Rising property tax values across the state—including in Harris and Montgomery counties—over the past few years are putting a strain on home and business owners. The issue has prompted state legislators to explore ways to alleviate the growing burden.

Between 2005 and 2014, Harris and Montgomery county property tax levies have increased by 79 percent and 119 percent, respectively, according to the Texas Comptroller of Public Accounts. During that same time frame, median household incomes increased only 29 percent and 15.5 percent, respectively, according to the U.S. Census Bureau.

Meanwhile, the average assessed value of property in Humble ISD increased by more than 20 percent between 2014 and 2016, according to data from the Harris County Appraisal District. Local officials say the rate of increase is unsustainable.

“Whatever the economic drivers are that drive those values up, the fact is that a lot of people are faced with appraisals they just can’t afford,” Harris County Tax Assessor-Collector Mike Sullivan said.

Appraisal process

Appraisers with the Harris County and Montgomery Central appraisal districts determine the assessed value of a property using a formula that takes home sale prices, median prices and sales volume into account, appraisal officials said.

“We’re required by the tax code to appraise all property at 100 percent market value, basically what the property would sell for on Jan. 1 of each tax year,” said Tony Belinoski, deputy chief appraiser for Montgomery Central Appraisal District.

The existing system often yields an assessed value that does not correlate with what is happening in the market, said Mike Olivares, chief operating officer of O’Connor and Associates, a Houston-based property tax consulting firm.

“When the county goes in and assesses the entire market, you have to ascribe values to property that hasn’t sold,” he said. “These past few years were the perfect example of the increases in value seeming to surpass what the market was actually doing.”

In 2014, HCAD began hosting workshops in conjunction with the tax assessor-collector’s office with the goal of educating the public on the entire property tax system, HCAD Chief Communications Officer Jack Barnett said.

“Part of the problem is that people tend to only deal with property taxes twice per year: when they get their property value notice in the spring and when they get their tax bill in the fall,” he said.

The number of protests filed in both counties have increased since 2012. Of the 1.8 million land parcels taxed every year in Harris County, about 368,000 were protested in 2015, according to HCAD data. About 39,000 total protests occurred in Montgomery County in 2015, according to MCAD data.

Valuation problem

Although the Harris County tax rate has increased slightly over the past decade, the assessed value of property has gone up substantially. The market value of property has also spiked in Montgomery County, where the tax rate has decreased over the past decade, according to MCAD data, resulting in more property tax revenue.

In the city of Humble, the average assessed value increased from $109,956 in 2014 to $139,594 in 2016. City Manager Darrell Boeske said he encourages residents to file a protest if they feel their properties have been assessed too high.

“I understand what it means to protest a [high valuation],” Boeske said. I’d advise any resident to set up an appointment with HCAD if they’re unhappy with their valuation, just like I did.”

The city collects additional property tax revenue each year from higher values and new construction, but Boeske said sales tax revenue allow the city to keep a low property tax rate.

Although Humble’s property tax rate was increased to 21 cents per $100 valuation in September, residents are less burdened than their neighbors in the city of Houston, which has a property tax rate of 60 cents per $100 valuation.

In Kingwood, the average assessed value has risen from $219,770 to $260,209 between 2014 and 2016. With rapid growth and development in the area, Stan Sarman, chairman of Kingwood Tax Increment Reinvestment Zone 10, said he believes the assessed value increases in Kingwood have not been excessive.

Sarman said some residents received tax relief after Kingwood was annexed by the city of Houston 20 years ago.

“Before Kingwood was annexed into the city of Houston, it was controlled by 11 [municipal utility districts],” Sarman said. “Residents in nine of the 11 MUDs received a property tax cut.”

To state Sen. Paul Bettencourt, R-Houston, who leads the Property Tax Committee established by Lt. Gov. Dan Patrick to address rapidly increasing property appraisals, the problem can be summarized by how much faster assessed values have risen compared with median household income.

“What we’re seeing is a constant pattern of property taxes increasing 2.5 to three times faster than Texans’ paychecks,” Bettencourt said. “For homes below the statewide median average, those budgets are very stretched to begin with.”

Legislative priorities

The Texas Legislature passed several bills aimed at property tax reform in the 2015 legislative session. Senate Joint Resolution 1, passed by voters in November 2015, increased the homestead exemption for school districts from $15,000 to $25,000, saving residents an average of $115 on their tax bill every year.

Additionally, the franchise tax was reduced by 25 percent statewide. The franchise tax is a margins tax levied on entities, such as corporations, banks and business associations.

The property tax discussion is expected to resurface in the 2017 legislative session as well. One method of reform revolves around implementing a measure that causes tax rates to go down automatically as assessed values rise, Bettencourt said.

Sen. Brandon Creighton, R-Conroe, whose senate district includes Kingwood and portions of Humble and Atascocita, has proposed additional changes to the franchise tax for the upcoming legislative session. Creighton filed Senate Bill 131 on Nov. 14, which will provide a rebate for payers of the franchise tax if the state maintains a positive general revenue balance the previous two years. 

Improving transparency within appraisal districts and appraisal review boards has also been proposed, according to the Senate Committee on Property Tax Reform. Bettencourt said slowing the rate of growth of government is another important part of the battle.

“Unless the public votes for something, you have to slow down the growth of government because the public just can’t afford it,” he said.