HomeMy WebLinkAboutIR 9229 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9229
To the Mayor and Members of the City Council April 13, 2010
ON Page 1 of 2
SUBJECT: HOMESTEAD EXEMPTION
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This purpose of this Informal Report is to address a few additional questions raised
regarding the impact of modifying the General Homestead Exemption.
The current 20% homestead exemption costs the City $30,800,000 per year in lost
revenues. The following table shows the exemptions are varying levels with the resulting
revenue and tax rate impact. For example, lowering the exemption to 10% would generate
$15AM in additional revenue. Correspondingly, it would require an across the board tax rate
increase of 3.8 cents to have an equivalent impact. Alternatively, the exemption could be
phased out over a period of time and that impact is represented by the 1% amount.
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20% $30,800,000 7.5 cents
10% $15,400,000 3.8 cents
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1% $1,540,000 0.38 cents
The additional revenue would not only mitigate significant service reductions; but also
increase debt capacity. Therefore, each of the above scenarios would provide funds that
would address some of the infrastructure needs.
While these options create additional revenue for the City, there is an incremental cost to
residential property owners. Lowering the exemption would reduce the benefit homeowners
currently enjoy. Below is an illustration of the impact annual and monthly basis. Depending
on the value of their property, residential property owners would see their benefit reduced
by the following amounts under each scenario.
Annual Monthly
$200,000 $171 $14
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$150,000 $128 $11
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$100,000 $86 $7
$50,000 $43 $4
4. In the case of a $100,000 home, lowering the exemption to 10% adds $86 to the annual tax
bill or $7 a month for residential property owners.
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 9229
.,.T: To the Mayor and Members of the City Council April 13, 2010
Page 2 of 2
• SUBJECT: HOMESTEAD EXEMPTION
According to information from the tax collector, man residential property
75% y p p rty owners (almost
pay property taxes monthly through an escrow account. This monthly payment also
includes the principal and interest. Modifying the exemption would increase taxes however
the increase would be allocated over a 12 month period. For the $100,000 property owner,
their payment could increase by $7 a month.
Residents that itemize their personal income taxes are afforded a deduction for property
taxes and interest. While lowering the exemption impacts the tax bill, the resident would be
able to deduct the property tax increase on their tax return.
If you have any questions, please call Horatio Porter, Budget Officer at 817.392.2379.
v
ale A. FiIse P.E.
City Manager
ISSUED BY THE CITY MANAGER
FORT WORTH, TEXAS