House Ways and Means – February 27, 2019

The House Committee on Ways and Means met on February 27, 2019, to take up and consider HB 2 (Burrows) relating to ad valorem taxation and HB 705 (Geren) relating to the substitution of a county sales and use tax for all or a portion of property taxes imposed by the county; authorizing the imposition of a tax.

This report is intended to give you an overview and highlight of the discussions on the various topics the committee took up. It is not a verbatim transcript of the hearing but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions. Technical issues were present in the video stream & archive during the layout of SB 2.

 

HB 705 (Geren) Relating to the substitution of a county sales and use tax for all or a portion of property taxes imposed by the county; authorizing the imposition of a tax.

• Geren – The purpose of the bill is to provide property tax relief. Cities and counties have to opportunity of eliminating the entire portion of M&O by offering a supplemental sales tax. Sales tax rate would be set at a rate equal to the M&O property tax revenue for a given jurisdiction but cannot exceed 2%. The bill allows for each city and county to decide whether to adopt supplemental tax rate or remain under the current structure.
• Difference from the bill as filed is that the substitute version applies to both cities and counties and only to M&O rates. Also, the rate changed from 1% to 2% and the substitute requires a full 100% swap of the M&O.
• Wray – The substitute bill went from 1% to 2%, is there a limit between cities and counties?
  • A city could do 2% and a county could do 2%. Most cities would not be able to adopt this because they only collect sales tax within city limits and do not collect the sales tax necessary for the 100% swap.
• Will have to make a change to the bill regarding the language “before June 30th,” to allow counties the time to adopt the bill this year.
• Murphy – So the bill is only for a 100% M&O trade off?
  • Correct.
• Murphy – Once they set that revenue, does that go up or down over time?
  • Sales tax can vary, and if they get too much, our intention is that they can bank that for the years that the sales tax go down.
• Cole – What cities would this actually apply to?
  • The counties that adopt this could see sales tax rise to 10.25% and if a city adopts it within the county it could rise to 12.25%.
• Sanford – Why can’t we do a blend instead of the 100% trade off?
  • In visiting with the speaker, he was determined to get rid of the M&O.
• Guillen – In Tarrant county, it would be about 1.1% to get to the requirements?
  • Correct, the city of Fort Worth would not be able to take advantage of this because they would need more than 2 cents to get to the 100% M&O.
• Bohac – This is a revenue neutral bill, correct?
  • Correct.

 

Glen Whitley, Tarrant County Judge

• Speaking in support of the bill on behalf of self and Tarrant County. Expressed that the bill will provide actual tax relief for constituents.
• Burrows – Do you have an estimate of how many people will be captured into the sales tax base?
  • I do not have that number.
• Guillen – What if your neighboring counties do not implement this, and your sales tax is higher. Would this have an effect on your sales?
  • Our surrounding counties are interested in implementing this. If they chose not to, we do not believe it will have a significant impact on us.
• Cole – Why is the focus on sales tax and not hotel occupancy tax?
  • The bed tax will not take care of what is necessary for the M&O.
• Sanford – Would this effect business development?
  • If business are looking at property tax, they will not get one from the county. Therefore, abatements would no longer be an issue.
• Sanford – Are there cities and counties that won’t have this option available to them?
  • Out of 254 counties, this would only apply to about 50.
• Sanford – Does that give those 50 counties a competitive advantage?
  • Counties can still enter into any type of agreements they would like to, but in terms of a long-term advantage, yes.
• Guillen – Are you saying that 50 counties would be able to take advantage of it, or would not?
  • Would be.
• Guillen – How do you compare to other sales taxes in neighboring states.
  • There are some sales taxes over 10% already, I haven’t sat down and looked at this on a combined type basis.
• Wray – Only about 50 of 254 counties would be able to take advantage of this tax swap.
  • That is a rough estimate.
• Wray – I think about 50% of Texans live in eight counties. This would still provide a major tax relief for a lot of people, even if we just capture about 50 counties.

 

Dale Craymer, Texas Taxpayers and Research Association

• Against the bill. Worried that the bill would create a patchwork quilt of different tax structures across the state.
• Should Texas ever need to raise additional revenue for whatever purposes, the sales tax is the only tool left. Sales tax rate is already at a high rate.
• Suggests that the ballot language specifically state amount of tax relief and the amount of additional sales tax rate that people would be paying.
• If counties adopt the bill, suggests that all jurisdictions within the county be subject to a lower temporary rollback rate.
• Suggests that if at some point the state has to raise sales tax, allow the counties the option to reconsider the measure.
• Allow a governing body to vote through the governing board on a sales tax, rather than through an election.
• Wray – Would the scenario that you describe not spur retail development in the county with the lower sales tax rate.
  • It is a possibility; however, customers already have an alternative of ordering something online and paying the local rate where they reside.
• Rep. – Which would make living in that county more affordable and attractive?
  • It would make no difference than currently. This might hurt the brick and mortar retailers by driving more people to online shopping.

 

Brad Reynolds, Comptroller’s Office

• Guillen – Would international shoppers still be eligible for manifesto?
  • Yes. International shoppers in the state can take their receipts to custom brokers and receive compensation for the state sales tax they paid. It is a means of exempting foreign visitors from state tax.
• Guillen – Are they exempt from 6.25% or 8.25%?
  • They are exempt from sales tax completely.
• Cole – Speak to your knowledge of this being a regressive tax in that low-income households would pay more.
  • A higher percentage of the household budget for low income households is paid on taxable items than high income households.
• Cole – Has there been any type of economic analysis of the bill to understand our concern on the impact of property and sales taxes between economic levels.
  • The chairman has the authority to request the tax equity note from LBB.
• Guillen – Under the bill, do they have the opportunity to change their mind after they opt in?
  • Has not had time to fully evaluate the substitute.
• Murphy – I think we heard testimony that the property tax itself had regressive elements to it. Because this is a swap, would your equity note account for the differential between the two taxes?
  • A tax equity note done on a bill like this would analyze all elements of the bill
• Cole – If the chairman decides to do this equity analysis, we also need to look at the TIF impact.

 

Dawn Dickson, Self

• Testifying in favor of the bill. Emphasized that it is not fair for someone to have property taxes so high that they are worried of losing their home.
• Bohac – A tax bill can go up by 10% each year, so that means a property tax bill can double every year. Which is hard for people with fixed incomes.

 

Jim Allison, County Judges and Commissioners Association of Texas

• In support of the bill. Believes that tax payers should have the opportunity to make the choice between property and sales taxes.
• Suggests that this bill be made available to all counties in the state, even if it does not completely eliminate property taxes in smaller counties.
• Burrows – Under your idea, counties would collect a certain amount of money from sales tax and apply that to a reduction in property tax relief.
  • Absolutely, it would be a dollar for dollar relief.
• Guillen – How many counties would be able to replace their property taxes with sales taxes under this bill?
  • 50, most likely to be urban counties.
• Guillen – Wouldn’t you say that rural folks are going into the bigger communities to spend money and would get hit double because they would be paying higher sales tax in the cities and their property taxes back home.
  • Yes, that is a part of it. However, if you make it available to all counties, at least all counties would be on equal footing to attempt to get those dollars.

 

Dick Levine, Center for Public Policy Priorities

• Testifying against the bill. Concerned about the regressivity of the sales tax. 80% of tax payers would be losers and only families with above 150k incomes would come out ahead.
• Concerned that consumption will decrease in cities who rely on sales taxes if their counties raise their sales tax.

 

Talmadge Heflin, Texas Public Policy Foundation

• Neutral on the bill. Believe that the bill should, for any sales tax dollars raised, must reduce property tax dollar for dollar.
• Would like to see that once the property tax is reduced, it could not be raised back.
• Bohac – Everybody pays property taxes in a county, whether you rent or own. Do you have any thoughts on the equity proposition?
  • The equity note just gives you a clear glimpse of what the bill does. I would be neutral on that.
• Martinez-Fischer – Do renters have the ability to protest their property taxes?
  • As far as I am concerned, they do not get credit directly from the taxing unit that the property owner does. However, their rent includes their property tax.
• Martinez-Fisher – Renters have no way of disputing their property tax, correct?
  • Correct.
• Burrows – Points out that renters can still attend rate setting hearings.

 

Ived Diotte, Self

• Was concerned that the bill would just be a revenue stream. Witness is in favor of the committee substitute.

 

Michael Openshaw, Self

• Supports concept of the bill. However, advocates for an option in place to back out of the bill.

 

Adam Haynes, Conference of Urban Counties

• Encourages the committee to follow the process of providing property tax relief throughout the session.
• Sanford – Sounds like you expect your member counties to engage in the swap?
  • The great thing about the bill is that it is an option between sales or property tax.

 

Richard Diotte, Self

• In favor of substitute bill. Testifying because of the burden that property taxes impose on fixed income and low-income residents.

 

Charles Reed, Dallas County Commissioners Court

• Would like to be allowed to split between jurisdictions.
• Also, would like to be able to have some discretion on not having to buy down the entire property tax rate. Concerned on how the bill would impact 312 agreements.
• Wray – To your point on the 312 agreement, if property tax is a deterrent,
• the 312 is designed to get passed that deterrent.
  • Correct.
• Wray – So if the county property tax goes away, there would no longer be a need to get around the deterrent, right?
  • We are concerned about the agreements that we already have. Part of those agreements is that the value of the property we abate reach a certain level.
• Wray – You are concerned with the agreements already in place and making sure that the businesses comply with the agreement.
  • Correct.

