At a time when data centers face nationwide backlash, Denton seems to be seeing a positive financial impact from them in a $2.22 billion budget proposed for 2026-27.
An increase in Denton鈥檚 taxable values, largely from business personal property, has resulted in a proposed property tax rate of $0.548485 per $100 property valuation 鈥� a 7.88% decrease from the previous year鈥檚 tax rate of $0.595420, in part due to billions in added value that city staff described as a 鈥渟hort-term boost.鈥�
The proposed tax rate would mean a decrease of about $203 on the annual property tax bill for the average home, valued roughly at $383,000.
Council member Joe Holland was impressed with the decrease at a budget workshop on Saturday, but worried about what he called the 鈥渞icochet effect鈥� on next year鈥檚 budget due to depreciation of business personal property.
Mayor Chris Watts called his observation 鈥渟pot on.鈥�
鈥淭his is going to be happening all over the state because of data centers and their business personal property,鈥� Watts said. 鈥淭his has made it very challenging.鈥�
Holland added, 鈥淭hese businesses that are sometimes perceived as villains in our community 鈥� man, they鈥檙e carrying their weight and helping row their boat.鈥�
Watts said for this particular year, it is true, but it鈥檚 because of the state tax legislative procedures that have created it, 鈥渨hich is good for the taxpayer, and it provides a little additional revenue.
鈥淏ut next year, as you pointed out, as these things begin to depreciate and as some of this new value is considered old value, it鈥檚 going to really be a seesaw effect that we鈥檝e got to really try to make sure we manage,鈥� Watts said.
The first public hearing for the proposed 2026-27 budget is on Sept. 15, followed by potential adoption by the council on Sept. 22.
Interim City Manager Cassey Ogden told the council over the weekend that her No. 1 priority for the city manager鈥檚 office鈥檚 proposed 2026-27 budget 鈥渨as focusing on investing in our staff and our employees while also maintaining the service levels for residents and planning for growth while also stabilizing our long-term financial health.鈥�
They approached it 鈥渨ith a business not as usual mindset,鈥� Ogden said.
For this year鈥檚 budget, Ogden said, they asked everyone 鈥渢o question all of the historical ways of doing things, looking for efficiencies, finding smarter ways to deliver services, finding more efficient ways but also maintaining service levels that our community expects.鈥�
The proposed 2026-27 budget includes a 2.5% merit increase for general government employees in the spring and a lump sum cost-of-living adjustment of $1,000 for full-time workers and $500 for part-timers in September.
Civil service compensation includes eligible step pay increases and a one-time cost-of-living adjustment of $1,000 for full-timers and $500 for part-timers. Firefighters could see a 3% base pay increase, although police weren鈥檛 listed yet since a new contract is currently being negotiated.
Employees will also see a 4.9% increase in health insurance costs absorbed by the city.
Last year, employees not only didn鈥檛 receive merit or cost-of-living adjustments but also experienced a pay cut since they were responsible for increased costs for health insurance, Ogden told the council during Saturday鈥檚 workshop.
While available funding for staff was good news, the council will be hosting a work session Aug. 18 to discuss community partnership funding after discovering that local organizations and events such as the Denton Noon Kiwanis Club鈥檚 July Fourth fireworks celebration were taking a financial hit due to how they scored on the Community Partnership Committee鈥檚 100-point scoring rubric.
Community partnership funding includes cash sponsorship from the city鈥檚 general fund, which is fueled by property and sales taxes, as well as in-kind support, such as public safety and other city services.
Council member Jill Jester recommended having a work session about the funding 鈥渢o better explain it to our constituents and our awesome organizations as we try to explain how these decisions are made.
鈥淏ecause when we鈥檙e not in that and those meetings aren鈥檛 being recorded and able to be watched, I think the more information the better, especially when we鈥檙e having to make tough decisions as far as who gets what,鈥� Jester said.
The scoring rubric required a score of 90 or higher for 100% funding, between 75 and 89 for 70% funding and 60 to 74 points for 50% funding.
