While governing entities are seeing an increase in preliminary tax bases compared to 2017, the year-over-year growth is as much as 50 percent less than it was the year before for the school districts as well as the cities.
When the mid-May deadline to protest appraisal taxes passed, governing entities were left with a better idea of what tax revenue would look like for the next fiscal year, although officials caution that final values fluctuate weekly. There are also more appraisal protests, which could delay the final calculation.
While some entities find themselves prepared for the upcoming fiscal year thanks to area growth, many remain unsure of what exactly to expect until official values are released later this summer.
Despite the growth, some entities, such as Pearland and Friendswood ISDs, are estimating conservatively and are anticipating tighter budgets in the coming fiscal year for many reasons, including potentially lower appraised values than expected and lower state funding.
“Knowing that there are still a lot of protests, we don’t know exactly how that is going to affect us from here until July,” PISD Chief Financial Officer Jorgannie Carter said.
After seeing preliminary appraised values and the damage Hurricane Harvey wrought on Galveston County—$56 million lost in taxable value—FISD Chief Financial Officer Connie Morgenroth knew values would likely be lower across the board. However, the amount of damage is still unknown, as there is $730.2 million under protest in Galveston County, Morgenroth said.
“We have more value under [Appraisal Review Board] review than what I had projected,” she said.
With nearly $1 billion in protests under review, it is hard to know what the end values will look like, Morgenroth said. The problem, she said, is that FISD has to approve its budget in late August, and final appraised values could come in as late as September.
The other unknown is how much new construction and growth will affect values. According to Morgenroth, Galveston County under-appraised the county a few years ago and has been raising appraisal values since.
This resulted in some large increases in past years, including 19 percent growth in the tax base for the county’s portion of Friendswood ISD in 2016. This is much higher than the average rate of growth for the district, which was at 7 percent in 2017.
Morgenroth is anticipating a loss of 10 percent of value from protests, coupled with a 1.2 percent increase in enrollment in the district.
While FISD is anticipating a hit in values due to Harvey, the city of Friendswood is still unsure of the effect the storm will have on appraised values.
The city of Friendswood has begun to look at the revenue portion of the budget process now that the preliminary values are in, officials said. The city has a 4 percent increase in values compared to last year in Galveston and Harris counties combined, according to the most recent data from Galveston County Appraisal District.
In the portion of Friendswood inside Harris County, 1,250 properties were damaged in the storm. However, the effect of the storm on property values, if any, is unclear, according to Katina Hampton, director of administrative service in Friendswood.
“We can’t directly relate it. We don’t have that much information at this point. We have done our comparison from last year’s preliminary values to this year’s preliminary values,” Hampton said.
Damage from Harvey was mostly confined to Pearland’s older residential areas. However, the storm’s effect on appraised values is minimal, Pearland City Manager Clay Pearson said.
Harvey affected some neighborhoods, such as Green Tee, Twin Creek, Sleepy Hollow and Connermara, yet not enough to decrease values in these neighborhoods, Pearson said.
“It’s minimal in the scheme of things,” Pearson said. “Hurricane damage is limited in Pearland and in the older areas built. The rest of Harris County is largely industrial for us. The new residential area held up well—they’re holding up marvelously.”
The city’s considerable growth as well as varied types of business are helping to bolster the city’s appraised values, Pearson said. Preliminary values in Pearland show a 5 percent increase in the Brazoria County portion of the city, according to the Brazoria County Appraisal District.
“I think that the smartest strategy is to plan on some positive decent growth, not at the breakneck speed. There are all kinds of wild cards,” Pearson said. “We are soundly optimistic for a good reason that we will continue to attract and retain families and investments here.”
Like Pearland, the growth in Friendswood appears to remain consistent, Morgenroth said.
The overall effect new construction plays on appraised values will not be known until the protests are finished, Morgenroth said. With so much left unknown, the city of Friendswood is also unsure about the growth it will see, Hampton said.
“At this point we have not received that level of detail,” Hampton said. “There has been new construction. We don’t have specific values on those yet.”
Overall, preliminary appraised values are up by 4 percent in Friendswood compared to an 8 percent growth in final values in 2017.
Belt-tightening to come
PISD and FISD are each anticipating budget cuts for the coming year, due to many different factors. Preliminary appraised values show the rate of growth is slowing compared to previous years.
According to Carter, higher appraised values will lead to less state funding for the district. State funding is determined in part by property tax revenue from the previous year, so school districts could be hit with less than expected revenue on both sides.
According to Carter, Brazoria County Appraisal District mass appraised certain areas in school district, so value has dropped in different areas throughout the county, according to Carter.
As of May 31, Brazoria County Appraisal District had almost $6.29 billion under ARB review, CAD officials said. This affects the district as well, Carter said.
“Anybody was allowed to protest their taxes so the number of protests is increasing much more than any other year would have been,” Carter said.
PISD has suffered from lower mass appraisals, or the appraisal of a group of properties through a standardized method, as well as flat enrollment in the district, Carter said. Enrollment is also a factor that could reduce state funding.
Spikes in residential enrollment are primarily in Fort Bend County or in the west side of Brazoria County, which are zoned to Fort Bend and Alvin ISDs, respectively, according to Pearson. Alvin ISD saw a projected 11 percent growth in the preliminary tax base, even with the growth seen the year before, according to data provided by Brazoria County Appraisal District.
“Much of the increased value is associated with new developments throughout the district. As values have continued to increase, Alvin ISD has simultaneously experienced similar student enrollment growth,” AISD Chief Financial Officer Jimmy Adams said.
FISD is also making cuts to the budget due to both the leveling of growth in the city as well as loss from Harvey, Morgenroth said.
“That definitely plays into how school funding is tied to property values. It’s having a negative impact on our revenues for next year. So we’ve made about $1.3 million in budget cuts,” Morgenroth said.
While the cities are unsure of whether cuts will need to be made, both Pearland and Friendswood officials know it is a possibility.
“There’s always more needs and wants then there are resources, but that is part of our job: to be smart about that,” Pearson said. “There’s a lot more necessities that we need to fund and there’s not enough to do that. That’s just the reality of being in a high-growth, attractive city like ours.”