PRESENTER: Presenter
Jeff Jewell, Economic and Community Development Director
Body
SUBJECT: Title
Public hearing and first reading of an ordinance amending Chapter 122 - Taxation - of the Code of Ordinances by adding an exemption from ad valorem taxes for qualifying childcare facility properties; providing for the repeal of conflicting provisions; providing for a severability clause; and declaring an effective date.
Header
DEPARTMENT: Economic and Community Development
Body
COUNCIL DISTRICTS IMPACTED: All
BACKGROUND INFORMATION:
On November 7, 2023, Texas voters approved an amendment to the Texas Constitution which authorized cities and counties to provide an exemption from ad valorem property taxation of 50 to 100 percent of the appraised value of all or a portion of real property used to operate a qualifying childcare facility. This exemption is in Texas Tax Code Section 11.36, passed during the 88th Texas Legislature regular session.
This proposed ordinance adopts an exemption of 100 percent (100%) of the appraised value of all or a portion of real property used to operate a qualifying childcare facility, starting in the 2025 tax year. Once Council adopts this ordinance, the person claiming the exemption must apply to the applicable appraisal district in which the property is located to receive the childcare facility tax exemption. The law requires the property owner to ensure that the rent charged reflects the tax reduction, which can be passed through a monthly or an annual rent credit.
To qualify, a childcare facility must be licensed by the Health and Human Service Commission, the owner or operator must participate in the Texas Workforce Commission (TWC)’s Texas Rising Star Program, and at least 20 percent (20%) of the total number of children enrolled at the facility must be subsidized by TWC’s childcare services program.
The following cities and counties have passed this same exemption: San Marcos, Kyle, Hays County, San Antonio, Bexar County, McKinney, Fort Worth, Tarrant County, Harris County, Houston, Austin, Denton, El Paso County, and Aransas County.
If approved, city staff would provide information and instructional guidance to childcare providers interested in applying for the exemption by working collaboratively with Comal and Guadalupe Counties. The Texas Comptroller’s Form 50-844 will be the required application to apply for this exemption and must be submitted to the appropriate appraisal district by April 2025 to be eligible for 2025 tax savings.
City Council received an informational presentation on this matter at the July 11, 2024, Council Retreat and requested city staff to advance next steps.
ISSUE:
Section 11.36 of the Texas Tax Code, as added by S.B. 1145 of the 88th Texas Legislature (2023), authorizes a municipality to adopt an exemption from ad valorem property taxes for businesses operating as a qualifying child-care facility. This proposed ordinance allows the City to provide this tax benefit to eligible child-care businesses, per state law.
STRATEGIC PLAN REFERENCE:
☒Economic Mobility ☐Enhanced Connectivity ☐Community Identity
☐Organizational Excellence ☒Community Well-Being ☐N/A
FISCAL IMPACT:
Home-based and non-profit providers are not eligible for the exemption. New Braunfels currently has three eligible childcare facilities that are members of the TWC rising star program. The fiscal impact is expected to be immaterial.
Recommendation
RECOMMENDATION:
The New Braunfels City Council approve the first reading of this ordinance and advance the item to a second reading at a future City Council meeting.