 

Clayton Chandler, City of Mansfield

• Testifying in favor of the bill. Believes that it provides relief and gives people a choice.

 

Leon Klement, Cook County Commissioner

• Concerned about relying too much on sales tax with the all or nothing option.

 

Terry Harper, Self

• Concerned about the rising property taxes in Guadalupe county and is in support of using sales tax as a relief method.

 

Holly Gray-Moore, Mayor Pro Tem of Roanoke

• Believes this bill would reduce the property tax in Roanoke significantly.
• Wray – Would changing to sales tax relieve the pressure to annex?
  • Absolutely, since the surrounding areas would be contributing to the sales tax.
• Guillen – It would also encourage cities to annex areas only for commercial purposes.
  • Correct, to some degree.

 

Silvia Coleson, Self

• Testified in favor of the bill and advocated for property tax relief. Suggests that the bill is applied to all counties.

 

Rep. Geren Closes on HB 705

• Geren – Will take testimony into consideration as they continue to work on the bill. Representative closed discussion on HB 705.

 

HB 705 left pending.

 

The committee recessed for the House floor. After resuming for the afternoon portion of the hearing, technical difficulties interrupted the live video broadcast. Notes below pick up from after the technical difficulties were resolved during Chair Burrows’ layout of HB 2.

 

HB 2 (Burrows) Relating to ad valorem taxation.

• Burrows – If property tax rates go up year-to-year at 8%, they will double in 8 years, it takes 28 years for taxes to double at 2.5% rate
• Martinez Fischer – Will take a lot of hours to sort through issues on bill, hopes that there will be collaboration & has seen continued dialogue
  • Burrows – My sincerest hope is that we have ideas and comments from across the spectrum, idea is to work with Committee to work out issues
• Martinez Fischer – Saving questions for witnesses who are technically proficient on the bill
• Rodrguez – How did you keep the $15 million carve out for small communities?
  • Burrows – This is not the first version of this bill filed, some version was filed in all recent sessions, at some point the Senate was at a $20 million and House was at a $25 million
  • Basis was that a lot of taxing jurisdictions were concerned that elections for small items would eat up all of the cost for those small items
  • Having public testimony and likely some think it should be bigger and some think it should go away, goal is to address these issues

 

John Hryorchuk, Office of the Governor

• Present as a resource witness; discussing interplay between property tax reform and school finance reform, though school finance reform bill has not yet been filed
• Property taxes are increasing because taxable values are rising and tax rates are not declining to offset, even if rates stay flat the average bill will go up
• Presents data on Texas’ rising values, school district rising tax bills, etc.

• As property taxes increase, state funding of M&O will decrease.
• Amount of school funding from property taxes could reach 68%.
• Recapture increases as property taxes rise.
• Expect 1/3 of districts in Texas to be paying recapture in the near future.
• 2.5% limit improves outlook for recapture.
• Recapture is calculated today using equalized wealth, prior year values, which can leave districts with less money than is needed to educate students. This occurred in 91 districts, it is not an isolated problem.
• District wealth does not necessarily equate to student wealth.
• Reward teachers for student achievement and pay teachers more especially in historically underserved areas.
• For non-recapture districts, additional funding will come from the state.
• Martinez Fischer – Your presentation was specifically looking at the rollback component?
  • Hryorchuk – Yes, looking at how to lower tax rates as property values rise
  • Martinez Fischer – So if the state does not put any money in above the 2.5, does that make your presentation harder?
  • Hryorchuk – Do not have a simple answer.
  • Martinez Fischer – If the state cannot backfill the needs what happens?
  • Hryorchuk – My answer on that is speculative, I would prefer not to speculate on what Huberty would include in his bill.
  • Martinez Fischer – Are you working on that bill?
  • Hryorchuk – I speak with Huberty frequently.
  • Martinez Fischer – I frequently speak with Huberty too but am not working on HB 3, are you working on HB 3?
  • Hryorchuk – Yes.
  • Martinez Fischer – If we are going to write one tax bill for all taxing entities, HB 3 is tied closely to HB 2.
  • Hryorchuk – Imperative to ensure that districts do not lose money.
• Burrows – HB 2 and HB 3 are intricately tied together.
  • Hryorchuk – Structured in a way that districts will not lose money
• Martinez Fischer – If there is a school finance disaster, could there be a hold harmless built in in order to course correct?
  • Hryorchuk – I would discuss with your office on how that would work.
• Rodriguez – When there are lean times, there should be a mechanism that schools are left whole or held harmless
  • Hryorchuk – There was not as much property value growth during the recession, you get fewer cost drivers during those times.
  • Rodriguez – When Huberty is working on the bill it will not be a projection in 2023, it will be addressed for 2025 or 2030, whenever?
  • Hryorchuk – We will try to project as far into the future as possible.
  • Rodriguez – Question about commission recommendation on teacher pay
  • Hryorchuk – Commission recommended merit based teacher pay.
  • Rodriguez – Texas Monthly article, students are being tested with STAAR at 2 years above their grade level, would suggest you take that into account.
  • Hryorchuk – Imperative to improve reading levels across the state.
  • Burrows – Let’s stay focused on property taxes here.
• Burrows – Do compression to get more money from the state into education?
  • Hryorchuk – Yes.
• Cole – Schools in Austin that are property poor, but these schools send money in recapture to other schools. Has there been analysis focused on students rather than districts?
  • Hryorchuk – Reforms should be based on students and not on districts. What you described is why these reforms are necessary. The circumstances facing AISD are unique but spreading to other districts.
  • Cole – This issue is spreading, large districts are already facing this issue, we need to address it.
• Shaheen – ON slide 5 it says impact at 2.5% revenue cap, for ISDs is that a true cap or a rollback?
  • Hryorchuk – For schools you want to limit overall growth in revenue year over year. You also have to structure in a way that guarantees the state will fill in to ensure districts are not losing money.
  • Shaheen – Rollback would trigger an election?
  • Hryorchuk – Putting it as a rollback would be more equitable.
  • Shaheen – Are you aware of the increase in education funding in the initial HB 1?
  • Hryorchuk – Believe it has $9b.
• Wray – Currently have per-student funding, so amount in system increases while per-student remains the same, some of the growth in budget is due to population growth?
  • Hryorchuk – Cannot speak to that.
  • Wray – Question about new values
  • Hryorchuk – In school mechanism the are often included.

 

