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A sweeping property tax reform bill that aims to slow rising property tax growth will soon head to Gov. Greg Abbott’s desk for approval, capping a years-long effort to address a pocketbook issue that has animated Republican leaders and angered their voters.
If signed by the governor — who has proclaimed his support for it — the Texas Property Tax Reform and Transparency Act would require cities, counties and other taxing units to receive voter approval before levying 3.5% more property tax revenue than the previous year. Community colleges, hospital districts and units with the lowest rates — of 2.5 cents per $100 valuation, or less — must do so before surpassing 8% revenue growth.
Proponents have called Senate Bill 2 a landmark reform, pointing to a raft of changes the bill makes to demystify the property appraisal and tax processes.
“Texas taxpayers are frustrated by rising property taxes. They are often confused about the process and many are scared of losing their homes,” state Rep. Dustin Burrows, the House sponsor of the legislation and a Lubbock Republican, said in a statement.
The legislation, which is not designed to reduce tax bills, “sheds light on who is raising their taxes and by how much,” Burrows said. “It gives our taxpayers more control over the process.”
The measure would create an online database to show property owners how proposed rate changes would affect their bills and make it easy to comment on increases using an automatically generated online form. The database would also include information about when public hearings are held to set local tax rates.
But while the transparency provisions garnered broad support during the legislative session, which ends Monday, other portions of the measure drew heavy fire from both sides of the political spectrum. Democrats said it would hamper local governments’ ability to provide vital services, and hardline conservative activists said it was not aggressive enough in offering relief.
One of the most contentious points of the reform package was the requirement that most taxing units hold an election before raising 3.5% more property tax revenue than the previous year. Only property taxes levied on existing properties, not new developments, count toward the revenue growth calculation.
Jeff Coyle, director of the San Antonio’s Government and Public Affairs department, told the Rivard Report last week, the bill “impacts the City’s bottom line when it comes to funding services and programs residents rely on and decreases its ability to rebound after recessions.”
According to Coyle, if a 3.5 percent cap had been in place during the past decade, the City would have had $137 million less in revenue and the savings to the average homeowner would have been $1.65 cents during that decade.
Appraisers determine the value of an owner’s taxable property, a number that plays a key role in determining the amount of taxes the owner pays. But taxing units, including cities, community colleges, and special purpose districts, levy the property taxes and set the local tax rate.
Currently, if a taxing unit tries to raise 8% more property tax revenue than the previous year, voters can petition for an election to roll back the increase. The 8% figure was set during a period of high inflation in the 1980s, and lawmakers have billed the lowered threshold as a necessary correction. But opponents say it would decimate local budgets while providing little tax relief for most Texans.
The bill gives taxing units some financial flexibility to provide poor people with attorneys and to pay for public hospitals. Not all of those expenditures will count toward the threshold that triggers an election.
In addition, cities, counties and other taxing units subject to the reduced election trigger can bank unused revenue growth for three years, allowing them to exceed the 3.5% threshold in some of them.
Abbott and leaders in the Legislature have agitated to pass a property tax relief bill for years. In 2017, lawmakers twice failed to advance measures that would have set election triggers between 4% and 6%. The governor later campaigned on a plan to limit the growth to 2.5%, and lawmakers increased it to 3.5% around April. Democrats and local officials decried the lower figures as impractical, and some suggested it was a punishment meted out after they refused to accept past proposals.
Still, more than a thousand taxing units may not have to abide by the 3.5% threshold in the reform bill, thanks to a provision that lets them raise $500,000 a year without automatically having to hold an election.
The allowance is intended to help areas with small tax bases make one-time, big-ticket purchases — for example, to buy a fire truck. It also may prevent local governments from having to administer elections when the cost of an election could outweigh the amount of revenue they are trying to raise.
If adding $500,000 would lead to a revenue growth increase of more than 8%, voters in the area could petition for an election to reduce it. They would need to gather fewer signatures than what current law requires.
The bill was approved by the House in an 88-50 vote, with 12 lawmakers marked absent and about a half-dozen Democrats voting for it. It was later approved in the Senate on a 21 to 9 margin.
This developing story will be updated.