Tax freeze for elderly may lead to $2.6 million deficit by 2027

Tax freeze for elderly may lead to $2.6 million deficit by 2027

Tax freeze for elderly may lead to $2.6 million deficit by 2027
February 01
18:46 2017

By James Norman & Julia Falcon 

On May 6, citizens of the city of Denton will head to the ballot to vote for a special election on a property tax ceiling for citizens who are 65 and over or are disabled and have a homestead exemption, also known as a tax freeze.

The tax freeze will cap how much those who qualify pay in property taxes. For example, say your home is valued at $100,000. The city of Denton’s property tax rate this year was 0.683 for every $100 – you pay 0.68 cents for every $100 your home is worth. Assuming you qualify for no exemptions, this means you would pay $683.34 in property taxes. The next year, though, if your home is revalued higher than when you bought it, you pay more in taxes.

This tax freeze caps that. It “freezes” the amount paid. It means that as long as you own that property, you will only ever pay $683.34 a year in property taxes, regardless of an increase in the value of your home.

Some of the concerns, however, are how much freezing taxes will cost the city over time. Initial estimates showed roughly $900,000 the first year. A figure elector co-chair Shirley Martin says is overblown.

“The property tax freeze for seniors and disabled will cost the city of Denton $200,000 the first year,” Martin said. “Total budget is $114 million.”

Documents posted about the issue on the City of Denton’s website, show $200,000 as a conservative estimate. By these estimates, the City of Denton will have lost $2.6 million by fiscal year 2027.

Assistant city manager Brian Langley said that all of the numbers are projections and rough estimates of what they think the financial impact could be with the tax freeze.

“It [the figures] is highly dependent upon growth of values each year and obviously the number of people who qualify,” Langley said. “We looked at the average annual value growth that we’ve had in those older than 65 exemptions [and disabled], that has been 3.6 percent.”

The estimations were measured with an annual value growth of 2 percent. When measured at 3 percent, the deficit rises to over $4 million by 2027.

Opponents worry this deficit created will shift a burden on younger generations to make up the money lost from the tax freeze. A growing senior citizen population is also a possibility.

The city of Denton’s senior citizen population was at 8.9 percent in 2010. Estimations from the census bureau show a 0.6 percent increase in that number from 2010-2015.

Martin acknowledged the concerns, but said the city should feel encouraged, rather than worried, saying that the tax freeze will attract more citizens.

“Why wouldn’t that be an incentive to move to the city of Denton?” Martin said.

During the public hearing held on Jan. 10, residents 65 years and older came and expressed their concerns about the issue at ballot.

Some opponents argue that with the exemptions these groups are already given, there is no need for a tax freeze.

“The Denton city is already generous in my opinion in the benefits it offers to senior citizens,” resident Michael Hennen said. “This would be an unnecessary tax give-away to a small group of people who individually may not need this tax relief.”

As of 2016, there are 18,297 properties that qualified for homestead exemption out of 27,857 single family homes. There were 6,874 properties that qualified for the over 65 exemption, and 260 properties qualified for the disabled exemption.

Resident Alfred Sanchez told the council that he believes each generation should provide for each other.

“Because people that lived here in past generations felt it was important enough to provide for the next generation, I feel the same way,” Sanchez said. “I’m 65 years old and it’s my responsibility to provide for the next generation. I believe we as baby boomers should take the same responsibility instead of acting like ‘we don’t have to pay for the next generation.’ That isn’t America.”

Langley also said that if a person receives a freeze depends on the circumstance.

“Someone who gets a tax freeze may decide to sell their home, or they may pass away and it goes to a spouse or the spouse sells the home,” Langley said. “We estimated conservatively at two percent but also three percent because it’s less than those numbers. We don’t know exactly what the value will be. There could be someone moving out of the city and the person moving in wouldn’t be an over 65 person who gets the freeze.”

The petition, according to a Denton Record-Chronicle interview with Don Duff, only needed six weeks to reach the amount of signatures necessary. Larry Wilson, one of the electors behind the petition, said he, along with Martin, feel very confident about it passing.

The freeze has been petitioned for in 218 cities across Texas. According to Wilson, not one of them failed to pass. If this is adopted by ordinance or approved by election, it is permanent and cannot be revoked.

Featured Image: Larry Wilson (left) and Shirley Martin (right), two of the electors that helped push through the tax freeze petition, say they are confident it will pass in May. Their petition received almost 9,000 signatures, surpassing their initial goal of 5,000. James Norman

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6 Comments

  1. CruisinDavid
    CruisinDavid February 02, 16:40

    Disabled and senior citizens – or “elderly” as they are called in the headline – are often on fixed incomes. Some depend solely on Social Security or disability benefits which do not increase at the same rate as the cost of living, especially when Medicare insurance and medical expenses are included. These citizens are the ones that really need the tax freeze.

    The article states, “Documents posted about the issue on the City of Denton’s website, show $200,000 as a conservative estimate. By these estimates, the City of Denton will have lost $2.6 million by fiscal year 2027.” Whether using the annual amount or ten-year figure, even if conservatively estimated, the cost insignificant in comparison to what the City will gain in property taxes from new homes and businesses over the same period. For example, if 200 new homes are completed in a large “affluent” community in 2017, a reasonable number, the additional annual revenue to the City of Denton would easily be five times that estimate of $200,000. If that community is one like Robson Ranch in southwest Denton, the city has very little expense when serving the residents because Robson Development Corporation built the roads and the City of Denton does not maintain them.

    There will be hundreds of new homes completed in various parts of the city this year. Most of them will be bought by people under the age of 65. They can have a homestead exemption if they apply for it. Should we do away with that exemption in order to increase revenue for the city? That would be a real boom to the revenue side of the equation.

