\u201cThe city has not raised the tax rate since I was in college, so it\u2019s been some time,\u201d City Manager Erik Walsh told the City Council at a budget goal-setting session on Friday. \u201cI suspect it won\u2019t be a positive reaction.\u201d<\/p>\n
City Council will approve a tax rate and budget in September, and have already been looking at spending cuts to stave off a potentially ballooning deficit<\/a>.<\/p>\n Walsh alerted council members in May<\/a> that low consumer confidence was negatively impacting many facets of city revenue, including hotel occupancy tax, the airport development services and residential and commercial building permits.<\/p>\n But property taxes, which account for more than a quarter of the city\u2019s general fund<\/a>, have been a relatively predictable revenue source in recent years.<\/p>\n Texas law caps<\/a> the amount of property tax revenue cities can collect at 3.5% overall growth from the previous year, not including new construction, and San Antonio easily hit that amount as property values grew by 22% in 2022, 15% in 2023 and 2.4% in 2024. <\/p>\n \u201cWe\u2019ve had the luxury of having an upward market for several years now, so taxing units could keep tax rates the same and still get more revenue from an increased market values,\u201d said Bexar County\u2019s Chief Appraiser Rogelio Sandoval.<\/p>\n This year, however, higher interest rates and general consumer uncertainty have contributed to a cooling housing market<\/a>, and property values have stagnated<\/a> to the point that San Antonio won\u2019t meet the state\u2019s 3.5% growth cap without a rate increase.<\/p>\n Sandoval estimated residential properties in San Antonio had only risen in value by about 1.5% this year \u2014 a number that will decrease even further as homeowners appeal their valuations.<\/p>\n \u201cThe bottom line is, we\u2019re experiencing a flat market, and that has really put a lot of pressure on taxing jurisdictions,\u201d Sandoval said. \u201d \u2026 When you\u2019re seeing a stagnant market like we have seen lately, they\u2019re put in a position where if they\u2019re going to try to generate more revenue, they would have to consider raising that tax rate.\u201d<\/p>\n Homestead exemption here to stay<\/p>\n Texas\u2019 revenue cap<\/a> meant that as property values soared in recent years, cities needed to reduce their tax rates to comply, or find other ways to shed revenue through other targeted exemptions.<\/p>\n From the taxpayer\u2019s perspective, property tax bills were still rising with their valuations. But the city got to take a victory lap on lowering its rate<\/a> multiple times<\/a> in recent years, and offering targeted property tax relief<\/a> to certain groups, such as seniors, disabled veterans and people claiming a homestead exemption on their primary residence.<\/p>\n San Antonio, which already had a property tax freeze in place for seniors, created its first homestead exemption<\/a> in 2022, allowing homeowners to reduce the taxable value of their primary residence \u2014 and later increased it to the maximum 20%.<\/p>\n Despite the change in financial situation, Walsh told reporters earlier this year that San Antonio\u2019s increased homestead exemption<\/a> had been a valuable tool to keep families in their homes, and there were no plans to reverse that part of the city\u2019s revenue-shedding measures.<\/p>\n \u201cI think it was impossible not to do the homestead exemptions,\u201d he said. \u201cIt would not have made sense to us, structurally, just to change the rate.\u201d<\/p>\n San Antonio\u2019s tax rate, however, is likely to come back up after decreasing<\/a> in 2023 and 2024 and staying even in 2025.<\/p>\n To get the 3.5% growth rate, the city projects it would need to raise it from the current 54.159 cents per $100 of valuation to 55.406 cents. <\/p>\n It could legally raise it even higher, to 55.862 cents per $100 of valuation, by rolling over some of the increase it didn\u2019t use in previous years \u2014 known as the unused increment.<\/p>\n Those estimates are subject to change based on appeals to residents\u2019 property valuations, which will continue to lower the city\u2019s taxable values throughout the summer.<\/p>\n \u201cThere\u2019s a lot of work going on with the Appraisal District right now,\u201d Walsh told the council on Friday. \u201cBut as it stands, we\u2019re are anticipating negative growth in our base taxable values, which hasn\u2019t occurred since the aftermath of the 2009 recession.\u201d<\/p>\n CPS Energy revenue <\/p>\n According to the city\u2019s latest projections<\/a>, slight improvements in sales tax revenue and CPS Energy revenue had helped ease the urgent need for cuts<\/a> in this fall\u2019s budget.<\/p>\n But without big forecasting changes, the city estimates that it could have a more than $150 million deficit<\/a> by fiscal year 2027. <\/p>\n To address that issue, city leaders said Friday that they wanted to press pause on a recent plan to reinvest CPS Energy revenue<\/a> into capitol projects at the city-owned utility \u2014 instead reserving that money for the city\u2019s own operating expenses. <\/p>\n CPS Energy\u2019s ability to sell energy onto the Texas grid has been one bright spot in the city\u2019s revenue model, and last year city leaders crafted an agreement to use some of that money to help the utility company stave off future rate increases. <\/p>\n![\"\"](\"https:\/\/sanantonioreport.org\/wp-content\/uploads\/2025\/06\/average-home-tax-increase.png\")
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