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The committee met in San Antonio 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.
 
Testimony
 
David Shoemaker, Policy Analyst for Sen. Bettencourt

  • Shoemaker reprised testimony given by the Comptroller’s Office at a previous hearing
  • Since 2005, county property tax levies have increased much faster than household income
    • County tax levies have increased by 70% while median household income has increased by 26%
  • Shoemaker discussed how property taxes are calculated  and the property tax yearly cycle
  • In Bexar County, from 2012-2015, filed property tax protests and protests taken before the ARB have increased by 70%
    • In the same time period, protests taken to court have increased by 82%

Albert Uresti, Bexar County Tax Assessor-Collector

  • In 2014, Bexar County adopted a combined tax rate of .3145, taxable value was $111 billion and total tax levy was $350 million
    • In 2015, tax rate remained the same, taxable value increased 13.5% and total levy increased by 12.05%
  • In October 2015 the county generated over 600,000 statements
  • 33% of property taxes statements were paid by mortgage lenders
  • Bexar County offers a half payment plan for tax payers to better budget their money; 75,000 property owners use the program of which less than 50% are residential property owners
  • The county started a 10 month payment program for residential owners who are either over 65 years old, disabled, veterans with a disability or surviving spouses of any of these groups
    • Bexar is the only county with this type of payment plan
    • 5,000 accounts use this plan
  • Would like to adjust tax code 26.15(f) to prevent refunds from being issued to new property owners who did not pay the previous property tax the refund is issued from
    • This is a big area for abuse
  • Would also like to amend 42.43(b) to move the interest rate on refund interest from 9.5% to a rate around 4-6%
    • A property owner can wait an extended period of time and allow their refund to accrue  a large amount of interest at the 9.5% rate
  • Chairman Paul Bettencourt noted a focus of the Lieutenant Governor is the growth in tax levies because of increasing valuations even though the state benefits from this because of the smaller share of public education funding the state would be responsible for; this problem is occurring all over the state
  • Bettencourt noted that refund fraud does exist and that may be a good area for legislation in the coming session
  • Sen. Eddie Lucio asked how many first time homeowners paid property taxes in 2015 in the county; is the county doing anything to make the process more simple for these taxpayers
    • Not sure how many first time taxpayers there were; this is a good point because many first time homeowners don’t know the system, don’t file for homestead exemptions, etc.; trying to do more outreach to benefit this population
  • Lucio asked what is being done to keep property taxes low
    • That is more of a County Commissioner’s role; still trying to make more people aware of the half payment plan and the 10 month payment plan
  • Lucio asked what changes can be made at the state level to reduce the tax burden
    • Need to make more people aware of the appeals process
  • Sen. Kelly Hancock noted in a 4 year period there
  • Sen. Van Taylor asked how many people are being foreclosed on because of failure to pay increasing property taxes
    • Not sure; the county is now requiring attorneys to post addresses of people in delinquency because many times senior citizens get behind and don’t want their families to know so the problem grows ; foreclosures do happen but the tax office tries harder than anyone to keep people in their homes and is willing to work with people who sincerely are trying to get their taxes paid but are having trouble
  • Taylor noted this problem will continue to get worse as tax burden grows

