On social media and in community meetings with elected officials, El Pasoans often express two feelings about taxation: property taxes are too high, and we don’t get enough basic services from the city government.
The high tax/low service complaint may seem contradictory, but it’s actually a feature of the taxation system Texas has set up for local governments. Property taxes make up the bulk of the revenue local governments collect to provide services. That system works much better for communities with higher property wealth – especially commercial property – than for those with low property wealth.
El Paso has low property wealth, so our local governments struggle to generate revenue despite high tax rates. As a result, those governments also struggle to provide much beyond basic services like public safety.
To understand the impact of the property tax system, El Paso Matters compared the municipal governments of the six Texas cities with more than 500,000 people – Houston, San Antonio, Dallas, Fort Worth, Austin and El Paso. We looked at tax rates, home values, total property values and spending by city governments to create comparisons.
Here’s what we found.
City property tax rates and bills
El Paso has the highest city tax rate among Texas’ largest cities. Our municipal tax rate is almost 60% higher than Austin’s.
The tax rate is generally what El Pasoans are referring to when they say El Paso has the highest property taxes in Texas. And tax rates are important – they’re one of two key elements in determining your property tax bill. The other is your taxable property value.
But as we’ve shown in the past, focusing only on the rate is misleading because El Paso’s property valuations are so much lower than in other Texas urban areas. The total property tax bill on the average-value El Paso home is much lower than tax bills in other urban areas.
That’s obviously little consolation to El Pasoans writing a check to pay taxes. But it’s important to keep in mind.
When we look at just the city part of the tax bill, El Pasoans pay more than two major cities and less than three. So we’re in the middle.
It’s worth noting that despite having a much higher rate than Austin, the bill on an average value home in El Paso is 18% less.
The impact of total property value
For our comparisons, we’re looking at the impact on residential homeowners. But it’s important to remember that property taxes are paid by residential property owners and commercial property owners.
In most large Texas cities, commercial properties make up the bulk of the taxable values. El Paso is the exception. Most of our property tax base is residential.
As a result, the tax base available to El Paso’s city government is well below that of other big Texas cities. Here’s the comparison of per capita property tax valuation – the amount of taxable property city governments had per person last year.
Austin stands out in this comparison because of its flourishing commercial sector and expensive housing market. And the high per capita property value is why its tax rate is so much lower than the other big cities.
El Paso’s per capita property value is 22% less than San Antonio’s, the second lowest among the big cities. That’s a key reason why its tax rate is higher than the other cities.
Basically, El Paso generates less property tax revenue than other big cities, despite a high rate.
That has an impact on the services the city can afford to provide.
Comparing municipal spending in big Texas cities
Comparing services among cities is difficult, because communities are different and needs vary.
El Paso Matters examined the general fund expenditures of the state’s largest cities. That’s the source of funding for municipal services like public safety, streets, parks and libraries. The general fund is primarily funded by property taxes, but also includes revenue from sales taxes and fees for city services.
To make comparisons more useful, El Paso Matters is using the general fund expenditure per person in each city.
El Paso’s general fund spending per capita is much lower than the other large cities. El Paso spends about $17 less per person than Fort Worth, which has the next-lowest spending level, and 40% less per person than Austin, which has the highest per capita spending level.
Even with the highest property tax rate among the state’s largest cities, El Paso is able to generate a fraction of the property tax revenue that those cities get with lower rates.
All cities spend to provide public safety and infrastructure to its residents. Cities that generate more revenue per capita have more to spend on quality of life and amenities.
El Paso devotes almost 70% of its general fund budget to public safety, including the police and fire departments, and infrastructure such as streets and bridges. That leaves only 30% for quality of life items like libraries, parks, museums and the visual image of the city.
Many of the comments about a lack of services focus on things like the poor condition or shortages of parks, and the inability to clear weeds from public spaces during the summer monsoon season.
Providing more money for those services would require further increasing property taxes or reducing spending from other areas, or a combination of both.
Higher property taxes would be unpopular, to put it mildly. The same holds true for redirecting funding from public safety or infrastructure needs.
That leaves the remaining 30% of the city budget as a source for shifting existing revenues. But programs in these areas have comparatively little money to begin with, and they often have constituencies that feel those programs need more money.
That’s the challenge El Paso City Council has each budget season. And it’s why mayors and council members repeatedly say El Paso needs to grow a bigger commercial tax base to bring in more revenue and lift the burden on homeowners.
As decades of history demonstrate, that change is extraordinarily difficult to execute.
The post Why El Paso’s city government spends far less on services than other big Texas cities, despite having highest tax rate appeared first on El Paso Matters.
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