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City leaders say property tax offers little relief, lots of pain

A local official said “a property tax reform bill aimed at slowing the growth of tax rises in Texas would confine the flexibility of local governments to pay for police and firefighters, construct new roads and provide essential services while giving homeowners minimal relief from rising tax bills.”

Recorded a month ago, Senate Bill 2 would require cities or counties to look for voter endorsement for any property tax rate increase that surpasses 4%. Right now, the law takes into account for hikes up to 8% without setting off a rollback election.

The measure would save a little more money for taxpayers because the municipal property tax represents just 16% of the taxes paid by Texans, City officials in Tarrant County Appraisal District (TAD) said. (About 50% of local taxes go to school districts.) But it could largely affect city budget.

Fort Worth Mayor Betsy Price stated that the bill would curtail the city’s ability to provide roads, infrastructure and public safety for a fast-growing population. She says the 8% cap has given the city the flexibility to “do what we needed to do” in good times and bad.

Arlington Mayor Jeff Williams says it’s too early to decide the bill’s real impact. The Legislature doesn’t meet until one month from now but noted that it’s well known that costs keep rising.

Texas State Senator, Paul Betterncourt, author of the bill, discovers that the comments by city officials are not straight forward. He said local governments can simply go to the voters and seek approval.

According to his Senate Select Committee on Property Tax Reform and Relief, a 90-page report shows an average home property tax appraisals have risen 22-24% over the past two years in the Fort Worth area and 20% in San Antonio. But the report indicates that from 2011 to 2015 levies jumped 14% in Fort Worth and 52% in Harris County.

Ability-to-pay

Bettencourt’s efforts to bring property tax relief to taxpayers has the support of Dan Patrick, Lieutenant Governor of Texas, who commissioned the select committee’s report and has assigned the reform bill to be a top priority in the upcoming legislative session. In a statement released after the report’s publication, Patrick voiced strong support for SB2 (Senate Bill 2).

Bettencourt, R-Houston, a former HCAD tax assessor-collector argues that as property appraisals in Texas increased because of its booming economy local taxing entities should have cut their tax rates because they were already getting more money from land valued at higher prices.

Instead, the committee’s report said that among the 4,039 taxing units in Texas, data from 2005 to 2015 shows tax levy increase of 93% for special districts such as utility and public improvement; 82% for the counties; 71% for the cities; and 39% for schools.

As a result, Texas now has the fifth-highest median property tax rate in the country at $2.17 per $100 of assessed property value, with only Illinois, New York, New Hampshire and New Jersey higher, the report says. At the same time, household median income went up 32% from 2005 to 2015, the study shows.

He said the bill would put in the same tax rate system as the school districts. It also removes the high petition threshold for calling a rollback election — 7% of registered voters in the larger cities.

Bettencourt said they want to stop government growing by “double digits.”

Tarrant Appraisal District (TAD)

Reforming the property tax system should be done realistically to provide local officials who are closest to the people the flexibility to make the best decisions for their community, officials say.

This year, Tarrant Appraisal District (TAD)saw its property valuations go up 9%, giving the country with an extra $19 million in property tax incomes, a 5% hike. The county’s operating budget is $588.2 million, which includes the general fund. Tarrant County Appraisal District commissioners cut the tax rate by a cent, or 4%, to 25 cents per $100 of valuation.

Still, the county needs to manage with what it calls state “unfunded mandates” such as providing attorneys for indigent criminal defendants. Last year it cost the county $14 million, and the state provided $1.7 million. The county pays $70 a day for prison-ready jail inmates. Last week, more than 100 were awaiting transfer.

Both Arlington and Fort Worth brought down their tax rates this year. Arlington cut its rate by a halfpercent to 64.48 cents for every $100 of valuation, and Fort Worth trimmed its by 2.3% to 83.5 cents.

Because of higher property values, both cities still experienced the increase in revenue. In Arlington, an additional $8.2 million was factored into the general fund budget. Fort Worth Appraisal District, after factoring in other considerations, benefited about $20 million for its operating budget.

If the 4% cap is imposed, cities will find it difficult to pay for initiatives, said Terry Hanson, Fort Worth’s assistant director over budget and analysis.

Fort Worth Appraisal District, for instance, has been able to pay for a new police station in far north Fort Worth near Old Denton Road and North Tarrant Parkway that will anchor a 6th patrol division with up to 100 additional employees with that flexibility, Hanson said.

Price agrees, saying the entire issue goes to local control. She says the council is out in the community and recognizes what its needs are. She additionally said that the proposed reform would not provide that much tax relief about $2 or $3 a month or $36 a year.

Jeff Coyle, director of government and public affairs for San Antonio, said the proposal would toss a torque into the operations of cities, which are the state’s economic engines, while giving little relief to taxpayers. In his city, if the bill had been on the books for the last decade, the average homeowner would have spared about $4.30 a month, while it would have cost the city nearly $300 million.

He said Bettencourt’s committee also continues to mischaracterize the comparison of property tax increases and personal income. A slide he disseminatesfights that from 2005 to 2014 city property tax levies have raised by 60% while individual pay has climbed 62%.

Blog Author

Patrick O’Connor, MAI, Owner and President
Patrick O’Connor has been active in reducing property taxes, providing expert witness testimony and appraising commercial real estate property since 1983. Pat is active in publishing analyses and data with respect to the real estate market, while being a highly regarded media spokesperson for the real estate community. He holds a MAI, the highest achievable designation from the Appraisal Institute, and is a licensed senior property tax consultant. Pat earned a Master of Business Administration from Harvard University. In 2001, he authored the first definitive consumer guide to Texas property taxes, Cut Your Texas Property Taxes.

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