After the city in sponsorship last year, the Denton Noon Kiwanis Club lowered its request from $75,300 in 2025 to $65,000 in cash sponsorship for the July 2027 event.
The Community Partnership Committee, however, recommended only $5,000 in cash sponsorship and $10,000 in-kind services for the Kiwanis event as part of the city鈥檚 proposed $2.2 billion budget.
The Noon Kiwanis Club, which donates all proceeds from the event after expenses to its nonprofit Children鈥檚 Clinic, scored 47.5 on the rubric.
It received the largest decrease in cash sponsorship requested out of the 23 other local organizations, which included the Denton Blues Festival (71), Denton Parks Foundation Juneteenth (73) and the Denton Community Market (67.5), according to the Aug. 8 presentation.
Only three organizations scored above a 90: Denton鈥檚 Day of the Dead (95 for $15,000 in cash, $15,000 in-kind), Denton Arts & Jazz Festival (93.5 for $20,000 in cash, $76,000 in-kind) and the North Texas State Fair Association (91.5 for $32,000 in cash, $5,000 in-kind).
Mayor Pro Tem Nick Stevens called the Kiwanis鈥� Fourth of July fireworks event 鈥渙ne of the most important things that happens in the community each year that people attend.
鈥淚 don鈥檛 want to set them up to fail,鈥� Stevens said.
Aimee Kaslik, the city鈥檚 chief strategy officer, indicated that business personal property played a significant role in the proposed lower tax rate and increase in the city鈥檚 certified assessed value.
Kaslik said Denton鈥檚 certified assessed value increased 18% over last year, from $22.7 billion to $26.7 billion.
This amount also includes $1.9 billion in new value added to the tax roll, of which $1.3 billion of that new value came from business personal property.
The new value added 鈥渋s a big contributor to the overall increase,鈥� Kaslik said.
Watts mentioned that the increase in assessed value was about $3 billion in value from a 鈥渃ertain entity鈥� that he didn鈥檛 identify.
Kaslik agreed with him and pointed out that what the council has 鈥渟een on paper looks great.鈥�
鈥淚t鈥檚 a lower tax rate, higher values and what would appear to be a stable revenue picture,鈥� Kaslik said. 鈥淏ut it [business personal property] does decline in value much faster than a home or a commercial building. Equipment depreciates every year. And in some cases, major amounts of value can disappear overnight.
鈥淭he tax rate that looks sustainable one year can be stretched the next.鈥�
While the added value from business personal property helps today, Kaslik stressed that it isn鈥檛 the kind of long-term value the city can count on to maintain a lower tax rate year after year.
鈥淚t鈥檚 a boost, but it鈥檚 certainly not a guarantee,鈥� Kaslik said. 鈥淥ur financial planning going forward needs to recognize the differences so we aren鈥檛 overreliant on a revenue source that can shift very quickly.鈥�
The city estimates receiving $71.5 million in property tax for fiscal year 2025-26 and $84.08 million for FY 2026-27, and projects a 6.62% increase in sales tax revenue from $62.9 million in FY 2025-26 to $66.09 million in FY 2026-27, according to the Aug. 8 presentation.
Matt Hamilton, the city鈥檚 chief financial officer, told council members that the state does provide 鈥渟ignificant sales tax exemptions鈥� for data centers in areas such as when purchasing electric or equipment.
Core Scientific, the largest of the two data centers in Denton, qualified for a sales tax exemption from the state last year, Hamilton said.
Holland asked Hamilton if he knew the state鈥檚 intention for allowing such an exemption and called it 鈥渙dd for a for-profit business to not pay sales tax.鈥�
鈥淚 don鈥檛 want to speak for the state,鈥� Hamilton said. 鈥淢y assumption would be that a number of years ago, the idea was that the state of Texas wanted to attract data centers and businesses to Texas. I think that it was probably very effective, and now we鈥檙e in a position where we have a lot of data centers and a lot of related businesses being built.
鈥淣ow it鈥檚 a movement toward potentially slowing that down.鈥�
