Overview
- Paxton’s office notified more than 110 cities on Monday that they may not adopt ad valorem tax rates above their no-new-revenue rate after failing to submit required audited financial statements and auditors’ opinions.
- Senate Bill 1851, which took effect Sept. 1, 2025, requires municipalities to complete annual audits and file the auditor’s opinion and the resulting financial statement within 180 days of the fiscal year end.
- Under the law, a city that misses those filings cannot set a property-tax rate that raises revenue above the prior year for properties taxed in both years, a rule designed to block unlawful tax hikes.
- Small towns and some larger cities say limited staff, added audit work from grant awards and tight timelines made compliance difficult, and at least one city reported its request for a deadline extension was denied.
- The attorney general’s review is ongoing after document requests to more than 1,000 municipalities and earlier letters to over 130 cities, and affected governments now face near-term budgeting pressure and possible service impacts if audits are not completed.