Senate Local Government Interim Report to the 88th Legislature

The Senate Committee on Local Government interim report to the 88th Legislature covers property tax reform, tax appraisal reform, special purpose districts, affordable housing, bond elections, taxpayer funded lobbying, efficiency audits, municipal extraterritorial jurisdiction, and constitutional amendment and local ballot language. For more information see the full report here.

Spotlight on Recommendations

Charge 1: Property Tax Reform: Review the effect of Senate Bill 2 (86th Legislature), the Texas Property Tax Reform and Transparency Act of 2019, and related legislation passed by the 87th Legislature. Make recommendations for further property tax reform and relief.

• The Legislature should consider adopting legislation requiring the citation and sourcing of data used on a taxing entity’s tax rate calculation worksheet.
• The Legislature should consider adopting legislation clarifying that tax rate calculations from prior tax years may not be amended for purposes of calculating a current year tax rate.
• The Legislature should consider adopting legislation clarifying the proper calculation of the following for taxing entities’ tax rate calculation worksheets:
  • Taxable value lost because court appeals of ARB decisions reduced prior value appraised value
  • Prior year taxable value subject to an appeal under Chapter 42
  • Total taxable value on the current year certified appraisal roll
  • Total value of properties under protest or not included on certified appraisal roll
• The Legislature should consider adopting legislation amending the definition of debt for purposes of calculating a tax rate to ensure that only voter-approved debt is included in the calculation of a debt tax rate.
• The Legislature should consider adopting legislation requiring oversight and periodic audit review of taxing entities’ tax rate calculations.
• The Legislature should consider adopting legislation repealing taxing entities’ ability to adopt a de minimis tax rate.
• The Legislature should consider adopting legislation decreasing the number of years for which a taxing entity is able to utilize an unused increment rate from three years to one year.
• The Legislature should consider adopting legislation requiring that a taxing unit’s unused increment be calculated using a tax rate that would yield the same amount of revenue in the tax year that the increment is being levied as the tax year in which the increment was saved.
• The Legislature should consider adopting legislation clarifying that a taxing unit’s unused increment is adjusted once taxing unit has utilized the unused increment.
• The Legislature should consider adopting legislation ensuring that adjustments to tax freeze properties’ tax bills are automatically made to reflect any state compression of ISD tax rates.
• The Legislature should consider passing legislation to ensure the timely adoption of tax rates following taxing entities’ receipt of a certified appraisal roll or a certified estimate of an appraisal roll.

Charge 2: Appraisal Reform: Review the implementation of Senate Bill 63, House Bill 988, and other related legislation passed by the 87th Legislature. Make recommendations to ensure appraisal guidelines are effective and taxpayers have enforcement mechanisms.

• The Legislature should consider expanding the causes for which a taxpayer is eligible to request limited binding arbitration with regard to protest proceedings related to their appraisal values.
• The Legislature should consider passing legislation to increase transparency measures related to protest hearings conducted by an appraisal review board.
• The Legislature should consider passing legislation expanding the class of individuals who are eligible to serve on an Appraisal Review Board.
• The Legislature should consider passing legislation to modernize the electronic transfer of CAD data and allow for the electronic payment of property taxes for all taxing units in the state.
• The Legislature should consider changing the spring appraisal value notice to remove the prior year’s tax rate as tax rates are falling due to a combination of S.B. 2 and H.B. 3.
• The Legislature should consider passing legislation to ensure that postcard notices related to the Texas Property Tax Database are mailed only after timely data has been uploaded to the databases.

Charge 3: Special Purpose Districts: Perform a comprehensive study on the powers and purposes of various special purpose districts and their associated legislative templates. Make recommendations to improve public transparency in operations of special purpose districts and associated legislative templates.

• The Legislature should consider adopting legislation clarifying that the powers granted to a special purpose district do not extend beyond the boundaries of the special purpose district for any reason.
• The Legislature should consider adopting legislation to ensure that special tax treatments granted to special purpose districts only apply to taxable property located wholly within or taxable transactions occurring wholly within the district’s boundary.
• The Legislature should consider adopting legislation granting the Comptroller of Public Accounts and the Texas Commission on Environmental Quality (TCEQ) additional oversight and audit authorities over certain types of special purpose districts.
• Municipal Management District template language should be used as a baseline for districts created by the Legislature. Suggested template language from the 85th Legislature’s House Special Purpose District Committee Interim Report is listed in the Appendix of this report.

