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The House Committee on Ways & Means met on September 8th to hear invited testimony on the following interim charges:

  • Oversee associated rulemaking and agency actions for:
    • HB 2404, relating to creating and maintaining a database of information regarding certain local economic development agreements.
    • SB 2 (86R – the Texas Property Tax Reform and Transparency Act of 2019) and related property tax reform legislation passed by the 87th Legislature, including HB 1869, HB 2429, HB 2723, and SB 1438.
    • Monitor legislation relating to reform of the property tax appraisal system, including HB 988, HB 2941, HB 3971, SB 63, SB 916, and SB 1919.
  • Study Texas’ property tax appraisal system and make appropriate recommendations to improve the appraisal system.
  • Conduct a comprehensive review of the impact of not renewing Chapter 313, Tax Code.

 

Opening Comments 

  • Chair Meyer – Priority of Speaker Phelan to look at appraisal system and potential improvements

 

This report is intended to give you an overview and highlight of the various topics taken up. It is not a verbatim transcript of the discussions 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. 

 

HB 2404, relating to creating and maintaining a database of information regarding certain local economic development agreements. 

Korry Castillo, Comptroller of Public Accounts 

  • Provides overview of database contents, originally set to be effective Sept. 1
  • Have noncompliance agreements for local govs not submitting info & civil penalty available of up to $1k
  • Database went live August 2022, have had no compliance issues to date, but may not be aware of all agreements
  • Highlights screenshots of the database and info available
  • Rep. Murphy – Are you tracking how much its accessed?
    • Can pull this data
  • Rep. Martinez Fischer – Have we asked local officials to report these agreements?
    • Yes, have sent a couple different communications on the obligation
  • Martinez Fischer – So reporting is on entity receiving the benefit as well?
    • Obligation to report is on the local gov
  • Rep. Thierry – Regarding employment, pretty easy to verify that companies have hired the required number?
    • This database is focused on agreement compliance, do not dig down into employment; would be on the local gov to ensure compliance with terms
  • Chair Meyer – Any issues with the actual site itself?
    • So far so good, have gotten compliments on ease of access
  • Chair Meyer – What are the penalties for noncompliance?
    • First work to get the local gov in compliance, if they do fail we refer to OAG for the civil penalty

 

Bill Longley, Texas Municipal League 

  • TML and cities were supportive of HB 2404, like the fact that it is a one-stop clearinghouse for 380 agreements; agreements have always been public info under the PIA, but one website helps to search for info
  • Cities have 14 days to submit info to Comptroller after entering into agreement, if city does not then Comptroller sends notice & cities have 30 days; no automatic penalty for oversight or technical errors
  • Working with Comptroller’s Office to notify members as well, have not heard complaints about how the database works or reporting
  • HB 2404 had to report existing agreements by Jan. 1, 2022, now moving forward need to submit as they enter agreements
  • Rep. Rodriguez – Any complaints that agreement info wasn’t submitted?
    • Castillo, Comptroller’s Office – Haven’t received any
  • Chair Meyer – What steps has TML taken to educate member cities?
    • Longley, TML – We have, proactive and reactive; legal department fields compliance questions & send out newsletters every week that carried info about HB 2404

 

Adam Haynes, Texas Association of Counties 

  • Were worried about compliance last session, but Comptroller’s Office took the worry off the table, process is easy
  • Will be a good tool for counties by providing visibility into other county agreements, will be able to see job numbers, etc. & encourage cooperation
  • Chair Meyer – Have you received any complaints?
    • No, sent out articles & info; haven’t heard of anyone out of compliance

 

SB 2 (86R – the Texas Property Tax Reform and Transparency Act of 2019) and related property tax reform legislation passed by the 87th Legislature, including HB 1869, HB 2429, HB 2723, and SB 1438. 

 

Panel 1 

Korry Castillo, Comptroller of Public Accounts 

  • HB 1869 dealt with definitions of debt, no changes were required on the tax recalculation forms, but did make note of definition
  • HB 2429 was a notice for certain proposed taxing units not a special unit or municipalities less than 30k pop regardless; applied to a unique taxing unit that fell outside of other notice provisions
  • Comptroller created a sample form for HB 2429, local govs are not required to use these forms, but can
  • HB 2723 directed truth in taxation postcards and website through Texas.gov/propertytaxes, Comptroller’s Office issued a model postcard notice with the website
  • SB 1438 replaced existing optional provisions for declared disaster areas, 2022 is the first year a taxing unit may need to use this, Comptroller’s Office created a worksheet
  • Martinez Fischer – On the disaster rate, any plans for agency to notify counties that potentially could be impacted?
    • Have a process in place to notify, incl. the timeframe to apply
    • Send out notice to all appraisal districts when a disaster is declared, not aware if we send something similar to local govs, but could implement this
  • Martinez Fischer – Local govs are dealing with the disaster, want to know if there is a way to notify them they can spend a little more
    • Could look at implementing this, ability to use this is tied to action by the appraisal district
    • Could partner with appraisal districts
  • Chair Meyer – Have you seen issues with the tax rate worksheet and people unable to comply
    • SB 2 included a standardization of taxing worksheets at the Comptroller’s Office, previously worksheets were models and there was inconsistency in how they were done
    • Standardization was very complicated for the various local govs; convened workgroups to assist with worksheets & clarify what each item means, tying it back to statute, etc.
    • Comptroller’s Office can’t provide guidance on what numbers to include, but can provide guidance on what the statute is
    • Some areas get a lot of questions, largely due to the statutory interpretation and language
    • When problems are discovered, usually already past the point to update the worksheet for the current cycle; try to issue worksheet in Spring or early Summer to have it available for taxing units by July, but can take time
  • Chair Meyer – What statutorily can we do to address some of this? Simplify or streamline?
    • Office can provide a few key areas where questions occur repeatedly

 

Brent South, Texas Association of Appraisal Districts 

  • On the worksheets, there is an issue with how undisputed value is reported; some districts are using previous year’s data
  • Could require property owner to provide opinion of value, would allow us to see difference between certified and owner’s opinion of value
  • Under binding arbitration, owners are required to provide their opinion of value & whoever is closer the other party must pay arbitrator fees; could do something similar with attorney’s fees
  • SB 2 has done a great job of providing greater clarity on property tax system & role of appraisal districts
  • SB 2 removed estimate of taxes from 2519 proposed estimate of values, estimate was misleading to property owners as it would effectively always show an increase
  • Market value is defined by the legislature, as long as the standard is 100%, appraisal districts will appraise at this rate; after appraisal it is up to local govs
  • Real time tax database provides much more accurate info for property owners
  • SB 2 also requires notice directing people to website, requires appraisal district to send postcards but these aren’t very effective; by August 7th, not a lot of info on the website and don’t know how to get people to return
  • Polled appraisal districts, additional cost for August 7th mailing is $4.1m & could be used for something else
  • Chair Meyer – What other notice alternative would there be? Have mailing addresses
    • Goes into HB 2723 requiring publishing website on taxing notices, would like to put this on multiple appraisal notices & websites; as many as we can
  • Rep. Cole – What date would be better for the postcards if August 7th is too early?
    • Not sure about deadlines when info needs to be posted, but hardly any units would’ve put info up by August 7th
  • Chair Meyer – Is this something we need to fix?
    • August 7th is in the tax code
  • HB 2723 will help direct people to the website and provide more confidence in online info; HB 2723 as originally filed did eliminate the August 7th postcards
  • Chair Meyer – Have you had any issues with timely submission of data to the websites? Have you surveyed members on how the websites are working?
    • Taxing units have for the most part complied, appraisal districts don’t police this
    • Information on the websites is helpful, though when you talk about multiple rates it gets confusing to property owners, could be helpful to streamline this
  • Chair Meyer – Has HB 2723 increased views on websites?
    • Too early to tell
  • Thierry – You mentioned putting website info on the appraisal notice?
    • It goes out early, helpful but by August or September people have forgotten the info; taxing unit info
  • Thierry – Did the legislature give you any design reqs on the postcards?
    • No, language on the postcard is specified, but the design is not; not even required to be a postcard, but cost leads to postcard
  • Thierry – Have seen design reqs in other areas
    • Castillo, Comptrollers’ Office – This notice does not have these types of requirements, but Comptroller’s Office could develop a sample
    • Being done differently by each district, Travis is doing a glossy pamphlet for instance
  • Thierry – Could discuss some kind of uniformity

