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: how new property is treated in the no-new-revenue rate calculation.
This page explains how county taxes actually work, what the no-new-revenue rate really is, and why tax abatements are a policy choice, not a requirement.
The 3.5% Cap — What It Really Applies To
Under Texas law, a county that adopts a maintenance-and-operations rate more than 3.5% above its no-new-revenue M&O rate triggers a voter-approval election. Debt service is added separately and is not subject to that 3.5% factor.
Key point:
👉 The cap applies only to property that was already on the rolls, 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.
It is also worth being precise about what the cap is: exceeding it is not prohibited. Under Tax Code § 26.07, a county may adopt a higher rate — it simply has to go to the voters. And § 26.013 lets a county bank up to three prior years of unused capacity and add it back.
What NNR Actually Stands For
NNR stands for no-new-revenue — as in the no-new-revenue tax rate. It is the name of a tax rate, not a category of revenue.
You can see the term on Leon County’s own tax notices. The county’s 2025 Notice of Public Hearing on Tax Increase lists:
NO-NEW-REVENUE TAX RATE — $0.393894 per $100
The no-new-revenue rate is the rate that brings in the same amount of money as last year from the same properties. That is what “no new revenue” means — not zero revenue, and not reduced revenue. The same revenue.
Leon County’s own notice says so in plain words: it is the rate “that will raise the same amount of property tax revenue for County of Leon from the same properties in both the 2024 tax year and the 2025 tax year.”
The Term That Gets Left Out: “New Property Value”
The piece missing from the public conversation is a separate, specific term in the statute: new property value.
Texas Tax Code § 26.04(c) sets the no-new-revenue rate this way:
NO-NEW-REVENUE TAX RATE = (LAST YEAR’S LEVY − LOST PROPERTY LEVY) ÷ (CURRENT TOTAL VALUE − NEW PROPERTY VALUE)
New property value is subtracted out of the calculation. Section 26.012(17)(A) defines it as:
“the total taxable value of property added to the appraisal roll in the current year by annexation and improvements listed on the appraisal roll that were made after January 1 of the preceding tax year, including personal property located in new improvements that was brought into the unit after January 1 of the preceding tax year”
That language covers:
- New industrial facilities
- Data centers
- Solar farms
- Battery Energy Storage Systems (BESS)
- New commercial buildings
- Major expansions that add taxable value
The building and the equipment inside it are both excluded.
Because new property is excluded from the calculation, a large new facility arriving on the tax roll:
- does not force the county’s tax rate down
- can be taxed at the full adopted tax rate
- produces revenue added on top of the capped base
- does not count toward the 3.5% limit
This is not a loophole — it is how the system is designed. The exclusion exists precisely so that new construction does not distort the rate.
There is a second provision worth knowing. Section 26.012(17)(B) applies the same treatment to value that comes back onto the roll when a tax abatement expires. That value is also counted as new property value, and also excluded. So there is no year — not when a facility is built, and not when its abatement ends — in which new value forces a county’s rate down.
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.
You Can See This in Leon County’s Own Numbers
This is not theoretical. It shows up in the county’s own tax filings.
From Leon County’s 2025 Notice of Public Hearing on Tax Increase:
| 2024 | 2025 | Change | |
|---|---|---|---|
| Total tax rate per $100 | $0.419296 | $0.419296 | 0.00% |
| Total tax levy, all properties | $11,286,778 | $12,239,706 | +8.44% |
The county held its tax rate exactly flat — identical to six decimal places — and total collections still rose 8.44 percent, nearly a million dollars. Growth in the tax base raises revenue at an unchanged rate.
If a growing tax base forced rates down and cut revenue, that result would be impossible.
Leon County’s Track Record
Leon County has:
- Granted multiple tax abatements
- Later voted to raise property taxes
- Given up revenue it could have collected from new property, 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
- “NNR” means no-new-revenue — it is the name of a tax rate, not a type of revenue
- The no-new-revenue rate raises the same money as last year, never less
- The 3.5% cap applies to the M&O rate on property already on the rolls
- New property value is excluded from the calculation entirely (§ 26.012(17))
- Full taxation of new projects grows the county budget without raising anyone’s rate
- Tax abatements are optional incentives, not requirements
- Granting an abatement is a political decision, not a legal one
Understanding this is essential to having an honest conversation about taxes, development, and who really pays the bill.
Check This Yourself
Everything above is verifiable without taking my word for it:
- Tex. Tax Code § 26.04(c) — the no-new-revenue and voter-approval rate formulas
- Tex. Tax Code § 26.012(17) — the definition of “new property value”
- Tex. Tax Code § 26.013 — the unused increment rate
- Tex. Tax Code § 26.07 — election to exceed the voter-approval rate
- All at statutes.capitol.texas.gov
- Texas Comptroller, Truth-in-Taxation — comptroller.texas.gov/taxes/property-tax/truth-in-taxation
- Leon County’s 2025 tax notices (Forms 50-212 and 50-876) — leoncountytax.org
If you believe anything on this page is wrong, the Leon County Tax Assessor-Collector can settle it in a sentence. I will publish their answer as written.
More documents and primary sources related to this issue are available in the Documents section of this site.