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Tax Free Cities


 

While fighting the the Tex-Mix invasion, we learned that incorporation was the only way we could gain land use control.   Our County Commissioner, Jen Crownover, sent us a list of Texas cities (with populations, assets, and tax rates or indebtedness) and pointed out that 53 cities had no tax and no indebtedness!  We wondered how this was possible?  What services do these cities offer, what assets do these cities own, and how do the cities raise the revenue needed? 

We talked to the mayors of five of these cities ranging in population in 2015 from just under 200 to over 3,000. 
Every one of the Mayors we talked with said their motivation for incorporating was to keep from being annexed by a neighboring city.  The neighboring city's ETJ expanded until it threatened them with future involuntary annexation, so they incorporated. The following pattern emerged.

No Tax Cities Pattern

  1. ·         They use an Interlocal Agreement with their County for Sherriff (police protection) and road maintenance.
  2. ·         They have a volunteer fire department (that owns the firefighting equipment and facilities), or they have an agreement with an encompassing Fire Department (like Bulverde Spring Branch Fire & EMS)
  3. ·         They do not supply or facilitate an EMS, but they may or may not be supported by an encompassing EMS.
  4. ·         They do not supply or facilitate a water supply, but often have a water supply available to some portions of the city which are close to an independently operated water supply.
  5. ·         They do not supply or facilitate sewer.  Typically everyone is on septic.
  6. ·         The governance positions (e.g. Mayor, Councilmembers”) are volunteer positions (as in, “no pay”) but are still elected.
  7. ·         They often have a donated building for the “City Hall” and the City Hall is only open limited hours on limited days.  In one case they used a bedroom in the Mayor’s house, and in another case the city built a City Hall (think barn raising) on a donated parcel of land.
  8. ·         They have no assets other than City Hall.
  9. ·         They don’t have any employees but often have a contracted part-time City Secretary (paid, but not an employee). 
  10. ·         About half of the cities control land use, but those cities that don’t have land use control typically exist around Home Owners Associations or land that has Deed Restrictions, which provide the control.  One city uses building permits.
  11. ·         They raise revenue needed to maintain City Hall and pay the City Secretary (if paid) by one of more of the following methods:
  1. 1 cent sales tax
  2. Building permits
  3. Franchise tax on utilities (mainly electricity)

 Each of these cities has existed for 15 to 50 years using only these revenue methods without resorting to any debt obligations.