In Austin, city officials have begun the budget planning process with the release of a five-year financial forecast, as Mayor Kirk Watson directed the city manager to prepare projections based on a scenario in which property tax revenue does not increase. The request marks a shift from previous years, when forecasts were based on the maximum allowable tax increase under state law.
Watson said the approach aims to evaluate the impact of property taxes on residents amid economic challenges. Under Texas law, cities can increase property tax revenue by up to 3.5% annually without voter approval, a threshold known as the voter-approval rate. In prior years, Austin has set its tax rate at that level.
The mayor instead asked for projections using the “no-new-revenue rate,” which would generate the same amount of property tax revenue from existing properties as the previous year, even if property values rise. City officials said this rate would still allow for some additional revenue from newly developed properties added to the tax roll.
City leaders have not made a final decision on the tax rate. Mayor Pro Tem Chito Vela said he supports reviewing the no-new-revenue scenario but indicated he may ultimately support adopting the full 3.5% increase allowed under state law. The City Council is expected to approve a final budget in August.
Officials noted that property tax bills include both operations and maintenance and debt service components. While the operations portion could remain flat under a no-new-revenue rate, city staff said the debt portion is expected to increase due to existing obligations. The city reported $2.4 billion in outstanding debt and projected that the average homeowner’s annual debt service cost will rise from about $450 in 2026 to approximately $615 by 2030.
The budget process follows last year’s extended timeline, when voters rejected Proposition Q, a measure that would have increased property tax rates beyond the standard cap. Despite the measure’s failure, the average homeowner’s city tax bill still increased, though by a smaller amount than proposed.