Michael Amezquita, Chief Appraiser, Bexar County Appraisal District

  • Everyone pays taxes but everyone does not pay at the same rate
  • In Texas, taxation is required to be equal and uniform in proportion to value; this is where the problem lies with the property tax system in Texas
  • Equal and uniform appeals were introduced as an opportunity for homeowners to get a fair valuation in relation to comparable properties within their neighborhoods; this system has morphed into a way for the very best commercial properties to use very rudimentary math to compare their properties to the median level of value within that subset of properties
  • If the subject property is appraised above that median level of value, the ARB or district court is required to reduce those values to the median
  • There is concern that this leads to ridiculously low values on commercial property
  • Homeowners are not precluded from using the same system, but for residential properties it does not lead to the same outcome
  • A 10% reduction on a $200 million property is a lot more than a 10% reduction on a $200,000 home
  • Market value means a very different thing for a homeowner and a commercial property owner
  • Looking at 10 years’ worth of data will show that commercial property ends up being taxed at about 40-50% of market value
  • The constitution mandates that property be taxed at market value but the truth is that homeowners are treated disparately in relation to commercial property owners
  • From 2005-2015, total market value on the rolls in litigation has grown from $2.27 billion to $19 billion; a 7x increase
    • In 2005 values were around $74 billion and current values are $147 billion; this only shows a 2x increase
    • In 2005 average value of a property in litigation was $2.1 million and the current average value in litigation is $7.1 million
  • In any given year the county will lose 10-15% of valuation to litigation; a total levy decrease of $81 million; this tax burden is shifted to everyone who didn’t benefit from a valuation decrease
    • This is equivalent to taking 20,000 average valued properties completely off of the rolls
  • Bettencourt noted there is a real question of when enough is enough
  • In 2015 total value notice to residential homeowners was around $83 billion; lost less than 9/10 of a percent in total appeals
    • In the same year the total commercial file was $52 billion ; so far 5.4% has been lost to appeals; this is not as high as other years because all of those appeals have not been settled
  • Discussed the fact that the county is liable for all attorney’s fees so the county must decide which cases it wishes to settle and which to take to court; tax attorney are in total control of the schedule
  • If a taxpayer wants an informal settlement conference they must be granted one within 120 days of their request; there are so many requests that the volume of requests cannot be supported
    • For the most part they will no-show their informal date and no-show their formal date; they will submit an affidavit saying their property was unfairly appraised and would like to go to district court
    • It seems, at a minimum, they should be required to provide some evidence fi they will pursue 42.227
  • Arbitrations have gone up 4x from 2014-2015; almost exclusively commercial
  • All of these issues lead to problems for homeowners and small business owners
  • Bettencourt noted the whole purpose of changing the arbitration bill was to give small business people the opportunity to go to arbitration and have a quick hearing to review their value
  • Bettencourt asked what type of value increases there have been in downtown San Antonio recently
    • Do not really track downtown as a separate statistic; the relevant point is that no properties that are going to litigation to claim they are over-appraised, they are all going to claim equal and uniform and all of it is commercial
  • Bettencourt noted his point is that the largest appraisal district in the state increased their values by 70% in two years; has there been a corresponding increase to commercial values in San Antonio
    • Yes but closer to 20%; the need for that kind of increase is a direct result of equal and uniform appeals
  • Hancock asked how a commercial property having their value decreased would impact a residential homeowner; are rates raised for other taxpayers
    • The county raises value but not rates
  • Hancock noted the rate stays the same so it does not impact property owners that do not litigate
    • If the total collectable revenue decreases by $81 million someone else is going to pay those taxes; the tax rates are adopted after the fact
  • Hancock disagrees, unless there is artificial manipulation of appraisals
    • That doesn’t happen because the Comptroller comes in and tests values; it is a determination of fairness; if everyone is supposed to be taxed at market value and a certain group is not taxed that way there is a split roll
  • Bettencourt asked if value goes up and the tax rate stays the same is that a tax increase
    • Of course
  • Bettencourt asked if there is a 30% increase in levy in a few years, when is enough actually enough
    • If everyone paid on the same level of value then taxes could be lower for everyone
  • Taylor noted one way to look at this is that the county is constantly over-appraising property by 5% and that is why when property owners come against the county, the county folds
    • That is not what the litigation says; litigation says they are not being appraised equally; they are simply comparing appraisals; the problem is that nobody else in the entire nation does this without marrying equality to market value; if an amendment was added saying in no case could equal and uniform value be less than 90% of market value the system would be better
  • Taylor asked if the appraisal office asks what property purchasers pay for properties
    • Yes; a majority of the 20% of surveys that are returned disclose that amount and the office also gathers data in other ways
  • Taylor asks if the appraisal office makes it clear it is not mandatory to disclose that amount
    • The survey does not say it is mandatory, they just ask

