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The Senate Committee on Property Tax met on February 26, 2019, to hear testimony on SB 67 (Nelson), SB 135 (Nichols), SB 449 (Creighton), and SB 462 (Campbell).

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.

 

SB 67 (Nelson) Relating to the administration of the ad valorem tax system; authorizing a fee.

Sen. Nelson

  • Almost identical to appraisal reform bill from last session.
  • Make appraisal process more transparent, fair, and accurate.
  • Implements term limits for appraisal district board members, changes selection process of board members.
  • Bettencourt – A lot of this bill is already in SB 2.

 

Paul Pennington, Citizens for Appraisal Reform

  • Reviewed recent history of appraisal reform efforts.
  • Supports SB 67.
  • Bill will provide taxpayers with fairness in ARB hearings and the arbitration process.
  • Bettencourt – Bill changes term limits for members of appraisal review boards, expand on that and expand on the reforms for evidence in hearings.
    • Pennington – ARB members can serve a limit of 6 years, but there is a loophole allowing essentially unlimited terms for board members. For evidence in hearings, changing the language so that taxpayers have time review the evidence that will be used in the hearing.

 

Michael Henry, Ryan LLC

  • Supports SB 67.
  • Grouping of hearings, schedule up to 20 hearings in a single day, will make the process more efficient.

 

Adam Haynes, Conference of Urban Counties

  • Supports SB 67.
  • Put back in provisions that give LBB oversight of advisory committee processes.
  • Taxpayers should be able to see evidence before the hearing. If new evidence is presented there should be an ability to rebut or refute that evidence.
  • Keep the risk based system in place.
  • Hancock – Aren’t there already laws that require appraisals to be within a certain variance?
    • Haynes – Yes that is correct.
    • Hancock – I do not see the need to go above the rate that would require the individual to come before the ARB.
    • Haynes – Part of the system is that there is risk for both sides. If the risk is eliminated for one side then there is no incentive to settle, it will always go to a hearing.
    • Hancock – So the ARB needs the threat of taking the values higher to offer a settlement?
    • Haynes – That taxpayer should have a risk to proceed with the case.
    • Hancock – That risk is the time resources, it seems you are saying they need additional risk, that the ARB would need the ability to threaten an increase in order to reach a settlement?
    • Haynes – If the judge finds in their favor, then set the bill up where there are penalties applied to the board. If the board is the bad actor, address the bad actor.
  • Bettencourt – There are two sides to this coin, I think you need to look at this issue again. The ARB is not supposed to be an adversarial scenario, it should be a board of citizens who will give a fair hearing.

SB 67 left pending

 

SB 462 (Campbell) Relating to ballot propositions authorizing certain political subdivisions to issue debt obligations.

Sen. Campbell

  • Bond debt has been increasing, leading to a rise in property taxes.
  • SB 462 will require bond propositions on ballots to be clear and provide sufficient detail for voters to know what the long-term impacts will be.
    • Information about how the money will be borrowed and how it will be paid off.
    • Disclose purpose of the debt, amount of outstanding existing debt, potential future tax increases to pay for the debt.
  • Hinojosa – Past session discussing capital appreciation bonds, they would have been paid in 20-25 years. Many voters did not understand what was going on. Important to inform the voters how much and what type of debt. Support providing more information to voters.
  • Hinojosa – Having a centralized authority to provide information of combined debt for all taxing jurisdictions within a county.
    • Campbell – I have another bill that would do exactly that.
  • Bettencourt – Using a percentage basis is something the public understands, that is a good idea.

 

Adam Haynes, Conference of Urban Counties

  • Against SB 462.
  • Most information the bill provides for is already there.
  • Make sure the entities know if the bond doesn’t pass what will happen. Provide more balance
  • Campbell – Why don’t you like the bill? Because it won’t say that if the bond proposal fails the voters might not get the road or park or whatever is being proposed?
    • Haynes – Yes.
    • Campbell – I think the voters are smart and will realize that if they vote no they may not get what is being proposed.
  • Hinojosa – For capital appreciation bonds there was pushback on putting too much info on the ballot, but there are ways to put precise, concise info in a small space, I think this is what we are looking for.
    • Haynes – It is difficult to get people to vote on down ballot measures. Ballot complexity is an issue.
  • Bettencourt – Data is clear that people went down ballot and voted. Emphasize Campbell’s statement that the public knows what a no or yes vote will do.

 

James Quintero, Texas Public Policy Foundation

  • Support of SB 462.
  • Proposals are currently written too broadly, do not give enough information to make an informed decision.
  • There are many people who do not realize new debt often comes with new taxes.

