Print 🖨

The committee met in Harlingen to consider the following interim charges:
 
Study the property tax process, including the appraisal system, and recommend ways to promote transparency, simplicity, and accountability by all taxing entities.
 
Examine and develop options to further reduce the tax burden on property owners.
 
 
David Shoemaker, Committee Policy Analyst

  • Shoemaker offered testimony from previous hearings
  • Since 2005, county property tax levies have increased much faster than household income
    • Statewide, county tax levies have increased by 70% while median household income has increased by 26%
  • City and county tax levies have increased by 62%; household income has grown by 30% in Cameron County and 42% in Hidalgo County
  • Bettencourt noted that when the state offers an increased homestead exemption, the state is responsible for the obligation to the school districts
  • Bettencourt discussed the rollback rate; because of property value increases, a tax levy will increase despite a stagnant tax rate; if a tax rate increases by 8% a tax levy in certain areas of the state with high property value increases  will increase by much more than 8%

 
Frutoso Gomez, Jr., Chief Appraiser, Cameron County Appraisal District

  • Property owners have noted that information on tax notices is confusing
  • Taxpayers are generally not aware of all the taxing entities they fall under and want to know what services are being provided by those entities
  • Tax estimates are confusing to property owners as well
  • Property owners have expressed interest in having their ARB hearing via telephone or Skype
  • When individuals file protests, many times they are withdrawn or do not show up
  • In 2015 there were approximately 10,000 protests filed for multiple reasons
    • Over 2,500 were withdrawn
  • Sen. Charles Perry noted the 2,500 withdrawn protests were probably because people decided it was not worth it
  • Bettencourt asked about average home value increases over the last year
    • In 2014 average home value was $86,405 and for 2015 it was $87,858
  • Taylor asked if taxpayers were allowed to have ARB hearings over the phone if that would make hearings increase in number
    • It would be hard to determine if the person on the phone was the actual property owner; believe it should be up to the legislature whether that is acceptable; might be a positive benefit for the people
  • Sen. Eddie Lucio asked if there are or have been blanket increases in property valuations
    • No
  • Lucio noted he has heard concerns about properties eroding in Cameron County because of small bodies of water near the property; people build walls to prevent this erosion; do these retaining walls increase property values
    • Yes they do
  • Cameron County has $2.8 billion in commercial property value and $10 billion in residential property value

 
Tony Yzaguirre, Jr., Tax Assessor Collector, Cameron County

  • Last year the office sent out bills totaling around $282 million
  • The office collects for Cameron County and 37 other districts
  • Cameron County offers discounted rates for timely payment of tax bills
  • Complaints to the office are relatively few; some are concerned that they do not have the entire payment available
    • Payment plans are offered
  • Bettencourt asked what the percentage increase of total levy is for the last year
    • In 2012 the levy was $61 million; in 2014 it was $66 million; this year it was nearly $67 million
  • Bettencourt asked if these are tax rate increases or mostly valuation increases
    • From 2014-2015 the valuation increase was about 4.4%
  • Perry asked if the process is fair and independent
    • Gomez responded that the system has improved significantly since the 1970s when he began working for the county
  • Perry noted there is never a decrease in valuations and that does not track with reality; when there are recessions and depression in the economy property values do go down but tax valuations do not
  • Lucio asked if foreclosures are increasing or decreasing
    • There is an increase; will be selling 115 properties next month unless some additional tax bills are paid
  • Bettencourt asked if the county offers an optional homestead exemption
    • No
  • Many times first time homeowners don’t know they need to file for a homestead exemption; would like to see some sort of mechanism for educating homebuyers about this

 
Rolando Garza, Chief Appraiser, Hidalgo County Appraisal District

  • Covers around 350,000 properties with a taxable value upwards of $30 billion
  • Notices of appraised value are very confusing to property owners; complaints come in regarding tax rates and estimated taxes
  • Would like this notice to be simplified and tax rate and estimated tax should be removed because the appraisal district doesn’t have anything to do with setting tax rates
  • The appeal process does not allow much time for property owners or the district
  • Two most common protests are unequal appraisal or market value protest; the evidence for a market value protest is fairly straightforward but there are problems with the unequal appraisal
    • Perhaps should limit the total reduction from an unequal protest; would be far more equitable for all property owners
  • A high percentage of property owners who have gone before the ARB in Hidalgo County believe they were treated fairly and they were happy with the ARB
  • Bettencourt asked about the previous hearing’s testimony regarding the deposition of Hidalgo County ARB members
    • Was present at that deposition; the deposition agitated the ARB members and they didn’t want to answer any more questions after a certain point
  • Lucio asked what commercial property values are
    • Commercial properties account for $7 billion of the total $30 billion
  • Bettencourt asked what the rate of increase was for commercial properties
    • About 12%
  • Bettencourt noted the witness mentioned being unhappy with E&U; if commercial values are too low why hasn’t the appraisal office raised them
    • The issue is not the proposed value; it is that property owners use comparables with a much lower value; it is still too early to know whether the recent legislation will be beneficial or not
  • Sen. Brandon Creighton asked about the income approach for a determination on assessing commercial properties; what if that approach were removed
    • The county uses the income approach on several types of properties; it does indicate the actual value of an income producing property; without it districts would be put at a disadvantage

