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 state Sen. Paul Bettencourt, R-Houston. Bettencourt filed Senate Bill 2, the Texas Property Tax Reform and Relief Act of 2017, on Nov. 29. SB 2 was given top priority by Lt. Gov. Dan Patrick.
“Texans have told us loud and clear that common-sense 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.”
Among other goals, SB 2 seeks to lower the property tax rollback rate for governmental entities from 8 percent to 4 percent, meaning an election would be triggered any time an entity’s property tax revenue increased by 4 percent over the previous year.
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. Meanwhile, officials with cities and counties across the state, including Fort Bend County and Sugar Land, have expressed concerns about how SB 2 could restrict future budgets.
“The largest budget item for every city in Texas is public safety—police, fire fighting and emergency medical services,” said Bennett Sandlin, executive director of the Texas Municipal League, 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.”
Patsy Schultz, Fort Bend County’s tax assessor-collector, said the county’s property tax levy has increased from just under $1.3 billion in 2013 to almost $1.6 billion in 2016, an increase of more than 23.1 percent.
Bettencourt, who serves as chairman of the Senate Select Committee on Property Tax Reform & Relief, 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.”
Critics like Bettencourt claim this system produces assessed values that often do not correlate with what is actually happening in the market. In areas with rapid population growth, such as Houston and Dallas, property values have been increasing at an especially fast pace.
“The rate of growth from year to year is not sustainable,” said state Sen. Jeff Leach, R-Plano, who also works as an attorney with the property tax firm Gray Reed, which has offices in Houston and Dallas. “This is not a Democrat/Republican issue. We want [property values] to increase, but [they] need to increase at a sustainable rate.”
In Richmond, total assessed property values increased from $685.9 billion in 2014 to $807.7 billion in 2016, according to the city’s most recent budget.
However, much of those property values are exempt from paying city property taxes, Richmond Finance Director Susan Lang said. Instead, any property holders pay taxes to municipal utility districts, or MUDs, in addition to county property tax.
Beyond the normal exemptions granted in all cities, such as homestead exemptions and tax breaks given to businesses, Richmond is home to many county facilities and buildings, which like schools and churches, do not pay property taxes. Of the $807.7 billion in Richmond property values, only $497.4 billion of that was taxed, according to the budget.
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 House Bill 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.
Some legislation filed has been more extreme. Rep. Valerie Swanson, R-Tomball, filed HB 1050 would abolish property taxes entirely by Jan. 1, 2022.
What would change
If passed, SB 2 would essentially force a taxing entity to lower its tax rate to compensate for increases in property values, Bettencourt said. As a result, the amount a homeowner’s property tax bill would go up each year would be strictly limited.
Under existing rules, citizens must petition to bring about a rollback election, where voters can decide to reject planned tax increases. Under SB 2, the election would be triggered automatically whenever a 4 percent increase in property tax revenue from the previous year is reached, and voters would get to decide whether to approve the adopted tax rate.
The election would be held during the uniform election date in November, and the ballot language must include the adopted tax rate and the difference between that rate and the rollback tax rate. The bill would affect cities and counties but not municipal utility districts and emergency services districts.
Leach said he believes it is impossible to project how much property tax reform would save the average homeowner. However, Sandlin questioned how much of an effect lowering the rollback rate would actually have on tax bills.
“Hypothetically, under their proposal, some average homeowners in some cities in some future year might possibly have the increase in their property tax bill reduced by $2 or $3 per month,” he said. “Elderly and disabled homeowners would have the smallest hypothetical tax savings because of the exemptions they currently receive.”
In addition to reducing the rollback rate, SB 2 would also require the state comptroller to appoint a property tax administration advisory board with responsibility for state administration of property taxes and oversight of appraisal districts and local tax offices.
The bill also would amend the state tax code by requiring people who serve on appraisal district boards to be elected county officers or elected officials of political subdivisions within the county.
Lang said if SB 2 had been in place this year, the city’s tax revenue would have been about $73,000 lower.
“That’s two police cars I won’t be able to replace,” Lang said.
“We are very prudent, and we run a lean city,” she said. “But we still like to see that flexibility.”