 
Catherine Morse, Samsung Austin Semiconductor

  • In 2014, Samsung was the largest taxpayers in the state with a net liability around $32 million
  • Equipment used to make microchips is very expensive and there is not much relief from depreciation because the equipment is constantly changing and improving
  • A lot of states that semiconductor manufacturers are moving to do not tax business personal property
  • Hancock made the point that for businesses, not only is there a tax on the brick and mortar, there is also a tax on business property and inventory that are all taxed at the same rate; Texas is trying to lure businesses to the state but the property tax system makes that hard for certain types of businesses
    • Texas is the 3rd worst in the nation for property taxes on big manufacturing companies

 
Jim Popp, Popp Hutcheson Property Tax Attorneys

  • Appraisal districts do a really great job and Texas has one of the best systems in the country
  • Harris County has relatively few litigations compared to the number of appraisals they make
  • The state must preserve equal and uniform; it is the foundation of fairness in the property tax system
  • Suggested the re-creation of a property tax board; would help increase transparency
  • The state must eliminate the ability of a tax office or chief appraiser to sue a taxpayer
  • Bettencourt asked if there have been any problems with SB 593 from last session
    • No; it has resulted in expediting resolution of lawsuits

 
Russell Bellamy, Self

  • A quick solution to the problem is to stop hiding property transactions
  • Texas is one of the few states that hides that information

Sheryl Sculley, City Manager, City of San Antonio

  • San Antonio has reduced the property tax rate four times in the last ten years
  • Discussed what the city has been able to do without raising taxes
  • San Antonio maintains a AAA rating from all three rating agencies which allows the city to keep taxes low
  • Bettencourt asked what the rate of growth in the city has been over the last few years
    • 3.9% annual growth rate over the last three years
  • Bettencourt asked what the recent tax reductions have been
    • 3/4 of one cent
  • Bettencourt made the point that it is disingenuous to talk about tax decreases that don’t really mean much; it is more important to talk about the magnitude impact to taxpayers

 
Ben Gorzell, Chief Financial Officer, City of San Antonio

  • The city does not offer a city homestead exemption
  • The topic of revenue caps came up last session; looking at the past 10 years, if a 4% cap had been in place instead of the 8% cap, the cumulative impact to the city would have been $251 million in lost revenue
  • The city portion of the tax bill is about 20% so that cap would have saved the average taxpayer $44 per year
  • The lower revenue cap would restrict the city’s ability to do business
  • Do not think revenue caps would provide much property tax relief but they would hinder the city’s ability function

 
Carlos Martinez, IBC Bank

  • Concerned with the Ad Valorem tax system
  • Preliminary valuation has been decreased 17% every year that a protest has been made
  • The protest process is burdensome and expensive and happens year after year
  • Bettencourt asked how much time and effort is spent toward that end
    • It is substantial; some years the bank wins and goes down to a certain level then the next year it goes right back up; the only people making money are the attorneys and tax consultants

 
Ashley Walker, Americans for Prosperity

  • Property taxes should not be increased
  • Property taxes affect homeowners but they also affect renters

 
James Quintero, Texas Public Policy Foundation

  • In Texas there is a serious local debt epidemic
  • As of FY15 there is $338 billion in total local debt
    • $12,500 owed per person
  • Most people do not make the connection between what is voted on in the booth and what the actual cost is
    • There are two pieces of information in the voting booth, principal amount and a short paragraph of legal jargon
  • Would like to see total amount of debt owed by the entity asking for more debt, total debt being asked for including interest, and property tax impact to taxpayers
  • Looking at the long-term growth trend of property tax levies, total state tax levies have increased by over 100% from 2000-2014; over the same period of time, population and inflation only increased by 70%
    • On an average annual basis, school district property tax levy grew by 5%, county tax levy increased by 6% , city levy grew by 5.8% and special district levy grew by 6%
    • The combination of all of them is a serious growth problem year after year
  • There needs to be an automatic election provision that would allow citizens to vote to allow taxes to increase by this much
  • Bettencourt noted the school districts already have an automatic election at the rollback rate; are you advocating an automatic election for all jurisdictions
    • Yes; want to hold all jurisdictions to the same standard to protect taxpayers

