This month: Funding options for cash-strapped local governments
Partnering for Impact
In a slowing economy, cities can tap sales tax options to fund services and programs.
The Comptroller’s office empowers local governments and communities across the state with the information and tools they need to support economic development and create new jobs for Texans. Look for our special “Partnering for Impact” section in each issue of Texas Rising, featuring timely, important information and tips for local governments and economic development corporations.
Municipal Sales Tax Options (Rate Options)
- Regular Sales Tax (1 percent)
- Sales Tax for Property Tax Relief (1/8, or 1/2 of 1 percent)
- Sales Tax for Street Maintenance and Repair (1/8 or 1/4 of 1 percent)
- Sales Tax for Economic Development (1/8, 1/4, 3/8 or 1/2 of 1 percent)
- Sales Tax for Crime Control and Prevention (1/8,1/4, 3/8,or 1/2 of 1 percent)
With the economy slowing, cash-strapped local governments are increasingly concerned with having enough funds to pay for programs and services. To meet their revenue needs, cities may consider a variety of sales tax options, up to a combined maximum local rate of 2 percent. With the exception of the regular 1 percent sales tax and the sales tax for property tax relief, additional sales taxes must be dedicated to funding specific purposes as required by state law. These purposes may include economic development, crime control and prevention, street maintenance and repair, sports or community venue projects, municipal development or fire control, fire prevention and emergency medical services.
Cities should periodically evaluate the local sales taxes they impose to ensure they meet their current budgetary priorities. If a city council determines it needs to change either the sales tax rate or the special purpose to which a portion of the sales tax is dedicated, it must seek voter approval. Elections may take place on either the second Saturday in May or the second Tuesday after the first Monday in November of each year.
Following an election, the city must notify the Comptroller’s office of the election results. The new sales tax rate becomes effective on the first day of the calendar quarter that begins after one full calendar quarter has passed since the city notified the Comptroller’s office. TR
Texas Transparency Check-up
Local governments across Texas are raising their blinds – giving taxpayers a transparent online look at their budgets and expenditures.
The Comptroller’s office recently researched and compiled a list of financial transparency efforts by local governments around the state. Find out who is leading the charge in transparency and how they are doing it by visiting www.window.state.tx.us/comptrol/checkup.
You can also read step-by-step tips from local governments on how to get started.
We’ll spotlight local governments that are making transparency work in upcoming issues of Texas Rising. If you are a local government using technology or other tools to give taxpayers a transparent look at expenses, budgets or books, e-mail us your story at email@example.com.
For more information on municipal sales tax options, contact the Comptroller’s Local Government Assistance and Economic Development Division at (800) 531-5441, ext. 3-4679.