Dale Craymer, Texas Taxpayers and Research Association

• Bill has 3 pillars
  • Tax visibility
  • Process reforms
  • Tax constraints.
• Property tax bill as of now is a black box, we get in April a “fictitious” notice in April of what our taxes might be.
  • Each jurisdiction must adopt a new rate each year, last years tax rate may not be indicative of the rate this year.
• New process would make it clear which jurisdictions are driving up property taxes, will tell where and when the property tax hearing is.
• Give people an opportunity to impact their bill/rate before the rate is set.
• Reform the appeal process, make it more taxpayer friendly.
• Body of this bill more far reaching than anything before.
• Tax constraint part of HB 2 makes TTARA register as neutral and not in support.
• Now, for a district to adopt a rate above $1.04 there has to be an election. With HB 2 the districts will be able to go over 2.5% without an election, which makes it easier for districts to raise taxes.
  • Recognize this language will likely be replaced in the public ed committee.
• Support automatic election provisions.
  • Arduous process to trigger an election, should be automatic if a district adopts a rate above the rollback rate.
• 2.5% is too low for a rollback rate.
• Rollback rate set at 5% in 1979, raised in ‘81 to 8% due to high inflation. Inflation is now lower than it was then, this gives local jurisdictions more latitude to change taxes than was envisioned in 1979 and 1981.
• Give Comptroller resources to verify data submitted to property tax districts and cities.
• Debt service tax rates should only include debt that has been specifically approved by voters.
• Burrows – Real time tax notice is a frustrating process, have you looked into this process?
  • Craymer – It is not unusual that people will show up to pay property taxes thinking that the estimate is what they were billed. People will also appeal their values thinking that will lower their rate and then don’t pay attention to the tax rates that are adopted in the summer.
  • Burrows – How can we get taxpayers more engaged in the rate setting process, do you think getting people to the rate setting hearing will accomplish this?
  • Craymer – Yes and part of the bill is to allow people to engage in the process without going to the hearing.
• Shaheen – What specific properties does the rollback apply to?
  • Craymer – Only applies to properties on the rolls in current year and previous year. New values are not included. So, if there are new values property tax revenues could increase over the rollback rate.
  • Shaheen – So the 2.5% only applies to existing properties?
  • Craymer – Yes
  • Shaheen – Can cities go over the 2.5%?
  • Craymer – Yes. If they go over the 2.5% there would be an election.
  • Shaheen – So a city could go over by, say, 20%?
  • Craymer – Yes, subject to voter approval.
• Murphy – If you held to a compound growth rate of 2.5%, have you given thought to something to address the down cycles?
  • Craymer – Effective or “no new taxes” rate means that if values decrease the rate will automatically adjust upward, if values increase the rate will increase,
  • Murphy – Revenues are protected regardless of rate?
  • Craymer – Yes.
• Murphy – Question about 8% rate set in 1981 and 5% rate set in 79
  • Craymer – Inflation was in double digits, so it was raised to 8% from 5% in 1981.
  • Murphy – Was there analysis done to choose that 8% number?
  • Craymer – I don’t know, I think they just picked a number.
• Martinez Fischer – Question about a more convenient way to protest appraisals, current system is dysfunctional. TTARA says government exists to do things the private sector can’t do,
  • Craymer – Fighting a fire at a chemical plant might require very specialized equipment that is on site.
  • Martinez Fischer – Was disagreement between House and Senate on 4% or 6% because they wanted lower rates?
  • Craymer – There were some who wanted lower rates, but those rates were generally on the low end of what a lot of members wanted.
  • Martinez Fischer – Nobody said that this didn’t happen because the rate wasn’t low enough, we are starting at a lower baseline now and it does flummox me a bit.
  • Craymer – 2.5% came out as part of Abbott’s proposal in Jan 2018.
  • Martinez Fischer – Cities and counties will have to find a revenue stream, are you willing to entertain a fee-for-service for your members, for local governments to analyze rights-of-way and franchise fees?
  • Craymer – We are happy to entertain that discussion. We understand that our members have a responsibility to fund a lot of those things.
  • Martinez Fischer – Is it a fair discussion to look at those ways of funding to make local governments whole?
  • Craymer – We are happy to participate in that discussion.
  • Martinez Fischer – Tell about Massachusetts cap
  • Craymer – 2.5% limit was put in place in Massachusetts for cities and townships. Different from Texas because the 2.5% rate is automatic, it is not an item of discretion. Mass also provides 15-20% of city and township budgets through state aid.
  • Martinez Fischer – And is that aid due to state income tax?
  • Craymer – Partly, lottery revenue was also dedicated to local governments. State has basically subsidized that 2.5% limit by distributing a pool of state aid to them.
  • Martinez Fischer – In the Mass pan there was also a hard line on unfunded mandates?
  • Craymer – I am less familiar with that aspect of the plan.
  • Martinez Fischer – That 2.5% cap came about at a time known as the “Massachusetts miracle”
  • Craymer – It came in around 1980, the same time as Texas was doing its thing with rates and California was doing something similar.
  • My understanding is Mass is still the 8^th highest tax state in the country?
  • Craymer – It is overall a high tax state. Property taxes are low, but they have high state income taxes and other taxes.
  • Martinez Fischer – Would the 2.5% proposal lead to rate disparities between affluent and low income areas?
  • Craymer – There is research that concludes that more affluent areas are more likely to vote to exceed the 2.5% than lower income areas.
  • Martinez Fischer – Question about special purpose districts
  • Craymer – Special purpose districts must be approved by voters. I will get with counsel to understand the specifics of this language.
• Bohac – Where did you get inflation data?
  • Craymer – US Bureau of Labor Statistics.
  • Bohac – I find these inflation numbers awfully low, do you calculate your own?
  • Craymer – We do not calculate our own. BLS calculates using a consumer basket, so declining gas prices have lowered the rate. Local government inflation indices will be more closely related to labor costs than consumption goods.
• Cole – What is per-student average expenditures?
  • Craymer – $5,140, which understates the actual spending since we count special needs students as more than one student to make sure they get addition dollars.
  • Cole – What is national average?
  • Craymer – Not sure, but I think we are slightly below the national average.
  • Cole – How does the cap amount help us with schools?
  • Craymer – Under current law a rollback election is a tax ratification election for a school district. With a city or county is a tax rejection election, so they vote no, and it rolls back to that 8% rate.
  • Cole – Question about property taxes.
  • Craymer – If you want to address high property taxes in Texas you have to address schools, cities and counties.
• Guillen – What percentage of districts take advantage of the 8% on a year to year basis?
  • Craymer – It is few of them. When inflation was higher we saw more of them, but now with low inflation there are fewer elections.
  • Guillen – How many go to the max every time, but don’t have an election?
  • Craymer – Can get that info from the Comptroller, but the 8% barrier is more of a political barrier than a real barrier. About 20% of districts will go up to the 8%. Most jurisdictions will try to stay below the 8%.
  • Guillen – How many stay below 2.5% on an annual basis?
  • Craymer – Would like to get more info before giving an answer.
• Frank – What is the average CPI rate over the past 10-20 years?
  • Craymer – Over the past 20 years has been in the 2% range. Double digit inflation was an anomaly, low inflation rates seem to have staying power.
  • Frank – Do you follow inflation indices other than the CPI, do those trend higher or lower than CPI?
  • Craymer – They tend to be less volatile, but in the long run tend to be in the same range as CPI.
  • Frank – What has the employment cost index been doing recently?
  • Craymer – Wages have recently increased, but for a while they were not increasing at the same rate as the rest of the economy. Do not know what the employment cost index is relative to CPI.

 

Marya Crigler, Chief Appraiser of Travis CAD

• 26% were protesting to lower value, more were protesting their taxes.
• Property owners have a lack of understanding of the property tax system.
• Rodriguez – What was the percentage who protest to lower taxes vs value?
  • Crigler – 74% protest taxes, 26% protest value.
  • Rodriguez – Do values ever increase after protests?
  • Crigler – There are times where a newly purchased property will be appraised for above the purchase price.
  • Rodriguez – This bill will prohibit that increase, how do you feel about that?
  • Crigler – Do not have an opinion on that.
  • Rodriguez – So you do not have an opinion, you are just doing your job, the taxing entities might have a stronger opinion on that.
• Burrows – Travis CAD has done a good job, other CADs should emulate.
• Martinez Fischer – Your testimony is on the appraisal side or ARB side?
  • Crigler – Testifying specifically on appraisal side.
  • Martinez Fischer – Why does the Comptroller’s office not do the appraisal?
  • Crigler – Cannot answer that question.
  • Martinez Fischer – You don’t have to answer but I would like you to think about it.
  • Crigler – The independence of the chief appraiser is very specific and is meant to avoid political influence. As chief appraiser I am not an advocate for the taxing entities or the property owners, I try to appraise properties at market value.
  • Martinez Fischer – But are you really that independent from the Comptroller?
  • Crigler – In determining values the appraisal district is independent. We are studied biennially by the Comptroller.
  • Martinez Fischer – What happens if you do not pass property value study?
  • Crigler – The Comptroller would perform a study in the following year.
  • Martinez Fischer – If we are going to hold everyone accountable, it seems there may be unique functions of your office, but it seems you are really a good conduit between the public and the Comptroller. It seems that for efficiency the Comptroller might take control of this process.
  • Crigler – Comptroller is not making judgements on values, they are making sure we follow the rules.
  • Martinez Fischer – Might be good because of the Comptroller’s ability to interact with the legislature on a regular basis.

 

Brent South, Texas Association of Appraisal Districts

• Emphasize figure reported by Mrs. Crigler that 74% of people going to appraisal district were going to protest their taxes.
• Important to help the average home and property owner understand the system.
• Appraisal districts have no control over the market, buyers and sellers do. Appraisal districts just report information on values. Buyers and sellers will raise or lower values.
• Sensitive to homeowners leaving an ARB with a higher value than they came in with.
• Problem with holding elections on general election dates. It will be almost impossible for appraisal districts to produce a certified appraisal roll by July 25.
  • Districts could use estimates that could come out on July 25, these would be within 1% of the final official value.
• Support the real-time tax database.
• Deadline for appraisal review board orders to be sent, currently there is no timeline. 15 day timeline is problematic for ARBs that operate in panels.
  • Recommend the deadline for counties with less than 4m in population be 30 days, 45 days for counties with populations over 4m.
• Should be able to enter additional evidence to rebut or refute additional information introduced to ARB hearings.
• Martinez Fischer – In the ARB process you will not come up with a number higher for single family residences?
  • South – Yes we would like to limit that to single family residences.
  • Martinez Fischer – Question about people representing themselves in ARBs and people who have professional representation
  • South – This was something that was asked for by property tax consultants. My opinion is that if you are going to take on a certain number of clients you should have the resources to handle those clients.
  • Martinez Fischer – I do not want people who do this for a living to do it at the expense of people who are representing themselves.
  • South – Do not want to speak on behalf of the agents
  • Martinez Fischer – Do not want anybody to be waiting for someone who is doing it professionally.
  • South – Professional agents are becoming more the norm than individual property owners.
  • Martinez Fischer – Can you walk me through some of these scenarios when evidence might be introduced during the ARB process?
  • South – If there was a mechanism to send initial evidence but reserve the right to send you back to a website where all the information is that would be good. Problem is that they can request a hard copy of everything, which could get expensive quickly for the appraisal districts.
  • Martinez Fischer – For a process that is supposed to be accessible for lay people this seems like a complicated process.
  • South – I agree, we don’t want to surprise people, but we also want to be able to introduce evidence. This process would not be necessary if people understand market value was the ultimate goal, not lower taxes.
• Burrows – My understanding is the appraisal district has to give everything they will use to the person appealing, and that an appealer does not have to provide what they will present at a hearing. What you would like is a narrow exception that if the appealer presents information you should be able to introduce new evidence in order to rebut that/
  • South – That is correct.
• Wray – Anecdotes about people being “threatened” with values going up in the ARB as a negotiation tactic, does your agency offer guidance to the districts as to whether or not that tis appropriate?
  • South – We go through a lot of training and ethics course, emphasize we are public servants and do not want to use scare tactics or be heavy handed.
  • Wray – I think the potential for abuse outweighs the potential benefit.
  • South – There are complexities with ag or people with multiple properties, but mostly agree.
  • Wray – Does not seem fair that a person could enter an ARB process and have their values increased.
• Cole – Have you had an opportunity to look at revisions in bill for transparency and websites?
  • South – Yes.
  • Cole – What month do taxing jurisdictions set budget hearings and rate?
  • South – Certify at end of July, truth in taxes process begins at that time. Typically, in August and September those things are happening.
  • Cole – In Austin tax rate is generally set in September, some other jurisdictions in October. People don’t actually get their bill until when?
  • South – They get the bill in October. At that point they say their taxes went up and they want to protest. The time for that was in April and May. For this reason, the appraisal notice sent out in April makes no sense since it is an estimate based on last year’s tax rates. I believe all those problems are fixed in HB 2.
• Murphy – There were no privileges for agents in this bill, it just gave them the same privileges as individual owners.
  • South – Yes.
  • Murphy – There are a lot of communities who rely on these agents, want to make sure they have the same privileges as individuals.