Charge 4: Affordable Housing: Study issues related to affordable housing, homelessness, and methods of providing and financing affordable housing. Make recommendations to improve transparency and accountability, as well as to better utilize existing federal, state, and local programs.

• The Legislature should consider eliminating the ad valorem tax exemption offered in Sec. 303.042(f), Texas Local Government Code.
• The Legislature should consider passing legislation providing that an exemption under 303.042, Texas Local Government Code (Taxation) for a multifamily residential development which is owned by a public facility corporation (PFC) applies only if the PFC has entered into a memorandum of understanding with the governing bodies of local government units with the authority to levy ad valorem taxes on the property.
• The Legislature should consider passing legislation to increase transparency and accountability measures related to tax exemptions offered under Sec. 303.042, Texas Local Government Code.
• The Legislature should consider passing legislation requiring cities to allow third party review of preliminary plans, building permits, site plans, subdivision plans, and inspections, with the choice of whether to use third party review belonging to the applicant, and with the ability of the city to audit third party reviews.
• The Legislature should consider passing legislation strengthening personal property rights, which are the bedrock of free market exchange and economic development, by identifying specific instances of local overregulation to cull. This will preserve the economic freedom of homeowners and home builders to meet the needs of the Texas housing market.
• The Legislature should consider passing legislation prohibiting special districts and any corporations acting on their behalf from owning or investing in affordable housing properties outside of the district’s boundaries.
• The Legislature should consider passing legislation requiring all affordable housing projects to be approved by the local taxing units in which the property is located, disallowing the approval by a taxing unit from another jurisdiction.

Charge 5: Bond Elections: Review and report on voter participation and bond election result differences between November and May elections. Make recommendations for improved voter turnout, increased election efficiencies, and better accountability of local debt.

• The Legislature should consider passing legislation requiring all bond elections be held on a uniform election date.
• The Legislature should consider passing legislation to expand the types of debt instruments requiring voter-approval prior to issuance.
• The Legislature should consider adopting clear ballot language guidelines for all taxing units in the state.

Charge 6: Taxpayer Funded Lobbying: Study how governmental entities use public funds for political lobbying purposes. Examine what types of governmental entities use public funds for lobbying purposes and what level of transparency is available to the public. Make recommendations to protect taxpayers from paying for lobbyists who may not represent the taxpayers’ interests.

• The Legislature should consider adopting legislation that would prevent the governing body of a county or municipality from spending public money or providing compensation in any manner to directly or indirectly influence the outcome of any legislation pending before the Legislature.
• The Legislature should consider adopting legislation increasing transparency measures related to lobby contracts entered into by political subdivisions of the state. The Legislature should consider requiring political subdivisions’ lobby contracts be filed with and published by the Texas Ethics Commission.

Charge 7: Efficiency Audits: Study the concept of efficiency audits for cities, counties and special purpose districts and under what circumstances they should be performed. Evaluate whether efficiency audits provide Texans tools to combat wasteful government spending and report whether they are needed before local government tax ratification elections.

• The Legislature should consider adopting legislation requiring political subdivisions of the state to examine the operations of the political subdivision’s fiscal management, efficiency, and utilization of resources. Political subdivisions should be required to post the findings of the audit before certifying a tax rate election to adopt a tax rate above the taxing entity’s voter-approval tax rate.
• The Legislature should consider expanding existing offices of inspectors general (OIGs) in state agencies or expanding OIGs to include regional audit centers across the State of Texas.

Charge 8: Extraterritorial Jurisdictions: Study issues related to municipal extraterritorial jurisdictions and annexation powers, including examining possible disannexation authority. Determine whether extraterritorial jurisdictions continue to provide value to their residents and make recommendations on equitable methods for disannexation.

• The Legislature should consider adopting legislation to create a method for reconciling a controlling regulatory regime for purposes of land development regulations in ETJs where municipal and county regulations conflict.
• The Legislature should consider adopting legislation creating a statewide model for municipal disannexation.

Charge 9: Ballot Language: Study the development of the language used for constitutional amendment and local ballot propositions. Recommend changes to make ballot propositions more easily understood by voters

• The Legislature should consider passing legislation to simplify ballot proposition language, making ballot propositions and the changes to law they would affect more easily understandable.
• The Legislature should consider passing legislation amending provisions in the Elections Code that require statewide ballot propositions be printed in one sentence.