Houston Does Not Have a Revenue Cap

Contrary to the claims of the Turner administration and the most media accounts, there is no cap on the City of Houston’s revenues.  There is, however, a cap on how much the City can charge in property taxes every year.  This distinction is important because property taxes only make up about 25% of the City’s total revenues and under the charter, that is the only source of revenue that is capped.  There is absolutely no cap on 75% of the City’s revenues.

And even to describe the charter limitation as a “cap” on property taxes is somewhat misleading because the charter still allows the property tax collections to increase every year by the sum of inflation and population growth.  And increase they have.

Since the charter amendment was enacted, the City’s property tax receipts have increased by 70%, rising from $646 million to $1.1 billion.  The average increase since 2005 has been just under 5%.  Twice since the charter was amended, the City has enjoyed double digit increases.  For the last three years, the average increase was almost 7%.

     And according to the City’s most recent monthly report, property taxes so far this year are up an eye-popping 15%.  Eventually, that number will come down some due to refunds from value appeals, but the City is still projecting an increase of over 5% even with these refunds.  I feel certain that the City has overestimated the amount of refunds since it is a little embarrassing to ask voters to repeal the property tax cap in a year when the property taxes are increasing by double digits.

Turner will inevitably make the case that he must be able to raise your taxes to pay for more police officers since everyone knows we need more officers.  But you might recall that we have seen this movie before.  In 2006, the City asked voters to increase the property tax cap by $90 million, which was supposed to be dedicated entirely to public safety.   So, what did we get for that $90 million increase?  A whopping increase in the HPD headcount of 212 (3% increase).  And incredibly the Fire Department actually has 244 ­fewer employees than it did in 2006.  I do not know what the $90 million was spent on, but it certainly was not spent on increasing the size of our public safety personnel.  The City did, however somehow find the money to increase the headcount outside police and fire by over 1,000 employees.

But here is the real kicker.  The charter provision that sets out the limitation on property taxes begin with these words:

The City Council shall not, without voter approval . . .”

In other words, anytime the City administration and Council believe they must increase taxes by more than the cap, all they have to do is ask your permission.  In the twelve years since the property tax cap was adopted, Council has never asked the voters for more money.

What Turner wants is the unrestricted ability to increase your property taxes.  So far the cap has had relatively little effect on the City or taxpayers.  But it has stopped City Council from indiscriminately increasing your property taxes year after year.  And therein lies its true value.

Last year, Chicago increased its property taxes by over 20% and plans to increase them by another 30% over the next four years.

That will never happen in Houston . . . . as long as we have the property tax cap.