 

Larry Gaddes, Tax Assessor-Collectors Association

• Recommends changing some of the deadlines in the proposed bill.
• Change August 15 deadline for rollback date to a date not later than 71^st day before the year’s general election.
• Notices that are published are convoluted. Recommend that one simplified, uniform notice is published, written in language understandable by the general public.

 

Jennifer Rabb, Baker Institute for Public Policy

• There is an imbalance in the protest process and the tax rate process.
• Market value is not discretionary. Tax rate is discretionary.
• Tax rate is the determinative value. The appraisal process is a process to divide up the tax burden between the people in the tax base.
• Protesting the appraisal is an individual act, which is relatively easy for someone to do. Protesting the tax rate is a political movement and is much more difficult than protesting appraised value.
• Real time tax notice is useful, could help in grassroots organizing.
• Martinez Fischer – Do you have any guidance for turning that information into action, where enough protest of the rate turns into a public hearing?
  • Rabb – One part of the real time tax notice is the ability to send feedback in an email.
  • Martinez Fischer – Are you confident that the real time notices would push people to engage with the process?
  • Rabb – Real time notice would not take the place of public hearing requirements.
  • Martinez Fischer – How many people would have to protest to get a discussion at a rate hearing?
  • Rabb – I don’t know the answer to that, it is a complicated issue.

 

Ginger Nelson, Mayor of Amarillo – On

• Amarillo and other cities in Texas support efforts for property tax reforms.
  • Support certain parts of HB 2, do not support other parts.
• One of the most prominent costs in city budgets is public safety.
• Helpful for citizens to use language that is easily understandable.
• Burrows – Some of the thing sin the bill about transparency, citizen engagement is something that the City of Amarillo would support?
  • Nelson – Yes transparency and citizen engagement is important.
  • Burrows – The rollback rate is one of the reasons why some of the big cities do not fully support the bill. Do you have an opinion what it should be, 8% is current and I have proposed 2.5%?
  • Nelson – We are collecting data that will give ranges for what we think it should be.

 

Dee Margo, Mayor of El Paso – On

• Support property tax reform efforts. Efforts must consider challenges faced by different parts of the state.
• Property taxes make up 45% of El Paso budget.
• Public safety expenditures are biggest cost for El Paso. These costs have been growing faster than property taxes.
• Economic situation of El Paso is unique.
• ARBs are often made up of retirees who do not necessarily have the training they need.
• Burrows – Question about El Paso’s situation for property taxes.
  • Margo – Property values, especially on the commercial side are not commiserate with what the market value is. El Paso has one of the lowest tax bill in Texas but has a high tax rate.
• Shaheen – Would the proposed rate where citizens vote if it goes above a certain rate, would that require you to cut?
  • Margo – I do not want to raise unless we absolutely have to.
  • Shaheen – If the rollback does not pass, would you have to cut police officers?
  • Margo – It depends on if revenues are increasing. There is a difference between appraised values and tax rates. Property values in El Paso are not increasing at the same rate as other cities in Texas. There would be a scenario in which I would have to cut.
  • Shaheen – I don’t understand how you could have an increase in revenue, maybe not as big an increase as you want but still an increase, and you would have to cut police officers, I do not understand that.
  • Margo – Last year we had to cut and appropriate to pay for fire, police, streets and parks.
  • Shaheen – I do not understand why you would have to cut from you police officers
  • Margo – If the total revenue does not meet what we have budgeted for police, streets, parks, then we would have to cut. I do not think the 2.5% would be enough to do this without cutting.
  • Shaheen – So if revenue increases 2.5% for existing properties, not including new properties, then you would have to cut from your police officers?
  • Margo – I am telling you my expenses are higher than my revenue.
  • Shaheen – I am not talking about that scenario
  • Margo – If revenue is higher than expenses we will not cut. Last year my revenues went up 4%, you are saying 2.5%, there is a scenario where I would have to cut.
  • Shaheen – But if revenues are increasing that is not a situation where you would have to cut existing police forces.
  • Margo – I am trying to convey that El Paso has not historically had the same kind of growth as other cities.
  • Shaheen – I am trying to clarify that in the worst case scenario that if the rollback was 2.5% then you would not have to cut your police forces.
  • Margo – That is a strong assumption you are making
  • Shaheen – I am not aware of any businesses that see increases in revenues and have to cut services.
• Bohac – Population is going up every year, do you have an oversupply of housing and that is why you do not see residential values increase?
  • Margo – Residential values are not the problem, those are at market rates. The commercial properties receive some benefits from the appraisal process, I am convinced that those commercial properties are not appraised at market values.
• Cole – Are you a collective bargaining city?
  • Margo – Yes we have agreements with police and fire.
  • Cole – How does those agreements relate to the cuts or no cuts discussion
  • Margo – If the 2.5% Shaheen talks about is enough we will not make changes, but if it is not enough we will make changes.
  • Cole – Was not trying to go back to those discussions, what are the effects of those agreements on public safety?
  • Margo – Those are 4 year agreements.
  • Cole – So you would want some kind of carve out for those since you are locked in?
  • Margo – Yes.
• Martinez Fischer – You are competing with another country and another state on your borders correct?
  • Margo – Yes, correct.
  • Martinez Fischer – it is assumed that you would shoulder a good incentive package to attract employers to come to El Paso? Talking about large scale developments.
  • Margo – We have 312s and 313s. We are working on a couple prospects.
  • Martinez Fischer – Employers now want site ready with huge upfront costs, with no guarantee of ROI for the city, how do you address that?
  • Margo – We are actively engaged in economic development. We have a large number of commercial vehicles and people coming over from Mexico legally every day, which we pay for the infrastructure for without a tax base for that, which puts us in a unique situation. We are engaged in creating incentives for investment.
  • Martinez Fischer – Does that 2.5% growth rate make it harder to incentivize investment and development?
  • Margo – The only way it would affect it is if we are attracting businesses based on safety, quality of life, etc.

 

Jason Corley, Lubbock County Commissioner – For

• Fully support HB 2.
• Bill does not affect sales tax or new growth, only relates to revenue created by current tax rate.
• As county commissioner should get permission from voters to raise taxes.

 

Scott Norman, Texas Association of Builders – For

• In support of HB 2.
• Transparency and visibility is good for the process.
• Support property tax relief.
• Martinez Fischer – Are you done studying the rollback rate and are ok with 2.5%?
  • Norman – We are not done studying it, we support the idea of limiting the growth but there is nothing magic about the 2.5% or the 8% number.
  • Martinez Fischer – If local leadership does not want to go to ratification elections and instead increase the fees associated with building a home, do you have comments on that?
  • Norman – We would support any city who wanted to go to the voters to get a higher rate.
  • Martinez Fischer – The hypothetical is that a city council decides they need to increase revenue streams, maybe they can start raising water connection fees or similar fees, if you had a choice between that and increasing property taxes which would you want?
  • Norman – There is a balance to strike between the two. We will undoubtedly see increasing fees.
• Burrows – In best interests for you to work with cities to find out what the best number is if it is not 2.5%.

