By Rita Cook
Correspondent
Texas Metro News
AUSTIN – The City of Ferris’ city manager Dr. Brooks Williams recently had an idea that is a worthy consideration.
In fact, politicians in Austin might want to consider a conversation on the idea when the next legislative session begins in January 2027.
Williams is calling on state politicians to consider a new local option in Texas law that would allow a city to remove its maintenance and operations property tax from homes that already qualify as a residence homestead under state law.
As a refresher maintenance and operations (M&O) property tax in Texas is the portion of your property tax bill that funds the day-to-day operations of local governments — such as cities, counties, school districts, and other taxing units — rather than paying down debt.
M&O taxes cover operational expenses like public safety (police, fire, EMS); streets, roads, and drainage; parks, recreation, and libraries; building and health inspections; animal control and code enforcement and administrative costs for the taxing unit as defined at the North Richland Hills, Texas Municipal website.
For school districts, M&O taxes are the largest single component of property tax revenue, funding classroom operations, staff salaries, and other educational services according to the Texas Public Policy Foundation.
Regarding how M&O taxes are structured, a local property tax rate is split into two parts according to the Texas Education Agency.
The M&O rate funds maintenance and operations while the I&S (Interest and Sinking) rate funds debt service (repaying bonds for facilities).
In 2019 Senate Bill 2 in Texas changed terminology and rate-setting rules stating “No-new-revenue M&O tax rate” which replaced the old “effective M&O rate.”
Currently cities are required to hold automatic elections to approve tax rates above the “voter-approval rate” (now 3.5% above the no-new-revenue rate for most units) as noted by the Texas Municipal League.
Under the concept Williams is offering cities like Ferris could have its City Council act by ordinance to provide full M&O tax relief to properties that already qualify as primary residence homesteads under state law. Commercial property, rental property, investment property, second homes, and institutional or corporate ownership would remain fully taxable and continue paying their normal share. Debt service taxes would stay untouched and continue under current law.
“Current law gives cities only limited ways to respond,” Williams said. “A city can use the homestead exemption that already exists, but it is capped at 20%, by state law. A city can also lower the tax rate, but that gives the same break to every type of property on the roll. If the goal is to help the homeowner living in the property as a primary residence, that is not a very precise tool.”
City officials in Ferris say Williams’ idea is rooted in a simple point…When Texans voice concern that they never really own the home they live in, they are talking about the place they call home each day. They are not talking about a strip center, a corporate rental portfolio, or an investor-held house.
Williams also said the city is not asking the Legislature to force the model on every community.
As for Ferris and other cities seeing the benefit of this model it can also bring broader economic benefits.
City leaders believe that removing city operating taxes from qualified homesteads could make communities more attractive to owner-occupants, support neighborhood stability, strengthen long-term population growth, and improve the case for new retail and service investment.
“Texas already knows how to identify a qualified residence homestead,” Williams said. “The appraisal process already separates the primary home someone lives in from commercial property, rental property, investment property, and second homes.”
In fact, current law under Tex. Tax Code § 11.13(n) lets cities offer only a capped local-option exemption. Therefore, if a city wants to go further, the practical answer is to lower the overall rate, and that gives the same break to every class of property on the roll. “We are asking for something more precise than that,” Williams added. “We are asking for the authority to remove the City’s M&O tax from qualified homesteads only, while keeping non-homestead property fully in the base.”
Ferris city officials added that moving from the current 20% city homestead cap to a full municipal M&O homestead option would likely require both statutory changes to the Texas Tax Code and a constitutional amendment under Article VIII of the Texas Constitution. Previous bills have followed that same path by tying the change to voter approval of the required constitutional amendment.
Rita Cook is a world traveler and writer/editor who specializes in writing on travel, auto, crime and politics. A correspondent for Texas Metro News, she has published 11 books and has also produced low-budget films.
