The Texas Senate approved Senate Bill 2 on Tuesday. The controversial bill that seeks to curb the growth in property taxes that local government agencies like cities and counties levy on landowners passed in an 18-12 vote. SB 2 could require taxing entities to hold an election if the amount of operating and maintenance funds they plan to collect from property taxes is, in general, 5 percent more than what they took in the previous year.
Posted March 15 at 9:48 a.m.
In its initial form, SB 2 would lower the rollback tax rate from its current cap of 8 percent to 4 percent.
However, state Sen. Joan Huffman, R-Houston proposed an amendment early Wednesday morning that would change the proposed 4 percent threshold to 5 percent, with the hope that this extra percentage point would still enable cities and political jurisdictions to carry out adequate services for citizens.
Posted March 13 at 10:31 a.m.
Some local city and county government officials are worried their budgets will suffer as Texas lawmakers prioritize taxpayer relief this legislative session.
Currently, the average home in Georgetown is valued at $253,320. This means the average taxpayer pays $1,074 in city property tax per year, according to research provided by the city. Had Senate Bill 2 been in place, the yearly savings on the average tax bill would have only been $10.06.
Sen. Paul Bettencourt, R-Houston, filed SB 2 on Nov. 29 in an attempt to reform the property tax system. The bill, known as the Texas Property Tax Reform and Relief Act, was given top priority by Lt. Gov. Dan Patrick.
“Texans have told us loud and clear that commonsense property tax reform legislation is long overdue,” Patrick said. “Property taxes are driving people out of their homes and hampering business expansion and growth. It’s time for this to stop.”
According to a March 3 article from The Texas Tribune, a similar bill was also filed in the House by Rep. Dennis Bonnen, R-Angelton.
A 2016 report by CoreLogic, a financial and business analyst company, said the median property tax rate in Texas was 2.17 percent, ranking the Lone Star State as having the fifth-highest property tax burden—at about 70 percent higher than the nationwide average rate of
Only Illinois, New York, New Hampshire and New Jersey ranked higher.
Under existing rules, Williamson County and Georgetown citizens unhappy with tax rate increases must petition for signatures from 7 percent of registered county voters to get a rollback election onto the ballot. Voters can then decide to reject the proposed tax rate.
This can only be done if the Williamson County Commissioners Court or Georgetown City Council adopts a rate higher than the calculated rollback rate currently at 8 percent, according to county and city officials. The court can adopt the exact rollback rate, and no petition could be submitted. To date, Williamson County and the city of Georgetown have never exceeded the 8 percent rollback rate.
SB 2 seeks to lower the property tax revenue cap for cities and counties from an 8 percent increase over the previous year down to a 4 percent increase.
If a city or county were to exceed the revenue cap, a rollback election would be automatically triggered, giving voters the chance to approve or reject the new tax rate.
Bettencourt, who serves as chairman of the Senate Select Committee on Property Tax Reform, hosted a series of town hall meetings across the state in 2016.
“The committee heard the same message loud and clear,” Bettencourt said. “Texans are asking for and deserve property tax relief.”
Small-business owners are frustrated their hard-earned profits are going out the window. Big businesses reported they’re relocating, taking jobs out of Texas.
Part of Bettencourt’s argument calling for the tax reform stems from so-called problems with the reappraisal system.
The state tax code requires appraisal districts to adopt a written reappraisal plan every two years to make sure appraisals accurately reflect changes in the real estate market.
However, Bettencourt said the system still produces assessed values that often do not correlate with what is actually happening in the market.
Average assessed values in Williamson County increased by 17.68 percent between 2014 and 2016, from $219,235 to $258,006 officials said.
For property owners, appraisal increases mean paying higher tax bills. Tax increases are also often passed on to renters as rental properties increase rent prices upon renewal of leases or subsequent tenants.
In addition to reducing the rollback rate, SB 2 would also install a series of appraisal reforms, including the creation of oversight boards, raising small-business exemptions and standardizing the date for property owners to protest their appraisals.
THE PURSUIT OF LOCAL FUNDING
City and county-level governments in Texas rely heavily on property taxes for much of their funding, officials said. While states such as New York also receive city and state income tax revenue.
Though the city of Georgetown also receives sales tax revenue, Williamson County does not.
The Texas sales and use tax rate is 6.25 percent, according to the Texas Comptroller of Public Accounts website. Local taxing jurisdictions may also impose sales and use tax of up to 2 percent for a total of 8.25 percent.
For the current fiscal year, the city of Georgetown expects to take in $12.8 million in sales tax revenue, which is just 1 percent of the 8.25 percent sales tax. The state collects the bulk of it at 6.25 percent. The remaining 1 percent goes to dedicated city uses. The city will also receive $12.5 million in property tax, Georgetown City Manager David Morgan said.
The rollback and effective tax rate factor in any increases in sales tax, so if sales tax goes up in a year, then the rollback and effective tax rate would be lower, according to city officials.
Larry Gaddes, Williamson County tax assessor-collector, said SB 2 would directly affect the maintenance and operations portion of budgets.
The price of postage, fuel for emergency vehicles and ammunition for law-enforcement agencies is typically found there and frequently experience price changes.
“The biggest issue is that the bill would lock the county down on a number for a part of the budget that fluctuates and that we cannot predict what is going to happen,” Gaddes said.
Cynthia Long, Williamson County Precinct 2 commissioner, said the legislation could significantly restrict future budgets because of state-required expenses.
“There are lots of things that we are mandated to do by the state but are not given any money to do them,” Long said. “It has to come out of that local property tax.”
Julie Kiley, the first assistant county auditor for Williamson County, said the Legislature would also make it tough for the county to fund projects that residents desire but are not required by the state.
“Parks is not something we have to do by statute,” Kiley said. “But the voters in this county have strongly supported parks, and we have borrowed money to build these facilities because the voters spoke and that’s what they said they wanted us to do.”
Morgan said the legislation would prohibitively limit cities’ ability to raise “appropriate revenue to provide adequate levels of services” because of logistical challenges rendered.
Under the bill, if Georgetown or Williamson County considered adopting a tax rate higher than the 4 percent rollback rate, they would be required to adopt it before Aug. 15.
This must be done so the appropriate ballot for the mandatory election, if one is triggered, can be issued before the election that would be required in November. Tax bills would be calculated and mailed soon thereafter.
Current law allows for the elections to be held in November or May at each jurisdiction’s choice—allowing budgets to be set before adopting a tax rate that might trigger an election.
Ballot language must include the adopted tax rate—the rate set for budgeting purposes—as well as the difference between that rate and the rollback tax rat —the rate that would need to be set to stay under the 4 percent revenue cap.
“The logistical challenges would make an election pretty much impractical,” Morgan said. “So Senate Bill 2 is essentially putting a 4 percent cap on things.”