 

Dale Richardson, Department of Information Resources 

  • Speaking on HB 2723, transparency bill hosting property tax info on Texas.gov/propertytaxes
  • Highlights development, passage and implementation of bill, TAAD approached DIR about this database after passage of SB 2

 

Larry Gaddes, Tax Assessor-Collectors Association of Texas 

  • On August 7th, vast majority of taxing units did not appropriate info on the website; timing of the postcard is an issue
  • Possible solutions incl. phone alerts when info on the website is updated; need something to bring more attention to the notice
  • Info available can be confusing and overwhelming
  • Early calendar districts have hearings in June about budget and tax rates, hearing and adoption should be at the same and notice should be sent shortly before
  • Rep. Guerra – Owe it to the public to make sure there is uniformity throughout the state
    • Uniformity would be the first step in the right direction to bringing understandability to the process
    • SB 2 created multiple definitions of different taxing units, each with different rules, notices, calculations, and rates; public can’t see the difference between these
  • Rep. Button – Has DIR done anything special in terms of cybersecurity regarding the property tax information being collected?
    • Richardson, DIR – Yes, have several levels of security and working with several entities
    • Have a security operations vendor constantly monitoring the traffic for Texas.gov, audited numerous times each year
  • Button – System is good, but sometimes when additions are made can impact security

 

Panel 2 

Dale Craymer, Texas Taxpayers & Research Association 

  • Working to simplify calculation on worksheet and happy to work with committee
  • Data should be verified, currently no verification requirements; cities should look at worksheets as part of the annual audit
  • Recommend some type of reconciliation for the worksheets, incentive for jurisdiction to do overly low estimation of tax base to adopt a higher tax rate
  • Have concerns over the de minimis rate and how it is used, should review need for this rate; creates confusion for taxpayers and in the calculation
  • Unused increment has been a source of confusion, should do away with it or convert it a dollar basis
  • On disaster provision, just because a property suffered damage doesn’t mean jurisdiction was impacted financially, could require a demonstration to access the higher rate
  • Real time website has been a tremendous benefit to taxpayers
  • Many ISDs have already adopted rates by August 7th, taxpayers should still be notified; could have a registration for notifications from Texas.gov
  • Difficult to solve while different jurisdictions are on different schedules, could standardize but every local gov would complain
  • On HB 1869 & local debt, many districts leave rate at the previous year and using more to pay down debt; taxpayers should be notified that their rate may be higher than it would’ve been
  • Martinez Fischer – Adjusting the disaster provision?
    • Most districts are subject to 3.5% voter approval rate in a disaster area; if one property is affected by the disaster the district could claim 8%, but could be a city where services weren’t affected, or property damage that didn’t lead to actual impact
  • Martinez Fischer – Does the Gov have the ability to specify which parts of the county are included versus not?
    • Not sure of that
  • Martinez Fischer – Haven’t seen a disaster declaration that was specific to a certain portion of the county
    • Question remains what is a disaster that causes actual harm to a district
  • Martinez Fischer – Have some parts of the tax code where local govs should decide things, but other parts they shouldn’t
    • Legitimate policy question, e.g. municipality claiming disaster rate if one house is damaged & city incurred no cost
    • Something to keep an eye on to see if it is working or not; possible for a district to claim rate with no damage and this is troubling
  • Martinez Fischer – Equally troubling if there is an issue in the ETJ and the municipality makes a decision not to address due to the resource cost

 

James Quintero, Texas Public Policy Foundation 

  • SB 2 move to shift tax rate from 8% to 3.5% was needed, but still room for improvement
  • Should consider changing name of voter approval election to tax increase election, easier for public to understand; could also include tax impact info for voters to better understand
  • City of Austin developed taxpayer impact info, included with proposed and adopted budgets; stellar tool and more districts should adopt or legislature should impose
  • Should examine opportunity to include new construction in voter approval tax rate calculation
  • Should consider lowering limit to 2.5% across gov types; all districts should be required to observe 3.5% mark as well

 

Bill Longley, Texas Municipal League 

  • Since passage of SB 2, cities have been working to understand & comply; also adjusting to new processes such as de minimis rates
  • Many different economic situations now from when SB 2 was passed, federal funds from the PHE, inflation, budget stressors, appraised value increases, etc.; downward pressure on city tax rates and cities are growing faster
  • HB 2429 addresses a notice issue, allowed cities to provide proper notice
  • HB 1869 as filed would’ve significantly limited city flexibility regarding debt and would’ve prevented use of refunding bonds; end result was a bill that addressed problem while preserving city flexibility
  • When cities adopt tax rates, typically also adopting budgets; SB 2 timelines sometimes require cities to post budgets 30 days ahead of August, before certified data is ready
  • Statute also reqs cities to adopt budget before the date of the tax levy, could consolidate adoption of budget with the hearing
  • Tax code reqs adoption of increased rate 71 days in advance of Nov general election, this makes sense, but some cities under 30k can go over voter approval rate without the election; for those cities it would be helpful to keep the non-voter approval calendar in place
  • On the worksheet and definition of last year’s tax levy, have had issues with this and how disputed values are treated; cities concerned about consistency in numbers
  • Martinez Fischer – Disaster tax rate?
    • Would err on the side of allowing local officials to determine the extent of the damage in their community and react accordingly
    • Not aware of any instances of one house being damaged and cities opting into the higher rate; if there were, would be a matter of handling this specifically & defer to local discretion outside of this
  • Martinez Fischer – Could this compete with a jurisdiction’s ability to receive federal funds? Heard any discussions about this?
    • Not that I’ve heard
  • Martinez Fischer – Concerned about the thought that just because you can, you will; would like a report back on membership position
  • Button – Regarding local elections, if we don’t manage election process in small cities properly could lead to significant costs; need to ensure not placing additional burden on small cities
  • Murphy – One house being damaged and the whole county getting an 8% rate hasn’t happened, but we don’t want it to happen
  • Murphy – Asks Craymer on banking, rationale was to encourage cities not to increase by the max every year and allow banking of lower rates; you don’t see an incentive
    • Craymer, TTARA – Have seen issues on worksheets that allowed jurisdictions to claim unused increment when the data might should not have let them
    • Also as values increase, value of unused increment grows, e.g. will be worth 20% the next year
    • Could shift from tax rate amount to tax revenue amount, e.g. allow $1m to carry forward rather than .5%
  • Murphy – Future value of money could also take it the other way; but incentivizing jurisdictions to not max out tax rate every year is in interest of the taxpayer?
    • It is, but there are issues with the worksheets
  • Murphy – Idea of truing up the worksheet data is brilliant
    • And it isn’t something we don’t already do for school finance
  • Murphy – On the 8% in the disaster declaration, it becomes the new basis?
    • I believe so
  • Murphy – Might want to consider this as well
    • Longley, TML – Amendment on SB 1438 implemented concept of emergency revenue rate; prior to that bill it would’ve carried forward, but now there is a deduction by this rate after the disaster declaration is over

