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For the first time in over a decade, the Carrollton property tax rate will not be lower than the prior year. In their first budget talk for the season, council members and staff discussed setting a rate of $0.5375 per $100 in assessed valuation, the same as last year's.
The proposed Maintenance & Operations rate remains below the No-New-Revenue rate, and the overall rate sits safely below the Voter-Approval Tax Rate.
Along with this news came several other changes and developments for next fiscal year's proposed budget.
Planning for the proposed budget has been underway since February. The total proposed operating budget stands at $356,103,213, a 9% increase over the previous year, alongside a capital budget of $116,459,692.
This increase was attributed to a strategic shift in how property tax revenues are allocated.
Previously, property tax dollars dedicated to streets and capital projects were routed directly into those specific funds. Under a new accounting model, all property tax revenue will first flow into the General Fund before being transferred to dedicated street and capital funds. Finance Director Melissa Everett said these new systems of accounting gave the city more flexibility in its finances. Money needed for improvements and services will be leveraged more strategically for long-term stability and transferred out of the General Fund as needed.
City officials assured that this model was commonplace in many other cities but that Carrollton made the switch to counter perceived threats from the state legislature. Mayor Steve Babick said this change is designed to act as a buffer for Carrollton's coffers. City officials currently worry that Gov. Greg Abbott and state representatives could place "arbitrary caps" on city expenditure and property tax revenue growth. Other recently enacted policies have also affected the city's bottom line.
"This is really about ensuring the city is prepared and planning for potential legislative threats that relate to property tax," said Babick. "What we're trying to do here is ensure that we're transparent and that we're aligning ourselves proactively with where the legislature is going."
New increases to state business personal property exemptions, effective fiscal year 2027, removed $326,879,758 in property valuation, translating to a $1.75 million tax levy loss.
Overall, the city saw a 5.21% drop in total assessed valuation for the year, a decline not seen since 2009. Approximately 35% of properties went under protest, driving valuation losses across Denton, Collin and Dallas counties.
Meanwhile, many of the city's expenses only continue to grow, including an increase of nearly 30% in health insurance costs.
Babick noted that 12 straight years of prior tax rate decreases leave Carrollton in a strong position compared to some surrounding communities, which currently face furloughs or major cuts. A priority this year will be to work on ensuring that legislators know the degree to which property taxes impact how cities can deliver critical services.
"We all want lower taxes," Babick said. "[But] we need to help educate our legislators. That's part of why we have a legislative committee this year to make sure they're informed ... as to how some of these impacts affect our local budget and our ability to fund public safety and other aspects that run the city."
The General Fund remains the city's primary operating vehicle, with public safety taking the lion's share. Public safety services, including police, fire, emergency management, dispatch, environmental services and animal services, account for 65% to 70% of the General Fund budget.
Chief Financial Officer Diana Vaughn cautioned regarding sales tax dependency, noting potential shrinkage in 2026 sales tax revenues. The city is also proactively budgeting for up to a $4 million potential annual loss resulting from ongoing litigation.
"Sales tax is a volatile source," Vaughn explained. "That's why Carrollton has always had conservative fiscal policies, because we don't want to be the city that has to suddenly lay people off or close a bunch of facilities."
Another key change to this year's budget is a change in how stormwater operations are funded.
First established by ordinance in Nov. 2025 and taking effect Oct. 1, 2026, stormwater operations will transition into dedicated enterprise funds sustained by user fees under a tiered rate system for residents and equivalent residential units for commercial properties.
This structure creates four new dedicated funds covering Operating, Debt, Fleet Replacement and Capital Improvements. The transition includes 13 new positions and a revised financial policy requiring a 90-day fund balance reserve in the Stormwater Operating Fund.
The city council is currently evaluating several key decision points and proposed budget additions. Specific items under council review include pay adjustments and potential equipment purchases.
On Sept. 1, the city will hold a public hearing on the budget and tax rate, followed by the vote on its formal adoption. On Oct. 1, Fiscal Year 2026 officially begins.
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