Marfa
City Councilmember Raul Lara—the only “no” vote on the City Council’s adopted tax rate increase of nearly 70%—filed a complaint with Attorney General Ken Paxton last week saying the increase violated a new state law. Council members stated that the increase was intended to fund a $5 million tax note for street repairs and new smart water meters that transmit usage electronically to the city instead of requiring a physical reading.
“This increase could force people to leave the town they grew up in,” Lara said Monday and reiterated his position that the city shouldn’t be tackling two major projects at once with debt.
According to Presidio County Appraisal District figures, the 2024 average homestead tax was $498.32, which would rise 50% on average to $747.90—based on an average taxable homestead of $134,408, down from $151,810 last year. The actual tax increases could vary widely, depending on if the property is a homestead, what exemptions it qualifies for and appraised values.
SB 1851, passed in the spring legislative session, states that municipalities must meet the state requirements for completing financial audits on time or face the penalty of adopting a no-new-revenue tax rate—a rate that only allows cities to collect revenue matching their previous year’s revenue. On September 29, the City Council adopted a higher voter approval rate—the highest rate without approval of voters.
The city’s audit was due in March, but wasn’t completed until September 19. A completed audit also was required for the city to take on debt with the tax note. It’s fairly common for municipalities to miss audit deadlines, but it’s anticipated that the new law will force cities to comply with deadlines.
Paxton fired off letters to four cities last Thursday stating that he had received complaints from residents who said their cities—all with late audits—were violating the law by adopting rates other than no-new-revenue rates. In his letters, Paxton demanded a variety of financial records and other documents to evaluate the complaints.
The cities are firing back with arguments that SB 1851’s audit requirements only applied to future tax years after the law’s effective date of September 1—meaning that the law wouldn’t apply until cities went to adopt rates in the fall of 2026. They point to language in the statute that states: “This Act applies only to the adoption of an ad valorem tax rate for a tax year that begins on or after the effective date of this Act.”
Although municipalities use their fiscal budget year as October 1 to September 30, Texas law defines “tax year” as the calendar year. So, cities are taking the position that the “after” in the bill’s language would mean that the requirements on audits can’t be applied until 2026—thus, cities would still have an opportunity to do their 2025 audit by March and still be in compliance with the law.
A legislative analysis also notes that the law is prospective, meaning after its effective date, and not retroactive, applying to before that time. Paxton is likely looking to score political points in his bid against John Cornyn for U.S. Senate by being tough on high taxes, and it’s unclear how the current conflicts will play out and if any legal action will be taken by cities.