The Amarillo City Council may be headed back to the budget drawing board after learning that adopting the no-new-revenue property tax rate would create a much larger hole in the proposed 2026-2027 budget than initially expected.
During its regular meeting Tuesday, the council received an update from city staff on the proposed budget and tax rate, including calculations requested after the city's recent budget workshops.
At the end of those workshops, councilmembers asked staff to determine how proposed debt would affect the 2027 tax rate and what the budget would look like if the city adopted the no-new-revenue rate.
The answer wasn't what council or staff expected.
No-New-Revenue Rate Creates $3.4 Million Gap
During the budget workshops, city officials had been working under the assumption that moving from the voter-approved tax rate to the no-new-revenue rate would reduce available revenue by about $800,000.
After staff ran the full calculations, however, the effect on the city's maintenance and operations budget came to approximately $3.4 million.
The difference stems from how the no-new-revenue rate is calculated. The formula takes into account factors including money needed to pay debt and frozen property taxes for seniors and people with disabilities.
The no-new-revenue rate is designed to generate roughly the same amount of property tax revenue from existing properties as the previous year, accounting for changes in taxable values. That doesn't mean every homeowner's tax bill remains the same. Someone whose taxable property value increases could still pay more.
Under state law, municipalities generally can increase the maintenance and operations portion of their property tax revenue by up to 3.5% without triggering an election. Unused portions of that increase can also be carried forward for up to three years.
For Amarillo, the voter-approved tax rate is $0.44728, while the no-new-revenue rate is $0.42170.
Staff told the council that a rate that would actually keep the city's budget roughly even with last year would fall somewhere between those two figures.
Pay Raises and One-Time Spending Could Face Scrutiny
The proposed budget had been built around revenue projections that included sales taxes and the voter-approved property tax rate.
Under that scenario, staff recommended approximately $5 million in pay raises for civilian employees and police and fire personnel. The budget also included roughly $2.2 million in one-time expenses.
Those spending plans could now face another round of scrutiny if the council decides to pursue the lower tax rate.
Both councilmembers and staff expressed frustration with the situation Tuesday. Staff said they had not previously been asked to prepare a budget around the no-new-revenue rate and had not anticipated the gap would be as large as the new calculations showed.
Several councilmembers, meanwhile, continued to express interest in providing property tax relief.
“In a good faith effort, I think we ought to do as much as we possibly can to tighten our belts, just like citizens have had to tighten their belts and pay for a whole lot of other things,” Place Four Councilmember Les Simpson said. “You know, in the last four years, salaries have not kept up with how much we’re raising taxes.”
Council Could Revisit Both Taxes and Fees
Mayor Cole Stanley pointed out that property taxes are only one piece of what Amarillo residents pay to the city.
The proposed budget also includes an 8% increase in water and sewer fees, if approved by the council. That means some of the benefit residents receive from a lower property tax rate could be offset by higher utility costs.
“What I’m hearing is we probably need to regroup and come back, Council,” Stanley said.
Place Two Councilmember Don Tipps asked city staff to examine where spending could be reduced if the council ultimately chooses the no-new-revenue rate. He also asked staff to consider options if councilmembers decide they want to reduce the proposed fee increases.
That sets up another round of budget discussions as the council moves closer to adopting both the tax rate and the city's spending plan.
The council is scheduled to set its not-to-exceed property tax rate on Sept. 8. Setting that ceiling does not lock the council into that particular rate; councilmembers can ultimately adopt a rate at or below the maximum.
Public hearings and initial votes on the budget and tax rate are planned for Sept. 22, followed by final votes on Sept. 29.
