San Antonio city leaders will propose raising the tax rate for the first time in 33 years, due in part to a drop in the city’s base taxable values.
On Wednesday, the City Council received its first major financial briefing since the appraisal district released its preliminary data on 2026 property valuations.
Overall, the county’s taxable value went up about 2.5% in 2026, but many individual valuations actually went down from 2025 — particularly on single-family homes. That data should have come as a relief to many homeowners, whose property tax bills are based on those valuations.
But across the board, taxing entities are now talking about raising rates to keep their revenue on pace with growing expenses.
Texas law allows cities to collect up to 3.5% more revenue from property taxes over the previous year without asking voters’ permission — not including taxes collected on new development.
In years of high growth municipalities actually had to lower its rate to keep its revenue within that range.
But Erik Walsh said Wednesday that he’s recommending the city start setting its tax rate to meet that 3.5% growth, even if it means raising the rate to keep up.
Doing so would generate an extra $25 million in the coming year’s budget, he said, and $42 million in the year after that.
“Just the normal growth we have in our budget for employees or labor expenses … all those dollar amounts are more than $25 million,” Walsh said. “The 3.5% as laid out in state law, is for cities and counties to sustain municipal operations. So that’s how I view it.”
The exact rate increase won’t be known until the appraisal district finalizes its numbers later this summer, and council approves the decision.
Budget cuts to come
Across the county, school districts and municipalities are largely feeling the same stress when it comes to property values.
Last week, Bexar County leaders had a similar budget forecasting meeting, in which County Manager David Smith said they’re in for “the worst year for property tax revenue that we’ve seen” since the 2008 financial crisis.
By comparison, San Antonio has a more diverse revenue stream that’s helping even things out.
Roughly a third of San Antonio’s general fund — projected at about $1.7 billion for fiscal year 2026-27 — comes from property taxes.
A third comes from CPS Energy, which has been selling lots of energy onto the grid for a profit, Walsh said, and a quarter comes from sales tax, which is on a better growth trajectory. Another 15% comes from other sources.
But Budget Director Freddy Martinez said the city still needs to trim $70 million out of its next two years’ budgets to remain structurally sound — even if it raises property taxes to the highest the state allows.
That’s because the cost of big-ticket items like police and fire, staff salaries and employee healthcare, as well as technology and equipment rise annually at a rate that exceeds projected revenue growth.
‘Still a high-growth city’
Overall, the county’s taxable value went up about 2.5% in 2026.
But when San Antonio properties are separated out from the broader countywide data, the taxable value on existing properties was down by about 3.54%.
Residential home permits are projected to be down about 24%, according to a city presentation, while median home prices are lower than last year, and homes are on the market longer.
“Negative growth is one of the major drivers behind what we are seeing,” Walsh said. ” … We’re in an unusual situation with the appraisal district, because we’re still a high-growth city … To have base values across the board decrease … We’ve not been in a negative position like this.”
The potential tax rate increase comes as both city-owned utilities, SAWS and CPS Energy, are both gearing up to seek to increase their rates as well.
The city is also looking at increasing the storm water fee to fund drainage, and its maintenance and operations tax rate to pay for infrastructure that it might not have money for in a smaller-than-expected bond.
