Local Government
Tools that Made
the Difference:
Dedicated Sales Taxes
Establishing a dedicated sales tax is an option only for cities where local sales taxes (such as city, county, emergency services district or 4A/4B economic development) total less than 2 cents.
Dedicated sales taxes can be used for:
- Street Maintenance and Repair (1/8 or 1/4 of 1 percent)
- Economic Development* (1/8, 1/4, 3/8 or 1/2 of 1 percent)
- Crime Control and Prevention (1/8, 1/4, 3/8, or 1/2 of 1 percent)
- Emergency Services District (amount that combined with other taxes is no more than 2 percent)
It is also a public process where people are involved in creating the ballot measures, which are voted on separately.
“Dedicated sales tax decisions go directly to the voters, who then choose which services they want to support,” says Chuck Springer, Flower Mound’s chief financial officer.
* Flower Mound voters adopted a 1/4-cent 4B sales tax dedicated to funding parks.
Two Cents Worth
Flower Mound Utilizes New Sales Tax for Services.
Some North Texas cities are cutting their budgets to counteract sinking property values and declining sales tax revenue. Others are bucking the trend by taking advantage of other avenues to boost tax revenue.
In Dallas County, year-to-year changes varied among its cities’ preliminary tax base values, while appraised property values increased countywide by 2.42 percent in 2009. The city of Lancaster’s tax base was reduced by 4.13 percent, according to preliminary values released by Dallas Central Appraisal District in early summer.
The situation is similar in neighboring Duncanville, where appraised values are 3.44 percent lower than in 2008. In May, Duncanville city officials announced 12 mandatory furlough days for city employees through the end of September to balance the current budget. Not all Dallas County communities are facing potential ad valorem tax revenue declines. Grapevine’s preliminary appraised values are 22 percent higher, about $30 million more than last year, according to the appraisal district.
Sales tax boosts budget
While some North Texas cities face the prospect of trimming personnel budgets, the Town of Flower Mound in Denton County plans to add 27 firefighters, increase its police force by 18 officers and build three new parks.
Property Tax Rates for Similar Cities
| City | Property tax rate 2008-2009 |
|---|---|
| Grapevine | $0.3500 |
| Colleyville | $0.3559 |
| Lewisville | $0.4402 |
| Flower Mound | $0.4497 |
| Frisco | $0.4500 |
| Southlake | $0.4620 |
| Plano | $0.4735 |
| Irving | $0.5406 |
| Allen | $0.5560 |
| North Richland Hills | $0.5700 |
| Richardon | $0.5752 |
| McKinney | $0.5855 |
| Carrolton | $0.6179 |
| Coppell | $0.6415 |
| Denton | $0.6665 |
| Rowlett | $0.7472 |
Source: Town of Flower Mound
Flower Mound’s total general fund revenues are expected to increase $600,000 to $40.7 million in fiscal 2010, due in part to a 1.2 percent expansion in the tax base and an unchanged property tax rate of $0.4497 per $100 of valuation.
More significant, however, is the second year of additional revenue from a 1-cent sales tax rate increase approved by voters in November 2007. State law allows local taxing entities to add up to 2 cents to the state’s sales tax rate of 6.25 cents per dollar spent. The increase, which took effect in April 2008, is expected to generate $6.7 million in fiscal 2010 that will be divided evenly among Flower Mound’s fire, police, street maintenance and parks services. Chief Financial Officer Chuck Springer says the additional revenue is needed so the town can provide the same level of services as surrounding cities and be competitive in attracting business.
“The vast majority of North Texas communities that are of any size have already adopted dedicated sales tax rates,” Springer says. Flower Mound would have had to increase its property tax rate by 10 cents, about 25 percent, to generate the same revenue as the additional 1-cent sales tax, he says.
The recession is expected to reduce Flower Mound’s sales tax revenue by about $200,000 in fiscal 2010, Springer says. However, municipal court revenues, which had declined in the past few years, are projected to increase by $500,000 because of the additional police patrols.
“Considering the current trends and economic climate, we’re pleased with our fiscal stability,” Springer says. To learn more about dedicated sales tax uses visit the Comptroller’s Local Government Assistance site. TR