Round Rock makes case against legislature-supported property tax reform in Senate Bill 2

Throughout the regular legislative session, cities and counties from around the state railed against Senate Bill 2, which initially proposed to cap the rollback tax rate at 4 percent and eventually settled on a 5 percent cap in the Senate passed bill.

This would mean that cities could only increase their property tax rate by enough to gain 5 percent more in revenue from the previous year without having an automatic election triggered to approve greater increases.

The bill failed to pass in the regular session, but could be revived in the special session starting July 18, after being listed as one of Gov. Greg Abbott's priorities in his press conference announcing the special session.

At a budget workshop on Thursday, members of Round Rock City Council issued their own criticism of the legislation.

The council's main argument against the proposed cap has to do with Round Rock's fast growth.

CFO Susan Morgan said even though there was $250 million in new growth of properties during the 2016-17, it only yielded $500,000 in revenue to the city. Craig Morgan said the yield is not enough to cover all of the growth.

"It is just a disingenuous statement because $250 million sounds great, but it only brings in $500,000 to cover operating costs," he said.

He said the property tax reform proposed in SB2 could work for slower growth cities in rural Texas, but not for cities that are expanding rapidly like Sugar Land, Frisco and Round Rock.

Another argument the city lobbed against the bill is that cities with taxes that are already set at a high rate have an advantage over cities with a lower tax rate.

Councilmember Writ Baese said cities with a higher tax rate would be able to continue raising their taxes in larger increments because raises would be capped based on percentage. For example, a city with a 90 cent tax rate could raise the rate to 94.5 cents while a city with a tax rate set at 50 cents could only raise it to 52.5 cents.

Cities with lower taxes would have less flexibility, and would therefore have to continually raise their taxes to the cap to keep up with demand. Council members said lowering the tax rate would be disincentivized.

Susan Morgan said Round Rock has raised property taxes on average between 3 and 3.5 percent over the past 10 years, at one point even dropping the tax rate, during the recession.

"You try to do the right thing by dropping it and you get punished," City Manager Laurie Hadley said.

Craig Morgan suggested the legislature should instead look at school finance for true property tax reform.

The special session version of the property tax bill, as requested by Abbott, has yet to be filed.

 


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