 

Tray Bates, Texas Association of Realtors – For

• Believes bill is good for taxpayers since it focuses on rate process
• Suggestions for changes
  • Manuals should adhere to general appraisal techniques
  • ARB chair will only send to panel with consent of property owner
  • Expand provision to include binding arbitration and district court hearings
  • Two technical changes include discovery that protects property owner private information
• Rodriguez – wants to know if he heard earlier testimony on cost of housing
  • Bates – Absolutely
• Martinez Fischer – ask if any issue with viability or transparency piece
  • Bates – No
• Martinez Fischer – do you support getting to market value, do you have any objection to sales price disclosure
  • Burrows – not sure sales price disclosure will be in the bill or if it could be in there so not sure if the question is in scope of bill
  • Bates – Do not support sales price disclosure
• Martinez Fischer – regarding that appraisal is about getting to the market value and believes sales price may reduce pages in bill
  • Bates – Believes many jurisdiction may have access
  • Bates – Why they suggest the manual should adhere to general appraisal techniques

 

Judge Glen Whitley, Tarrant County Commissioners Court – Against

• Would like ARB elected, supports transparency
• Would like sales price disclosure
• If you go to the Comptroller site there is a tax deferral form to defer property tax
• Luce and Perryman have said if we don’t look at where Texas is spending money in regard to infrastructure, education, and health care then the Texas miracle may come to an end
• If determined to lower property tax and shift it elsewhere then let state be equal partner because that will cost $12 billion
• Burrows – clarified witness was against rollback rate
• Suggest they look at exemptions
• Burrows – asked about 8% in law
  • Whitley – Fine with that, support the law that is on the books today but believes it should be a local decision
• Does not think state is spending too much money, if keeping miracle alive then need to find more funding

 

Harry LaRosiliere, Mayor of Plano – On

• Realize there are many components, support transparency discussion but not the 2.5%
• Would like to offer the following considerations:
  • Consider credit rating and low debt per capita
• Cole – asked about bonding language
  • LaRosiliere – Triple AAA rating language read such as modest liability burden and proven budgeting
  • LaRosiliere – Fitch said if enacted it could impact certain rating assessments
  • Cole – asked who could speak to lowering rates
  • LaRosiliere – Have used cash funding and language is speaking to the fact they would have to do bonding if this bill was in place
  • Cole- will continue questions off line, interested in that they are self-financing
• Murphy – you understand debt you issue is exempted from the bill, not so sure the underwriters do
  • LaRosiliere – Yes, if they are impaired in ability to capture revenue then they would need to take on debt
• Rodriguez – is there a way to figure out how or if a higher number would change anything?
  • LaRosiliere – Believes there is no solution they will not find if they work together

 

Ron Nirenberg, Mayor of San Antonio – On

• Here to work with them to support meaningful relief
• 5% not feasible
• Cost driver are infrastructure and public safety
• Propose including those cost drivers in formula for rollback
• Propose solution be flexible to the reality that property values do fluctuate
• Shaheen – ask about property values
  • Nirenberg – They had several years of negative revenues but if rollback rate was not exceeded they could access it in the following years – capacity could be banked
• Shaheen – wanted to clarify it would not impact growth, growth does not go into effective tax rate equation only existing housing on the rolls
  • Nirenberg – Bulk of rise of public safety is coming from existing salary and benefits
• TMF – think that they need to understand how compression impacts today and what they are doing tomorrow
  • Nirenberg – Bulk of expenses are public safety, but cost drivers are growth and public safety
• Cole – are there any other cost drivers? Medical cost, any others outside of public safety
  • Nirenberg – Within public safety, the cost driver is medical cost
  • Nirenberg – Uniform benefits are under a collective bargaining agreement
• Regarding question on what percentage would he choose
  • Nirenberg – Not a one size fits all, would like to see a formula behind the number
• Property tax revenues only account for 20% of revenue but other two revenue streams are not growing
• From rating standpoint, they need to maintain infrastructure
• They want transparency
• Bohac – school finance bill will deliver relief and this bill will deliver reform
• Martinez Fischer – clarified asking voters for bond vs basics
  • Nirenberg – Do bond programs to ask voters what they want, and most are about sidewalks, infrastructure
• Cole – has not focused on what it means if they go to the election, and where is that money coming from

 

George Haehn, Mayor of Buda 

• Supports some of bill and against other parts
• Out of control appraisal leads to problems
• Tax revenue lags far behind growth
• Burrows – asked him if he is ok with current rollback rate
  • Haehn – 8% rollback rate is fine with him
  • Haehn – Responsible to prudently manage money given to him from the citizens
  • Burrows- sounds like you don’t like state having a rollback
  • Haehn – Against a 2.5% rollback and at 8% have not seen anyone exceed it
• Burrows – so you are not against a rollback rate as long as very few ever reach it
• Burrows – how much of budget is property taxes?
  • Haehn – 47%

 

James LeBas, TxOGA – For

• Oil and gas plays an outsized role in the State of Texas, realize they are needed dollars but there are limits on how much can be payed
• Bill has positive features, transparency
• Support not predicated on 2.5%
• Martinez Fischer – thinking about time when infrastructure not available when there is an oil and gas boom, example of Eagle Ford Shale road

 

Chad Seay, Lubbock County Commissioner Prec. 4 testifying for self – For

• Says bill serves as warning that the Texas taxpayers are watching
• Cole – concerns on services that are provided that may be cut back?
  • Seay – Believes voters will give them support if they ask for it in an election

 

Shona Huffman, Mayor Pro-Tempore City of Frisco – On

• Does realize that new growth is not in the bill but would like to address some of the questions brought up on new growth
• New growth this year is taking care of people from last year, so concern is not about cutting but future planning
• Partner with school district to pay a cost of the school resource officers
• Solutions offered – look for incentives such as credit on rollback rate with homestead exemptions they offer, maybe credits on rollback rate if they are trying to increase public safety

 

Steve Adler, Mayor of Austin – On

• Part of group of 24 mayors that turned in a letter
• 5% not workable because one size does not fit all
• Appreciates focus in House on school finance and their desire to work with mayors
• Hope for bill that is data driven
• Want to come up with a formula that would work with various cost drivers in cities
• Noted cost to provide exemptions goes against rollback rate, do disincentive to provide exemptions with bill
• They do have collective bargaining agreements, long term contracts
• Burrows – would assume in Lubbock that citizens would prefer lower rollback, not able to say if its true in every city and could see a scenario where voters may want a higher rollback rate
  • Adler – It could be that voters in Austin would approve a higher rollback rate and thinks that is true around the state
• Rodriguez – appreciates mayor and the groups commitment to work with the committee, a very diverse group which represents the diversity of the cities
  • Adler – Speaking of economic development tools – notes need for flexibility in system and would like to see that worked in a formula
• Rodriguez – sales taxes are more in flux
  • Adler – One of most unpredictable source of revenue is sales tax
• Half of their revenue is coming in at a 2% increase, sales tax is coming in at a 3% increase and just around 47% of budget is property tax
• Shaheen – not sure why there is concern on voter support
  • Adler – Not making assumptions that voters would not support them going up on tax rate
  • Adler – But issue on going to voters ever year, will not go into contract if need to get approve annually
  • Adler – Have an annual election is a factor that will be considered by credit rating agencies
  • Adler – The thought of going to voters every year is not appropriate to go to voters with when you have inherent cost drivers
  • Adler – Concern of so many elections and losing voters’ attention on bigger issues so would try not to go to election every year
• Shaheen – asked about if taxes were on unified election date
  • Adler – Hard enough to get people to focus on ballot so as practical matter just do not think cities will exceed the rate
  • Adler – Just don’t think any taxing entity is going to want to go to voters every year on cost drivers because you are putting at risk bigger projects
• Shaheen – asked about growth, can’t get arm around people cutting projects with revenue growth
  • Adler – Cost drivers are going up 3.8% so will be required to close some program
• Shaheen – other factors will be considered in bond rating correct?
  • Adler – Absolutely
• Sanford – sounds like budget necessitates tax increase, long term contracts require year over year commitment of tax dollars
• Cole – asked about election/voter, not something to take for granted
  • Adler – Risk of voters going in any certain direction is real
  • Adler – There is risk in any election
• Rodriguez – tax rates are going down, not raising taxes to meet contracts and let’s not forget AISD is about to send $1 billion to the state

 

Ellen Troxclair, TPPF – For

• Formerly on city council
• People all over Texas who have high property tax keeping them out of housing
• Provides details on things council could reduce to keep on budget. I.e., cutting back on wasteful spending.

 

Chris Hill, Collin County Judge – For

• Advocating for a vote on property tax rate increases.
• HB 2 does not restrict the ability to set own budget, does not require tax cuts, and does not require a raise in taxes.
• 90% of constituents in Collin county support HB2.

 

George Fuller, Mayor of McKinney – On

• Representing the coalition of 24 mayors.
• Supports many aspects of the bill.
• Asks committee to take into consideration cost drivers and percentage of revenue of individual areas when coming up with the rollback rate.
• In favor of the voters deciding.
• Sanford – What is the comptrollers rating for the city of McKinney?
  • Fuller – We have a 5-star transparency rating. Triple A bond rating.
• Sanford – We have one of the fastest growing cities in the country, which brings new challenges. Does HB2 have an impact on that?
  • Fuller – City of McKinney has invested $6.1 million in different projects over the last four years. Invested $3.6 million in maintenance and subsidy at the airport. HB2 won’t make the sky fall in McKinney, but it might in others.
• Sanford – You identified indexes using metrics, is there anything further that you would like to share?
  • Fuller – The construction and inflation cost indexes is high in McKinney. They are in a very competitive market surrounded by other fast-growing cities.
  • Fuller – Emphasized that there are unique needs for every city and county across the state.

 

David Stout, El Paso County Commissioner – Against

• El Paso county has not raised taxes over the last 4 years but cannot hold the line on taxes forever.
• County is growing but property values and tax revenues are not. El Paso will need to raise taxes to fund the costs of growth.
• One-size fits all revenue cap does not consider the needs of all counties.
• Wray – You mentioned that El Paso has not raised taxes for several years, did you adopt the effective tax rate?
  • Stout – This past year, the effective rate was lower than the current rate, so we went down to the effective rate. Years past, however, the current rate was lower than the effective rate, so we adopted the current rate.

