Tax Impact & Contract with Voters

In August, the City Council established the targeted maximum property tax for the issuance of the bonds, if they are approved by the voters. (See the Legal Statement below.)

Property tax rates are based on a rate per $100 of property value. The property tax rate for the 2008/2009 fiscal year is 35.622 cents.

The City Council established guidelines allowing a 3-cent maximum tax rate increase in any single year, with a targeted cumulative maximum increase of no more than 8 cents at the time of issuance of any series of 2008 voter-approved bonds. Bond issuances would occur in multiple series over a period of 10 to 15 years, or longer. This means that, in effect, the City can take out loans to pay for these projects, and the loans must be paid back by Georgetown taxpayers.

Below are questions and answers about property tax impacts of the proposed bonds.

What if my property taxes are frozen because I am a homeowner who is 65 years of age or older, or I am disabled? Will my taxes increase?

No. If your property taxes are frozen, passage of the bonds will not increase your City property tax payment.

Does the targeted 8-cent maximum increase mean that the overall property tax rate will be 8 cents higher once all the bonds are issued?

Not necessarily.

The 8-cent maximum is only for the debt portion of the City’s property tax rate associated with the proposed 2008 bond issuances. The debt portion of the 2008/2009 fiscal year tax rate is 15.569 cents. The other component of the property tax rate is for maintenance and operations, such as employee salaries and benefits, equipment, fuel, and other non-debt expenses.

Another factor that affects the tax rate is the total value of commercial, industrial, and residential property in the City, known as assessed valuation. The total amount of property tax collected increases as a result of new homes and businesses and as the value of those properties increases. For example, the 2008 assessed valuation in the City is $4.2 billion, which is an 11 percent increase over the prior year and more than double the assessed valuation in 2002. If the aggregate value of property in the City decreased in the future, then the total assessed valuation would decrease. This would result in a higher tax rate to raise the same amount of money as the previous year.

A third factor that affects the property tax rate is that Georgetown devotes one-eighth-of-one-percent (0.125 percent) of its sales tax to property tax reduction. This dedicated sales tax is used to offset a portion of property tax increases.

What has been the effect on the tax rate of the 2004 bonds that were issued for the new library, the Community Center, and the Recreation Center expansion?

The property tax rate in 2004 was 34.6 cents. The property tax rate for the 2009 fiscal year is 35.6, which is an increase of about 1 cent over five years. The maximum single-year increase was in 2007 when the bonds for the new library were issued. In that year, the property tax rate increased 2.1 cents. All of the bonds from the 2004 election have now been issued, and all the 2004 bonds are now included in the current tax rate. Prior to the 2004 bond election, the City Council committed to a maximum impact of no more than 4 cents in a single year, and a cumulative increase of no more than 8 cents at the time of issuance of any series of 2008 voter-approved bonds.

What if bond project costs increase in the future? Would this mean that taxes could go up more than 3 cents in a year or more than 8 cents over the life of the bonds?

No. If costs escalate in the future, the City is still bound by the targeted maximum tax impacts. Project timelines would have to be adjusted, if necessary, and some changes to the proposed projects could be required to stay within the financial constraints and approved voter limits.

What if one bond proposition is approved by the voters and the other proposition is not approved? How would this effect the maximum tax impact limits?

The limits would still be a 3-cent maximum tax rate increase for any single year, and a targeted cumulative maximum increase of no more than 8 cents at the time of issuance of any series of 2008 voter-approved bonds.

Can bond proceeds be spent on other projects not listed in informational materials?

No. The City will be limited to the projects listed.

Should conditions change in the future, is the City still bound to issue the bonds for these projects?

No. Approval of the bond propositions would give the City the authorization to issue the bonds, but it would not obligate the City to issue them. The final decision to issue any bonds would be determined by the City Council.

If the voters approved one or both bond propositions, how would my annual City property tax bill be affected?

Future property tax rates cannot be predicted, but the following chart shows some examples for illustration purposes. In these examples, a constant home value is assumed, so the examples do not account for changes in property value from year to year. Note that if your City property taxes are frozen because you are 65-or-over or disabled, passage of the bonds will not increase your City property tax payment.

Increase in Annual Taxes Paid

(Examples for illustration based on value of home or property)

Increase in Property Tax*

$100,000 home

$200,000 home

$300,000 home

Home of any value with frozen taxes**

1 cent

$10

$20

$30

$0

3 cents

$30

$60

$90

$0

5 cents

$50

$100

$150

$0

8 cents

$80

$160

$240

$0

* Property tax rates are based on a rate per $100 of property value. The City property tax rate for the 2008/2009 fiscal year is 35.622 cents.

** Homeowners with frozen property taxes will not be subject to property tax increases as a result of voter approval for bond items. Homeowners who are 65-or-older or who are disabled qualify for the property tax freeze.

Legal Statement: The City Council is establishing targets for tax rate increases due to the issuance of bonds set forth in Propositions 1 and 2. Such increases would apply at the time of issuance of these bonds. However, after issuance of the bonds and pursuant to state law, the City will be required to levy ad valorem taxes, within the limits prescribed by state law, to pay the principal and interest on the bonds.