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Preparing for City Budget Planning in Texas

Texas cities have already passed their operating budgets, but it is never too early to start taking the necessary steps for adopting the next annual budget. The tax-rate setting process takes place at the same time municipalities are performing all steps towards budget approval, passage and adoption.

The fiscal year for Texas cities generally begins October 1 and ends September 30 as the dates are driven by statutory deadlines. The last date a Texas city can adopt a budget is September 29. Commonly, this is the same date a city must adopt a tax rate but not always.

The Texas Constitution Art. VIII, Section 21 (adopted in 1978), states property taxes imposed by a city one year may not exceed the amount imposed the prior year, unless a city gives notice and holds a public hearing prior to any increase. The Constitution goes on to say the Texas Legislature is responsible for “prescribing” by law the methods cities must take to give notice, including publication, public hearings, posting, and public access. The methods are neither simple nor straightforward, and in fact are a convoluted weave of requirements found in both the Local Government Code and Tax Code.

Steps to adopt a city budget are set out in Chapter 102, Texas Uniform Budget Code of the Texas Local Government Code. A proposed budget is filed with the county clerk and posted on the website for the city, and a hard copy must be made available for the public to review in city hall. The posting on the city website providing notice to the public must state if the property tax rate will be increased or will stay the same. Once the budget is filed with the county clerk, a public hearing must take place within 15 days.  Meanwhile, the steps necessary for the approval and adoption of a tax rate are set out in Chapter 26 of the Texas Tax Code. The operating budget requires a public hearing, and if a city is going to increase its tax rate then it must hold two public hearings as required by the Local Government Code. This is a fine example of how a thorough familiarity with both Texas codes are required to ensure a city takes all of the necessary steps to adopt its budget and tax rate, every single year.

It appears our state government recognizes a convoluted process when it creates one, and the Texas Comptroller has taken steps to assist cities in navigating the statutory requirements, the deadlines and budget calendars on the Comptroller’s website.

The requirements of the Local Government Code and the Tax Code unfortunately are complex and really would benefit from a re-write but for now it is best for Texas municipalities to heed advice from their city attorney and create a Budget Calendar and Punch List, particularly since the next budget season is only months away.

Although budget season has passed, city staff continually work to identify budgetary needs, whether it be salary increases for employees or new equipment for the police force.

Please do not rely on this article as legal advice. We can tell you what the law is, but until we know the facts of your given situation, we cannot provide legal guidance. This website is for informational purposes and not for the purposes of providing legal advice. Information about our municipal law practice can be found here.

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