Analysis of Property Valuation and Tax Rate

Property taxes provide one of the largest sources of revenue for the City and determining the tax rate is a significant component of the annual budget process. Therefore, discussion of the General Fund cannot be separated from discussion of the tax rate and associated revenue.

PROPERTY VALUATION

The Kaufman County Appraisal District (KCAD) establishes and certifies the value of each property within the City of Forney and provides this information to both the city and the County Tax Assessor’s Office. The total certified value for Fiscal Year 2023 (Tax Year 2022) is $3,425,333,112. This is an increase of $770,781,644 or 29%.

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However, the Kaufman County Appraisal District does not adjust the certified taxable value for the Tax Increment Reinvestment Zone (TIRZ). In order to provide an accurate revenue estimate, the City subtracts 85% of the value of the properties included in the TIRZ. Total TIRZ value for Fiscal Year 2023 is $560,582,411 and 85% of that yields $476,495,049. Therefore, property tax revenue estimates are based on a value of $2,948,838,063. This is an increase of $627,060,688 or 27% from the previous year’s adjusted taxable value.

TAX RATE The total tax rate is made up of two portions: Maintenance & Operations (M&O) and Debt Service.

ANALYSIS OF PROPERTY VALUATIONS & TAX RATE

Assessed Values

3,500,000,000 3,000,000,000 2,500,000,000 2,000,000,000 1,500,000,000 1,000,000,000 500,000,000 2018 2019 2020 2021 2022 2023 Adjusted Values TIRZ Value

MAINTENANCE & OPERATIONS RATE

The Maintenance & Operations (M&O) portion of the tax rate provides funding for all general fund operations. This portion of the tax rate is flexible and can be adjusted to a higher or lower rate based on the needs of the community. The M&O rate also generates reserve funds for future capital expenses and allows the City to maintain a 90 day operating reserve. The proposed Fiscal Year 2023 Maintenance & Operations rate will decrease $0.04478 (-12.6%) to $0.311235. This rate will result in $9,177,816 in General Fund revenue; an increase of $911,940 (11%) from the previous year’s General Fund revenue.

DEBT SERVICE TAX RATE

The Debt Service (DS) portion of the tax rate covers the City’s bond payments and other outstanding debt. This portion of the tax rate is not flexible and is set by a calculation based on the required fiscal year payments of the City’s debt. The Fiscal Year 2023 debt service rate is $0.123316. This is a decrease of $0.02174 (‐14.99%) from the Fiscal Year 2022 rate, resulting in $3,636,394 in revenue to be used for debt payments. The Debt Service tax rate is calculated by subtracting any revenue paid from other sources from the annual required debt payment and then dividing that result by the adjusted taxable value and multiplying by 100.

M & O TAX RATE

0.393237 0.386125 0.378201 0.356015

0.311235

FY 2019 FY 2020 FY 2021 FY 2022 FY 2023

(Total annual debt payment) – (Non-tax revenue) ÷ (Adjusted Taxable Value) x 100 = Debt Service Tax Rate ((4,824,007 – 1,187,613) ÷ 2,948,838,063) x 100 = $0.123316

PASS THROUGH TOLL AGREEMENT

In addition to revenue from the debt service portion of the tax rate, the city receives an annual payment from the Texas Department of Transportation (TxDOT) as part of a Pass Through Tolling agreement. With this agreement, the City sold the 2008 General Obligation Bonds to fund the expansion of three state owned roadways within the city limits, and oversaw the construction. Upon completion of the projects, responsibility for the roadways was returned to the state and TxDOT began to reimburse the City annually. Repayment is structured with a minimum annual payment, with an additional accelerated portion (amount above the guaranteed minimum annual payment) based on traffic counts. The minimum annual payment is $2,009,570. The City Council has deemed any amount above the minimum payment be held as committed fund balance and, if possible, used for early redemption in order to reduce future interest payments. The city has redeemed an additional $19,040,000 resulting in $9,327,801 in interest savings. Combined with general obligation refunding and increasing property values, this early redemption process has helped to decrease the debt service tax rate by $0.14 in the last five fiscal years. The 2017 Tax Notes were issued to purchase fire equipment with the understanding that payments would be made from the debt service fund balance. This fund balance is the result of interest collected in the fund, as well as delinquent and penalty taxes that have accumulated over prior years. These funds are restricted and can only be used for debt payments.

TOTAL TAX RATE

The total tax rate for Fiscal Year 2023 is proposed at $0.434551. Tax revenue estimates are calculated at a 100% collection rate and are expected to result in a total of $12,814,210. This is an increase of $1,180,503 (9.21%) from Fiscal Year 2022 and is the result of an increase in assessed valuation and new taxable value. New taxable value added to the tax roll contributed 114% of the revenue increase.

The total tax rate has decreased each year since Fiscal Year 2019 (Tax Year 2018). The total five-year reduction is $0.19.

Property values have increased 91% in the past 5 years, due to significant new development. The Fiscal Year 2023 property values increased 29.04% - of that increase 40% is the result of new value added to the tax roll. The total Tax Rate has decreased $0.19 in the past 5 years with the Maintenance & Operations tax rate decreasing $0.082. While the M&O tax rate is decreasing, the increase in property values still provides funding 1,758,138,986 for enhanced existing 1,541,669,511 services, new services, and cash funded capital improvement without increasing taxpayer burden. The Debt Service tax rate has decreased $0.104 with sound debt management including early redemptions and refunding of existing debt.

2,026,576,340

3,500,000,000 0.7 3,000,000,000 0.621111 0.58 0.6 0.53871 2,500,000,000 0.501069 0.5 0.434551 2,000,000,000 0.4 1,500,000,000 2,948,838,063 0.3 2,321,777,375 1,000,000,000 0.2 500,000,000 0.1 0 0 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Valuations Tax Rate