Texas legislators are considering a bill local leaders oppose that would further limit how much counties and municipal entities can raise property tax rates without voter approval.
Among a list of other changes, the measure would require taxing entities receive voter approval for any tax rate increase of 4 percent or more. The law it would replace gives residents the option to file a petition requiring voter approval for rate increases of 8 percent or more.
Advocates describe the bill as a way to put the burden on elected officials to prove the need for tax-rate hikes to voters. But, McLennan County leaders feel the bill would limit local control and prevent municipalities from ever lowering taxes. Several say the state’s school finance system leads to high property taxes, not unchecked local elected officials.
Lt. Gov. Dan Patrick formed the Select Committee on Property Tax Reform and Relief in November 2015, and committee Chairman Sen. Paul Bettencourt and members Sen. Brandon Creighton, Sen. Kelly Hancock and Sen. Van Taylor are listed as authors of the bill. They are all Republicans.
Waco Mayor Kyle Deaver said the bill has been on city leaders’ radar, and he hopes the state decides against limiting local control.
No one is closer to voters than leaders who serve at the local level, Deaver said. If residents are unhappy with the direction of the city, they have the opportunity to change that during each election, he said.
Precinct 3 Commissioner Will Jones said the property tax problem is driven by the state’s school finance formula, not the county.
“If the Legislature wants to give property tax relief, they need to increase the state share of education funding,” Jones said. “The state has not increased its share substantially in a long time.”
Residents now have to collect signatures from a percentage of the population to trigger a referendum on tax-rate increases of 8 percent or more. The bill would cut the increase that triggers a vote to 4 percent and do away with the petition requirement. The votes would also have to be held in November, when more prominent races boost voter turnout.
The bill includes a long list of other changes to appraisal and tax laws aimed at easing the property tax burden. It would establish an advisory board in the state Comptroller’s Office to oversee local tax offices and appraisal offices; require appraisal board members to be elected officials in the county; increase the minimum value from $500 to $2,500 for taxable personal property used to generate income; and make changes to procedures for challenging and reviewing appraised property values.
While McLennan County is in good financial shape to meet challenges the changes would bring, the bill could hurt smaller counties, Precinct 4 Commissioner Ben Perry said.
If a smaller county faced a “$5 million hickey,” the area would never be able to raise that money with the cap, Perry said.
“The lieutenant governor was dead serious about it. I think this is one of the things that he’s going to pursue,” he said.
The bill appears to have strong support behind it, County Judge Scott Felton said. He has expressed his concern to state lawmakers who represent the area, including Sen. Brian Birdwell, R-Granbury, Felton said.
Birdwell has remained neutral on the bill, and it has not come before any committee he serves on or the full Senate.
“I am broadly supportive of providing substantive property tax relief to all Texans, and fortunately, I enjoy positive working relationships with the city and county leaders in Senate District 22, relationships which will facilitate important discussions about if and how this legislation would best serve our shared constituents,” Birdwell said.
The Texas Municipal League also has denounced the proposal as “a direct assault on public safety, economic development and transportation that will produce no noticeable tax reduction for homeowners.”
“The largest budget item for every city in Texas is public safety — police, fire fighting and emergency medical services,” Bennett Sandlin, Texas Municipal League executive director, said 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 salaries, equipment, vehicles, health insurance and pensions of the men and women who protect our communities.”
The bill comes after the select committee on tax reform heard almost 50 hours of testimony over 11 months, largely from taxpayers discussing property tax bills rising faster than their ability to pay, said Bettencourt, a Republican who represents Northwest Houston, including Spring, Tomball and Cypress.
“Texas taxpayers have been facing property tax bills that are increasing 2.5 to 3 times faster than median household income,” said Bettencourt, the CEO of Bettencourt Tax Advisors, LLC, a tax consulting company in Houston. “Throughout Texas, in hearing after hearing, the select committee heard the same message loud and clear: Texans are asking for and deserve property tax relief. 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 even 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 in Texas.”
A committee report on the bill states that, instead of residents having to petition to vote to keep taxes from increasing, local officials should need to make the case to residents on why the rate should be increased. The burden of proof should rest on local officials, the report states.
“Local taxing entities often deflect taxpayers who are upset about rising tax bills by telling them that the tax rate has remained unchanged, the increase in their tax bill is due entirely to the increase in their appraised value, and they should speak to the appraisal district about their value,” the committee report states. “Appraisal districts typically respond that appraisal districts are bound by the state constitution to appraise properties at market value, and that the property owner’s tax bill is determined by the property tax rate, which is set by local taxing units.
“Because those local taxing units did not increase the tax rate and thus claim they did not increase taxes, property owners are left with no one to hold accountable. In many cases, the property tax rates approved by local elected officials was in excess of the unit’s effective tax rate and occasionally even the rollback rate.”
The effective rate refers to a new tax rate that would generate the same revenue as an entity collected in the preceding year, and the rollback rate refers to the 8 percent increase that triggers the option for voter approval.
Sandlin said the bill is misdirected. Cities are not the cause of high property taxes, he said.
”Cities get only 16 percent of the property taxes paid by Texans while 55 percent is levied by school districts. Legislators don’t want to deal with the real cause of high property taxes — the school finance system — because the Legislature depends on rising school property taxes to balance the state budget,” he said.