As many Plano residents are well aware, lower property tax rates do not necessarily lead to lower bills for homeowners.

PLN-2017-04-01-7Climbing appraisal values have outstripped the effect of rate cuts in recent years—a trend some Texas lawmakers are seeking to slow over the protests of local officials.

As the state legislative session heads toward a close in May, a leading tax-relief bill proposes to trigger a special election whenever local property tax collections increase by more than 5 percent year over year. Under the proposal, Senate Bill 2, voters would then approve or reject a ballot measure that would allow property tax revenue to exceed the 5 percent mark.

This practice is not altogether new. State law already allows citizens to petition for a rollback election, which is a referendum on the proposed tax rate, when annual tax collection increases exceed 8 percent. This new proposal would lower that threshold and trigger the rollback election automatically.

The bill, filed by Sen. Paul Bettencourt, R-Houston, passed the state Senate on March 22 and was pending a hearing in the House Ways and Means Committee as of this newspaper’s April 20 print deadline. The bill 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.”

Sen. Van Taylor, R-Plano, a supporter of the bill, said it gives taxpayers more say over how quickly their tax bills go up.

“I think you never go wrong putting the people in the process and giving them a say whether or not their taxes go up,” he said. “So if elected officials and political leaders think that they need to raise taxes, they need to go after the people.”

Those opposing the bill, including 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 services.

“The largest budget item for every city in Texas is public safety” said Bennett Sandlin, executive director of the nonprofit, in a statement.

Meanwhile, Plano officials are concerned the bill would limit the city’s ability to address local needs.

Nearly half of the city of Plano’s general fund this year is devoted to public safety and health expenditures. Last year, the city lowered its property tax rate by 1 cent per $100 valuation and made room for 76 new public safety positions in the 2016-17 budget.

“If it comes down to it [and SB 2 passes], it’s clear we’ll continue to provide public safety,” Plano City Manager Bruce Glasscock said. “So if you’re in a crunch, what does that mean? Does that mean you defer infrastructure and repair and maintenance of your streets?”

Glasscock said the city did that to an extent during the Great Recession and is now playing catch-up on the maintenance of the deferred roadway and infrastructure projects.

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, Texans were asking for property tax relief, Bettencourt said.

PLN-2017-04-01-9The state tax code requires appraisal districts to adopt a written reappraisal plan every two years to make sure appraisals accurately reflect changes in the real estate market. However, critics like Bettencourt claim the system still produces assessed values that often do not reflect what is happening in the market.

In Plano, the average appraised market value of homes increased by nearly 12 percent on the Collin County side of the city between 2015 and 2016, according to the Collin Central Appraisal District. On the Denton County side of the city, appraised market values increased by approximately 8 percent between 2015 and 2016, according to the Denton Central Appraisal District.

Changes if bill passes

Under the proposed law, all rollback elections would be held during November. The ballot language would need to include the adopted tax rate—the rate set for budgeting purposes—as well as the difference between that rate and the rollback tax rate—the rate that would need to be set to stay under the 5 percent revenue cap.

PLN-2017-04-01-10The bill would affect cities and counties but not municipal utility districts, school districts or emergency services districts, which are separate from city emergency services.

Patrick O’Connor, president and owner of O’Connor & Associates, a property tax consulting business with offices in Houston, Austin and Dallas, 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 cities and counties with high growth.

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.

New priorities

As Plano’s tax base continues to grow, SB 2 could require the city to adopt a more limited budget that reprioritizes how funds are spent or else risk triggering a rollback election nearly every year, Glasscock said.

The proposed law’s timeline, Glasscock said, could also throw a wrench in the city’s budget process.

“We’ve got to adopt a budget
Oct. 1,” Glasscock said. “So [an election in November] doesn’t help. It puts us into limbo. Do I develop two budgets and then wait until November for an election to decide which one’s going to go? It’s just not realistic.”

Glasscock said SB 2 would penalize cities like Plano, an established residential suburb with an expanding core of business development.

Glasscock said he has heard from citizens and is concerned about the effect property appraisals have on taxes and the City Council but said he does not believe SB 2 addresses the main issue.

When looking at property tax bills, 19 cents of every tax dollar goes to the city of Plano and 66 cents of every tax dollar goes to Plano ISD. Rather than capping the tax revenue of Texas cities, Glasscock said, the Legislature should focus instead on adjusting the appraisal system.

“In the discussions we’ve had, one of the things we hear is that the entire appraisal system needs to be looked at and revamped,” he said. “We agree. So why don’t you revamp the appraisal system before you go in and start tinkering with the nuts and bolts?”