Providing property tax relief to taxpayers has broad bipartisan support, but how to achieve that relief is under debate at the Texas Capitol.
State lawmakers will consider two bills—Senate Bill 2 and House Bill 2—in the 86th legislative session that are aimed at relieving the burden of skyrocketing property taxes.
“This will be a big step in Texans getting the needed property tax relief that they deserve,” said state Sen. Paul Bettencourt, R-Houston, who filed SB 2, at a Senate Property Tax Committee meeting Feb. 11. “[High property taxes are] an everywhere problem. It is a substantial problem for Texas taxpayers, which is simply the fact that as values rise, tax bills have risen. We’ve got what I think is a great bill to proceed forward today with.”
However, these bills have taxing entities, such as the city of Austin, concerned about limiting the amount of revenue they can bring in each year.
“In the end taxpayer savings from this bill could be small to none, and frankly the loss of key city services will be very large, and that will make things more unaffordable and more difficult for people,” said Greg Casar, District 4 Austin City Council member in North Austin.
The road to relief
SB 2 and HB 2 are identical bills that seek to limit how much property tax revenue taxing entities could bring in year over year.
The current law restricts jurisdictions to increasing revenue by no more than 8 percent over the effective tax rate—the rate that would bring in the same amount of revenue as the previous year. If the entity approves a tax rate that generates revenue over that 8 percent cap, it triggers a rollback election to give voters the opportunity to approve or reject going over 8 percent.
The two bills seek to lower that rollback rate to 2.5 percent of year-over-year growth. Instead of a petition-driven election, the election would be automatic.
Bennett Sandlin, executive director of the Texas Municipal League, an advocacy group for cities in Texas, said his organization’s message is that cities are not the problem of rising property taxes and hopes the cap limit could be higher than 2.5 percent.
“We’re hopeful that 2.5 percent is the starting point,” he said.
Vance Ginn, director of the Center for Economic Prosperity at the Texas Public Policy Foundation—an organization that promotes and defends liberty, personal responsibility and free enterprise—said the cap is not really a cap.
“If there are legitimate reasons about securing liberty—which is the primary role of government, such as public safety—then I don’t see any reason why voters wouldn’t approve that increase,” he said.
Ginn said the goal of the two bills is really providing property tax reform and not relief because lowering the cap would slow growth of property taxes.
“It will provide a safeguard for voters to not have skyrocketing property taxes across the state and forcing these local governments to spend more wisely with each one of their dollars,” he said.
The price to pay
Providing property tax relief through limiting how much revenue taxing entities can bring in has city of Austin officials concerned with providing the same level of services and keeping up with the rising cost of living.
Ed Van Eenoo, deputy chief financial officer for the city, said the city needs to increase its revenue by about 5.5 percent from the previous year just to keep up with these costs.
“That wouldn’t leave money to address any community priorities that would exist, whether it be homelessness or affordable housing or additional staff for libraries or park maintenance,” he said. “This is just to cover our basic expenditures.”
Lowering the revenue cap from 8 percent to 2.5 percent would provide a savings of about $2.70 per month or $32.40 per year for a taxpayer with a median home value of $322,000, according to city data.
Because lower-income residents are less likely to own a home, Casar said the impact on them could be a reduction in basic city services that may need to be cut to adhere to a 2.5 percent revenue cap.
“They’re much more likely to need the basic functional city services like libraries and immunization clinics and a well-maintained sidewalk that gets you to the bus,” he said. “In many ways these basic services the city provides are an affordability solution.”
Because the Legislature had taken up revenue caps in previous sessions, Van Eenoo said the city protected itself by adding language in its labor contracts with police, fire and emergency medical services employees to renegotiate those. The city has over 1,900 police officers, 1,000 firefighters and 500 paramedics.
“It would be difficult to renegotiate,” he said. “Public safety employees rely on the contracts for their livelihoods.”
School finance reform
The bulk of a taxpayer’s bill goes toward school district taxes, so many lawmakers and city officials want to see the state funnel more money toward schools and teachers.
On March 5, Rep. Dan Huberty, R-Houston, who also chairs the House Public Education Committee, filed HB 3 that would add $9 billion in funding over the next two years to schools. The bill would also seek to lower school districts’ property tax rates by 4 cents and reduce recapture payments, in which revenues from property-rich districts are redistributed to property-poor districts.
One idea from the TPPF would be to limit the growth of the state’s general revenues to 4 percent over its two-year budget, Ginn said. Any general revenues over that 4 percent would then be used to buy down the maintenance and operation tax rate of school districts’ property taxes.
“If the Legislature did this session after session, using historical data, we showed that they could eliminate the school district maintenance and operation property tax over 12 years,” he said.
State Rep. Celia Israel, D-Austin, has seven school districts in her District 50. She said she would like to see the state recalibrate how the state funds schools and supports teachers.
“We used to be a 50/50 player with schools, and now it’s more like 30 percent,” she said. “I want to go back to my constituents and say we changed the game, not just moved the needle. … That will in turn have an impact on property taxes. It will mean school districts won’t have to come to the well as much or for as much.”