Brent South, Texas Association of Appraisal Districts

  • Would like to continue to be a resource to the legislature
  • The system in Texas is good but there is absolutely room for improvement
  • Bettencourt asked if the group was in favor of HB 1083 from last session
    • Yes

Mary Dennis, Mayor of Live Oak; President-Elect, Texas Municipal League

  • Opposes legislation that would lower revenue caps thus restricting cities in their ability to provide services to citizens
  • Cities have regional differences and cannot be grouped together
  • Need to be able to serve the citizens who elected us
  • Taylor noted that rollback elections allow taxpayers to decide what they want their elected officials to have
  • Taylor asked how much bigger government needs to get before it is enough; $0.42 of every dollar goes to government today
    • Believe very much in limited government
  • Bettencourt noted there is not currently a revenue cap although there is a rollback limit of 8% which really can add up to be closer to 17% revenue increase for smaller growing cities

 
David DeHarce, Self

  • Increasing tax burdens are going to push people out of their homes
  • Cities continue to annex new territory and pull homeowners into their jurisdiction and increase their property taxes
  • Would be an increase of 22% if his neighborhood is annexed by San Antonio

 
Tommy Calvert, Bexar County Commissioner

  • Would like legislation allowing taxing jurisdictions to carve out areas where hyper-inflation is taking place and allow the taxes to be indexed with inflation similar to a COLA
  • Bettencourt asked about Bexar County revenues going up 30% in 3 years
    • San Antonio and Bexar County are great places to live; people are moving to the area and jobs are being created; that does cause revenues to grow but that is necessary for growing areas

 
Jeff Judson, Former Alamos Park City Council Member; Candidate for Texas House District 121 (Straus)

  • Meaningful change will not occur until there is a change in House leadership
  • Need more strict requirements to obtain voter approval for tax increases above population plus inflation
  • There must be an end to taxpayer funded lobbying
  • Need to abolish the property tax and replace it with a consumption tax

 
Juan Flores, Self

  • Wants to caution legislators against lowering property taxes
  • Property tax decreases do not affect every citizen equally
  • The problem with this is likely somewhere in the tax code
  • The state must ensure the citizens are educated and property taxes fund the education system
  • Texas is one of the top 10 most regressive states for taxing people who cannot afford to pay taxes

 
Ross Kecseg, Texans for Fiscal Responsibility

  • Everyone, including people who do not own property, pay property taxes in some way
  • Rising tax burdens hurt low-income Texans the most
  • Supportive of ballot box transparency
    • Interest expenses are significant and voters do not see that cost in the voting booth; a $750 million bond  actually costs closer to $1 billion

 
Lorri Michel, Texas Association of Property Tax Professionals

  • The system in Texas is good but there is a perception of unfairness
  • There are problems with the ARB; there needs to be a better process for training board members
  • Discussed a story of taking depositions from ARB members in Hidalgo County who had little to no idea what the tax code says or
  • Not understanding the law has the same outcome as intentionally breaking the law
  • The Comptroller’s Office is doing the best they can with the resources they have but something needs to be done to increase ARB member training
  • Bettencourt asked if there was a profound ignorance of the tax code
    • Yes; believe there needs to be some kind of test for ARB members to take to prove a basic understanding
  • Bettencourt asked if the qualifications for ARB members need to be changed
    • A background in real estate would be beneficial to the system
  • A strong and independent ARB would likely help to decrease county litigation budgets
  • At Bettencourt’s request, Michel provided an overview on the current situation in the City of Austin property tax lawsuit
    • The City of Austin recently filed an appeal
  • Bettencourt noted he would be doing everything in his power to ensure there are no more avenues available for taxing entities to sue taxpayers

 
Debbie Cartwright, Olson & Olson LLP; Represents Harris and Travis County Appraisal Districts

