Property tax deduction: –40 million households nationwide receive an average benefit of $600 annually Mortgage interest deduction: –35 million households receive an average benefit of $1,850 annually

33 Public Services - Priority 1 Services targeted at public safety problems Severity – life threatening, severe injuries Urgency – immediate response Coverage area – widespread Example of services include:  Fire Suppression  Police Traffic Division  Fire Arson and Bomb  Traffic Signal Maintenance Program  Gang Unit  Police Communications  Police Field Operations

34 Public Services - Priority 2 Meets a Charter/State/Federal mandate or is a long-term contract Legally obligated to perform the service No authority to revoke the requirements for the service Contract locks the City into a long-term obligation Example of services include:  Library Department  City Plan Commission  Environmental Review  Economic Development 380 Agreements  Fort Worth Zoo Contract  Jail Contract

35 Public Services - Priority 3 Loss of services will have a long-term and potentially severe effect on the general public Example of services include:  Animal Care & Control  Fire Inspections  Street Maintenance (contract and in-house)  Planning and Development Inspections  Bridge Maintenance  Roadway Lighting  Consumer Health

36 Public Services - Priority 4 Necessary to construct, reconstruct and maintain City infrastructure Example of services include:  Parkland Maintenance  Facilities Operations/Maintenance  Traffic Operations  Citywide Mowing  Park Infrastructure Inspection/Maintenance  Park Trades Maintenance  Vehicle Replacement Program

37 Public Services - Priority 5 Impact on public safety but is not severe nor widespread Example of services include  Code Field Operations  Directions Home Program  Street Permit Program  Code Building Standards  Mounted Patrol  Police Victim Assistance  Fire Safety Education

38 Public Services - Priority 6 Provides funds through a direct revenue-generating or collection function Example of services include:  Programs with a Grant Match  Municipal Court Core Operations  Gas Leasing  Treasury - Cashier Services  Real Property Services  Transportation Impact Fees & Planning

39 Public Services - Priority 7 Has a beneficial effect on the population and is not the core service of another entity Council has more discretion on these services No other organization provides this service to the residents Benefits a large numbers of citizens Example of services include:  Neighborhood Libraries  Youth Athletics Program  MWBE Office  Community Outreach  Human Relations Commission  Urban Design  Community Centers (Non-CAP Sites)

40 Public Services - Priority 8 Service that does not meet the priorities set forth above The service is available to citizens through another entity The service does not meet any of the above priorities General Fund subsidy helps leverage other investments Example of services include  Cowboy Santas  Internal Police Service Programs  Program funding for Arts  Business Assistance Center  Early Childhood Matters  Athletic Facilities & Programming  Aquatics

41 Administrative Services - Priority A Meets a Charter/State/Federal mandate or is a long-term contract Legally obligated to perform the service No authority to revoke the requirements for the service Contract locks the City into a long-term course of action Example of services include  Accounting  Attorneys and staff  Annual External Audits  Internal Audit  Utility Cost  City Insurance  Annual Appraisal District Services

42 Administrative Services - Priority B Necessary in the short term for the delivery of a service Loss of this service would interrupt delivery of public services within 30 days (immediate/imminent impact) Example of services include  Contractual Staff for ERP  Building Security Initiatives

43 Administrative Services - Priority C Loss of this Service will have a long-term and potentially severe effect on the organization Example of services include  Human Resource Information Systems and Records  Outside Legal Funding  Utilities Management  Classification/Compensation/Civil Service Plans  Human Resource Disability Program

44 Administrative Services - Priority D Necessary in the long-term for the delivery of a service Example of services include  Governmental Relations  Human Resources  Learning Services  Employee Relations  Labor Relations  Staffing Services

45 Administrative Services - Priority E Beneficial but not critical in the delivery of a service The service does not directly impact service delivery Example of services include  Education Reimbursement Program  Employee Assistance Program  Vacation Buy Back Program

46 Example of “Investments”

47 Example of “Resources”

48 Possible FY2011 Budget Gap

49 FY2011 Budget Gap

50 Priority 7 Services Community Relations –Administration & Operations –Cable Office –Communications Office –Community Outreach –Human Relations Commission Environmental Management –Administration –City Switchboard –GIS Library –Neighborhood Libraries Planning & Development –Downtown Design Review Board –Urban Design Comm. –Geographic Information Systems (GIS) –Historic / Cultural Landmarks Comm. –Support Services –Urban Design –Urban Forestry Housing & Economic Development –Economic Development –Housing & Community Development –MWBE Parks & Community Services –Administration –CAP Community Centers –Community Services Administration –Community Tree Planting –Comprehensive Planning –Nature Center & Refuge –Northeast Region Administration –Planning Resource Mgmt Admin –Southwest Region Administration –Youth Athletics Program –Community Centers - Non Cap Sites Police –Community Liaison – Administration TPW –Ground Transportation Regulation

51 Priority 8 Services Community Relations –Early Childhood Matters –Mayor's Committee On Persons With Disabilities Police –Chaplain –Peer Support Coordinator Non-Departmental –Arts Council –Mental Health Connection Membership Housing & Economic Development –Business Assistance Center Parks & Community Services –Aquatics –Athletic Facilities & Programming –Cowboy Santas Toy Program, Inc. –Mcleland Tennis Center –Summer Day Camp / Mobile Rec Summer Day Camp

52 Priority D & E Programs Priority D Human Resources –Employee Relations –Labor Relations –Learning Services –Disability Program –Staffing Services Police –Contract Management –Data Management –Fiscal & Employment Mgmt –Fleet –Internal Affairs Div –Property Control –Records –Research & Planning –Vehicle Impound Operations Section Non-Departmental –Stormwater Utility Payments Priority E Community Relations –Customer Service Human Resources –Employee Assistance Program Non-Departmental –Education Reimbursement Program –Misc. Agreements –Vacation Buy Back Program