 

Bill Longley, Texas Municipal League

  • Supports SB 462.
  • Reviewed recent reforms around debt transparency.
  • Bill could add more context, showing bond ratings or a city’s ability to pay back the debt.
  • Bettencourt – You support the bill but want to add information about a city’s bond rating?
    • Longley – Yes, we appreciate that aspect of 461.
  • Campbell – Did not include the bond rating because it is not about whether or not a subdivision to do it, it is about whether or not a voter can afford it.

 

Bob Collie, Orrick Law Firm, representing Harris County

  • In opposition to SB 462 but supports the intent of voter education.
  • Existing debt and amount of new debt is a dynamic process. Putting the outstanding debt and new debt creates a false perception of what debt will be.
  • Should put estimated debt after the bond is passed on the ballot.
  • Bettencourt – Still trying to understand what the objection is?
    • Collie – There is other information the voter should be educated about that is not included in SB 462. Include this information in a voter information sheet rather than on the ballot.
  • Hancock – On that sheet would it be advisable to let property owners know that their tax rates would drop by a certain date if no new bonds are sold?
    • Paley – Would not have a problem with that, but the way it usually works is that new bonds are sold as old ones are paid off.
    • Hancock – There is some pressure to keep the tax rate steady so they don’t have to raise rates in the future, would it not be a good idea to let voters know they have a say in what their tax rate will be?
    • Collie – I wouldn’t be opposed to that, but I do not think that bonds are being sold to maintain a tax rate, they are being sold to serve a need.
  • Hinojosa – Is there a way for voters to know they are incurring debt?
    • Collie – If a bond election has failed you can’t sell Certificates of Obligation (COO) for the same propose for 3 years. There needs to be a voter information sheet.
    • Hinojosa – A COO can be issued without a restriction on the amount or number of years?
    • Collie – There used to be a petition requirement, 5% of voters can submit a petition that stops issuance of COOs.
    • Bettencourt – Current election system in Harris County is limited to 5,000 characters. The ballot would describe what the bond was for and some key data points.

 

Adam Cahn, Cahnman’s Musings

  • Supports SB 462.
  • Local government debt has increased by about 50% in recent years.
  • Getting good info to voters in critical in down-ballot campaigns. Large proportion of voters do not know what is going on in down-ballot initiatives.
  • Bettencourt – Is the proposed information in SB 462 enough to get voters enough information?
    • Cahn – The expected likely tax increase and the amount of existing debt is good information. For local bond ratings, I do not trust the rating agencies but there is not necessarily a problem.
  • Campbell – Bond ratings is not a part of this bill. It is about affordability for taxpayers, not ability of subdivisions to finance the bonds.

 

Brian Talley, Self

  • Supports SB 462.
  • City of Austin has seen large increase in debt. $1600 per capita is being paid by Austin residents for debt service.
  • Bettencourt – We are also going to bring back a bill relating to ballot language.

SB 462 left pending

 

SB 449 (Creighton) Relating to testimony by an appraisal district employee as to the value of real property in certain ad valorem tax appeals.

Sen. Creighton

  • Intent of SB 1760 was that an appraiser be a licensed or certified appraiser to appear in a hearing, intended to give a level playing field for the taxpayer.
    • Amendment language that made it in the bill made the bill an anti-taxpayer bill. A judge would be able to give preference to an employee of an appraisal district because the appraiser is certified.
  • This bill restores the status quo, does not change anything else.
  • Bettencourt – This is already part of SB 2.

 

Michael Henry, Ryan LLC

  • Supports SB 449.
  • This bill would correct a serious imbalance. If this imbalance is not addressed it would hurt taxpayers.
  • Judicial process should judge testimony based on merits, appraisal district employees should not have preferential treatment.

 

Lorri Michel, Texas Association of Property Tax Professionals

  • Supports SB 449.
  • Playing field should be leveled, right now it is hurting tax payers.
  • Statue does not enact until 2020, opposition counsel in a case argued that the clear intent of the bill was to give preference to appraisal district.
  • Paxton – Opposing counsel actually stated that the intent was to give preference to appraisal district employees, when Creighton says his intent was the opposite?
    • Michel – It is kind of ironic that opposition argued the intent. They made that argument because the law was not to go into effect until 2020. Since the statute was clear that it would give preference to appraisal district employees the courts do not look at legislator intent.

SB 449 left pending

 

SB 135 (Nichols) Relating to the eligibility of land used as an ecological laboratory for appraisal for ad valorem tax purposes as qualified open-space land.

Sen. Nichols

  • Relating to eco-lab provision and open space land.
  • Land used as eco-labs by a university is considered open space land.
    • Constitutional amendment was authorized in 1978, unlikely that voters knew that that amendment would give eco-labs generous tax breaks with less stringent requirements than for ag lands.
  • Eco-lab land is qualified as open space after 1 year, takes five out of seven years for ag land.
  • Bill will correct imbalance between agricultural land and eco-labs.
  • Taxes must be fair and uniform, as it stands it is not.
  • Hancock – How much land are we talking about?
    • Nichols – Do not know, but it is growing every year.
  • A law firm in Austin works with a particular professor at UT Austin and will send a student to perform studies on land to establish it as an eco-lab. These studies are often trivial. The land owner will then save hundreds of thousands of dollars in taxes.
  • Paxton – How does this effect lands already in the program?
    • Nichols – Grandfather them in.