 

James LeBas, TXOGA, TAM, Texas Apartment Association 

  • Industries require they make major capital investments, so they have major property tax bills
  • For property taxes, rate compression is the fairest way to go
  • Need to protect and enhance the independents of the appraisal process; cannot politicize the process
  • As rates go up, values should come down; only system that is fair in the long run
  • Have heard complaints from apartments on rising property taxes, multi-family appraisals are growing at double the rate over the last 10 years & rate will increase with homestead exemptions
  • Murphy – Are you comparing effective taxes paid between homesteads and apartments?
    • Taxable value, reflecting all of the discounts
  • Murphy – Comptroller value study provides independent verification of at-market; are you pointing out tax system favor single-family? Data would suggest otherwise
    • Comptroller will apply methodology as directed
  • Murphy – Want to hear more on this as I don’t want one group affected differently for effective taxes paid

 

Russell Berry, Texas Realtors 

  • Nig issue is lack of transparency in tax rate setting process, big concern is what tax rate will be the next year
  • Supportive of all of the legislation passed so far, taxpayers need to understand the process
  • Some entities are soliciting for homestead exemptions and attaching a price
  • Many are governed by multiple different taxing entities, need to protest to all of them & could combine protests somehow
  • Highlights knowyourtaxes.org, willing to partner with the state to promote info
  • Button – Many are confused about the appraisal process, held a virtual town hall 2 years ago walking participants on how to protest appraised values; could educate via a video or other info at the county level
    • Some countries put this information on their websites, Texas realtors is trying to become a central source of info via knowyourtaxes.org
    • Getting the word out will need a grassroots solution, educating people via outreach can get very expensive

 

Alex Fairly, Fairly Group 

  • HB 1869 and potential for abuse with debt instruments that don’t require voter approval is concerning
  • Involved in lawsuit with City of Amarillo over a bond, initial proposal was voted down, P3 was not available, Amarillo issued $260m in Tax Anticipation Notes (1431)
  • Anticipation notes have very low accountability, taxpayers do not have input & accountability is limited
  • Anticipation notes were passed with one hearing & ad valorem debt was doubled to $468m
  • Amarillo intended to refinance note with a refunding bond & will end up with 30 year note to build civic center
  • Filed a lawsuit against the City of Amarillo; Amarillo has laid out a plan for other cities in the state to follow
  • Highlights aspects of the issuance of the anticipation notes and arguments made as part of the lawsuit
  • Murphy – Have you heard what revenue stream Amarillo intends to use?
    • Ad valorem taxes, intending to put it on the I&S side of the budget to avoid 3.5% limit
  • Murphy – Do you have a suggestion for the legislature?
    • Need to look at 1431 tax notes; previously gave a lot of attention to Cos, but Amarillo’s actions were unanticipated
    • Seems like a good tool for some expenditures, but could be improved and would be good to add notice of petition
  • Murphy – Idea is a bridge loan until revenues come in, this is a different issue
  • Shine – TANs is an anticipation of revenue coming in; have never heard of any entity issuing these and financing with another form of debt, would think this is a violation of the covenant with the underwriter
  • Martinez Fischer – Use of TANs in general, you don’t have an issue with that?
    • No, see the value of these
  • Martinez Fischer – So what brought you here was an alleged abuse?
    • Yes
  • Martinez Fischer – Exploitation of a loophole?
    • If I win, will be because Amarillo did some things wrong; not because there isn’t a way to do what Amarillo did under the TAN statute
  • Martinez Fischer – Voters rejected when? Council passed the TAN?
    • Vote in November 2020, council action in May of 2022
    • 4 of the 5 were there in November, those 4 carried the vote
  • Martinez Fischer – typically voters have an input, petition, etc.
    • Can’t do that with TANs, can with COs
    • Have done a petition because there is a right in the city charter, but TANs don’t normally allow petition challenges
  • Martinez Fischer – TAN was done by ordinance, but subject to recall?
    • Yes, but only by city charter
  • Martinez Fischer – Has there been any attempt to challenge the ordinance?
    • Yes, collected 13k signatures and presented to the city last week; done under city charter, not under TAN code
  • Martinez Fischer – If the petition prevails, you’ll speak before the council, if successful will it unroll the ordinance?
    • We think it should, Amarillo is building argument that petition through charter shouldn’t apply in this case, but haven’t made that argument formally yet
  • Martinez Fischer – Shares concerns, though highlights TANs do a lot of good, want to make sure you’re not asking to throw out the system
    • No, see the value, just want to address the hole
  • Thierry – My understanding is there are different types of anticipation notes, e.g. for bonds, for taxes, etc.; need to understand what type of anticipation note Amarillo is using
    • Confident it is a TAN from Gov. Code 1431
  • Shine – Amarillo council members part of TIERS?
    • Don’t believe so
  • Shine – So not issued by the TIERS, issued by the city council?
    • Correct
  • Shine – What does your lawsuit do?
    • 5 causes related to open meetings issues, notice issues, etc.
  • Chair Meyer – Regardless of lawsuit, will address the loophole Amarillo is using, trying to exploit lawsuit; will address this next session

 

Public Testimony 

Fran Rhodes, True Texas Project 

  • Spoke in favor of SB 2 when it was moving through House & Senate committees
  • Numerous city representatives came to speak about significant negative impact from SB 2; taxpayers are at a disadvantage in the tax system
  • Still waiting on promised tax relief from SB 2, Fort Worth is raising rates and staying under the voter approval rates, local govs still raising rates

 

David Billings, City of Fate Mayor 

  • School taxes are the highest tax rates, then MUDs, then cities or counties
  • Most common requests are to lower taxes, but citizens also expect good roads, services, etc.; when tax rates are lowered, then services are reduced; need to find balance between revenues and quality of life

 

Chandler Crouch, Real Estate Broker, Property Tax Consultant 

  • Property tax bill is proportionate to valuation & valuation is disconnected from ability to pay; as long as value is outpacing ability to pay, will keep needing to meet on this issue
  • Appraisal districts are playing a far bigger role than they ever thought they’d play due to high price appreciation year to year
  • Will have more problems when values start dipping, homesteads are capped out & rates will still increase due to the 10% increase year to year; will have issues while tax system is based on single-family values
  • Martinez Fischer – Have you ever looked at what role Comptroller plays with regard to property valuation studies and how that plays into appraisals
    • Yes, study is part of the issue, right now there is a 5% above and below what they’re required to hit, but also tasked with hitting a moving target
    • Appraisal districts may have to forecast even higher values in a fast moving market
    • Could expand tolerance levels
  • Martinez Fischer – If we had the Comptroller’s seal on the value, would likely get better answers
    • Possibly, but Comptroller is statewide and dealing with local taxation, would be difficult to hold Comptroller accountable for all local values
  • Martinez Fischer – Agrees, Comptroller exists to provide revenue for essentially public education; but having a conversation without all parties involved
    • Understanding is that SB 2 gave a lot of responsibility to the Comptroller, likely don’t want more responsibility
    • Appraisal districts are tasked with an impossible task and not on the elected officials chosen to represent the taxpayer
  • Martinez Fischer – Comptorller involved heavily in taxes and valuations

 

Christy Rome, Texas School Coalition 

  • TSC did all it could to promote the Texas.gov/propertytaxes, but missing piece is how much property tax is going to recapture
  • Law requires calculation of maximum compressed rate, cannot adopt rates before August 7th
  • Disaster rates have to do with declaration given by a Governor, Governor has standards when districts are eligible; not many have ISDs have used this despite the numerous declarations
  • No new revenue rate for schools would be more accurately called the less revenue rate, finance relies on tax effort & reducing tax rate means ISDs receive less on the entitlement
  • A – If August is not a good date, do you have a date?
    • Mid to late August, just not August 7th

 

Monitor legislation relating to reform of the property tax appraisal system, including HB 988, HB 2941, HB 3971, SB 63, SB 916, and SB 1919. 

