The main attempt to reform the property tax system this session comes from Sen. Paul Bettencourt, R-Houston. Bettencourt filed Senate Bill 2, the Texas Property Tax Reform and Relief Act, on Nov. 29. It was given top 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.”
Among other goals, SB 2 seeks to lower the property tax revenue cap for cities and counties from an increase of 8 percent over the previous year to an increase of 4 percent. 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.
Officials at 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 Harris County, have expressed concerns about how SB 2 could restrict future budgets.
“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. “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.”
Call for reform
Bettencourt, who serves as chairman 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 system in Harris County is designed to allocate the tax burden fairly among all owners of taxable property, according to officials with the Harris County Appraisal District.
HCAD appraisers determine the assessed value of a property using a formula referred to as mass appraisal. Using computer algorithms, HCAD analyzes property sales in each zone and performs a calculation to determine changes in value that apply to all properties in that zone.
In Spring and Klein, average assessed values increased by about 20 percent between 2014 and 2016. In Spring, the average assessed value increased from $109,304 to $131,375, or 20.2 percent, while in Klein, it increased from $171,781 to $205,598, or 19.7 percent, according to HCAD.
However, officials with the Harris County budget office said looking at averages can be misleading because they include new property added to the system. In other words, increases in the average assessed value do not necessarily reflect increases in individual homes, which are rising at a slower rate.
Melissa Rowell, a Houston Realtor and a membership sales representative for the Houston Northwest Chamber of Commerce, said she believes cutting the threshold for a rollback election in half will make taxing authorities more accountable and force tax growth to slow.
“Most property owners will agree that our property tax system is flawed,” Rowell said. “Homeowners love when their investment increases in value but hate that the increase in value is simultaneously a tax increase. SB 2 is not a complete fix but it is definitely a step in the right direction.”
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.
Some legislation filed has been more extreme. Rep. Valerie Swanson, R-Tomball, filed HB 1050, which would abolish property taxes entirely by Jan. 1, 2022.
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 triggered automatically whenever a 4 percent increase in property tax revenue from the previous year is reached.
SB 2 would also install a series of appraisal reforms, including standardizing the date for property owners to protest their appraisals.
Patrick O’Connor, president and owner of Houston-based property tax consulting business O’Connor & Associates, said the legislation is the most significant taxpayer relief bill filed in the state in 20 years. O’Connor said the bill would have the greatest effect in areas with high growth.
“It would definitely save homeowners money in years where property values go [up] quickly,” O’Connor said. “And we’ve seen a number of years in Harris County where appraisals have risen by 10 percent.”
O’Connor said in a best-case scenario with a 10 percent increase in appraised value year over year on a $280,000 home and a total combined property tax rate of $2.70 per $100 valuation—including all taxing entities—the bill could save homeowners as much as $454 that year if residents were to vote down the tax increase.
Barbara Thomason, president of the Houston Northwest Chamber of Commerce, said the chamber’s board of directors expressed its opposition to SB 2 in a letter to Sen. Bettencourt and the Senate Finance Committee on March 3.
“The 4 percent cap creates a barrier to areas experiencing significant growth, which is the case in northwest Harris County,” the letter said. “Our infrastructure development depends on the county’s ability to raise revenues necessary to keep up with the area’s growth.”
In an address to the Houston Northwest Chamber of Commerce in January, Harris County Judge Ed Emmett said growth will present challenges for the county as it struggles to provide for larger numbers of residents with limited funding options.
“We’re going to have to find a way for the county to have a different financial bucket to draw from other than the property tax,” he said.
In Harris County—where 75 percent of population growth in 2016 took place in unincorporated areas, according to county officials—property tax revenue will be even more crucial to the county, said Jim Robinson, deputy director for special projects with the Harris County Budget Management Department.
Robinson acknowledged the growing property tax burden but said little leeway exists to make cuts in these areas.
However, because Harris County has been conservative in its budgeting, SB 2 is not expected to affect Harris County as much as other cities and counties, Robinson said.
Robinson said the county budget office has been in touch with Bettencourt’s team to communicate concerns and come up with solutions.
Robinson also suggested having the state put more money in public education as another way to lower property tax bills. School districts are primarily funded through property tax revenue and state aid, and he said an increase in state education funding would allow districts to decrease their tax rates.
“As a former chief appraiser, I recognize that property tax is a burden,” Robinson said. “Hopefully the final product will be something that taxpayers and jurisdictions are happy with.”