Pflugerville expects commercial growth to lower property taxes
Pflugerville expects commercial growth to lower property taxes
Written by Eric Pulsifer Friday, 03 October 2008
Homeowners will pay more next year in property taxes despite decreased rate.
Property tax is the single largest revenue source in Pflugerville's 2009 fiscal year general fund. The city hopes increases in sales tax revenue will gradually lower the tax burden on homeowners.
For years, Pflugerville has had one of the highest property tax rates in the Austin area, but with five consecutive years of decreasing rates, Mayor Jeff Coleman said those days might soon come to an end.
"I firmly believe that in the next four to seven years, this city is going to have to make a dramatic decrease in the tax rate,” he said. “By then, Stone Hill [Town Center] will be full, Verde [commercial development] will be full. It's just going to take some time.”
City officials anticipate that commercial growth in Pflugerville will continue to push the property tax rate down, as it has done in other cities experiencing similar growth. But Coleman said it will take time for retailers to generate the substantial sales tax revenue needed to change the city’s funding mix.
Pflugerville is just now seeing the level of sales tax revenue from Wal-Mart that was projected when it opened last year. Coleman said property taxes and sales tax revenue will continue to grow as the million sq. ft. of retail space at Stone Hill Town Center develops. SuperTarget and Best Buy are set to open there in 2009.
City Councilman Mike Marsh, who ran on a platform of lowering property taxes before being elected earlier this year, agreed that commercial growth will bring taxes down over the coming years.
“The population has grown and with the improvements in the highway system, a climate exists in Pflugerville to bring in new retail,” Marsh said. “But people have to change their shopping habits. We need to encourage everyone to shop Pflugerville once these retail outlets are in.”
Growing pains, property values
On Sept. 23, the city council approved the 2009 fiscal year budget, including a half-cent decrease in the property tax rate.
The current city tax rate of $0.614 per $100 of property valuation will be lower than last year’s rate of $0.619, but rising property values mean homeowners are likely to pay more at tax time. The value of an average home in Pflugerville is $169,791, and with the new rate a homeowner will pay $1,042.52 next year in city property tax — an increase of $25.20.
The 2009 general fund budget totals approximately $22 million, nearly $2.7 million more than last year's budget. The city reports a majority of the increase will cover the expansion of police services, parks and other services related to the population growth and annexations Pflugerville has experienced in the past few years.
Coleman said annexation of more than 2,000 acres and a population spike have led to some new expenses to keep the city’s level of service where it is currently.
“In the 2000 [U.S.] Census, we had 16,000 people. Today, we have over 41,800,” Coleman said. “In less than eight years we have grown drastically.”
The budget includes an increase of $829,000 for the police department to maintain 1.5 officers for every 1,000 citizens. The parks department will see an increase of $300,000 to cover maintenance of parkland annexed this year. Other expenses include three major road projects — Pflugerville Parkway, Kelly Lane and the northern part of Heatherwilde Boulevard — and the first portion of expansions to the public library.
Rooftop market
Although the new rate is lower than last year’s, it will still remain significantly higher than nearby cities such as Round Rock and Austin, with respective rates of $0.3652 and $0.4012 per $100. Coleman attributes this to those cities’ more established commercial sectors and the amount of sales tax revenue they generate.
“When compared to similar cities in our circumstance, we’re very competitive with our tax rate,” he said.
Pflugerville relies more on property taxes than neighboring Round Rock, which depends on sales tax revenue from Dell, Inc. for a large percentage of its general fund revenue. For 2009, only 14 percent of Pflugerville’s general fund revenue will come from sales tax, and nearly half will come from property taxes.
City Manager David Buesing said cities like Pflugerville traditionally have higher tax rates to compensate for the lack of retail.
“We’ve got a rooftop market here and when that’s mainly what you have, you have higher taxes,” he said.
Buesing said without the bump in sales tax revenue from recently opened retailers, a decrease in the tax rate would have been hard to accomplish.
“We would have been hard pressed to drop it even that half-cent had we not picked up some additional sales tax last year because we’re going through the same economic times as everyone else.”
Coleman said even with higher property tax rates than nearby cities, Pflugerville homes are among the best values in the region.
“We feel like we have the most reasonably priced housing market in the northern Austin market,” Coleman said. “You can buy more house [for the price] in Pflugerville than virtually any place in Central Texas.”
Mixed messages
As the commercial sector develops in Pflugerville, the council wants to make the city a place where residents can also work.
“What we’re really focusing on now is recruiting businesses that are going to bring employment bases into Pflugerville,” Coleman said.
But as the city moves forward, Coleman said the council will do all it can to preserve Pflugerville’s rural charm.
“Our goal is to maintain as much of that small-town, community feel as possible while implementing those aspects of a larger suburb, which are retail growth and commercial tax base growth.”
The dilemma facing the council, Coleman said, is finding a compromise that satisfies citizens wanting lower taxes but not willing to see nearby green fields transformed into retail space.
“The city council receives a very mixed message depending on the project,” Coleman said. “On one hand they say drop our tax rate and on the other hand they say don’t change to do that, and we can’t accomplish both things. We try to find a balance.”
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