 

Debbie Cartwright, Texas Taxpayers and Research Association

• Supports the special appraisal review board panels. Provision in the bill allows the administrative district judge to appoint persons to hear appraisal protests concerning properties over $50 million in value, and for commercial, industrial, manufacturing, and multi-family properties.

 

Richard Levine, Center for Public Policy Priorities – Against

• Correct way to look at inflation is not CPI. Instead, they should look at the State and Local Implicit Price Deflator for Government Consumption Expenditures and Gross Investment, which has been about 2% for the last 10 years.
• Price deflator before recession was 4%. Advocating for a number higher than 4%.
• Rodriguez – On the sales disclosure issue, what do you think that would do for the appraisal process?
  • Levine – It would clearly make appraisals more accurate. It might particularly help in commercial properties.
• Rodriguez – I suppose it would save money as well?
  • Levine – Yes.

 

James Harris, Citizens for Appraisal Reform – For

• Citizens for Appraisal board is a non-profit organization that aims at increasing fairness in arbitration and appraisal review.
• HB2 sets minimum requirements in ARB training and continuing education. It also helps increase arbitration training.
• Bill helps provide taxpayers with fair notice of information that the appraisal district is going to use against them in a hearing.
• Bill prevents taxpayers from the ARB raising the value above the notified amount.

 

Karl Mooney, Mayor of College Station – On

• City of College station is in support of the visibility that is available through this bill.
• Concerned about the dates of the general election.
• Recently moved to having four-year terms, which means city will only have elections on even numbered years. The bill has the potential of requiring elections every year.
• Believes one of the challenges everyone faces is that additional revenue is needed.
• Recommendation is to look at a 6% change for the tax rate cut-off. This would allow new revenues for cities.
• Would also like committee to consider raising the exemption of the total sales tax and property tax earned by a city from $15 million to $100 million.

 

Sarah Eckhardt, Travis County Judge – Against

• Counties need more revenue to provide basic services to their constituents.
• If the county has a rollback rate, they will hold it in reserve to protect against economic downturns, rather than putting the money back into the taxpayer’s pocket.
• Would like to keep 8% cap because counties do not have meaningful revenues other than property taxes.
• Rodriguez – What would be the biggest part of your budget right now?
  • Eckhardt – Civil court, criminal court, law enforcement, and jail represent more than half. Elections, tax collection, emergency response, and roads brings it up to 80%.
• Rodriguez – Are a lot of the other counties with a large city in it in a similar situation?
  • Eckhardt – They are not. Travis county, 50% of the territory is outside of a city limit, and 30% of the population is outside of a city limit. Law enforcement investments is growing with it. Dallas county, however, most of their territory is within the city of Dallas. Harris County is different, there are more people outside the city of Houston than there are inside.
• Rodriguez – What is your county rate right now?
  • Eckhardt – The county rate is 36 cents per 100-dollar valuation. It is 20% lower than it was in 2015. In 2007, it was 51 cents per 100-dollar valuation. As the county sees revenues growing, they reduce the tax rate.
• Rodriguez – You provide an exemption?
  • Eckhardt – We have a 20% homestead exemption.
• Rodriguez – If this bill passes, at 2%, would you still be able to provide that?
  • Eckhardt – It would be political suicide to pull back from the 20% homestead exemption. However, we would not see future exemptions in the over 65 and disabled exemption.
  • Eckhardt – If you really want to give property tax relief to both city and county property tax payers, take the homestead exemption to a $100k flat rate.
• Rodriguez – The flexibility that you have, not hitting 8%, that is what allows you to hit the 30 cents, correct?
  • Eckhardt – It allows us to keep money in people’s pockets and circulating into the economy; and, also gives us a tremendous borrowing power at a very low rate.
  • Eckhardt – Counties need that 8% flexibility because it is the only flexibility they have.
  • Eckhardt – At a 2.5%, the amount of property tax relief that you would give the average Travis county home owner is $33 dollars a year. Meanwhile, you blow a $19 million hole in the county budget.
• Bohac – The smallest unit of government is family, they get their tax bill every year and see that their mortgage payment is increasing because of property taxes. Family revenue does not grow as fast as property tax rates, and people are having to reprioritize their household incomes.
  • Eckhardt – In 2015, the average property taxes on the average taxable homestead in Travis County was $1,095.24. In 2019, that average tax bill was $1,157.86. That is a 5% increase over four years, I think that is a pretty good deal for the government services we provide.
• Bohac – So would you just leave the rate at 8%?
  • Eckhardt – Yes. If you lower our cap, we will have to go to rollback so that we have reserves necessary to cover economic downturns.
• Bohac – I think the flaw in your argument is that the family and the individual can’t do that, i.e., save up for a rainy day.
  • Eckhardt – I save up for rainy days, don’t you have a savings account?
• Bohac – I’m talking about the average Texas family.
  • Eckhardt – You’re right, you don’t want to not spend your money and leave it in your savings account because you’re afraid you won’t have a salary next year. If I don’t have the flexibility to meet the increasing demand of Travis county residents, I’m going to sock more of their tax payer dollars into a reserve to inoculate against a shock. In the same way, a family who feels they have uncertainty in employment, they will save more in their savings account in case there is a shock in their employment.
• Cole – I was under the assumption that there would be a way to also look at your expenses that should not be subject to a cap, like unfunded mandates.
  • Eckhardt – That is difficult to do. Cities can do anything that the state does not prohibit them. Counties can only do what the state requires them to do. Everything counties do is a mandate.
• Burrows – If we took away the entire budget, would we need counties?
  • Eckhardt – If you want to get rid of counties and take on all these responsibilities at the state, I think that would be great.
• Burrows – Is that the position?
  • Eckhardt – Sure, y’all pick up civil and criminal courts and all of the roads including county roads.
  • Eckhardt – What you’re talking about is getting rid of the layer of government that is county.
• Burrows – I did not say that, I just asked if there would be a purpose for a county if we took away the entire budget.
  • Eckhardt – I misunderstood, I meant that if you were to do a carve out accepting mandates from the lowered cap, you would be taking out the entire budget.
• Cole – Will visit with your staff later.

 

Darrell Hale, Collin County Commissioner – For

• Over 90% support of HB2 in precinct.
• Flaws in how the text is written up. Ex: term limits portion, are you limiting them to three total, is it just for cities inside Collin county, etc.
• Would like to see the basis for the value put into the portal, ahead of an informal appraisal hearing.

 

Richard Diotte, self – For

• Supports 2.5% because it allows for growth.
• Prefers an opt-in for all the counties in Texas.
• Burrows – Before you go on, do you remember that I said the focus of this bill was the taxpayer?
  • Diotte – Yes, it is outstanding that people are being pushed of their homes because of property tax rates.
• Burrows – I invited a lot of testimony in the beginning, because as simple as this bill is, there are a lot of different parts to it. We had resources witnesses go first in order to educate the new members of the ways and means committee.

 

Ived Diotte, self – For

• Asking to stick to the 2.5%.
• Asking for more control in spending of taxpayer dollars.

 

John Dean, City of Ovilla – On

• For the increased transparency and simplifying the appraisal review process.
• In favor of the mandatory elections.
• Wants a decision that affects all Texans, not just some.

 

Sylvia Coleson, self – For

• Taxes are spiraling out of control and friends are having to move out of their homes because of it.
• Supports the 2.5% trigger that lets the residents decide.
• Supports uniform November election date.

 

Michael Openshaw, self – For

• Property tax increases lead to decisions that impact everyone.
• This bill gives a voice to citizens when it comes to property tax increases.
• Without a cap, any relief that you give us will be grown away from us.
• Burrows – Do you think that a better way to talk about the trigger rollback rates is to just say it is protection?
  • Openshaw – I like what they came up with in the senate, a voter approved rate, not a rollback rate.
  • Openshaw – The other thing I liked about the senate was the opt-in option for 15 million and under and required election to have it considered.
• Murphy – Thanks the constituent for his letter. Acknowledges the good that the constituent has done for children in Uganda.

 

Holly Gray-Moore, Mayor Pro Tem of Roanoke – Against

• In favor of the transparency and reform.
• Has an issue with the 2.5% rate.
• City of Roanoke does not have property tax issues, they have school tax issues.

 

Kimberly Savage, self – For

• In favor of the 2.5% rollback.
• Do not need the $15 million exemption.
• Burrows – When elected officials tell you that you should just save more, what do you think about that?
  • Savage – It makes me angry. I got hit by a texting driver in 2011 and all of my savings are gone now.
  • Savage – My husband is 63, set to retire, but cannot retire anymore.
• Burrows – I assume that your health care costs and other costs are going up too?
  • Savage – Yes. As a conservative, we joined the pipe fitter’s union because we needed the extra help.

 

Brynn Myers, City Manager for the City of Temple – Against

• Opposition comes from the 2.5% rollback rate threshold.
• Appreciates language that provides context to voters when they are asked to approve taxes that will exceed the rollback rate.
• For bond elections, suggests considering the opportunity to have voters approve O&M associated with a bond election.