  • Vigorously opposed the initial lawsuit in the City of Austin and vigorously opposed the appeal
  • Believes Travis County property values are fairly appraised
  • Provided further updates on the City of Austin Lawsuit

 
Jason Moore, Self

  • Local officials have the power to lower the tax rate in order to offset appraisals
  • Local control has been redefined as local officials having total control
  • Discussed the issues of local government spending which necessitates more tax revenue
  • There needs to be more transparency in local debt issuance
  • Need automatic rollback election triggers for all taxing entities, somewhere in the neighborhood of 4-5%

 
Scott Caballero, Texas Association of Realtors

  • There was an issue in Bexar County in 2004 when the chief appraiser interfered with the ARB panel which had ruled in favor of property owners after a formal hearing
  • Will be making more recommendations regarding the appraisal system before next legislative session including sales price disclosure, effective tax calculations, requirements for rollback elections, lowering the rollback rate and appraisal standards and processes
  • Texans overwhelmingly supported a prohibition on real estate transfer taxes in the constitutional amendment election in November yet appraisal districts want to pass a law requiring citizens to disclose private details of all real estate transactions
  • Last session TAR supported measures that would decrease the trigger for rollback elections to 5%
  • The legislature must review truth in taxation measure to ensure there is real transparency

 
Bob Martin, Homeowner Taxpayer Association of Bexar County

  • Discussed issues in Bexar County with increasing tax liability despite the city advertising tax decreases

 
Peggy Venable, Americans for Prosperity

  • Supports a lower rollback election trigger
  • Taxpayers deserve to hear from their local officials when they ask for a tax increase; officials need to tell how much they are asking for and what they intend to spend the money on
  • Would like to see a voter turnout requirement for tax elections

 
Cynthia Bass, Locke Lord

  • Represent owners of affordable housing complexes
  • Here to talk about valuations of properties that are funded with the low income housing tax program
  • The program comes with significant restrictions on rents which are increasing at a very low rate while mandatory expenses are inflating at a more rapid rate
  • Properties operate on slim margins
  • Legislature has already directed that these properties should be valued using the income approach for ad valorem purposes
  • Still seeing great deviation by appraisal districts

 
Barry Conn, Tax Credit Developer
(same issue as previous witness)

  • Looking for consistency with appraisals
  • Go in front of ARB panels and they are unfamiliar with tax credits
  • Would like more training for ARB members
  • Suggesting that taxes be more closely tied to income and expenses for these types of properties

 
Mike Esparza, Director, Property Tax Assistance Division, Office of the Comptroller

  • Has discussed with staff and trying to address and it is a complicated subject with ARB members
  • Bettencourt would like to know what result of the decision is that Comptroller arrives at including training of ARB
  • Bettencourt would like to see training materials given to ARB

 
Teresa Berlanga, Self

  • Does not think property owners have enough time in front of ARB
  • Would like to know why appraisal districts and ARBs cannot be sued together
  • Bettencourt said his staff will look into that issue

 
Michael Berlanga, Self

  • Do not have truth in taxation
  • Truth in taxation will demand transparency
  • Elderly never will own their own homes

 
Kenneth Graeber, Texas Association of Property Tax Professionals

  • Texas has one of the most fair property tax systems in the nation
  • The tax code states all the rights and remedies each party has
  • Problems occur when one or more parties carries out their duties not in accordance with the law
  • Would like to increase state role in providing guidelines in monitoring tax system to ensure compliance with laws
    • Bettencourt said he agrees top down guidelines are needed
  • The Comptroller’s Office has done an admirable job dealing with the issues assigned to them when the Property Tax Board was abolished
  • Encourages the committee to consider strengthening the state’s role in ensuring the property tax system is carried out as the law provides
  • Consideration should be given to the establishment of an agency similar to the Property Tax Board
    • If this is not a viable option the Comptroller should review their funding to ensure it is sufficient for carrying out the duties regarding the property tax system
  • Bettencourt agreed that the training may need to be beefed up as multiple witnesses have expressed; noted that John Sharp has expressed his belief that it was a mistake to have brought the Property Tax Board into the Comptroller’s Office because it is a regulatory body not a revenue generating body

