The city of Rollingwood passed a $3.6 million budget last week and voted to raise the property tax rate significantly.

The decision followed weeks of debate and presentations, and while the budget is largely status quo, the council voted 3-2 to raise the tax rate by more than 20 percent. Alderman John Hinton and Alderwoman Shanthi Jayakumar voted against the rate proposal.

The current property tax rate is 11.16 cents per $100 of valuation. The new tax rate is 13.48 cents per $100 of valuation, meaning the average homeowner will pay about $148 more in taxes.

The goal of the property tax increase is to reduce monthly centralized wastewater service bills for the average Rollingwood resident by the same amount or more than the property tax increase. Right now, wastewater customers are paying about $775,000 a year to the Lower Colorado River Authority to pay off the cost of installing the wastewater system in Rollingwood. Under the tax proposal, the additional property taxes collected would be used to pay $75,000 of that charge from LCRA every year, a little less than 10 percent of the total bill.

Residents with homes valued less than the average, about $641,000, would see more savings on wastewater bills versus the increase in property taxes, but residents with more expensive homes will end up paying more in taxes than they see in sewer bill savings.

The new tax rate was part of a proposal presented by Alderman Barry Bone in an effort to relieve some residents from what many consider high sewer bills.

“This is a step to have a reduction and see how it works and learn from it,” Bone said.

Alderwoman Sara Hutson had proposed a significantly higher tax rate increase earlier in budget discussions that would have moved the entire yearly $775,000 capital charge into property taxes, causing a 17-cent per $100 valuation increase in the rate. That proposal was withdrawn before the draft budget was presented.

Because the new tax rate is above the rollback rate of 12.72 cents per $100 of valuation, the council’s decision could trigger a rollback election. Residents have 90 days to submit the paperwork to call for the election, Mayor Bill Hamilton said.

The city is expected to run a surplus budget, with about a $200,000 cushion built in, despite a project 10 percent drop in sales tax revenue.

“I’m glad to have the budget in place,” Hamilton said. There’s a little bit for everybody in the budget and I’m looking forward to implementing some of the new initiatives and start to benefit from an economic recovery so we can have some flexibility to do creative things in next years budget. We wanted to make sure that we have a fiscally sound budget in City Hall. We know that our residents and businesses are having to deal with some tough economic times and I think our city budget must reflect the same.”

Some additions to the budget include a $10,000 contingency fund that Hamilton said could be used for merit pay for city employees, $71,000 for street repairs and repaving projects and $161,000 in capital projects for the parks department. The city may also be able to utilize about $200,000 from Rollingwood Community Development Corporation funds for water projects, should a Nov. 2 ballot initiative pass. The RCDC currently has about $400,000 in reserve and was primarily spending on parks projects.