 

Panel 1 

Korry Castillo, Comptroller of Public Accounts 

  • HB 988, any websites forms, etc. that needed to be updated have been; under HB 988 ARBs are req’d to adopt model hearing procedures
  • As of Sept. 7th, have received 246 of the model appraisal procedures & should have all in according to timeline in statute
  • ARB report has a summary of complaints, comments, and suggestions from liaison officer
  • Highlights Limited Binding Arbitration under HB 988, can be filed by property owner when they believe there is a procedural violation during ARB process, under faster timeline
  • HB 988 had an immediate implementation date, rulemaking has been delayed as Comptroller has tried to spin up Limited Binding Arbitration; working on rules now
  • HB 2941 relates to how ARB members are appointed, primarily local implementation; Comptroller has communicated this through materials
  • HB 3971 also mostly local implementation
  • SB 63 required many process changes at Comptroller’s Office, incl. remote payments for the PUF to the Comptroller, other remote optimizations like training
  • SB 916 required a connection between Chief Appraiser license at TDLR and results of various Comptroller studies; worked with TDLR to make info available
  • SB 1919 is mostly a local bill related to hearings via video conference, Comptroller provided training & education, updated websites, etc.

 

Steve Bruno, Texas Department of Licensing & Regulation 

  • Speaking on SB 916; TDLR hosts Chief Appraiser reports, able to search licensees
  • Shine – On the PVS reports, a number of districts have failed; what kind of enforcement is there when they fail multiple times?
    • Nothing in statute at TDLR, license the employees, not the district
    • Castillo, Comptroller’s Office – If an ISD is invalid for a PVS in any year, Comtproller sends notice to the Chief Appraiser; If there are 3 invalids in a row, then they are subject to an additional MAAP; escalates into directing ARB to take action
  • Shine – So if they don’t, there is nothing forcing them?
    • Could result in termination of Chief Appraiser, no oversight over the ARB
  • Shine – Any idea on how many have multiple failed PVS?
    • Right in the part of the cycle where some would be getting into the MAAP cycle, number currently are potentially 42 depending on results
    • Chance for number to come down, monitoring last 3 cycles and if any become valid then it resets
  • Shine – As far as the validity of the PVS, any changes needed?
    • Always opportunity to improve
    • Margin of error is not wiggle room for the Appraiser, more a range of the confidence by the Comptroller’s Office
  • Shine – Have you considered measures to enforce failures of the PVS?
    • PVS is a school finance mechanism & to do indirect equalization of how the state funds schools
    • PVS is a way to ensure values are in an acceptable range, if they are then there is no pressure on the ISD; feels very different to ISD in the middle of it
    • Comptroller understands it is a range & value is somewhere in between, try to work with ISDs to not make this a punishment
  • Shine – Does the Comptroller’s Office monitor ARBs in terms of percentage of reductions before the ARB board?
    • Not directly, we do get feedback; does affect the PVS when protested properties are part of the sample
  • Shine – Any data on rate?
    • Don’t get this data, only get the specific orders for the properties sampled
  • Shine – So if you did get rates, and data on ARB awards, is there any mechanism that goes into that appraisal district to see what might be out of sync?
    • No mechanism now because we aren’t getting the aggregate or individual data to identify patterns in reductions that would warrant an additional look
    • District and ARB are independent, so may not be an adjustment problem, possibly an education problem
  • Shine – Do you feel this info may be important to review the PVS and how it is implemented?
    • ARB order info is helpful to the Office when adjustments are needed for the study sample; useful info for the system, but not sure it feeds into the PVS
  • Shine – Have you ever considered any type of alternative to the PVS to improve this process
    • PVS has always been focused on the school finance piece; even though there is a connection between ARB orders and final numbers reported to TEA, not the same or in sync
    • Probably leads more to ARB training
  • Martinez Fischer – You can provide guidance on the PVS but can’t do anything about it?
    • Yes, role is to look at the PVS and provide guidance
  • Martinez Fischer – In other industries where there is a disconnect of authority there are solutions, what would you need to improve the system
    • There is a provision in Chapter 6 that allows Comptroller’s office to appoint Chief Appraiser in case of absence
    • But when a repetitive problem is identified, Comptroller’s Office doesn’t have significant enforcement options per statute; do have notification and education functions
  • Martinez Fischer – Talking about whistleblowers, need for inspector general, etc.; curious to look at Chapter 6 and possibly broaden authority of the Comptroller’s Office to step in

 

Brent South, Texas Association of Appraisal Districts 

  • Regarding margin of error being expanded past 5%, there was a bill last session that would’ve changed this, but wouldn’t have changed the way appraisers operate as they are required to operate at 100%
  • Also have a prohibition on keeping statistics on ARB panels in whether they are maintaining values, etc.
  • HB 988 was originally a simple bill for Limited Binding arbitration and it grew through the process
  • Highlights Limited Binding Arbitration requests, large majority are coming from one agent; while there is a need for a property owner to secure a remedy, but this process isn’t being utilized very heavily
  • HB 988 requires a mandatory informal meeting ahead of the arbitration, very helpful and resolves issues ahead of time
  • Timelines have narrowed, somehow need to adjust or provide more resources to appraisal districts; would like legislature to help adjust the process
  • Provisions restricting communications affecting values is an additional safeguard
  • Required to send notice if value increases by more than $1k, would like to be allowed to post these on the web rather than mail notice
  • On Comptroller review of ARB rule, should only require review if model process or internal process rules change
  • HB 988 requires ARB order to list land and improvement value separated, requests being allowed to only put total market value
  • Chair Meyer – I think this would make it more difficult for a taxpayer to protest, most often just about the improvement
    • Value of land and value of house is what you are protesting
  • Chair Meyer – Disagree, makes it harder
  • Shine – What about rural areas where a house may be sitting on 300 acres, how do you carve out house and homestead?
    • With an ag use appraisal would still need to list them separately
  • Shine – What would the rule be on how much land belongs to the house versus the exemption?
    • Very subjective now, 20 acres under homestead exemption, you want as much use under ag use as possible, etc.; need to make judgments on how much is used as yard area versus ag product
  • Like the fact that HB 2941 creates separation between ARBs and districts, would like to see more separation; many assume Arb and district are always siding together
  • ARBs this past year have had challenges filling all positions, hundreds of thousands of protests require significant resources and many don’t want to work a limited time out of the year; could remove certain restrictions like not allowing members of a taxing unit to be ARB members
  • Could also allow single ARB members to hear cases
  • Murphy – People would want to speak before just one member?
    • Surprised when it was allowed this past year how many chose the option
  • 90 day exemption action has been a significant issue, number of exemption applications have grown exponentially
  • Would like to work with Comptroller and TDLR on SB 916 and how failures could be attached to new Chief Appraisers licenses
  • Would like opportunity to appeal or review MAAP
  • Thierry – How much of district budget accounts for staffing?
    • Around 60%-70%, very labor intensive organization that needs physical staff, difficult to automate