 
James LeBas, Fiscal Analyst

  • Works with some of the largest taxpayers of the state
    • Property taxes over $50 billion and more than 10 times what the companies pay in franchise tax
  • % of total taxes paid by businesses is 63% and stand above national average and primarily because of property taxes on labor intensive sectors
  • If the committee proposes tax relief, it should be in proportion to taxes that are paid
    • Bettencourt would like to see relief in equal measure where you work and live
  • Hancock inquired about the areas they pay into with taxes, % based on investment/capital inventory, etc.
    • There are breakouts available from Comptroller by broad categories not sure if it is by industry
  • Hancock gave data centers as an example, some are capital intensive and may not get depreciated value; is there any way to measure the impact of that
    • Maybe; will work on that

 
Matt Beebe, Small Business Owner

  • Has attempted to protest his taxes on multiple occasions
  • Fundamental concern with appraiser trespassing on his property
  • Property tax code looks more like the internal revenue code
    • Bettencourt said he presented fascinating evidence and will be writing a letter about it; evidence does not show appraiser respecting private property rights

 
Dale Craymer, Texas Taxpayers and Research Association (TTRA)

  • Two types of property tax payers – business and residential
  • Texas is at a disadvantage relative to other states in taxing certain business properties – gives example of taxes a manufacturing plant would pay
  • Arbitrary value restrictions will shift cost onto others
  • Presents a rollback chart to committee
    • Bettencourt says he appreciates the data
  • Voters have few effective tools to weigh in on property taxes with little oversight
  • Believe a statewide board would work better than the current system under certain circumstances

 
Jesse Adams, SWBC Ad Valorem

  • Texas has a property tax system that is superior to most other states in the country
  • Clients say ARB is number one concern with the system today
  • Presented report Otto’s committee published discussing concern of ARBs; did not seem like ARB was independent of the appraiser, ARBs mistreated taxpayers, ARBs seemed to have their minds made up before the taxpayer’s case was heard
  • Four sessions have passed since that report was generated and ARBs are still not independent
  • ARBS receive their budget from the chief appraiser, they receive their staff from the chief appraiser and they receive their paychecks from the chief appraiser
  • Comptroller needs to receive more funding so they can better train the ARBs

 
Mark Ross, National Chairman of National Apartment Assoc.

  • There are problems at the ARBs
  • Has been told before that by asking to reduce appraised valuation that he would be taking money from school districts

 
Scott Samkin, Corporate Services at USAA

  • Sales tax information should remain cofidential

 
Richard Perez, San Antonio Chamber of Commerce

  • Consider incentive opportunities and tax reform that encourage business to make investments in the city
  • Stands behind city to use tax revenue to improve services and has a AAA bond rating without increasing the tax rate
  • Believe current rollback limit is appropriate
  • Says community is happy with the way local government is spending
  • Taylor – is there a breaking point where government is growing too large
    • Federal money is drying up so local government has the burden more than ever to work on infrastructure

Roy Brooks, Retired Teacher

  • Appraisal dispute process concerns
  • People are losing houses just because they are unable to pay

 
Derek Pena, O’Connell and Associates

  • Education is needed for ARB members and needs to be improved
  • Would recommend third party system to train ARB members

 
Jack M. Finger, Self

  • Apartment renter
  • Thanks committee for exposing politicians and deceptions

 
Selina Moreno, Latino Education Coalition

  • School finance system has been ruled as not financially adequate or equitable
  • Urges committee not to take steps to take funding away from all learners
  • Funding woefully inadequate including the ones for facilities
  • Bettencourt asked her if she had any particular proposal to make
    • The state could increase share of funding to help ease property tax burden
  • Bettencourt asked witness if she was aware that legislature put back $2.5 million into public ed above growth requirement and she should come back to the education committee

 
Julia Odom, citizen

  • Taxes are used wrong and there is  public corruption
  • Bond money not being used for what it is supposed to go for, etc.