The price of living in Houston and Harris County is going up. 

The question is: by how much?

Harris County Commissioners Court answered part of that question Tuesday by preliminarily increasing its overall property tax rate to 60.4 cents per $100 of assessed value, a little more than 7 cents higher than the current levy. The court is expected to finalize the rate Sept. 19.

The city of Houston could be looking at a property tax increase of its own next month as the mayor and city council seek ways to shore up a projected $160 million deficit, pay for a $1.5 billion contract and settlement with the firefighters union, and recover unplanned cleanup costs from the May derecho and Hurricane Beryl. 

Almost immediately after the council approved Mayor John Whitmire’s first $6.6 billion budget in June, the administration turned its attention to closing the deficit projected for the fiscal year that begins next July.

Options under consideration include a monthly garbage fee, raising the city’s voter-approved revenue cap and shifting some utility revenue to the operations budget. Whitmire also has pledged to cut spending wherever possible before presenting a “creative financial plan” for the city next month.

Houston’s Finance Director Melissa Dubowski on Monday told a City Council committee the city would need to raise its property tax rate by at least 3.2 cents per $100 of assessed value to avoid further budget cuts and cover the costs from the two weather disasters.

A mayoral spokesperson said on Tuesday Whitmire will look at further budget cuts before agreeing to a higher tax rate.

The city’s property tax rate has decreased in nine of the past 10 years because of a voter-approved revenue cap that limits the amount of additional money the city can take in from property taxes each year to 4.5 percent. A 2019 state law reduced that cap to 3.5 percent. 

“The residents have seen the benefit of having a lower property tax bill, but the flip side of that is the impact to city services,” Dubowski said Monday pointing to garbage collection, public safety funding and the long-delayed contract with the Houston fire union. 

Raising the city’s tax rate by 3.2 cents would be a nearly 6 percent increase from the current rate of just under 52 cents per $100 of assessed value.

Harris County was facing a $130 million deficit of its own last month.

The state-imposed revenue cap, however, does not apply during declared disasters, paving the way for Commissioners Court to approve the higher tax rates. Gov. Greg Abbott declared disasters for both the derecho and Beryl. 

Houston could follow suit. 

Higher tax bills

Under the rates given the preliminary OK by Commissioners Court Tuesday, the owner of a $274,000 home – the median home value in Harris County, according to the Harris Central Appraisal District – with the standard 20 percent homestead exemption can expect to see their tax bill go up about $162.

It would be the first increase in the county’s overall property tax rate in six years.

RELATED: Inflation, population & calculation: Explaining Houston’s property tax revenue cap

Harris County’s overall property tax rate is comprised of four component rates for the county, the Harris Health hospital district, the port of Houston Authority rate and the Harris County Flood Control District. 

The individual rates OK’d by the court are:

• Harris County: 38.5 cents per $100 of assessed value
• Harris Health: 16.3 cents
• Port of Houston Authority: 0.6 cents
• Flood Control District: 4.9 cents

Commissioners Court increased the flood control district’s tax rate on Aug. 15, setting up an election this November to seek final approval from voters on what county officials have said would be a “transformational” tax rate for the district.

EARLIER: Harris County will ask voters to increase flood control district property tax rate in November

In addition to the tax rates, Commissioners Court on Tuesday gave preliminary approval to its $2.7 billion budget. A final vote on the spending plan also is expected Sept. 19. 

Ripple effect 

The impact of the higher tax rates will depend in part on how much homeowners’ property appraisals rise, University of Houston Economics Professor Steve Craig said. 

The rising rates also can be expected to affect renters as landlords increase rents to keep up with costs, Craig said. The risk is in whether residents will find enough additional value in the city services they pay for. 

“The city is entering a sort of a frightening era, I think, because the city of Houston is becoming disproportionately more expensive,” Craig said. “As the city of Houston becomes more expensive, it gets economically weaker as people choose not to live there. So, that’s the threat to our environment.”

Craig cited the firefighter contract and settlement as a primary reason the city will have to raise taxes and fees or cut spending. If other the city’s municipal workers and police unions are able to exact significant raises in their collective bargaining agreements, the city will only become more expensive, Craig said. 

“The way that the city should be evaluating all of its expenditures is: Is it worth it to the taxpayers for the cost?” he said. 

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