 

Megan LaVoie, Office of Court Administration 

  • Speaking on HB 2941 and data collected by OCA
  • Provides overview of LAJs, scope of duties expanded greatly during the COVID pandemic
  • Statute specifies that a taxpayer liaison officer should assist LAJs to assist with recruiting members to serve on boards under HB 2941, but support is limited
  • Appointment load varies, e.g. Harris has 150, Rockwall has 9

 

Panel 2 

Jim Popp, Popp Hutcheson PLLC 

  • Comptroller annual survey on ARB issues received 5k response; 64% said that ARBs are courteous, 60% said they were attentive, 55% said knowledgeable, 83% said procedures were followed, etc.
  • Single ARB member seems to be working for some, Rep. Shine put this in the bill as an option for taxpayers
  • Settlement conferences enhance the process and help resolve issues
  • Binding arbitration portion
  • Continually looking for better ideas on how to appoint ARB members; LAJs don’t like it and have enough to do, perhaps can find another system
  • Separation of land and improvement value benefits taxpayers
  • Button – Cycle time to get one review done?
    • Protests filed in May, most completed in July, after ARB issues order you have 60 days to file suit so typically August or September, most lawsuits are settled within 1 year and don’t linger very long
  • Button – What is the estimated hours for working each case? Difficult for essentially volunteers to put in this work
    • Overall ARB members are very qualified and have sufficient experience to make decisions
  • Button – Highlights lack of compensation for ARB members
    • Agrees, most are retired and participate in sense of community service
  • Chair Meyer – If the LAJ doesn’t appoint them, who do you suggest?
    • Previously done by the appraisal district Board; suggested LAJ as they are a neutral party
    • Could appoint some special master, attorneys in the community may be willing to serve
  • Chair Meyer – Has been a precipitous drop in ARB ratings since 2019, why has there been a steep drop? Still good, but much better 2 and 4 years ago
    • Getting more data
    • COVID and remoteness has impacted, restrictions on interaction, less personal face-to-face contact
  • Chair Meyer – How many took the survey
    • 5,310
  • Chair Meyer – In 2019 there were over 17k respondents; calls Castillo with Comptroller’s Office back to address these questions
    • Castillo, Comptroller’s Office – Slides for the next charge cover this

 

Paul Pennington, Citizens for Appraisal Reform 

  • Provides overview of CFAR, work to pass pro-taxpayer legislation
  • SB 1919 videoconferencing was appreciated, had some pushback from larger districts on this
  • Regarding HB 988, experience in going before ARBs differs & compliance needs to be looked at
  • Limited Binding Arbitration is very narrow, not available in some situations where ARBs are not following multiple procedures
  • Need to make a stronger connection between HB 988 requirements and the ARBs, need training for ARBs that focuses on citizens and taxpayers
  • Only remedy for ARBs is appointments & limited oversight; need education
  • On SB 63, includes deadline to take an action when filing an exemption; issue is if there is enough time to file protest and resolve this before the tax bill comes
  • Button – Issue is a noticeable inconsistency in quality of ARB?
    • Yes
  • Button – No oversight of the ARB training?
    • Comptroller has come up with a great training manual, when the Comptroller puts on there their training maybe there should be someone who represents taxpayers
  • Button – So no independent oversight? You do feel there is something missing and this is the taxpayer perspective?
    • Yes
  • Button – If the majority of districts push for an extension on the exemption, it will happen which is unfortunate
  • Button – Do you see more complaints in the Dallas area, or in others?
    • Only comment on DFW is that expertise is lesser with residential ARB, higher with commercial and business ARBs

 

Joe Harrison, Texas Association of Property Tax Professionals 

  • Provides overview of the ARB system, 40 year old system created to promote consistency in appraisal, protect taxpayer due process, and fulfill mandate that taxation be equal and uniform; changes have filled gaps and added remedies like arbitration
  • Have training manuals and the ARB Operations Manual
  • Have systems in place already, robust system of rules, responsibilities, and remedies to make system function properly if the ARBs were diligently adhering to these, but this is not always the case
  • Need to focus on ways to ensure districts and ARBs are adhering to existing code and rules, HB 988 is a great example
  • Would be a good idea for every protest hearing to be immediately preceded or followed by a reminder of the taxpayer liaison office, ability to file complaints
  • Limited Binding arbitration should be expanded, currently very narrow scope; Model Hearing Procedures are objective and could be a basis
  • LAJ appointing ARB members is a good change, could be an option for special masters for larger counties if this is a burden; not a good idea to return power to appoint to the district
  • Agree training modules are good ones, need taxpayer input in the process
  • District boards should be added to with representatives for taxpayer interests, could have multiple in larger districts
  • The more transparent and smoother the system works the more credibility is enhanced, incl. training, liaison, etc.; will resolve more protests at the administrative level

 

Study Texas’ property tax appraisal system and make appropriate recommendations to improve the appraisal system. 

Panel 1 

Korry Castillo, Comptroller of Public Accounts

  • Provides overview of property taxes and Comptroller functions, incl. training, manuals, forms, publications, etc.
  • Highlights Appraisal District Ratio Study, different than School District Value Study, but done at same time and based on the same data; study of uniformity and median levels by the district
  • Chair Meyer – What trends have you been seeing, more accurate, less accurate?
    • Trends change based on the market, matter of trying to appraise based on the market
    • For residential property, fast market makes it difficult to track
    • When market is steady & slow, studies are steady & slow as well as it is easy to stay on top of values
  • Chair Meyer – How do we address inaccuracy?
    • Report this back to appraisal district and they will adjust, responsible for making these adjustments & Comptroller does not have enforcement mechanism
    • Tying enforcement to Chief Appraiser are probably more accurate than looking to things that affect state funding
    • Can look at MAAP, things unrelated to values like deadlines and members could harm a district; values and other issues have gotten mixed
  • Chair Meyer – PVS does evaluate accuracy?
    • Does evaluate accuracy by school district of the value; data set is the same and there is median value review
    • Appraisal districts at a local level will better manage this than ISDs, ISDs could be small
  • Chair Meyer – What happens after, do you then check their homework, how does that work?
    • Ability to review appraisal district studies on the website, there is follow up on the MAAP & the PVS has a study on the subsequent year if they are invalid in the previous year
  • Murphy – Calling for districts to do a better job year to year doesn’t seem to do much, don’t want to punish appraisers or districts, but when it affects ISDs need to do something
  • Murphy – Interested in enforcement actions as not all appraisal districts are equal; interested to see stratification of data on their compliance
    • Can get that to you, have three tiers of appraisal districts based on size; give less of a review on smaller ones
  • 15-month cycle to do review plus a one-year review with the appraisal district; then goes over to TDLR for another year for another review
  • Follow up process; heard a request for an appeal process for the methods and assistance process
  • Is a period of a few months to identify any issues with the process then another year for recommendations; then is a referral to TDLR
  • If there is a disagreement on law, that would be a place for remedy; has happened before and is an opportunity to get an OAG opinion or legislative fix
  • Increasing number of appraisal districts under review
  • Data about number of surveys between 2019-2020; due to COVID and was a change in legislation that drove more paper surveys
  • Was an uptick in “poor overall impression” which coincided with their value not being lowered
  • Will release a more robust report which includes TLO complaints in the future