 

Bill Jackson, Self

  • Many landowners wanted to protect wildlife or natural beauty of land without burden of taxes at the market rate.
  • Two rules for the wildlife legislation. property must be appraised as open space and the legislation must be revenue neutral.
    • Eco-lab program for does not comply with these two rules.
  • People applying for eco-lab program should have to comply with the same requirements as other land.
  • Nichols – This practice has been spreading?
    • Jackson – Yes, it is more prominent in the hill country. Before wildlife, this was not an issue.

 

Scott Fair, Gillespie Central Appraisal District

  • Support SB 135
  • This is a fair and equal issue, should be covered the same way as farming and ranching.

 

Wendy Grams, Bandera Central Appraisal District

  • Bandera has seen 24 eco-labs since 2010.
  • Support history requirement.
  • Additional information should be required.
  • Bettencourt – Besides the traditional requirements for ag and wildlife, you think there should be additional information?
    • Grams – Yes.
    • Bettencourt – Do you know how many parcels are being covered?
    • Grams – There are 4 eco-labs in Bandera.

 

Jeff Wisebarg, Self

  • Against SB 135.
  • Landowner with land under eco-lab.
  • Program is useful, researchers have been real researchers doing real work.
    • Without the eco-labs program that research would not have happened.
  • Land already in eco-lab should be grandfathered in.
  • Nichols – If you already have the designation you will be grandfathered.
    • Wisebarg – I cannot tell, the project has not been completed.
    • Nichols – Eco-lab was never defined in the legislation, it has been defined by a law firm in Austin. But if you have been designated and the students want to continue research then you will be grandfathered in.
    • Wisebarg – If the rule is that I have to participate 5 out of 7 years then there is no reason for me to do it.
    • Nichols – Maybe you just love ecological research.
    • Wisebarg – There are costs associated with doing this research.
  • Bettencourt – It is the intent of the author to have people already covered to eb grandfathered in.

 

Rufino Lozano, Comal Appraisal District

  • Supports SB 135.
  • Amount of land under eco-lab program is small. Losses in property tax are small.
  • Current system is not fair or equal.
  • Bettencourt – The loss is not large, but it is a fairness issue.

 

Stephanie Urdle, Self

  • Against SB 135.
  • Eco-lab very valuable, allowed property which is not suited for ag to be designated as a wildlife management land.
  • Wildlife management takes work to do. Hiring people to do that work would cost more than the tax savings.
  • Research on kissing bugs and Guadalupe Bass has been valuable.
  • Program does not compare to ag, it is a different program.
  • Hancock – How long have you been doing this?
    • Urdle – Since 2013.
    • Hancock – So this bill doesn’t apply to you.
    • Urdle – It does apply since I am in the Hill Country, a lot of that land is not suited for agriculture and we need a way to get to wildlife management
    • Hancock – But your tax status will not change if this bill passes?
    • Urdle – That is correct.
  • Bettencourt – If you had to do this 5 out of 7 seven years would you have done it?
    • Urdle – No we probably would not have done it.
  • Nichols – I do not understand why you fell that if you were doing it the first time, why does a farmer have to work their land for 5 years, but you get preferential treatment for doing it in 1 year, why should you get preferential treatment?
    • Urdle – Ag is income producing, if you are doing something that is not income producing it is more difficult to do it over a longer period of time.

 

Melisa Dickerson, Hays County Appraisal District

  • Supports SB 135.
  • Losses of over $1m for Dripping Springs, Hays, and Wimberly ISDs.
  • Bettencourt – Pattern is that eco-lab goes to wildlife?
    • Dickerson – Not necessarily, some of the larger tracts could be used for crop production or grazing.
    • Bettencourt – You denied 5 or 6 application?
    • Dickerson- No, we have received 6 applications to convert to wildlife from eco-lab.
  • Nichols – Eco-lab is traditionally used as a bridge to wildlife, once they get to wildlife do they continue to do eco lab?
    • Dickerson – No.

 

Desiree Tupac, Self

  • Against SB 135.
  • Ag is income producing to offset costs, eco-lab has costs and does not produce income.
  • Instead of raising requirement for eco-labs, might be better to lower the requirement for ag land.
  • Research was always serious research.
  • Bettencourt – How much money?
    • Tupac – Around $5,000 per year.
    • Bettencourt – You say there is a barrier to spending $5,000 per year but you have continued to do it?
    • Tupac – Yes I am starting a third year in the program but am looking to recoup some of those costs. This program is important for the researchers.