 

Suzanne Bellsnyder, City of Spearman – On

• Hopes the board will consider dynamics of a small city.
• For a small community, taxpayers have access to the budget process.
• Burrows – How big is spearman?
  • Bellsynder – 3,000
• Burrows – How much is the fire truck y’all took five years to save up for?
  • Bellsynder – $367,000 and it is just barebones.
• Biggest concern with the 2.5% is that it takes away flexibility to deal with expenses.

 

Joe Palmer, self – For

• HB 2 came from hearings conducted by Bettencourt around the state, there was overwhelming concern and problems around property taxes.
• Vast majority of delegates at Republican Party Convention were in favor of abolishing property tax system because it is neither moral nor functional.
• The needs of a taxing entity does not increase or decrease based on the value of properties within that jurisdiction.
• Burrows – Does electing and re-electing people indicates support of the system?
  • Palmer – We do not elect members of the appraisal boards. Some of those people should be elected.
• Small and large taxing districts should receive equal districts.
• Solution is to tax purchase, not ownership, of property.

 

Robert Riza, Texas Association of Community Colleges – On

• Community colleges have 3 revenue streams: state appropriations, local property taxes, and tuition and fees.
• Do not like to balance budgets on the backs of students, but tuition is the only one that is controllable by community colleges.
• Burrows – Is that true for all community colleges?
  • Riza – Yes it is true for all of them. Some have greater property valuations than others, but all have the same three strands.
• Exempt community colleges from the 2.5% part of the bill.
• Burrows – If you don’t have that exemption you would have to raise tuition?
  • Riza – Yes, for Clarendon College we have done projections and we would have to raise tuition.
• Rodriguez – Do you know what the House budget now has for community colleges?
  • Riza – Defer to director of Texas Assoc of Community Colleges.
  • Rodriguez – Would like to know what it has been like over the past 3 or 4 budgets.
• Martinez Fischer – Are there any community colleges that are not members of your association?
  • Riza – All CCs in Texas are members.
  • Martinez Fischer – I have seen CCs across the state passing promise programs so that students can attend for cheap or free, which requires a lot of planning. Would this bill curtail the way you plan for those kinds of things?
  • Riza – We have worked with foundations to pick up costs for some free and reduced lunch students. If we are limited you will see fewer career and technical programs.
  • Martinez Fischer – Want to get data as to the benefit and savings to the state from strong CC programs, especially workforce readiness. Maybe figure out some sort of hold harmless so we do not disincentivize workforce readiness.
  • Riza – Last to springs and falls we have seen record enrollment, which has strained budgets.
  • Martinez Fischer – CCs in San Antonio started adopting manufacturing programs when Toyota came, and we wrote legislation to incentivize Boeing to come to San Antonio. CCs helped workforce readiness for Boeing, which pays good wages and further education.
• Rodriguez – Several early college high schools in my district, would this cap impact those programs?
  • Riza – Any type of limit on revenues you would see an impact because those programs are cost intensive.
• Springer – Not all CC property tax bases are equal, different counties will pay different rates of property taxes. It would be hard for some CCs to do anything if we limited them.

 

Bill Jackson, Budget Director for Harris County – Against

• Against the 2.5% rollback.
• 43% of budget goes to healthcare, 35% goes to justice.
• Harris County has exemption for seniors and he disabled.
• County put up $176m for Harvey, still owed $80m.
• Healthcare CPIs go up at around 4.5%, this is a problem when 43% of budget goes to healthcare.
• Burrows – Health insurance for homeowners is also above CPI?
  • Jackson – Not sure, cannot comment on that.
• Martinez Fischer – Have you spoken with Bettencourt about SB 2?
  • Jackson – I have not spoken with him personally.
• Murphy – You support the transparency and appraisal review, concern is with 2.5%. You calculated inflation around 4.5%, was that a comparative number for you at that time?
  • Jackson – Cannot comment on that number. Over the last 10 years property taxes have increased around 4.9%. Inflation rate for healthcare is the biggest component, it is hard to maintain and with no sales tax money it is difficult to maintain.
• Shaheen – You have a hospital district with its own taxing authority, correct?
  • Jackson – No, the board is appointed by the Commissioners, and the tax rate is set by the Commissioners Court.

 

Thomas Fabry, Frisco Tea Party – For

• Frisco needs this bill to pass urgently, has seen massive growth in property taxes.
• Officials try to maximize revenues, abrogate responsibility to citizens trying to figure out their own budgets.
• 5% will provide real tax relief.

 

Maureen Milligan, Teaching Hospitals of Texas – Against

• Concern with 2.5% trigger
  • Medical inflation rates tend to run higher than CPI rates.
  • 5% trigger is too low for Texas health care needs, would be compounded by fast growth especially in West Texas
• Burrows – Medical care is passed off through insurance rates, people are seeing increases in taxes to pay for indigent or uninsured care and are seeing their insurance rates increase.
  • Milligan – Texas hospitals provided $9b in uncompensated care last year. It is like a safety net system so people who can’t afford insurance can get care.
  • Burrows – Those who are mandated to have insurance will pay 20k-22k per year for health insurance.
  • Milligan – Medical inflation is an issue, our hospitals are directly paying for their care and will not pass of expenses to insurers.
• Medicaid underfunds rates it pays for hospitals in Texas. 50-70% of costs are paid by Medicaid. Gap is covered by supplemental programs, which is paid largely by property taxes.
• Martinez Fischer – Out of county expenses for UHS in Bexar County?
  • Milligan – $30 in out of county expenses per year.
  • Martinez Fischer – How many counties is it?
  • Milligan – People from all around the state come to Bexar for UHS.
  • Martinez Fischer – As a matter of policy it seems to be working, but there is a cost driver there that wouldn’t be there is UHS served only Bexar, which is the only the county it taxes
  • Milligan – That could be something to look at.
• Burrows – Amount of the economy healthcare represents is unsustainable.
• Underfunded services are problematic.
• Burrows – Have heard form several different medical groups and hospitals, growth of health care spending needs to come under control.
  • Milligan – Many hospitals are looking to be more creative in keeping costs down.

 

Robin Lennon, Kingwood Tea Party – For

• Process was very unwelcoming for many people who came to testify.
• Pursuit of happiness was originally property, Texans feel like they have paid their taxes and would like to have the 2.5% trigger to have a say if their property taxes are increased.

 

Roger Faulk, Travis County Taxpayers Union – For

• Judge Eckhart from Travis County has “gone behind the voters’ backs” and issued certificates of obligation to build a new courthouse after the voters voted down that project.
• Mayor Adler lowered tax rate by 1% but appraisal value increased by 11%, which blew through rollback rate. It is too difficult to challenge that under the current law.
• Opponents have pushed the “cap” language, when in reality it is a trigger rate.

 

Jimmy Stathatos, Flower Mound Town Manager – Against

• Concern with 2.5% threshold, rest of bill is great.
• Would be better if the threshold is closer to 8%.
• Burrows – Do you agree it should be lower than 8%?
  • Stathatos – Yes maybe at 7.9%.
• New growth is exempted which is good, but new growth does not cover everything.
• Over 90% of elections over 2.5% would pass, but the logistics would be difficult.

 

Samuel Sheets, Americans for Prosperity – For

• HB 2 will keep property taxes under control, give people more say in process.
• Making elections automatic is a positive development.

 

Jim Allisson, County Judges and Commissioners Association – Against

• Support transparency, simplified notice, reforms of the appraisal process
• Counties can only pay for unfunded mandates through property taxes, it is the main source of revenue for counties.
• Wray – What is the appraisal freeze for homes with sale price disclosure?
  • Allisson – Almost every state other than Texas has sales price disclosure. When buying or selling property you would disclose the price and would be locked into that value until the home was sold.
  • Wray – That is something you would do?
  • Allisson – Yes that would be real relief for homeowners.
• Rodriguez – What if we just did the disclosure and not the freeze, would that help?
  • Allisson – Yes it would help appraisers get closer to the real market price, especially for commercial and industrial properties.
  • Rodriguez – How would the freeze be different from what California did?
  • Allisson – It would have to be modified, maybe through a homestead exemption. We believe homeowners have carried too much of the burden and need some help.
  • Rodriguez – What would the inflation protection look like?
  • Allisson – We would allow the exemption to float with inflation rather than coming back to the legislature every time.

 

John Barton, Justice of the Peace in Midland County, Justice of the Peace and Constables Association – Against

• Proposed bill could hinder budget flexibility to hire and maintain staff.
• Midland in unique situation due to the oil and gas industry, difficult to maintain competitive salaries.

 

Roberto Zarate, Community College Association of Texas Trustees

• Community colleges have worked hard to keep rates low
• Include Community Colleges in definition of small districts
• Murphy – What is the average tax rate for community colleges?
  • Serrate – .09% in Austin, .14% in San Antonio

 

Robert Primo, County Commissioner Greg County – For

• Residential valuations have increased 15 years in a row in Greg County
  • Growth in Greg county during that time has been low, inflation has been low.
  • Combination of growing values and low growth leads to suspicions that valuations are being manipulated
• Residential homeowners have had to bear disproportionate tax burden.

 

Joe Shuster, Pecos County Judge – Against

• Pecos has taken $1.5b decrease in appraised values, most of taxes are collected through oil and gas tax.
• $5.6m in unfunded mandate.

 

Mark Ramsey, SREC Legislative Priorities Committee – For

• SREC platform calls for 2.5% trigger.
• Chapter 313 is prima facie evidence that the property tax system is broken. Chapter 313 should be eliminated.

