There has been repeated public messaging from Leon County leadership suggesting that tax abatements are required to avoid exceeding the annual 3.5% property tax revenue cap.
That claim leaves out a critical piece of Texas tax law: New-Property Revenue, commonly referred to as NNR.
This page explains how county taxes actually work, what NNR is, and why tax abatements are a policy choice, not a requirement.
The 3.5% Cap — What It Really Applies To
Under Texas law, counties are generally limited to increasing existing-property tax revenue by no more than 3.5% per year without triggering a voter-approval election.
Key point:
👉 The cap applies only to existing property, not to new development.
If property already on the tax rolls increases in value, the county can only capture up to a 3.5% increase from that existing base unless voters approve more.
What Is NNR (New-Property Revenue)?
NNR stands for New-Property Revenue.
NNR represents tax revenue from property that did not exist on the tax rolls the prior year, including:
- New industrial facilities
- Data centers
- Solar farms
- Battery Energy Storage Systems (BESS)
- New commercial buildings
- Major expansions that add taxable value
Under Texas Tax Code Chapter 24, this revenue is not subject to the 3.5% cap.
That means:
- New property can be taxed at the full adopted tax rate
- The resulting revenue is added on top of the capped base
- It does not force a tax increase
- It does not count toward the 3.5% limit
This is not a loophole — it is how the system is designed.
What Happens If a Data Center (or Similar Project) Gets NO Abatement?
If a large industrial project:
- Builds in Leon County
- Receives no tax abatement
- Pays taxes on its full appraised value
Then the result is simple:
- The county’s total budget capacity increases
- The county can fund services without raising tax rates
- Existing taxpayers are not hit with higher taxes
- The 3.5% cap is not violated
In other words: 👉 Full taxation of new projects helps the county.
What a Tax Abatement Actually Is
A tax abatement does not protect taxpayers. It does not prevent tax increases. It does not avoid the 3.5% cap.
A tax abatement is simply an incentive — a voluntary decision by the county to:
- Forgive a portion of taxes that would otherwise be owed
- Reduce NNR the county could legally collect
- Shift more of the budget burden onto existing taxpayers
Counties are never required to grant abatements.
They are optional. Always.
The Missing Piece in Public Statements
When county leadership claims that abatements are needed to “stay under the cap,” that statement omits NNR entirely.
That omission matters because:
- NNR makes abatements unnecessary for cap compliance
- New projects paying full tax do not cause tax hikes
- Abatements reduce county revenue by choice, not law
Leaving out NNR creates the false impression that the county’s hands are tied.
They are not.
Leon County’s Track Record
Leon County has:
- Granted multiple tax abatements
- Later voted to raise property taxes
- Reduced potential NNR while increasing the burden on residents
That pattern demonstrates that abatements do not prevent tax increases — and may actually make them more likely by shrinking the tax base.
Bottom Line
- The 3.5% cap limits revenue from existing property only
- NNR from new development is uncapped
- Full taxation of new projects grows the county budget
- Tax abatements are optional incentives, not requirements
- Granting abatements is a political decision, not a legal one
Understanding NNR is essential to having an honest conversation about taxes, development, and who really pays the bill.
More documents and primary sources related to this issue are available in the Documents section of this site.