 

Judge Trevor Moore, State Office of Administrative Hearings 

  • Those dissatisfied with appraisal review board can go to court, arbitration, or appeal to SOAH
  • Only hear cases of properties $1m and above
  • Have a limited amount of judges in SOAH who hear these cases; past several years have been 15-25 appeals referred to SOAH every year and large amount are commercial property
  • Very few go to a hearing as they settle before hearing
  • Is a fairly quick process after the hearing, is an option to file objections and to make amendments/corrections
  • Is not an appealable decision under government code; cost of hearing is paid by the losing party
  • Guerra – At this point, are most represented by lawyers?
    • Correct; if most are dismissed before the hearing, have no idea
    • Commerical properties are typically far in excess of $1m

 

Megan LaVoie, Office of Court Administration 

  • Is concern between judges who have to appoint 200 members of appraisal committee 
  • If they had the appropriate staff/resources it would not be so difficult 
  • If were able to collect more robust data on appraisal appeals, would need to invest in a more robust system
  • Thierry – What do you suggest we consider to prevent growing pains?
    • Urban areas having the most difficulties with this as their responsibilities have increased
    • If they had a dedicated staff person to review applications would be helpful
  • Noble – When we have another employee, have an issue where the taxpayer is paying; would not make sense to have another judge under that judge?
    • Splitting the workload among judges would help

 

Panel 2 

Brent South, Texas Association of Appraisal Districts 

  • Are already good provisions in place that study values established and operating procedures
  • Legislature has done a good job in allowing property owners the right to participate in the appraisal process; overviews legislative requirements added over the years
  • Would be helpful for homeowners if the legislature look at current equal and uniform appraisal statutes; majority of lawsuits are filed under this
    • Tax burden is shifting over to residential properties
  • Are no standards for the selection of comparable properties, no standards for adjustment to the comparable properties, are issues with the median value standard
  • Code is meant to make equity in the system concerning lawyers fees; typical homeowners will save more money by not going appealing their case
  • Recommend and will work with committee on ideas how to make equal and
  • One idea is to put in place 10% margin of error on market value
  • Recommend requiring comparable properties come within the same county, if possible
  • Attorneys fees should follow the same for binding arbitration; require property owner to provide their opinion of value and determine whose property value is closer
  • Chair Meyer – Want tax payers to pay attorney fees if they lose at that level?
    • Correct; just want to even the playing field
  • Thierry – Shocking there is no statutory guidance on comparisons; would make guidelines to similar types of property are if cannot find within their county?
    • Are required to follow UPAP rules and are other standards by the IAAO

 

Jim Popp, Popp Hutcheson PLLC 

  • Encourage legislature consider further electronic communication and electronic payment
  • Concerning your ARB member election charge; aimed to get politics out of the process
  • Chair Meyer – The thought process is that you are making them more accountable if they are elected
    • Texas has the best appraisal system in the country
  • Chair Meyer – In what ways?
    • Having one appraisal standard, remedies, elected officials in other states show deference to some groups while ignoring others
  • If you eliminated A3, would be eliminating equal and uniform entirely
  • Have yet to see data to support the tax burden is shifting from commercial to residential
  • Legislature in 2015 passed HB 2083 that reinforced the standards of comparable properties
  • 56% of protests were on homes
  • Concerning litigation costs is worth $90b informally and $60m at ARB

 

Paul Pennington, Citizens for Appraisal Reform 

  • Have the following recommendations
  • For counties over 120k website with the values should be continuously updated; is about 40 counties
  • Qualified LES should be able to go to arbitration; wording to fix in Comptroller’s rule
  • ARBs need to issue an order of dismissal
  • For omitted real estate, appraisal district should send notice registered mail
  • Should revisit and shorten terms for appraiser board members
  • Should make document signing more efficient; should get rid of requiring the IP address when you DocuSign
  • For a telephone or video conference you have to mail a notice 10 days before; change from 10 days to 5 days
  • Should allow limited binding arbitration if an ARB fails to follow Comptroller’s rule

 

Ray Head, Texas Association of Property Tax Professionals 

  • Out of necessity appraisal districts use mass appraisal techniques
  • Look to the protest process to ensure more property-specific accurate appraisals
  • Most CADs operate efficiently and effectively; inevitably will be mistakes in this complex process
  • Legislature has done a great job to remedy these deficiencies over the years
  • Support more use of electronic communication and tax payments
  • Feel method of selecting chief appraiser and board members is appropriate
  • Recommend addition of two board members that would be two taxpayer representatives
    • Would be ideally appointed by local administrative judge; could bracket to counties over 120k
  • Would like to see taxpayer lesion officer duties more readily available; TLO could be an important resource for ALJs to identify possible members for appraisal review board
    • If the TLO has disputes should be able to settle/respond to certain disputes
  • Suggest Comptroller’s office enhance ARB training and to stress differences between them and CADs; taxpayer advocate should also provide a presentation
  • If a protest hearing is not gotten to, hearing should be rescheduled, not dismissed
  • Thierry – What happens now concerning the rescheduling/dismissal of a hearing?
    • Can technically dismiss, have gotten better, but want to require rescheduling
  • CAD should be prohibited from requiring a taxpayer to waive a right granted by the legislature in order to waive the interest
  • Have taxpayers who do not want to waive interest; willing to have further conversations about this
  • Would like to clarify equal and uniform is an acceptable methodology in a 2525D motion
  • Would like clarification of market value is not admissible concerning certain remedies; ARB should rule on market value and e&u
    • If they differ, ARB should be required to adopt the lower of the two; are in the manual but not in law
  • Are happy to work with stakeholders to get to a mutually agreed resolution

 

 

Panel 3 

Dale Craymer, Texas Taxpayers & Research Association 

  • Accuracy of appraisal system is exceptional; is a small percentage of value disputes
    • Consistently hear Texas’ appraisal system is the best
  • Big problem with appraisal process is a lack of funding; most underfunded is the dispute system and suggest better funding for ARBs
  • Chair Meyer – Who sets that salary? What would the state do then?
    • Local district; may not require state intervention, but is something to discuss
  • Reconciliation of the tax rates takes pressure off producing 100% accurate role
  • Should allow ARBs apply to other counties
  • Supported Button’s bill HB 3890 creating a database of ARB decisions
  • Having elected appraisers is a step backward; do not want to add politics to this and need those who set values to have professional expertise
  • Are willing to look at governance issues; could look at having broader participation on taxing boards
  • Button – Thanks Craymer for the support of her bill; hopefully next session will have a good chance
  • Chair Meyer – Asks about professional expertise
    • Vetting could be lost if we go to elected ARBs
  • Chair Meyer – Thoughts on how to address complaints about appraisers who do not live within the county?
    • Are professionals who typically should know about the area whether they live there are not; is an informal process that can look at situations like that
    • Will take a further look at that and get back to you

 

Larry Clark, International Association of Assessing Officers 

  • Organization was founded with the purpose of educating and training on mass appraisal techniques
  • Have a program that requires designation and demonstration of knowledge; are 67 designees currently
  • Have developed 15 standards on mass appraisal recognized worldwide; many states incorporate our standards into their statutes particularly ratio standards
  • Overviews the process if a standard is amended
  • Murphy – Comments relative to the charge in front of us?
    • Push fair market standard for any appraisal
    • Has been discussion of use of equalized value
  • Murphy – Thoughts on uniform and equal discussions today
    • Means everything is appraised on market value

 

Public Comment

Lisa Heeley, Self

  • Notes their confusion with the annual appraisal process being tied to market value
  • Ask the committee reevaluate this assessment

 

Conduct a comprehensive review of the impact of not renewing Chapter 313, Tax Code. Evaluate tax incentives offered by other states and make recommendations for incentivizing manufacturers and other capital-intensive businesses to locate to Texas. 

