A property tax reform bill aimed at slowing the growth of tax hikes in Texas would restrict the flexibility of local governments to pay for police and firefighters, build new roads and provide crucial services while giving homeowners minimal relief from rising tax bills, local officials said.
Filed last month, Senate Bill 2 would require cities or counties to seek voter approval for any property tax rate increase that exceeds 4 percent. Currently, the law allows for hikes up to 8 percent without triggering a rollback election.
City officials in Tarrant County say the measure would leave only a little more money in the pockets of taxpayers since municipal property taxes represent just 16 percent of the taxes paid by Texans. (About 50 percent of local taxes go to school districts.) But it could have a big impact on city budgets.
Fort Worth Mayor Betsy Price said the bill would hamper the city’s ability to provide roads, infrastructure and public safety for a fast-growing population. She says the 8 percent cap has given the city the flexibility to “do what we needed to do” in good times and bad.
“Overall, I think that there is going to be a lot of pushback from cities and the counties,” Price said.
Arlington Mayor Jeff Williams says it’s too early to determine the bill’s real impact — the Legislature doesn’t even convene until next month — but noted that it’s well known that costs keep rising.
Everyone needs to remember that the cost of services is not flat. It continues to go up just like the cost of living for our citizens.
Arlington Mayor Jeff Williams
For example, in 2017, Arlington’s Police Department budget includes $84.4 million for salaries and benefits, which includes a 5 percent raise for officers and civilians that will cost roughly $3.2 million over nine months, a city budget official said. Adding to that, the city hired 15 more police officers, Williams said.
“Everyone needs to remember that the cost of services is not flat. It continues to go up just like the cost of living for our citizens,” Williams said.
There is a cry that this is going to devastate essential services and that is just nonsense.
State Sen. Paul Bettencourt
State Sen. Paul Bettencourt, author of the bill, finds the comments by city officials to be “disingenuous.”
“There is a cry that this is going to devastate essential services and that is just nonsense,” said Bettencourt, R-Houston, a former Harris County tax assessor-collector. He said local governments can simply go to the voters and seek approval. “I’m trying to keep taxpayers from bleeding to death on their bills.”
Average home property tax appraisals have risen 22-24 percent over the past two years in the Fort Worth area and 20 percent in San Antonio, according to a 90-page report by his Senate Select Committee on Property Tax Reform and Relief. But the report indicates that from 2011 to 2015 levies jumped 14 percent in Fort Worth and 52 percent in Harris County.
“If values go up, tax rates need to come down; otherwise property tax bills go through the roof for homeowners and business owners,” he said.
Taxpayers’ ability to pay
Bettencourt’s efforts to bring property tax relief to taxpayers has the support of Lt. Gov. Dan Patrick, 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.
“Texans have told us loud and clear that common-sense property tax reform legislation is long overdue,” Patrick said in a statement. “Property taxes are driving people out of their homes and hampering business expansion and growth. It’s time for this to stop.”
Bettencourt argues that as property appraisals in Texas increased because of its booming economy — he joked one time that the national bird of Texas should be a construction crane — local taxing entities should have cut their tax rates because they were already getting more money from land valued at higher prices.
The committee’s report said that there are 4,039 taxing units in Texas and that statewide data from 2005 to 2015 showed tax levy increases of 93 percent for the special districts such as utility and public improvement; 82 percent for the counties; 71 percent for the cities; and 39 percent for schools.
Instead, the committee’s report said that among the 4,039 taxing units in Texas, data from 2005 to 2015 shows tax levy increases of 93 percent for special districts such as utility and public improvement; 82 percent for the counties; 71 percent for the cities; and 39 percent 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 percent from 2005 to 2015, the study shows.
“This is a question of priorities and taxpayers’ ability to pay. I prioritize their ability to pay ahead of turning on a Hoover vacuum cleaner and sucking all of that money out of their wallets,” Bettencourt said.
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 percent of registered voters in the larger cities.
Bettencourt said they want to stop government growing by “double digits.”
Adding layers of difficulty
Reforming the property tax system should be done “realistically,” giving local officials who are closest to the people the flexibility to make the best decisions for their community, officials say.
“I’m not saying voters shouldn’t have a say. It needs to be approached realistically,” Tarrant County Administrator G.K. Maenius said. “Did anybody ever ask what services are being provided and if the citizens wanted those services and needed those services? … It is more complex than simply cutting revenue.”
This year Tarrant County saw its property valuations go up 9 percent, providing the county with an additional $19 million in property tax revenues, a 5 percent boost. The county’s operating budget is $588.2 million, which includes the general fund. Tarrant County commissioners cut the tax rate by a cent, or 4 percent, to 25 cents per $100 of valuation.
I’m not saying voters shouldn’t have a say. It needs to be approached realistically.
Tarrant County Administrator G.K. Maenius
Still, the county has to deal 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.
“It would make it very difficult to do the job,” county budget director Debbie Schneider said of the 4 percent rate hike cap. “The goals are the same, to provide the best services and the lowest cost, but mechanically we have to have a way to pull that off. It adds layers of difficulty.”
Both Arlington and Fort Worth lowered their tax rates this year. Arlington cut its rate by a half-percent to 64.48 cents per $100 of valuation, and Fort Worth trimmed its by 2.3 percent to 83.5 cents.
Because of higher property values, both cities still saw the revenue collected increase. In Arlington, an additional $8.2 million was factored into the general fund budget. Fort Worth, after factoring in other considerations, gained about $20 million for its operating budget.
I think it is an effort to take away local control.
Fort Worth Mayor Betsy Price
If the 4 percent cap is imposed, cities will find it difficult to pay for initiatives, said Terry Hanson, Fort Worth’s assistant director over budget and analysis. When he worked at cities in Minnesota and Wisconsin, where similar strictures were in place, it didn’t “allow a lot of room for things to occur,” he said.
Fort Worth, for example, 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 sixth patrol division with up to 100 additional employees with that flexibility, Hanson said.
“Those are the issues of growth that we are always looking at when considering future budgets,” Hanson said. “It does limit your flexibility. I think the local control the City Council now has is a good thing.”
Price agrees, saying the entire issue goes to local control. She says the council is out in the community and knows what its needs are. She also said that the proposed reform would not provide that much tax relief — about $2 or $3 a month — or $36 a year.
“I think it is an effort to take away local control,” Price said.
Jeff Coyle, director of government and public affairs for San Antonio, said the proposal would throw a wrench into the operations of cities, which are the state’s economic engines, while providing little relief to taxpayers. In his city, if the bill had been on the books for the last decade, the average homeowner would have saved about $4.30 a month, while it would have cost the city nearly $300 million.
“That is a lot of police officers, firefighters and street projects we would not have been able to afford,” Coyle said.
He said Bettencourt’s committee also continues to mischaracterize the comparison of property tax increases and personal income. A slide he distributes contends that from 2005 to 2014 city property tax levies have increased by 60 percent while personal income has climbed 62 percent.
“This is not real tax relief. There is minimal relief to homeowners while having a major negative impact on cities to provide public safety and infrastructure that our citizens expect from us,” Coyle said.