 

Richard Urdle, Self

  • Against SB 135.
  • Cannot use land for ag.
  • Current system made it financially feasible to participate in the program.
  • Paid more to fund the research than saved in taxes.
  • Bettencourt – Were you paying taxes on the land before you got eco-lab?
    • Urdle – Yes
    • Bettencourt – Were you planning on continuing to pay those taxes if you didn’t have eco-lab?
    • Urdle – It would depend on how much the taxes go up. The amount we saved in taxes is less than the cost to hire contractors to do the kind of work we are doing.

 

Bill Wilkinson, Self

  • Against SB 135.
  • Taxes have doubled over past 5 years on a parcel of land.

 

Joe Davis, Self

  • Against SB 135.
  • Have participated in eco-lab program, funded around $20k in research.
  • Moved from eco-lab to wildlife management in 2010.
  • Nichols – Do you still pay for eco-labs?
    • Davis – We stopped in 2015, I still make my land available but there is sometimes conflict between the work that needs to be done for wildlife management and eco-lab.

 

Ben Philips, Self

  • Against SB 135.
  • SB 135 does not include any clause to specifically grandfather in landowners currently in the program.
  • Bettencourt – Inaudible
    • Philips – We had to figure out what the break even point was on this program, it was 6-7 years out. If we did it 5 years it would have been a 20 year break even point.
  • Nichols – The bill is very clear that if you are in the program you are grandfathered in.
    • Philips – Disagree, the way it is written I am not sure if I will be grandfathered in.
    • Nichols – I am being very clear that if you have been approved before January 2020 you are in.

 

Dr. Stevana Struts, Self

  • Not a lot of public land available, eco-labs and wildlife management areas are useful for the research.
  • Appraisers often don’t have good information, studies can take years.
  • Bettencourt – How many eco-labs did you participate in?
    • Struts – Maybe 30-40.

 

Katherine Strain, Self

  • Research work on eco-labs provides valuable information.
  • Bettencourt – Eco-lab program gave access to private land you otherwise wouldn’t have access to?
    • Strain – Yes that is correct.

 

Alejandra Rodriguez, Self

  • Research done on eco-labs is valuable, would not be possible without the eco-labs.
  • Nichols – I have heard the comment there is not a lot of land available for research, but we have national forests, vast tracts of state land, parks, that is hundreds of thousands of acres?
    • Rodriguez – As an undergrad it is difficult to get to certain places to do this research.
    • Nichols – I live in East Texas, there are counties that are 80% public land.
    • Strain – There is not a lot of public land in certain areas that are of interest. To my knowledge it is less than 10% public land in Texas which makes it difficult.

 

Kelly Lyons, Trinity University

  • Eco-labs have been useful for research.
  • This bill will kill eco-lab since it is a net cash loss for the first years of eco lab.

 

Tom Miller, Self

  • Research sites on private land enhances the quality of research since it is more secure.
  • Eco-labs should be treated differently since there is value associated with scientific research.
  • Bettencourt – Do you have recommendations to change the bill that you would support it?
    • Lyons – The timeline should be shorter than 5 years.
    • Miller – I agree the timeline will kill it, it would make sense to shorten the timeline for other programs if we are concerned about equity.

 

Cassie Gresham, Braun and Gresham Law Firm

  • Worked with appraisal districts to create standards for eco-lab qualification.
  • There is a compromise that can be reached on this bill.
  • Nichols – Are you aware of any firms that do the amount of eco-lab work that you firm does?
    • Gresham – I am not aware of another law firm, there are some people who do it on their own.
    • Nichols – A couple weeks ago there were some pamphlets that used the UT Austin logo making it appear as if it was sponsored by UT, are you responsible for that?
    • Gresham – I am personally responsible, and I apologize for that, but all the information in those pamphlets is accurate and is public information.
    • Nichols – Did you ever approach our office this year to work on this bill?
    • Gresham – I have not personally come but we have lobbyists who have been in contact with your office.
  • Bettencourt – The behavior with the university logos is not acceptable, I appreciate the straightforward apology.

 

Mike Young, Self

  • Hard to find suitable land for research. Public land is covered with tourists and people, and the benefit of doing research is lost.
  • Against SB 135.
  • Bettencourt – Has your land been classified as eco-lab?
    • Young – Yes, but it is in the first year.
    • Bettencourt – You have an old-growth forest and that is where you are looking at conducting research on?
    • Young – Yes.

 

David Donohue, Self

  • Against SB 135.
  • Land has benefited from eco-lab program.

 

Nichols – Highlighted abuses of the eco-lab programs, certain landowners using the program to avoid taxes. This is shifting the tax burden onto other people.

SB 135 left pending