Panel 1 

Korry Castillo, Comptroller of Public Accounts 

  • Provides an overview of the Chapter 313 program; is a limitation on appraised value
  • Will expire on December 31, 2022 which will effectively end the program
  • Chair Meyer – Seen an uptick in applications?
    • Yes; uptick was way more than anticipated
  • To manage workload in processing/reviewing provided guidance all applications were due by June 1
  • Chair Meyer – Cannot take applications up to the 31?
    • Correct
  • Also provided guidance we would not process amendments that would expand the scope of a project or to push projects out into the future
  • Had 39 applications in March and May 31 had received 378 applications; are currently at 413
  • As of September 1: 5 were withdrawn, 324 had determined to be complete, 90 certified and around 30 are executing agreements
  • Chair Meyer – Will be able to get through all these applications by December 31?
    • No; have set up a process to maintain if they have met deadlines, will get to them
    • Will depend on the quality of the application when it came in
  • Chair Meyer – Timeline to be certified?
    • 90-day window in statute to complete that process; a lot are hitting that threshold
  • Of 408 active projects 60% are solar, 28% manufacturing, 48 are wind among others
  • Chair Meyer – What type of manufacturing? Looking at economic impact?
    • Variety, can get the committee a break down; some chip manufacturers, oil and gas, wood panel manufacturer
    • When it comes down to it, are looking at size of investment, number of jobs, etc.
  • Thierry – Information on regions that would benefit from this?
    • Can pull that together and a list of all the school districts where they have applied; some companies are negotiating with multiple school districts currently
  • Chair Meyer – Have year-to-year impacts of 313s on the economy?
    • Yes, can get that to you; not going to be able to fully account for the program in January
  • Cole – Why were there so many applications?
    • With the program expiring and no program replacing it, was a desire to “get in under the wire”

 

Panel 2 

Dale Craymer, Texas Taxpayers & Research Association 

  • Texas does not have a personal income tax so we rely more heavily on property and sales taxes
  • Could be more burden on businesses who want to come to the state; taxes distort the free market, not this program
  • Have been critical of aspects of 313s and was supportive of the reforms Rep. Murphy had previously
  • Button – Can breakdown what would happen if we did not have a 313 how many of the 408 applicants will still decide to build here
    • We will be uncompetitive the larger the investment is; for example Intel went to Ohio with a $20b investment
    • American manufacturers are looking to re-shore their operations here; could miss out if we are not able to compete with these projects
  • Rodriguez – How many states without any incentive program? Are they comparable in size/population?
    • 5 states; no
  • Murphy – Previously testified 313s aimed to bring down property tax bill
    • Is chapter 313 and 312 combined; Texas is never the lowest cost tax state, but do not have to be
    • Need to at least get close enough to other states, can beat them on other factors
  • Murphy – Heard Comptroller’s office testify are companies filing applications for multiple school districts; deals are different district to district?
    • Seems to be more of a function of speculative filing and keeping options open
  • Cole – What do you say to critics who say we do not have the resources?
    • Project had to demonstrate tax benefit would outpace taxes it would generate
    • Should look at the cost it would impose on infrastructure/services/etc. and balance with the revenue it would generate

 

Tony Bennett, Texas Association of Manufacturers 

  • Program has a lot to do with the economic development of Texas
  • For every manufacturing project, spins off 5 other jobs; are highly sought-after projects and competition is intensifying
  • Chair Meyer – Speak to how these incentives drive your members?
    • Cannot afford not to entertain other locations; majority of projects that Texas loses out on go to Louisiana with an 80% abatement
    • When Intel went to Ohio got a 30-year tax abatement
    • Ford EV battery plants went to Kentucky and Tennessee worth $11band 11k jobs
  • Texas cannot be out of the game when manufacturing is moving towards the U.S.
    • Especially semiconductor chips
  • Need major incentives in order to have a more reliable grid as well to assure industries they can move back home

 

Todd Staples, Texas Oil & Gas Association 

  • Policy, resources and people-power is what has made Texas great in terms of economic success
  • Most of member activity would not be eligible in the current or future programs
  • Members have noted that they cannot expand their operations because of the issues with the supply chain; need reliable manufacturing here
  • Need to keep these kinds limited tax discounts in order to keep Texas competitive
  • Chair Meyer – Policies in place have brought companies here?
    • Absolutely, including the L&G facilities

 

Spivey Paup, Recurrent Energy 

  • Have built four solar powerplants and have used 313s for each project
  • Solar is unique to the 313 program and is the only one that has a statutorily determined depreciation floor
  • $300m solar plant would depreciate and provide reliable revenue for school districts
  • Solar facilities are seeking out rural communities; unlike other sectors
    • Is low on local services and infrastructure and road usage is non-existent
  • 313 program functions as a driver for increased and diverse investment in this state
  • Request to participate in any successor program to 313s have recommendations for any potential replacement program:
  • Recommend keeping the program simple and standardizing the formula
  • Prioritize overall economic impact in applications
  • Design a program to attract broad and diverse industries

 

Q&A Panel 2

  • Martinez-Fischer – Was a mistake to leave this on the table last session?
    • Bennett – Members noted there were issues with 313s, but are bigger consequences now that there is global change 
  • Martinez-Fischer – Wish we would have at least extended this last session like the House proposed 
    • Bennett – Seems like a problem at the Senate-level
  • Martinez-Fischer – Asks about their members’ feedback?
    • Craymer – Willing to work with the committee on creating a new program; do not know what it will look like, but working with members to put something together
  • Martinez-Fischer – As dire testimony is today, confused that has not heard anything personally on this issue
    • Bennett – Has been a controversial and difficult situation to explain to members/public
  • Martinez-Fischer – Do any of you have proposals today? School districts, local government and others need to be a part of this conversation
    • Staples – Industry has been working to discuss what would be helpful for a new program
    • Bennett – Are working on concepts
    • Craymer – Have been meeting with member companies and have not put anything on paper
  • Martinez-Fischer – Do not understand why there was a modernization/renovation push for companies who are already here
    • Bennett – Push aimed to compare to what most states offer
  • Noble – Assume we’re taking land out of ag use and putting it into solar
    • Paup – Mixture of underutilized land
  • Noble – Abating tax base there, not buying this land
    • Can be either way
  • Noble – Who pays the property taxes when the 313 goes away?
    • Power plant operator, pay on the improvements
  • Murphy – Are other states doing agreements for battery storage?
    • Other states are doing similar things, not sure about battery storage
  • Murphy – Might be something to look at if it moves the needle
    • It would move the needle

 

