Little relief expected from property tax reforms

Even if plan OK’d at special session, homeowners will pay more next year

It’s been hyped as the most extensive state property tax reform legislation ever, yet many Texans wouldn’t see their property taxes go down by even a nickel compared to what they pay now under the plan the Legislature is set to take up this month.

Even architects of the property tax reform plan acknowledge that homeowners will still likely face higher property tax bills next year even if the reforms that Senate leaders have celebrated as historic were in effect already.

Still there was Lt. Gov. Dan Patrick in a press conference in May telling reporters that the Senate plan amounted to the “largest property tax reform in Texas history” — one that would save the average homeowner $20,000 over 20 years. That bill died at the end of the session, but is likely to be resuscitated because Gov. Greg Abbott demanded property tax reform be among the topics for the Legislature to revisit in a special session starting July 18.

“Skyrocketing property taxes in this state are unacceptable, and Texans need reform right now,” Abbott said Thursday in a statement advocating for the reforms.

But while Senate leaders tout their plan as big reform, many acknowledge that it won’t likely mean tax reductions for most homeowners on their bills next year because of rising home values and because school taxes — unaffected by the reforms — make up the ma-

jority of tax bills and continue to grow. Simply put, Texas’ property tax system is too complex and has too many variables for most taxpayers to grasp.

In some cities and counties, tax rates can actually be cut from the previous year, yet the result is still higher taxes for perplexed homeowners because of rising home values and other taxing jurisdictions increasing rates.

Critics of the Senate plan say Patrick’s $20,000 figure can’t be backed up by available data and is based on “bogus” assumptions. Even Patrick’s allies have resisted repeating his figures, opting instead for more nominal projections.

Patrick’s staff declined to comment, referring inquiries to Sen. Paul Bettencourt, the chairman of the Select Committee on Property Tax Reform and Relief and key architect of the tax reform plan. Bettencourt said the figure he’s relying on shows taxpayers could save between $35 and $100 a year.

“It doesn’t sound like much, but it adds up,” Bettencourt said.

Difference in language

Bettencourt said he’s been careful in debates not to let people think they are getting a tax cut if the reforms eventually pass.

“This is a property tax relief measure, not a property tax cut measure,” he said.

That is a big difference in language to Bettencourt. He said cities and counties are seeing massive increases in revenue from growing property values and not cutting tax rates enough to protect homeowners and businesses.

At the core of Senate plan that died in the closing days of the regular session was an effort to keep cities, counties and other local taxing districts from raising the effective tax rates above 5 percent. If they went above 5 percent, they would have to seek a vote of the public. Currently, cities and counties can go to 8 percent. If they top that, voters can petition to hold an election to roll back that tax — something that rarely ever happens in Texas because of the difficulty in meeting all of the requirements to force a rollback election.

Recent history shows most big counties would not have triggered that 5 percent cap, meaning growing tax bills in those counties wouldn’t be slowed at all. Homeowners in Harris, Bexar and Travis counties would all have seen no impact in the portion of their property tax bill charged by county governments in 2016 because none of those counties exceeded 5 percent, according to data provided by Texas Conference of Urban Counties. But in Dallas County and Williamson County, where the effective tax rate exceeded 6 percent, the county portion of the taxes would still go up, but only to 5 percent unless voters agree to let those counties go higher.

‘Totally bogus’

Of the state’s 38 most populous counties, just four in 2016 pushed the tax rate above the 5 percent threshold to trigger the reforms the Senate is seeking, according to Don Lee of the Texas Conference of Urban Counties. That is down from 2015, when 13 of those 38 went above 5 percent. In some fast growing counties, like Tarrant and Travis, the tax rate hasn’t been over 5 percent for three straight years according to Lee’s numbers.

“In some counties no one will notice any difference at all,” Lee said.

Bettencourt agrees, but says he’s trying to target the places that have been exceeding 8 percent year after year.

The Texas Municipal League contends the vast majority of cities didn’t top 5 percent. But there are cities that go over 8 percent: About 200 cities topped the mark in 2014 or 2015.

When Patrick declared the plan would save most homeowners $20,000 over 20 years, it was based on the assumption that all local governments would push their effective tax rates to the 8 percent limit every single year, but the proposal would limit it to 5 percent every year.

“I can find no facts to support that claim,” Lee said.

Bennett Sandlin, executive director of the Texas Municipal League, was even more direct.

“Those were totally bogus,” he said.

Both said starting at an assumption that all local governments are going to raise rates 8 percent every year for 20 years is just a faulty premise to start with since that is not what has happened in even the last three years.

Bettencourt would not directly defend Patrick’s comments from that press conference because he said he wasn’t there to hear it exactly.

However, he said, there is data to show how taxpayers could save close to $20,000 over 20 years using different figures. He said the median-valued home in Texas saw their tax bills from cities, counties and special districts grow 6.5 percent over five years according to the Texas Taxpayers and Research Association. If the Legislature could cut that rate in half to 3.25 percent, it would save an average homeowner $50 in the first year.

In the second year, the savings would jump to $106 compared to what could have been. By the 10th year, a tax bill would be $774 less high than it would have been if locals continued to increase rates 6.5 percent on the median-valued home. By year 20, the tax bill would be $2,520 less than it would have been if the 6.5 percent growth rate continued unabated.

Bettencourt said when those year-to-year savings are compounded, it gets to just short of $20,000 of savings for homeowners on average. However, Bettencourt acknowledged that setting the rollback rate at 5 percent alone would not necessarily accomplish that and would require additional reforms.

Support for rollback

While the rollback provision essentially died in the House during the regular session, it still has support there from a key player. Angleton Republican Dennis Bonnen, chairman of the House Ways and Means Committee, filed a bill early in the session that included a package of reforms for property taxes that included lowering the rollback rate. He said he supports the concept but had no choice but to pull the idea from his bill in the final days of the regular session because he didn’t expect the bill to be able to pass the full House because of opposition to the rollback language.

While he backs the rollback idea, Bonnen said he’s been cautious in how he touts the plan too. He said he doesn’t want homeowners thinking people are getting a tax break next year if the bill were to pass. He said changing the rollback rate won’t affect tax bills for people in communities where cities and counties keep tax rates growing at 5 percent or less.

“It doesn’t cut taxes,” Bonnen said.