Basic Legal Requirements for the Budget, Tax Rate, and Audit. Bill Longley TML Legislative Counsel

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1 Basic Legal Requirements for the Budget, Tax Rate, and Audit Bill Longley TML Legislative Counsel

2 Key Budget Questions What statute governs budget adoption? Local Government Code Chapter 102 Is an annual budget required? Yes. LGC Sec When must the budget be adopted? No date is required, but most cities have fiscal year beginning October 1 st Budget tied to tax rate

3 What must be included in the budget? LGC Sec requires: Itemized comparison between expenditures in the proposed budget and in the preceding year Must show the estimated amount of money for each project or expenditure A financial statement that shows: Outstanding obligations Cash on hand in each fund All funds received during preceding year All funds available for ensuing year Estimated revenue available to cover proposed budget Estimated tax rate needed to cover proposed budget

4 Who is the Budget Officer? Sec says budget officer is the mayor, unless city has adopted a city manager form of government (then budget officer is the city manager) City council cannot reassign duties to another official

5 Proposed Budget Prepared by budget officer Must be filed with city secretary at least 30 days before adoption of property tax rate Posted on city s website Cover sheet if proposed budget raises more from property taxes than in previous year

6 Budget Hearing At least 15 days after proposed budget filed with city secretary, but before date of the tax levy Published notice of hearing Must be published in paper between 10 and 30 days before the hearing Include statement if budget raises more from property taxes than the previous year Action must be taken at end of hearing

7 Budget Adoption Budget adopted after budget hearing but before tax rate adoption City may levy taxes only in accordance with the budget (LGC Sec ) Separate ratification vote if more property tax revenue S.B. 656 (2013) (LGC Secs and ) Cover sheet for adopted budget Statement if budget raises more, less, or the same amount of property taxes as previous budget Record vote, and various tax rates included on cover sheet Posted on website

8 Big Picture 1. Proposed Budget 2. Budget Hearing 3. Adoption of Budget 4. Adoption of Tax Rate

9 Property Tax Rate Setting Process Governed by Chapter 26 of the Tax Code and Local Government Code Sec Usually coincides with the budget adoption process

10 Tax Rate Adoption Timeline July 25 th Chief Appraiser certifies the appraisal roll (Tax Code Sec ) September 1 st Last day to provide notice of tax rate by publication or mail (LGC Sec ) H.B. 1953/S.B (2015): Can publish later if certified roll received late. Two tax rate hearings must be held starting at least seven days after notice, if city is a larger taxing unit and adopting a rate that exceeds the effective tax rate (Tax Code Sec (a)) September 29 th Last day to adopt tax rate (Tax Code Sec ) S.B (2015) 60 percent of governing body must vote in favor of tax rate that exceeds effective rate.

11 Property Tax Reform

12 Audit Requirement Local Government Code Chapter 103 A municipality shall have its records and accounts audited annually and shall have an annual financial statement prepared based on the audit.

13 Who Can Conduct Audit? LGC Sec A city may have an employee conduct the annual audit (not recommended) If not, city must hire a certified public accountant who is licensed in Texas or holds a permit to practice from the State Board of Public Accountancy

14 Hiring an Auditor City generally doesn t have to go through competitive bidding process for professional services pursuant to LGC Sec However, if hiring a CPA, city must comply with the Professional Services Procurement Act in Gov t Code Ch Request for Qualification process

15 Audit as a Public Record LGC Sec provides that annual financial statement and auditor s opinion on the statement must be filed with city secretary within 180 days after end of fiscal year

16 Failure to Comply With State Law

17 Contacts TML Legal Department (512) Texas Comptroller of Public Accounts, Property Tax Assistance Division comptroller.texas.gov

16 th Annual Riley Fletcher Basic Municipal Law Seminar Austin, Texas Thursday, February 5, 2015

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