Panel 3 

Janelle Fritts, Tax Foundation 

  • Texas offers far fewer corporate incentives than other states, which is to the state’s credit; recent evidence shows benefits are short lived and often cost the state more than it gets in return
  • Highlights North Carolina and Dell, Dell closed a plant moved to NC after 4 years; Kansas & Missouri competition also often led to businesses moving back and forth across state lines without profit to the state
  • Studies also often find that tax incentives provide little benefit, often go to businesses that would move to the state anyways and businesses have little staying power
  • Options aside from incentives exist to attract businesses
  • Tax Foundation conducted a study on 8 model firms & calculated the total tax burden for these firms based on different states
  • Texas’ relatively high property and sales taxes do yield high tax burden for new firms, but Texas tends to rank better for more mature firms; TX has 18th lowest burden on mature manufacturers
  • Distribution centers see high property tax burdens and data centers see high sales tax burdens
  • Property taxes are the majority of business taxes in Texas, but this trend exists in other states as well
  • Addressing business inventory could help equalize burden across businesses; issues include inventory taxes are levied regardless of profit, non-neutral towards businesses with large inventories, transparency issues, and in TX taxpayers must compute tax burden themselves
  • Slow phase outs over several years can help mitigate the loss of revenue
  • Would encourage state to consider increasing competitiveness in ways aside from Chapter 313
  • Murphy – 50 is the worst for burden on the chart, Texas is performing worse for many of the categories in your study?
    • Yes, Texas performs poorly for new firms
  • Button – Texas also competes internationally, not just other states
  • Button – Do you have examples of companies attracted to states without any tax incentives?
    • Companies that come to states and get a lot of fanfare are typically the ones that get incentives
    • Most employment comes from small businesses and often move to states without this fanfare or gaining the eco dev money
  • Button – Right about inventory tax; do you have examples of states using the tax to attradct high capital industries
    • Don’t have a lot more states at the moment, but there are some
    • Right now inventory tax does disproportionately affect companies with large amounts of inventory
  • Button – But they don’t do much about high capital-intensive companies
    • Texas does exempt machinery, machinery-based companies wouldn’t be affected, but companies with tangible personal property would be affected

 

Dick Lavine, Every Texan 

  • Highlights study looking into whether companies would come to states but for the incentive, conclusion is that between 2%-25% of companies move based on incentives, 75% would make the decision regardless of the incentive
  • Presents list of companies that invested in the state without incentives, incl. Caterpillar, Koch, Mitsubishi, American Spiral Weld Pipe Company, etc.
  • Property taxes are much lower now than they were, perhaps even lower since the studies were done before HB 3
  • Pilot payments were often 50% of the tax incentive; indicates incentive was likely twice as large as it needed to be
  • Need to determine the companies that would be attracted by incentives and tailor the incentive; 313 did not do a good job of determining which companies would take advantage of it
  • Goya moved from Harris to Waller with a 313; county placement shouldn’t be of interest to the state
  • Managing officers should sign statements with specifics on what other opportunities are competing; may have to disclose info, but also trying to claim a large benefit from the state
  • Murphy and Lavine discuss companies coming into the state
  • Murphy – Misconception was that there was a giant loss of revenue through 313, but this didn’t occur
    • Get a lot of questions about how it affects recapture, which isn’t the issue here
  • Highlights fiscal notes projecting into the future losses through the FSP and other ISD-related funding; stems from lost values and ability to perform tax compression for all other taxpayers

 

Glenn Hamer, Texas Association of Business 

  • Lack of capital-intensive tool to replace 313s would be devastating
  • Top issue for member companies of TAB; capital tax abatement tool and workforce development are two top issues for major businesses
  • Important to have incentives if Texas is going to capture supply chain businesses
  • Shares statement highlighting potential fiscal loss with only 1% employment loss per year
  • Lack of incentive affects international competitiveness

 

Panel 4 

Rev. Miles Brandon, Texas Industrial Areas Foundation 

  • Provides overview of Texas IAF, advocates for economic and human development
  • 313s should not be brought back, drains about $1b from the budget per year; 95% of ISDs would receive more funding if it was distributed rather than used for 313s
  • 313s benefit large businesses, but nothing for small businesses or individual home owners
  • Seeing a large number of businesses applying for 313s, over 4x; will cost taxpayers an additional $10b-$20b per year
  • If brought back, incentive should be decupled from school funding

 

Brett Bennett, Texas Public Policy Foundation 

  • Needs sot be a hard look at cost & benefit of doing this, need to look at the hard to calculate diffuse costs as well
  • Most efficient way to provide property tax relief is rate compression across the board; presented buy down plan for school M&O taxes previously
  • Support Gov. Abbott’s proposal to apply surplus to property tax relief
  • Giving out tax breaks to some corporations detracts from broad goal of tax relief generally
  • 96% of active 313s are energy related, most here because of geography
  • If we’re not building enough power generation, should be doing it through ERCOT market design; any new project should not include energy projects, particularly power generation
  • Any new incentive also needs to consider school boards having input when they don’t bear the full cost
  • Important to have transparency and a clear sunset date for the program
  • Shine – TPPF is opposed to any type of incentive to attract new business or industry to the state? Reinvestment zones, etc.?
    • Opposed to targeted incentives that don’t apply as broadly as possible
    • Incentives applying to everyone is essentially rate compression
  • Shine – Talking about all businesses across the board
    • They have to apply and then would not apply to all

 

Public Comment 

Christy Rome, Texas School Coalition 

  • ISDs and trustees should have a role in economic development in their communities, should have a voice & input into the incentive
  • ISDs will not agree if the agreement is good for the ISD, needs to have local ISD input

 

Mark Gollaby, Self 

  • Part of why 313 fell apart is because the tax burden shift was revealed; corporate welfare program that does not return an investment to the state
  • Residents are being taxed out of their homes, ISD tax discounts for large businesses do not make sense in this context
  • Barber’s Hill and Goose Creek ISD account for 35% of the agreements, good eco dev program should show benefits across the state
  • 313 is lowering property values by significant amounts; 25% across the state

 

Samuel Davis, Texas Land & Liberty Coalition 

  • Paint Rock ISD benefits from 313s, 313 agreements led to large tax support
  • Rural Texas benefits greatly from incentives like this
  • Clean energy investments lead to much larger tax bases for rural communities; 313s give communities the ability to compete
  • Must provide an eco dev framework that makes sense for rural Texas and industries that go there, not just the large industry members
  • Murphy – Heard that there is a 10-year reduction in value then after you’re back up

 

Bill Peacock, Huffines Liberty Foundation 

  • Property tax abatements were illegal in the state previously as they were considered to be theft; Texans narrowly adopted a Constitutional amendment in the 1980s to allow this in narrow circumstances
  • Without renewing 313s, problems with Texas’ high property tax rate becomes more apparent
  • Not renewing 313s will improve grid reliability
  • Eliminating 313s will be a down payment on $4b energy cost due to renewables
  • Not continuing 313s is the right thing to do economically & ethically

 

Lydia Moore, Central Texas Interfaith

  • Average citizens are forced to shoulder burden of high property taxes; companies do not always reach their commitment, nothing holds them accountable & regularly do not meet hiring metrics

 

Everett Lunning, Central Texas Interfaith 

  • 313 has rewarded individual school districts while siphoning funds away from the system statewide; shouldn’t take from the system to pay the richest companies in the world

 

Rickie Harris, West Orange-Cove CISD Superintendent 

  • West Orange-Cove CISD is in process of negotiating 313 agreement, beneficial to West Orange-Cove CISD; bring more resources into the district
  • Seeing jobs moving to the district, anticipation of the 313 has built excitement in the community
  • Legislature should look at allowing districts to hire professionals to help negotiate 313s, e.g. consultants
  • Existing agreements need to exist under the current system, shouldn’t penalize existing agreements

 

Pete Pape, Texas Schools for Economic Development, Mesquite ISD 

  • Support 313s partnerships, increase the tax base for ISDs
  • 313s entities are fully taxable for I&S
  • Support renewal of 313s or an incentive to replace 313s
  • Support process being transparent
  • Support local school boards’ ability to approve, negotiate, and hire consultants