Texas comptroller gives Tarrant County school districts a grace period

As bad as things appear with the loss of millions of dollars in local property taxes for schools, the financial problems could have been worse if the Texas comptroller’s office had not stepped in to avert a potential double whammy.

The threat of state cuts occurred because of a mismatch between the property value estimates reported by the Texas Comptroller of Public Accounts and the Tarrant Appraisal District. State law requires a difference of several percentage points, and fixing the difference can lead to a process in which local entities could lose substantial revenue.

The school districts dodged the potential financial disaster when the state comptroller declared a two-year grace period and used the local appraisal district’s lower property value estimate, instead of its own, to calculate state aid.

“I was sick to my stomach and sweating BBs at the time,” said Jim Schiele, chief financial officer of the Eagle Mountain-Saginaw school district.

Now school CFOs like Schiele are hoping that TAD appraisals will be in line with the comptroller’s estimates in 2016. After next year, the comptroller may not give school districts a pass if TAD’s appraisals don’t appear realistic.

“I don’t have any more get-out-of-jail free cards,” Fort Worth district CFO Elsie Schiro said. “God forbid that something goes wrong.”

The problems were created by the software conversion of more than 1.6 million property tax records at the Tarrant Appraisal District, which resulted in some incomplete appraisals and slowed down appraisal activities for several months.

TAD Chief Appraiser Jeff Law said last month that he expected no more problems with the new appraisal software, which the agency rolled out more than a year ago.

The CFOs said they were shorted millions of dollars in local property tax revenue because of TAD’s computer problems in 2015. Texas school district budgets are primarily made up of local and state funding.

Fort Worth estimated a loss of $12 million in local property tax revenue for the 2015-16 budget; Grapevine-Colleyville school district officials say they were shorted $8 million; Eagle Mountain-Saginaw got $5 million less than it had expected.

The comptroller reported a $5 billion difference in property value estimates when compared with TAD for 2015.

That represents more than $140 million in local revenue based on each school district’s tax rate, records show.

Property value study

State law requires the comptroller to conduct a property value study to make sure schools receive a similar per-pupil amount of state and local funding.

The property value study, conducted in each school district at least once every two years, looks at market values statewide and declares a standard that appraisal districts must meet. If the appraisal district meets the comptroller’s standard, the appraisal district certifies the local value to the education commissioner in order to calculate a district’s share of state funding.

Neighboring appraisal districts, including Dallas and Denton, met standards, for example.

Denton reported a 10 percent increase in property value from 2014 to 2015. Dallas reported a 7.5 percent increase over the same time.

TAD, though, reported an increase of 5 percent from 2014 to 2015, which the comptroller deemed “invalid” because it was too low.

“We knew the values were too low and so sure enough, when we got the comptroller study, we had invalids on our property values,” Grapevine-Colleyville CFO DaiAnn Mooney said. “I have not seen that for the 20 years that I have been with the school district.”

The CFOs have been encouraged by April 1 reports that the value of residential property in Tarrant County had increased about 14 percent.

“I think [Law] will take care of it next round,” said Northwest school district CFO Jon Graswich.

Law said he “felt very confident” that the comptroller’s study would be favorable to Tarrant school districts in 2016.

This story was originally published April 25, 2016 at 10:04 AM with the headline "Texas comptroller gives Tarrant County school districts a grace period."