 

Christy Rome, Texas School Coalition – On

• Want to see reduction in recapture.
• Local elected officials need flexibility to meet local calendars, November election date is problematic for many districts.

 

Russ Duerstein, Concerned Veterans for America – For

• Veterans are in unique situation.
• Property tax is a freedom issue

 

David Carter, self – For

• Emphasize it is a trigger and not a cap
• Counties are not the problem, they do what they are told by the state. are often profligate, the cities are the problem.
• Root cause of inflation is the Federal Reserve “counterfeiting our money”.

 

Al Zito, self – For

• Cities, counties, and ISDs manipulate voters in bond elections.
• Use different indices along with CPI for determining hard cap.
• Appraisals are never true appraisals, they are done on a superficial basis. Freezing sale value with a reasonable increase of 2.5% would be great relief for property owners.

 

Amy Headkey, self – On

• Local spending is excessive in many cases.

 

Linette Lucas, self – For

• Any tax relief is good.

 

John Carlton, Texas State Assoc of Fire and Emergency Districts – On

• Need to balance the need for funding essential services and protecting taxpayers

 

Terry Holcomb, Republican Party of Texas – For

• Bill meets one of the Republican Party planks
• 5% rollback trigger is good, but it must be coupled with property tax relief.
• If there is not property tax relief, the taxpayers will “revolt”. Homeowners are being taxed out of their homes.
• Elected officials who oppose this bill do not care about taxpayers.

 

David Palmer, City of Irving – On

• Most of Irving’s tax revenues come from property tax.
• Expenses are growing faster than 2.5%, so cuts are necessary even though there are increases in revenues.
• Support elections on these things but need carve outs for infrastructure and public safety.
• Cities need relief on matching funds.
• Sanford – Were taxpayer funds used for Texas Music Factory, Lottery Plaza, or the new hotel?
  • Palmer – Yes

 

Susan Peabody, self – For

• Appraised value of home has increased dramatically since purchase.
• Taxpayers need protection from being taxed out of houses.
• Renters also pay property taxes, rent is raised every time the property taxes are increased.

 

Terry Harper, SREC and RPT – For

• Read message from RPT chairman James Dickey
  • Cap on property taxes is overwhelmingly supported by Texas Republicans.
  • Republican Party platform calls for trigger rate of 2.5%.

 

Jay Elliot, Falls County Judge – Against

• Expenses are increasing at a rate higher than 2.5%.
• Process is already transparent.
• Burrows – Much of the earlier testimony was about getting more people involved in rate setting hearings since most of them now go to appraisal districts, is that what happens in Falls County?
  • Elliot – I put it on my website and in every newspaper. Mailing something out to every person costs about $5,000.
  • Burrows – So are you against every part of the bill including the visibility piece?
  • Elliot – No just the tax piece.
• Elected appraisal districts is a bad idea.
• Unfunded mandates on counties is either a “joke or lazy state budgeting”.
• Rodriguez – Are you under the $15m limit?
  • Elliot – Yes we are around $6.2m.

 

Charles Reed, Dallas County Commissioners Court – Against

• Against 2.5% rollback rate.
• Counties with low or no I&S rate are subject to 2.5% rate on entire tax levy.
  • Recommends putting language saying the greater of 20% of tax levy or I&S rate. 20% number could be whatever the legislature decides.
• Martinez Fischer – Interested in this concept for jurisdictions without debt, is there a way to incentivize jurisdictions with pay-as-you-go, whether it is a percentage rate or an average debt and allow you to sweep that into M&O?
  • Reed – That is why I threw out the 20% number. For counties with a bond program not on path to pay-as-you-go the average is around 20%, for all counties it is closer to 10%. Easiest way to do this is to add in language right behind I&S back out that says the greater of 20% or your I&S rate. That would solve a lot of problems with the bill for pay-as-you-go jurisdictions,
  • Martinez Fischer – Agree, you should not be penalized for not carrying debt.
• Rodriguez – Is it possible this could incentivize jurisdictions to take on debt?
  • Reed – With interest rates where they are now it would not, but if interest rates rise it could incentivize that, or if there is a period of higher inflation when cash on hand would not be as valuable it could incentivize certain jurisdictions to take on debt.
• Murphy – If we were to carve out a percentage, we would have to balance that against a future ability to issue debt. Would you want to give up your right to issue debt in the future?
  • Reed – That is why I am giving the option to use the greater of the 20% or the I&S rate.
  • Murphy – You might see some high growth counties with that 20% or higher but I think the modal number is much lower, you will probably want to look at the aggregate.

 

Crystal Main, Northeast Tarrant County Tea Party – For

• 8% rate is too high, many jurisdictions go right up to that rate and it results in large increases in property taxes due to compounding.
• 5% needs to apply to all Texans, not just urban areas.
• Voters should have the right to say yes or no to property tax increases.
• Irving is spending money on things they should not be spending it on and then says they do not have the money for other things.

 

Richard Bonnert, self – For

• 5% trigger is a good start.
• If taxes need to be raised, voters will allow it if there is a good reason.

 

Susan Spataro, self – For

• Good to keep school issue with tax reform.
• Trigger should be different for cities and counties. It should be higher than 2.5% for counties if they are going to maintain the criminal justice system. Cities have sources of revenue that counties do not have access to.
• Rules on ballot language should be in the bill.

 

Michelle Howarth, City Council for City of Sachse – On

• City of Sachse has around $16m in revenue, just above $15m. Small amounts can make a big difference.
• Size of city matters for the rate.

 

Adam Haynes, Conference of Urban Counties – Against

• Support the transparency parts of the bill.
• 5% is too low.
• Dovetail items in this bill with Huberty’s education bill, you will get property tax reform.

 

Jorge Martinez, LIBRE Initiative – For

• Support 2.5% trigger, will provide needed property relief.

 

Carlos Lopez, Justices of the Peace and Constables Association – Against

• If there are going to be cuts those would start at JP and constables’ offices
• In favor of keeping the system the way it is.

 

Bill Eastland, Texans for Freedom – For

• This is an important step in process for reforming property taxes.
• Goal is to get to point where there is no property tax. Will not happen overnight but this is a step in the right direction.
• If local and state governments can strip down we can get to a point with no property tax.
• Property tax is very regressive, must be paid whether there is any income or not.

 

Anthony Rickadelli, self – For

• Member of Plano City Council, not representing the city of Plano.
• HB 2 provides important mechanism for taxpayer making their voices heard.
• Hotel and motel taxes should be able to be used for public safety and road infrastructure.
• Murphy – Can you verify the statement by an earlier witness that Plano generates $3.9m for every penny in taxes?
  • Rickadelli – Yes, that is ballpark correct.
  • Murphy – Hotels and motels pay property taxes already, correct?
  • Rickadelli – Yes, I think it would make sense to be able to repurpose some of the existing revenues for the purpose of property tax relief.

 

Robert Johnson, Anderson County Judge, County Judges and Commissioners Association – Against

• Against the 2.5% trigger
• Expenses have been increasing faster than 2.5%.

 

Rick Smith, self – For

• Member of Plano City Council, not representing City of Plano.
• Hotel and motel taxes could be reallocated, this could help in property tax relief.
• Look at applying some form of inflation index, municipal cost index would be better than CPI. Municipal cost index is around 2.64% per year, so the 2.5% is grounded in some indices.
• Taxpayers have been ignored for too long, this needs to get done.

 

Stacy Suits, Travis County Constable – Against

• Opposed to 2.5%, in favor of the rest of the bill.
• School finance needs to be dealt with along with property tax.
• Do not want to prevent cities and counties from going to the full 20% homestead exemption.

 

Nguyen, self – For

• HB 2 will provide property tax relief.
• Put more money into education and reduce recapture.
• School M&O rates will be compressed, state can fill in the gap.
• This is in effect a cap for ISDs, since if an election is triggered it will go into recapture.
• Make sure ISD rate stays at 2.5% even if it is raised for other taxing entities.

 

Chris Coffman, City of Granbury, Texas City Managers’ Association – Against

• Support transparency and appraisal parts of the bill.
• Against 2.5% rollback rate.
• $2.9m for M&O in Granbury, school sends in $9m in recapture. This is a broken system.
• Carve outs for small cities to encourage economic development.

 

Margo Goodwin, Mayor of Highland Park – On

• Small towns like Highland Park need flexibility in their budget.
• All DPS personnel are triple trained as police, fire, EMT.
• Highland Park revenue is almost entirely property tax.
• Have no bond payments or debt, use pay as you go. Jurisdictions should not be penalized for not having any interest payments.
• Pay-as-you-go jurisdictions should be exempt from the 2.5% cap.

 

Robert Kinney, self – For

• Bought a house for $15,000, is now worth $252,000 on the tax rolls.
• Property taxes continue to increase after the house is paid for, committee should look at that.

 

Karen Depew, self – For

• Owns rental properties, property taxes have been increasing, mostly from school districts.
• Appraisal districts are also a problem.

 

Craig Licardi, self – For

• There is a difference between cap and trigger, the 2.5% trigger is a good thing.
• Would like to see abolition of property tax, but this is a good incremental step.
• Local taxpayer should have control over how much they will pay.

 

HB 2 left pending.