council3_rubal
Well-known member
Fellow Council Members,
After a brief discussion last, it became clear that there was a need to clarify approved uses of state sales tax. See the results of a web search.
Clearly, sales taxes may be used to offset property taxes and prevent loss of revenue (from interest payments) from the use of bonds.
In Texas, cities are authorized to levy a local sales tax of up to 2% on top of the state’s 6.25% rate. How a city uses this revenue depends largely on what the local voters have approved.
The revenue is generally split into two categories: General Fund (for everyday operations) and Dedicated Taxes (for specific projects).
After a brief discussion last, it became clear that there was a need to clarify approved uses of state sales tax. See the results of a web search.
Clearly, sales taxes may be used to offset property taxes and prevent loss of revenue (from interest payments) from the use of bonds.
In Texas, cities are authorized to levy a local sales tax of up to 2% on top of the state’s 6.25% rate. How a city uses this revenue depends largely on what the local voters have approved.
The revenue is generally split into two categories: General Fund (for everyday operations) and Dedicated Taxes (for specific projects).
1. General Fund Operations
The majority of municipal sales tax revenue typically goes into a city’s General Fund. This "unrestricted" money pays for the core services residents use every day:- Public Safety: Police and fire department salaries, equipment, and training.
- Infrastructure: Routine street maintenance, traffic lights, and sidewalk repairs.
- Community Services: Operating public libraries, parks, and recreation centers.
- Administration: Trash collection, code enforcement, and city planning.
2. Dedicated & Special Purpose Taxes
Texas law allows cities to earmark portions of their 2% local cap for specific uses, provided they are approved by voters. Common examples include:| Purpose | Description |
| Property Tax Relief | Revenue is used specifically to lower the city's maintenance and operations (M&O) property tax rate. |
| Economic Development | Funding for Type A (industrial/manufacturing) or Type B (quality-of-life like parks/stadiums) development corporations to attract businesses. |
| Street Maintenance | A dedicated fund strictly for the repair and maintenance of existing municipal streets. |
| Crime Control Districts | Funding for specific crime prevention programs, specialized police units, or detention facilities. |
| Emergency Services | Support for fire protection and emergency medical services (EMS), often through a Special Purpose District (SPD). |
3. Transit & Venues
Some cities use a portion of their local tax for specialized regional or entertainment infrastructure:- Mass Transit: Supporting bus systems or light rail (e.g., San Antonio's MTA).
- Sports & Community Venues: Building and maintaining stadiums, arenas, or convention centers.
Key Stats
- Maximum Combined Rate: 8.25% (6.25% State + 2% Local).
- Major Revenue Source: Sales tax is usually the second-largest revenue source for Texas cities, surpassed only by property taxes.
- The "2% Cap": This cap is shared between the city, county, and any special districts. If a city already uses 1.5% and a transit authority uses 0.5%, the limit is reached.