 
Pablo Villarreal, Tax Assessor Collector, Hidalgo County

  • Currently collect for around 42 taxing entities
  • A 2 year comparison for property values would be easier for taxpayers to understand on tax notices
  • Taxpayers would also like to see some relief from the penalties and interest that accrue when they cannot afford to pay their taxes
  • Sen. Chuy Hinojosa asked if Hidalgo has installment plans
    • Only for certain populations such as elderly or disabled; there are penalties and interest for other populations who pay in installments
  • Some citizens apply for a tax deferral; nearly 13,000 applications in 2015
  • For 2013 average taxable value for residential was around $85,000; in 2015 it was $92,000
  • Bettencourt noted that means there was a 6.5% increase in taxes without a tax rate increase

 
Lloyd Neal, County Judge, Nueces County

  • E&U is unfair to residential homeowners and burdensome to appraisal districts
  • The recent legislation has not solved the problem
  • Valero refineries in Nueces County are fine corporate citizens but they constantly challenge their appraisal
  • Litigation budget is $400,000 and Valero uses this information against the appraisal districts; legal fees are far more than the appraisal district budget
  • Out of fiscal necessity the appraisal district is forced to settle with Valero and they have reduced their valuations by $850 million over three years
    • Original valuation was $799 million; $250 million reduction the first two years and close to $400 million reduction for the third year
  • Refunds on behalf of all taxing entities this year totaled $9 million; interest was about $1 million as well
    • About half of that from the school district
  • This year the County did not refund Valero’s taxes but has reduced their taxes going forward
  • When the tax base is artificially lowered because of situations like these, other taxpayers must pick up the slack
  • Would like the legislature to review E&U provisions
  • Bettencourt noted from 2005 to 2015 tax levies in Nueces County have gone up twice as fast as median household income; county tax collections have nearly doubled in 10 years
    • Nueces is a growing county; value of revenue coming in is more than offset by all of the unfunded mandates from the state and federal government, the cost of bringing IT infrastructure up to date, indigent defense costs and indigent healthcare; cost of government goes up regardless of household income
  • Bettencourt asked when enough is enough
    • When the county responsibility stops increasing
  • Over the last 9 years the tax rate has been lowered 9%
  • About 60% of the tax burden falls on residential property
  • Hinojosa noted E&U is a statewide issue
    • The issue is not how it is applied; the real issue is that if the appraisal district loses the county has to pay the legal fees for both parties; that provision should be removed and it would slow the issue down
  • Taylor noted E&U protects taxpayers from an appraiser who may want to protect certain groups like larger cities where their electoral base is
    • Concern is not for the individual homeowner or small business owner; they can come before the appraisal district and work something out; the concern is the large business owners who challenge $850 million valuations; don’t want to take them to court because legal fees would have to be paid even if they win just a small decrease in valuation
    • If everyone bears their own expense the dynamics of this would change a lot
  • The impact on economic development by lowering the rollback rate could be disastrous in the event of a continued downturn in the Texas economy; placing restrictions on local government through revenue caps or rollback rate decreases would prevent economic growth
  • Bettencourt asked how it could be a disaster to reduce the rollback rate; Nueces County is nowhere near the rollback rate
    • 60 days away from hurricane season; one large disaster could eat through a county budget in 30 minutes
  • Taylor asked if valuations are driving the increase in the size of county government
    • No; valuation increases allow the county to cover the responsibilities assigned to the county

 
Public Testimony
 
Fern McClaugherty, Objective Watchers of the Legal System (OWLS)

  • Tax notices say “this is not a bill” at the top so most people throw them away; that is an issue
  • Increasing taxes on a low income population increases the number of families dependent on assistance
  • Primary problem with the existing appraisal process is that it is manipulated by the taxing entities that want to take more from the public
  • It doesn’t make any sense to increase penalties and interest on people who already cannot afford to pay their taxes

 
OWLS Witness

  • Increasing taxes on low income people produces more low income people
  • It should not be the role of government to pay the way for people who are not working hard enough
  • Appraisal districts determine values based on the need of the taxing entities; this is not the way it is supposed to happen
  • Efficiency in government offices has always been in question; if tax relief is to be achieved efficiency must increase

 
Marilyn Rhyne, OWLS

  • Was not aware for a long time that homeowners are allowed to protest their tax appraisals
  • People on a fixed income cannot afford to have more taxes levied on their properties

 
Ken Jones, Lower Rio Grande Valley Development Council

  • Extend the tax protection of SB 835 to all homeowners who participate in hurricane recovery programs and all future recipients of disaster recovery funds

 
Mary Elizondo, South Texas College

  • Discussed the benefits to the community that the college brings
  • Historically the college received equal funding from state appropriations, tuition and property tax
  • State appropriations have been reduced therefore student tuitions were required to be increased because of an M&O tax cap the voters placed on the district