    As pointed out in the article, over 200 cities in Texas have already enacted the over 65 and disabled tax freeze. Citizen petitions were seldom needed to accomplish those freezes; city councils realized the benefit to “the elderly” without being petitioned to put the matter to a public vote.

    It is wonderful that two excellent universities are within the city limits of Denton. But, UNT and TWU are a burden on the tax-paying residents of Denton due to the tax-free status the universities enjoy. The city provides some services to the universities and full services to the areas surrounding the campuses without having any revenue from taxes on the massive property occupied by the universities. Maybe what is needed is a petition drive to get the state of Texas to put on a referendum on the ballot that would eliminate the tax-free status of state universities!

    Reply to this comment
  2. Old Poke
    Old Poke February 06, 11:14

    Martin acknowledged the concerns, but said the city should feel encouraged, rather than worried, saying that the tax freeze will attract more citizens.

    Let’s assume there are a finite level of homes in Denton. Either someone above the age of 65 will live in the home, or someone below the age of 65 will live in the home. Those are the only two options. For every citizen above 65, there is one below age 65 that is unable to live in the home. If they are above 65, the city’s revenue will be capped.

    I believe the concept in economics is known as opportunity cost.

    Reply to this comment
  3. mr_fnord
    mr_fnord February 06, 13:32

    A tax rate freeze helps the wealthiest and hurts the poorest the most.

    Higher-valued houses have the most actual dollar assessment increase per rate increase. A $500,000 house with a 10% appraisal value increase has a valuation change of $50,000. A $50,000 house with a 10% appraisal increase has a $5,000 valuation change. The owner of the $500,000 house avoids taxes on $50,000 ($340 per year) while the owner of the $50,000 house avoids $34 in taxes a year. An elderly renter, who is probably the most likely to have limited financial resources and be on a fixed income, gets no tax freeze. The landlord will pass on all tax increases to the renter.

    What tax increases? The increases to everyone else’s taxes when some get a tax cut. The City of Denton takes in $40,000,000 a year in property taxes. If that tax revenue drops $200,000 a year, or more realistically $300,000 a year, the City will still need to pay for police, fire fighters, ambulance service (well over half the city’s budget), parks, libraries, etc. So, everyone else’s taxes will go up 1-2%, including renters. Elderly renters don’t get a homestead exemption or an over-65 exemption, so the poorest and most financially at risk elderly will see their rents go up so that the wealthiest can get a tax cut.

    A better way to help those in need is with the over-65 exemption. If you own your home, you can get the homestead exemption which means you don’t pay taxes on the first 0.5% ( with a $5,000 minimum) in value of your house. So, a $50,000 house would be taxed on $45,000 in value and a $500,000 house would be taxed on $495,000 in value. If you’re over-65 and own your home, you can get the Over 65 exemption, which excludes an additional $50,000 in value. The elderly owner of a $50,000 home pays no city taxes, and the elderly owner of a $500,000 home only pays taxes on $445,000 in values. With exemptions, the poorest and most in need get the biggest savings.

    Reply to this comment
  4. Nathan
    Nathan February 09, 08:34

    As much as this may affect me as a younger resident of Denton, those over 65 don’t obtain “cost of living” adjustments with SS benefits, retirement, pensions, etc. The increases in taxes for them can’t be made up for with their lack of rising incomes.

    Reply to this comment
  5. Don Duff
    Don Duff February 18, 10:31

    Here is what I told the Denton City Council:
    I organized the 100 volunteers that collected the petition signatures. The state law required 5% of the registered voters to sign the petition to put the tax freeze on the May 2017 ballot. We turned in signatures of over 11% of registered voters to the City Secretary. Over 11% is a good sample to determine what the rest of the voters would do. We suspended collecting signatures after November 8, with another 6 weeks available to us.
    This poster was presented on a table or back of a clip board like this one to registered voters to make it easy for them to understand what the tax freeze was about… 98% signed the petition. Can you actually get 98% of people to agree on anything? Age, race, gender did not matter, 98% signed.
    Reasons that the 2% would not sign: Most did not want to shift the burden to younger people. And of course, some said it was just about people at Robson Ranch. OK, let’s make this about Robson Ranch. Estimates I heard was the tax freeze would remove $900,000 from City property tax revenue. I think this is based on property values increasing by 10%. In 2016, Robson Ranch sales office built 154 new homes. In 2017 that adds about $400,000 in new City of Denton property taxes. At least an additional $400,000 will follow every year. By 2020, over $1.8 million in city property taxes will be added just from construction at Robson Ranch. This more than covered the loss of revenue from the tax freeze by the entire City of Denton. How does the additional homes at Robson Ranch impact City of Denton? City of Denton does have street repair issues. Robson Ranch HOA maintains their streets. Very seldom see police at Robson Ranch. Denton Utilities do not supply Robson Ranch electricity or natural gas.
    Of the signatures obtained, less than 20% were from Robson Ranch residents. With 98% of registered voters signing the petition, it is clear how the citizens of Denton will vote.
    Some people have questioned my motives for promoting the tax freeze. The tax freeze will not have any significant financial impact on me or most of the 100 that collected signatures. With DCAD home appraisals increasing every year for the over 65 and disabled in the City of Denton that live on a fixed income, this will make a difference. So to the seniors and disabled of the City of Denton, from 100 volunteers, “This tax freeze is for you.”

    Reply to this comment
  6. Don Duff
    Don Duff February 18, 11:13

    By 2027, new homes just at Robson Ranch will add over $4 Million to the City of Denton property tax.

    Reply to this comment

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