Council will weigh Lexington property tax rates this week. Here's what to know

During an August 11th Work Session, Council will take an initial vote on ad valorem (property tax) rates for fiscal year 2027.

As explained by Council presentation materials, an ad valorem tax is a tax based on the assessed value of an item, such as real estate or personal property. It covers things like homes, vehicles, and similar property.

The ad valorem tax is assessed on every $100 in value of owned property.

• For a $270,000 home, for example, the calculation would be 270,000/100 = 2,700 * the tax rate.

In Fayette County, ad valorem tax revenues are split between multiple agencies, with the bulk (63.14% in fiscal year 2026) going to the local public school district. Other taxing entities, such as the state government and Lextran, also levy property taxes.

Property taxes also help fund the Lexington-Fayette County Urban County Government, with 5.93% going to the city's General Fund in fiscal year 2026 and 13.69% going to its Urban Services Fund, which covers waste collection, street cleaning and street lights, according to presentation materials.

During the meeting, which will take place at 3 p.m. Tuesday, the Mayor's administration will present ad valorem tax rate options for Council to consider, as well as its own recommendations.

Council will take an initial vote to set the rates, followed by first and second readings. The second reading, held on August 27th at 6 p.m., will include a public hearing before the body takes a final vote on the rates.

Council considering two options for tax rates

Presentation materials lay out the following tax rate options for Council to consider for the city's General Fund:

• Option 1: Council could choose the "compensating rate," which would provide roughly the same amount of revenue as the previous fiscal year for existing property.
• Option 2: Council could select a rate that offers a 4% revenue increase from existing real property (examples of "real" property include residential homes and commercial office buildings).

If the city sets the rate above 4%, the rate would be subject to voter recall within 50 days if a petition is signed by 10% of voters in the last presidential election, which is 14,547 people, the presentation states.

How could this affect what homeowners pay?

For the city's General Services Fund, the Mayor's administration is recommending option 2 – the rate providing a 4% revenue increase. That would set a rate of 0.075 cents per $100 of taxable property value. Under that rate, the homeowner of a $270,000 house, for example, would pay $202.50 on their General Fund property tax bill, according to the presentation.

It's worth noting the administration is recommending the 4% rate, but that does not mean a 4% increase in an individual homeowner's tax bill. This year's 4% rate is the same as last year's rate (see below).

For the Urban Services Fund, which covers waste collection, street cleaning and street lights, the Mayor's administration is also recommending the rate that delivers a 4% revenue increase.

Taking the example of a $270,000 home again, the homeowner's property tax bill for Urban Services would be $467.10 under that rate.

So altogether, for a home valued at $270,000 under the proposed rate, the property tax bill would be:

• $202.50 toward the city's General Fund
• $467.10 toward its Urban Services Fund
• $669.60 altogether for both funds