Texas Legislature fails to address Gov. Abbott's No. 1 priority: property taxes

Gov. Greg Abbott signed a bill on municipal annexation reform into law Tuesday.

Gov. Greg Abbott signed a bill on municipal annexation reform into law Tuesday.

Signing off 27 hours early prior to the official end of the special session, the Texas House of Representatives effectively ended debate on what Gov. Greg Abbott has called his No. 1 priority in the special session: property tax reform.

The two chambers had been battling it out over the past several days on how to tackle the issue—mainly on the amount to limit rollback tax rates.

As it stands, Texas law allows entities to exceed the effective tax rate—which allows an entity to collect the same amount of revenue as the year prior—by 8 percent before holding a rollback election.

The Senate's proposal would lower this cap to 4 percent and the House's limit sat at 6 percent. The House's proposal also exempted entities bringing in $25 million or less in revenue from the limit. The Senate's version exempted those bringing in $20 million or less.

House Ways and Means Committee Chairman Dennis Bonnen, R-Angleton, led the charge for the House, working on negotiations with Sen. Paul Bettencourt, R-Houston, who has spearheaded the issue for the Senate in both the regular and special sessions.

Bonnen, who was expected to appoint conference committee members to further work out differences in the chambers' unique versions, surprised everyone by saying he would no longer look to do so with his counterparts in the Senate.

"I have been working with members of the Senate for several days on Senate Bill 1; we have made our efforts, so I don't want there to be in any way a suggestion that we have not, will not, would not work with the Senate on such an important issue," he said.

Bonnen declined to appoint a conference committee because he said doing so would effectively kill the bill, which needed to be agreed upon before a legislative deadline.

Shortly thereafter Tuesday night, the House adjourned for the special session, throwing the bill back into the Senate's court for further movement.

Bettencourt declined to accept the House's version of the bill, killing any hopes of advancing property tax reform in the current special session.

"We are not going to accept the take-it-or-leave-it proposal from the House, and we are going to fight another day," Bettencourt said. "I hope the governor calls us back as soon as possible."

Cities, counties and local entities have been critical of this method of fixing property taxes as limiting local control and limiting the growth of services for increasing populations.

San Marcos Mayor John Thomaides said he was pleased the property tax reform bill did not pass. The city's tax rate is $.53 per every $100 valuation.

Property taxes amounted to nearly 22 percent, or $13.3 million, of the city's budget in fiscal year 2016-17, which Thomaides said is enough to fund the city's police department. Nearly 46 percent of the city's revenue comes from sales taxes.

"Any legislation that would reduce that revenue and not allow us to respond to the growth of this community, that would definitely hurt public safety and it would limit our ability to prepare for and accommodate the significant growth that we continue to see year in and year out," he said.

Hays County Chief of Staff Lon Shell said in a statement the county has come "nowhere near" the four percent cap considered by the Legislature.

“Hays County can only look at the proposed legislation as it might have affected our County government tax rate, keeping in mind there are many taxing authorities that set their own rates," he said. "The highest we’ve seen is 3.06 percent, and only in one year. Typically it has been lower.”

Austin Mayor Steve Adler joined many others in expressing disappointment the Legislature had not touched school finance reform, which would have offered much relief to property taxes.

"Texas lost in the special session because our property taxes will continue to rise until the Legislature fixes the broken school finance system," Adler said. "And once again this session, they didn't even try."

The Legislature did pass a bill that creates a commission to study the school funding formulas, but no changes to the formulas can take place until the next called session.

At this time, Abbott has not indicated whether he plans to call the Legislature back for an additional special session.

Thomaides said he would not be surprised if another special session is called.

"We had a regular session, we had a special session; at some point in time you’ve got to allow the cities the right to govern themselves," he said. "Who is in a better position to understand the needs of our local citizens?"