Scott Felton

McLennan County Judge Scott Felton looks over a presentation on budget requests.

Flanked by the state’s top legislative leaders, Gov. Greg Abbott on Thursday announced that both chambers of the Texas Legislature will push to curb property tax growth by limiting how much money local governments collect without voter approval.

Abbott was joined by fellow Republicans Lt. Gov. Dan Patrick and House Speaker Dennis Bonnen, as well as the heads of both chambers’ tax-writing committees, in making the announcement. Their news conference followed the filing of two identical bills in both chambers, Senate Bill 2 and House Bill 2.

Abbott said it was “completely unprecedented” for lawmakers to be so closely aligned on such an important issue this early in the session.

“Most importantly, it’s a testament to the voters in this state,” he said. “The voters demanded this, and this demonstrates that the Texas Legislature is responsive to the needs of our voters.”

But two Democrats who sit on the House Ways & Means Committee said the proposed legislation is far from being a done deal. City of Waco and McLennan County officials gave the proposal a thumbs down. And an advocate for city governments said there are plenty of unintended consequences that need to be worked out. Chief among them is ensuring that cities aren’t suddenly unable to afford police officers and firefighters.

Thursday’s bills would require voters to approve a tax rate that allows government entities like cities, counties and school districts to collect an additional 2.5 percent in revenues from existing property compared with a previous year. The threshold would not apply to small taxing units — those whose potential property and sales tax collections are $15 million or less.

Currently, cities and counties can collect an additional 8 percent in revenues without involving voters. But even then, residents must collect enough signatures to force an election. The new pair of bills would automatically trigger what’s called a rollback election. If voters shoot down the measure, the government entity would have to set a tax rate that allows it to only collect revenues from existing properties that are less than 2.5 percent more than the previous year.

The rollback rate is also based on the appraised value of properties within a taxing unit’s borders. That means a city or county could hit the rollback election threshold without changing its tax rate – or even if they lower the tax rate – if there is a significant increase in local property values.

The legislation does not apply a cap to individual property tax bills. Because it would only limit how much government entities can collect in property tax revenues before getting voter approval, an agency could stay below the rollback election rate and that portion of a property owner’s tax bill could still increase.

Local officials are almost certain to push back. Bennett Sandlin is the executive director of the Texas Municipal League, which advocates for city governments. His organization estimates that about 150 of the state’s largest cities would be affected if the legislation passes. He said that the rollback threshold is lower than inflation and could prevent cities from paying for first responders’ raises, filling potholes and keeping recreation centers or libraries open.

“It is actually a service reduction,” Sandlin said.

Waco Mayor Kyle Deaver was quick to oppose the plan, calling the 2.5 percent proposal “completely arbitrary.”

“It’s going to make it very hard to plan for things like the street program that we have started — and seems to have broad support — and for public safety, police and firefighting,” Deaver said. “All those things require continued funding, so it’s just going to make it more difficult for us to deal with those things at the local level.”

He said he will “certainly” have conversations with Waco’s two representatives and senator.

“I have concerns about it, and I hope that they will remember that local control has always been a conservative value,” Deaver said. “That seems to be completely lost in this campaign that the lieutenant governor is on.”

The legislation filed Thursday sets the rollback threshold well below the amounts that drew heavy opposition from city and county leaders two years ago, when the House and Senate could not agree on where to place the rollback rate. The Senate landed at 4 percent. The House landed at 6 percent.

McLennan County Judge Scott Felton said he had not yet read the details of the plan but he was disappointed it wasn’t coupled with a cap on unfunded mandates, or spending that the state requires of local government. Felton has said almost 16 percent, or $11.14 million of the county’s budget, goes to fund state-mandated services.

Felton said the proposed 4 percent and 6 percent plans filed two years ago couldn’t get passed and now the state wants to take even more. Under normal circumstances, this county can operate under that cap, but it wasn’t that long ago the county’s liabilities were growing faster than its revenues, Felton said. The county had to take some drastic measures to restore its budget and had the revenue cap been in place in 2013, the county would still be trying to crawl out of that hole, Felton said.

John Kinnaird, a Waco councilman, said the plan makes it “very, very difficult” to adequately invest in the services citizens expect, and it doesn’t achieve the state’s goal to lower property taxes.

“Honestly, I’m concerned,” Kinnaird said. “It really takes away our ability to do our job, and it’s going to be felt, impacted and seen. We’ll do our best, but it will negatively impact a lot of the things we’re trying to do to better our community.”

Some lawmakers sounded a similar alarm.

“Starting at 2.5 it seems like a pretty uphill battle,” state Rep. Eddie Rodriguez, D-Austin, said at a press conference Thursday afternoon.

Rodriguez also noted that the House has 12 more Democrats this session than in 2017.

“Speaker Bonnen is committed to all 149 members being a part of this process,” Rodriguez said. “He said that to me personally.”

He and state Rep. Trey Martinez Fischer, D-San Antonio, criticized the legislation for not including the state’s plans for spending more on public education. They’re worried that lawmakers will cap property tax growth without replacing the revenue for schools.

“This raises more questions than it does answers,” Martinez Fischer said Thursday.

School districts get the majority of their money from local property tax revenue, and the state pays for most of the rest. Under Thursday’s legislation, with local revenue growth slowed, the state would have to pay for more public education. But state leaders have not said where that money will come from.

And while lawmakers could provide more funding for education, there is no current mechanism for helping cities and counties with their budgets.

State Rep. Chris Turner, D-Grand Prairie, said in a statement that property taxes are so high because the state has relied on local taxes to fund education, instead of increasing its share of the cost.

“An arbitrary revenue cap, one that will also make it more difficult for local communities to fund public safety, is not going to solve this problem,” said Turner, who also chairs the Texas House Democratic Caucus.

Martinez Fischer said that San Antonio could lose $300 million over the course of a decade if the bills pass as they are. But earlier Thursday, Republican state officials warned local leaders that the chambers and the governor will be united on a revenue cap this year. And, they said, local leaders should come to Austin armed with solutions – and not to just voice opposition.

“We ask you to come to the table and work with us on behalf of the taxpayers that we all represent, but you will not be dividing the House and the Senate and the governor on the solution,” Bonnen said. “So join us in finding the right solution because we’re already joined together.”

Sandlin worries that because the proposed revenue caps wouldn’t apply to smaller taxing entities, lawmakers who represent rural areas will more apt to support the bills. That could leave legislators from urban areas alone in a fight against the 2.5 percent threshold.

“It’s a bit of a divide-and-conquer strategy,” Sandlin said.

Bonnen called the unveiling of the legislation “the first step in solving the biggest problem facing Texas taxpayers.”

The state leaders were joined at the news conference by state Sen. Paul Bettencourt, R-Houston, the chairman of the new Senate Property Tax Committee, and state Rep. Dustin Burrows, R-Lubbock, the new chairman of the tax-writing House Ways and Means Committee. The participants traded some jokes as they rolled out the legislation, at one point musing that they should call it “HB 2.5” instead of HB 2 — a reference to the proposed rollback rate.

Sandlin didn’t find humor in the proposed 2.5 percent cap, though.

“It’s just draconian compared to prior versions,” he said.

The Tribune-Herald contributed to this report.

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