Cedar Park Maximum $10K Homestead Exemption Illegal: Texas AG

CEDAR PARK, TEXAS — The Texas Attorney General this week ruled that the City of Cedar Park has set an illegal amount — a level set at $10,000 this year — for its homestead exemption. In the ruling, the AG said the minimum can be set by an amount no greater than $5,000.

In making his ruling, AG Ken Paxton said a home-rule city cannot set a minimum exemption of more than $5,000, as the Austin Monitor reported. Last spring, the Cedar Park City Council passed an ordinance granting residential property owners a $10,000 exemption on their homesteads — a level equal to 1 percent of the appraised value of the residential property, but no less than $10,000.

Not so fast, Paxton said: State law allows home-rule cities such as Cedar Park and Austin to set a maximum exemption of $5,000. His ruling reportedly was requested by state Sen. Charles Schwertner after the Travis Central Appraisal District refused to implement the Cedar Park homestead exemption, citing the $5,000 maximum set by a home-rule city. The reason Travis County appraisers got into the act is because Cedar Park straddles parts of that county and Williamson County.

On a related front, the Cedar Park City Council on Sept. 13 adopted ad valorem property tax rate of 44.9 cents for every $100 of property valuation — representing a more than 4/5 cent decrease from last year’s 45.750 cents. "Combined with the new homestead exemption that City Council unanimously passed last spring, the average Cedar Park homeowner will not see an increase in his or her property taxes paid to the City of Cedar Park in 2019," city officials said at the time in a press advisory.

City officials also noted in their press advisory the newly passed tax rate also is the sixth consecutive year city council has lowered the tax rate and it is the lowest Cedar Park has seen in 16 years. As of early Thursday evening, the notice still boasted of the city's $10,000 exemption passed last spring on the Cedar Park municipal website despite the AG's ruling on Monday.

By Thursday, the city was forced to change course. Prior to the regular council meeting that day, Patch reached out to a city spokesperson for an official reaction to Paxton's ruling and a timeline as to when residents would be alerted of the lowered exemption.

The city issued a press advisory as a result, conceding in the headline: "The City of Cedar Park’s first homestead exemption, as adopted, was too high," the advisory read. But, city officials offered in the subhead: "Homeowners will still receive discount of at least $5,000 from appraised home value for the city portion of their property taxes."

In the press advisory, city officials explained they passed the high homestead exemption in an effort ot provide tax relief to residents in light of rising property values. Albeit at a lower exemption, homeowners still will see property relief at the lower amount, officials assured.

"In an effort to lessen the impact of property taxes on homeowners due to rising property values, the city council had adopted a one percent homestead exemption with a minimum amount of $10,000," city officials wrote in recap. "State law expressly provides a floor for the homestead exemption amount of $5,000 but does not specify that the floor cannot be increased. The city also reviewed precedent set by another Texas municipality and other entities, as well as Cedar Park’s home rule authority to adopt its own ordinances."

As a result, state and county officials sought an opinion from Paxton on the matter, according to the press advisory. In the interim, the Williamson County Appraisal District had accepted the city's new homestead exemption as adopted, but the Travis Central Appraisal District reduced it to $5,000, officials said.

"The AG reviewed the city’s new homestead exemption and issued an opinion that the city does not have the authority to increase the homestead exemption’s floor – or minimum – above $5,000," officials conceded.

But city officials offered a silver lining: "The good news is that Cedar Park homeowners will still receive the city’s first-ever homestead exemption that automatically deducts at least $5,000 from the appraised value of their home for the City portion of their taxes."

Cedar Park Mayor Corbin Van Arsdale added: “The council wanted to direct more property tax relief to homeowners than this. But in spite of the state’s limitations, we’re glad we at least got the city’s first-ever homestead exemption in place. It was a council priority, and we can build on it. We also just cut our property tax rate for the sixth year in a row, to the lowest it’s been in 16 years.”

Van Arsdale said the city will continue to explore legislative remedies and opportunities to provide Cedar Park homeowners more property tax relief in future years.

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