Some Texas lawmakers are prioritizing taxpayer relief this legislative session, which began in January, but local government officials are worried about what it could mean for their budgets.
The main attempt to reform the property tax system this session comes from Sen. Paul Bettencourt, R-Houston, who filed Senate Bill 2, the Texas Property Tax Reform and Relief Act, on Nov. 29. The bill was given high 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.”
In Williamson County, average assessed values increased by 20.52 percent between 2014 and 2016 from $210,184 to $253,320, according to the county.
Among other goals, SB 2 seeks to lower the property tax revenue cap for cities and counties from an 8 percent increase over the previous year to a 5 percent increase, as of Community Impact Newspaper’s March 15 print deadline. If a city or county were to exceed the revenue cap, a rollback election would be triggered, giving voters the chance to approve or reject the new tax rate.
Local government officials have questioned if the new legislation will help or hurt
rapid-growth areas in the long run. Williamson County Precinct 2 Commissioner Cynthia Long, whose precinct includes Cedar Park and Leander, said the legislation could significantly restrict local governments’ future budgets.
“In a fast-growing area there are lots of things that we are mandated to do by the state but are not given any money to do them with,” Long said. “It has to come out of that local property tax, and it would be hard to even do some of the mandated things [with the 5 percent cap].”
Leander City Manager Kent Cagle said the legislation does not tackle the core issue of rising property taxes to provide relief to citizens.
“It’s easy to say we’re not the issue, but [the city is] generally only a quarter of the tax bill,” he said. “This property tax legislation seems to be aimed directly at cities and counties.”
The call for reform
A 2016 report by CoreLogic, a financial and business analysis 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 1.31 percent. Only Illinois, New York, New Hampshire and New Jersey ranked higher.
Under the existing rules, county and city residents who are unhappy with tax rate increases must petition for signatures from 7 percent of registered voters to get a rollback election onto the ballot. Voters can then decide whether to reject the proposed tax rate.
This can only be done if county commissioners or a city council adopt a rate higher than the calculated rollback rate of 8 percent, according to Williamson County officials.
Bettencourt, who serves as chair-man of the Senate Select Committee on Property Tax Reform, hosted a series of town hall meetings across the state in 2016.
“In hearing after hearing, the committee heard the same message loud and clear: Texans are asking for and deserve property tax relief,” Bettencourt said. “Whether it was homeowners testifying that they are unable to keep up with their property tax bills,
small-business owners seeing their hard-earned profits go out the window, or big businesses testifying that they are locating new plants and taking jobs out of Texas due to high property taxes, they are all saying that property taxes are rising too fast.”
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, critics such as Bettencourt claim the system still produces assessed values that often do not correlate with what is actually happening in the market.
Average assessed values in the portions of Cedar Park that fall in Travis County increased by 19.72 percent between 2014 and 2016 from $351,795 to $421,164, according to the Travis Central Appraisal District. The portions of Leander that fall in Travis County increased by 7.65 percent between 2014 and 2016 from $433,453 to $466,598, according to data from the county.
In addition to SB 2, several other bills related to property tax relief have been filed by lawmakers this session. Rep. Cecil Bell, R-Magnolia, filed HB 167, which would limit appraisal increases to 5 percent of the appraised value of the property for the previous year. Rep. Dwayne Bohac, R-Houston, filed HB 1473, which would exempt homeowners age 80 and older from property taxes entirely if they have owned their homes for at least 10 years.
According to The Texas Tribune, a similar bill was also filed in early March in the House by Rep. Dennis Bonnen, R-Angelton.
Some legislation filed has been more extreme. Rep. Valerie Swan- son, R-Tomball, filed HB 1050, which would abolish property taxes entirely by Jan. 1, 2022.
Changes if SB 2 is passed
If passed, SB 2 would pressure a taxing entity to lower its tax rate to compensate for increases in assessed property values, Bettencourt said. As a result, the amount a homeowner’s property tax bill could go up each year would be limited.
Under existing rules, citizens must petition to bring about a rollback election in which voters can decide to reject a proposed tax rate. Under SB 2, the election would be generated automatically whenever a 5 percent increase in property tax revenue from the previous year is reached or passed.
The election would be held during the uniform election date in November. The 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 rate, the rate that would need to be set to stay under the 5 percent revenue cap. The bill would affect cities and counties but not municipal utility districts, emergency services districts or school districts.
Cagle said the legislation will not give much tax relief because school districts are the biggest driver of property taxes. The city of Leander’s tax rate is $0.599 per $100 valuation; Williamson County’s rate is $0.476529; the city of Cedar Park’s rate is $0.4795; and Leander ISD’s tax rate is $1.51187 per $100 valuation.
Cagle said cities account for only about a quarter of a homeowner’s property tax bill, and that the Texas Legislature has been leaving local districts to fund increasing school budgets.
“Every budget, the state puts a larger percentage of the school budget on local districts, and that’s what’s really driving the property tax problem,” he said. “I think one thing everybody can agree on is property taxes are too high. But I think the state is refusing its constitutional duty for public education—they’re dumping it on the locals.”
Under the bill, if counties or cities considered adopting a tax rate higher than the 5 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.
Patrick O’Connor, president and owner of property tax consulting business Connor & Associates, said the legislation is the most significant taxpayer relief bill filed in the state in 20 years. O’Connor, whose business is based in Houston and has offices in Austin and Dallas, said the bill would have the greatest effect in cities and counties with high growth.
“It would definitely save homeowners money in years where property values go [up] quickly,” he said.
Officials with the Texas Municipal League—a nonprofit that advocates for legislative issues on behalf of Texas cities—describe the proposed rollback rate reduction as an “assault on public safety, economic development and transportation.”
“The largest budget item for every city in Texas is public safety—police, firefighting and emergency medical services,” said Bennett Sandlin, executive director of the TML, in a statement. “Politicians can’t proclaim their support for first responders and then turn around and vote to restrict the funding that pays for the[ir] salaries, equipment, vehicles, health insurance and pensions.”
Larry Gaddes, Williamson County tax assessor/collector, said SB 2 would directly affect the maintenance and operations portion of budgets.
Funding for items such as postage, fuel for emergency vehicles and ammunition for law enforcement agencies are typically found in the M&O budget and frequently experience price changes.
“I think 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.
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 are not required by the state.
“We are going to have to start looking at what we are not required legislatively to provide,” Kiley said. “[For example], parks is not something we have to do by statute, 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.”
The city of Leander has not come close to having a 4 percent rate increase in a number of years, but Cagle said it could happen in the future. If that were the case, he said the city does not make cuts across the board, but would have to evaluate city departments.
Cagle also cautioned against adding another election to the ballot.
“[Citizens] have already voted on their City Council members to make these decisions,” he said. “And I think City Council members are probably closer to the public and taxpayers than any other elected representative in the state.”
In a statement to Community Impact Newspaper about property tax relief legislation, Jennie Huerta, the media and communications manager with the city of Cedar Park, said city staff was holding off on commenting about the impact to the city until further along in the legislative process.
“It is too early to determine possible effects at this stage of the legislative process, but the City of Cedar Park is aware of and monitoring this and many other pieces of proposed legislation that potentially impact cities,” she said.
Additional reporting by Caitlin Perrone