City Council voted unanimously Monday to provide a small property tax exemption for qualifying homeowners.
It’s the first time the City of San Antonio will provide a homestead exemption. The City could raise property taxes to recoup those costs as part of its 2020 budget conversations, but Mayor Ron Nirenberg and other Council members balked at that idea.
The minimum-allowed homestead exemption will shave $5,000 off the appraised values of homes that are the primary residence of a property owner. The result will be slightly decreased tax bills from the City, which accounts for roughly 20 percent of total tax bills.
“We do have to be cognizant of how equitable our property tax is … please know this is just the start,” said Nirenberg, who voted in favor of the exemption. In previous budget discussions, Nirenberg has been opposed to providing nominal tax relief at the expense of the City’s budget. Council and City staff plan to continue to enhance tools for affordable housing and work with the state to create new ones.
“Homeowners have been asking for property tax relief,” Nirenberg said earlier Monday. “I intend to provide it without strings attached.”
The mayor will work with City staff to identify budget cuts and possible efficiencies, he said, but they will not impact “public safety or essential services.”
The 0.01 percent exemption will save an average homeowner an estimated $28 per year, even less if the City increases its property tax to make up the difference. The exemption will remove nearly $6 million from the City’s budget – $3.6 million from the general fund, which the City uses to fund programs and services across San Antonio, and $2.2 million from the City’s debt service.
Councilman Clayton Perry (D10) has lobbied his colleagues since he was first elected in 2017 to consider a reduced tax rate or homestead exemption. He and Councilman John Courage (D9) filled a council consideration request in February to direct Council to consider the exemption.
“Over the last two election cycles … the top three [issues] that were continue to ring out were property taxes, police and fire protection, and infrastructure,” Perry said. “[And it’s important to let them know] City Council is listening to them and we are offering them tax relief.”
City Council will consider its 2020 budget in August, after its monthlong break from regularly scheduled meetings in July. In the meantime, City Manager Erik Walsh and department staff will be crafting their draft budgets for consideration.
The budget is also under pressure because of $11 million less in CPS Energy revenues so far, $7 million less in telecommunication company fees, and uncertainty with the firefighter union’s contract and Senate Bill 2 revenue caps that will come into effect in 2021.
Next year’s budget could include a tax rate increase to make up for the homestead exemption while maintaining funding for established and new initiatives, but that would curb the savings that homestead residents would see on their City tax bills. That option was presented to Council last week, but it has not seemed to gain traction among members.
Several Council members voted in favor of the exemption but cited concerns about the uncertainty of new State laws that could impact the City’s bottom line and the nominal relief taxpayers will see on their bills as a result of the exemption.
“What I hear more from my neighborhoods is that we just need more services,” Councilwoman Shirley Gonzales (D5) said. More parks, programs, and barbecue pits, for instance. “I believe that people are willing to sacrifice $28 a year [for such services].”
However, she said, it will come in handy politically to be able to point to the homestead exemption when voters ask what City Council has done for them.
In other words, It’s politically difficult to vote against a homestead exemption.
“This is a no-brainer,” Councilman Manny Pelaez (D8) said. However, while City Council can take a “victory lap” today after the vote, “I’m not sure that this is a victory that is going to be felt by the taxpayer for very long. … [This exemption is] probably not going to be very much appreciated or remembered.”
Appraisals consistently go up every year and drive the increases that homeowners see in their bills. An audit of the appraisal process, initiated by Pelaez and City Council earlier this year, is underway.
Bexar Appraisal District is also reviewing its own records to make sure eligible homeowners are taking advantage of their exemptions and that others aren’t abusing it (claiming a home is a homestead when it is not the primary resident), said Councilman Roberto Treviño (D1), who chairs the appraisal district’s board.
Renters, a significant portion of San Antonio’s population, would not benefit from a homestead exemption, Treviño noted. He plans to file a Council consideration request to create a renters commission to better include the rental community.
House Bill 3, also approved by the State during its latest legislative session, will have a greater impact on property tax bills. About half of property tax bills go to school districts, which have been receiving less and less funding from the state over the years. HB 3 replenishes some of that funding so school districts can lessen its tax burden to property owners. School districts account for about half of total property tax bills.
San Antonio Independent School District is expected to reduce its bill for the average-value home by $100, North East ISD by $163, and $140 in Northside ISD, according to City estimates.
Of Texas’ five largest cities – Houston, San Antonio, Dallas, Austin, and Fort Worth – San Antonio is the only one that had not offered a city homestead exemption. San Antonio’s tax rate is the second lowest, after Austin, and it offers a valuation freeze for residents who are 65 and over as well as an exemption of up to $65,000. Disabled residents can receive a $12,500 exemption.
Homestead exemptions in other cities provide more substantial relief than San Antonio’s 0.01 percent; Houston, Dallas, and Fort Worth have a 20 percent exemption – the maximum allowed by the state. Austin’s is 10 percent. Those cities, however, do not provide a valuation tax freeze for senior citizens as San Antonio does.
“This is a small step and I don’t consider this to be the last step,” Perry said. “I look for more increases to the exemption in the future as we can afford it.”