 
Steven Dunston, Tax Consultant

  • When applied properly, the tax system works very well in Texas
  • Discrepancies are growing annually by appraisal districts and ARBs
  • E&U is set up mainly for residential property owners but some appraisal districts valuation system is hidden from property owners
  • Transparency in many counties needs to improve
  • Appraisal district employees are licensed as well as tax consultants but ARB members are not licensed
  • Hope that these issues will be addressed by the committee
  • Bettencourt asked what transparency could improve
    • Some appraisal districts do not show classifications of residential structures; they have internal classifications and do not provide those; homeowners are at a disadvantage with E&U if they do not know the classification system
  • Bettencourt asked if the witness believes that a reduction in tax valuation on a commercial property directly affects a residential property owner
    • Not sure how that would be
  • Bettencourt asked if there were complaints against ARB chairmen made to TDLR what can be done
    • Have made those complaints and TDLR cannot do anything
  • Taylor noted if a person has a bad experience at the ARB they can still go to court
    • Yes; the problem is in instances where a taxpayer has no input on their hearing and are asked to waive their rights; ARBs will schedule a hearing for a certain day and not give any idea what time of day that will occur or how many panels a tax consultant will be appearing before
  • ARBs are under tremendous pressure to have a large number of hearings in a short period of time to have their valuations certified and it puts pressure on everyone else; with today’s technology, notices of appraised value should be sent out quite a bit earlier
  • Perry asked for Dunston to provide the committee with a list of his proposed solutions
  • Taylor asked for a proposal to solve the issues with bad ARB members
    • Nothing any greater or less than what is done with tax consultants and appraisal district employees; TDLR has a great process with a continuing education component; should be extended to ARB members

 
Marcus Phipps, Texas Association of Realtors

  • Sales price disclosure is an invasion of privacy
  • Florida had a similar law on the books and repealed it because the data was not reliable
  • Most appraisal districts do not have the capacity to analyze complex sales data

 
Jay Dickens, Real Estate Industry

  • There are problems in ag valuations; no arbitration provisions and no attorney fee provisions apply to special valuation provisions
    • Creates a high gain, low risk scenario for aggressive or dishonest appraisal districts
  • ARBs need to be more independent
  • There are vague standards in ARBs for which properties will be awarded the D1 status ag exemption

 
George Martinez, Libra Initiative

  • Concerned with high, inconsistent property taxes in the South Texas region
  • Texas property taxes are among the nation’s highest
  • Property taxes are always changing and hard to budget for
  • Lucio asked if the witness would favor a referendum allowing voters to decide where taxes come from such as an income tax versus a property tax
    • Do not have a position on this issue

 
Pete Perkins, Mayor, City of Ingleside

  • Opposes reducing rollback rates or limiting the ability of local governments to serve their people
  • Commercial properties are not forced to supply their actual sales value therefore commercial protests become a burden; commercial properties constantly postpone their protest hearings which cause problems as well
  • Bettencourt asked how much property taxes have increased in recent years
    • Valuations have increased 10% a year over the last three years
  • Discussed how much has to be refunded to commercial property owners including interest which must be paid back after ARBs find in favor of the property owner in a system that favors commercial property owners because of the lawyers they can hire

 
Jeff VanPelt, Comptroller’s Office

  • Bettencourt noted there is a lot of concern about ARB training
  • Comptroller is responsible for training of ARB members and continuing education
  • There are requirements for continuing education which include new methodologies and other information, information regarding the independence of ARB members, prohibition of communications, E&U requirements, rights of the property owner to dispute the appraisal and the requirement of the ARB to substantiate the valuations from the appraisal district
  • Bettencourt asked how much time is spent on training
    • 3-4 hours
  • Bettencourt noted that is a short period of time to cover a tremendous amount of required information; is it adequate?
    • Minimally adequate
  • Taylor asked if ARB members come to Austin to take the class
    • There are classes around the state; they are required to take the course annually
  • Taylor asked if it is the same class every year
    • New members get training certain training and returning members get continuing education training
  • Actively trying to fill empty positions in the office which are responsible for the training
  • Bettencourt asked for recommendations to improve training
    • Anything added to the statute will be incorporated into the training
  • Bettencourt noted he believes the length of time for training is awfully short

 
Bill Messeck, Field Appraiser Operations, Comptroller’s Office

  • Bettencourt noted this witness is more involved in the property tax study; will hear from him at a later hearing

 
Martin Villarreal, Chief Appraiser, Webb County Appraisal District

  • Issues in the heavy equipment rental business; companies are creating subsidiary corporations to lease equipment to take advantage of the loophole
  • Would like sales price disclosure
  • Would like to prorate taxes for individuals who have lost their homes due to catastrophic events

 
Jose Ramirez, Texas Low Income Housing Service

  • Echoed Ken Jones testimony

 
Intend to have the next meeting in Lubbock on March 21.