‘Fictional’ property tax notices drawing scrutiny
“You can’t let government grow 7, 8, 9 percent a year. Folks’ incomes can’t keep up with that.” State Sen. Paul Bettencourt
Local governments have not been properly notifying homeowners of their expected property tax increases since 1978, disregarding a requirement of the Texas Constitution, an academic researcher told lawmakers on Wednesday.
For decades, Texas has required appraisal notices that include an “estimate of tax due,” but the notices are both too confusing and not accurate enough to comply with the state constitution, said tax expert Jennifer Rabb, director and fellow of the McNair Center for Entrepreneurship and Economic Growth at Rice University.
The Constitution requires taxpayers be provided with “a reasonable estimate of the amount of taxes that would be imposed on his property if the total amount of property taxes for the subdivision were not increased.”
But Rabb said the notices sent to taxpayers each spring show them a misleading mix of the previous year’s tax rates along with current appraisals to create a number that is “entirely fictional” and has almost no chance of ever being accurate. Rabb and other tax experts told lawmakers that the technology exists to give taxpayers “real-time tax rate notices” electronically as various local governments propose rates. That would give homeowners more accurate information and a better opportunity to protest or give feedback to local officials about their proposed taxes before rates are set.
The critique of property tax notices was a key point as the Texas Legislature works on property tax reform proposals before the legislative session that begins on Jan. 8. While the Senate has long pushed to make it harder for local governments to enact substantial property tax increases without going to voters, the conversation on Wednesday showed the willingness of lawmakers to take up what has been a top priority of Rep. Dennis Bonnen, a Brazoria County Republican who is in line to become Speaker of the Texas House in January.
Bonnen in 2017 proposed a series of reforms to do exactly what Rabb and officials with the Texas Taxpayers and Research Association recommended on Wednesday. Bonnen’s House Bill 15 would have gotten rid of the “estimate of tax due” on appraisal notices and instead spelled out more clearly how the tax rates proposed by local governments would affect a homeowner’s tax bill.
“Our property tax system is needlessly confusing and discourages citizens from taking an active role in the local rate-setting process,” Bonnen said in 2017 when he announced the legislation.
The transparency measures Bonnen pitched were just one tax measure that went nowhere in the last legislative session. Though both Republican-dominated chambers of the Legislature and Gov. Greg Abbott have called for property tax reforms, a package of legislation died in both the 2017 legislative session and a special session called in the summer, amid disagreements between Lt. Gov. Dan Patrick and outgoing House Speaker Joe Straus.
Opponents of the reforms pointed out that state lawmakers themselves bear some of the blame for property tax escalation. As the state has reduced its share of education funding, school districts have had little choice but to compensate with property tax revenue, they say. State funding for schools is expected to be another big issue in the upcoming session.
State Sen. Paul Bettencourt, RHouston, pledged Wednesday that property tax reform will happen in 2019.
“Don’t underestimate the Lieutenant Governor’s resolve,” Bettencourt told the audience at Lone Star College-Montgomery.
As lieutenant governor, Patrick is elected statewide and presides over the Texas Senate with the ability to control which bills are heard in the Senate and when.
Wednesday’s hearing showed that once again a centerpiece to the reforms will be the Senate’s demand to limit how much cities, counties and special districts can increase property tax rates from year to year. Currently, Texas law allows local governments to increase the effective tax rate by 8 percent before the public can petition for a rollback election to contest the increase. The Senate in 2017 wanted to push the limit down to 4 percent and require an election anytime a local government wanted to go higher.
In January, Abbott pitched a tax reform plan that calls for an election anytime a local government raises its property tax levy by more than 2.5 percent.
Bettencourt, chairman of the Texas Senate Select Committee on Property Tax Reform, has long complained that tax revenues are growing far faster than people’s incomes, putting too much pressure on homeowners and businesses.
“You can’t let government grow 7, 8, 9 percent a year,” he said. “Folks’ incomes can’t keep up with that.”
On Wednesday, local governments were already lodging their opposition to the Legislature again trying to cap rates. Nathan Watkins, the city manager of Mont Belvieu in Harris County, said the rollback rate caps would hinder the ability of local government to provide the services people in communities like his demand.
Bettencourt said he has no doubt the Legislature will reset the rollback rate this year. It’s only a question of how low it will be set.
“It’s going to change,” he predicted. jeremy.wallace@chron.com