Ab­bott signs property tax ap­praisal bill

Law raises trans­parency for home­own­ers, caps col­lec­tion rate in­creases with­out vote

Houston Chronicle - - FRONT PAGE - By Jeremy Wal­lace AUSTIN BUREAU

Texas home­own­ers will have tools they’ve never had be­fore un­der leg­is­la­tion Gov. Greg Ab­bott signed into law on Wed­nes­day.

Start­ing next year, property ap­prais­ers statewide will have to re­vamp ap­praisal notices and create on­line real-time tax notices with clearer in­for­ma­tion for home­own­ers that show them who is try­ing to raise their taxes and where and when to fight it.

“For the first time ever, you will be shown ex­actly which local tax­ing en­tity is ask­ing you for more money,” said Texas House Speaker Den­nis Bon­nen, a Bra­zo­ria Repub­li­can who has spent years try­ing to de­mys­tify the ap­praisal notices re­quired by Texas law.

Of all the re­forms signed into law through Se­nate Bill 2, the change that will af­fect the most peo­ple is likely the new no­tice re­quire­ments, said Dale Craymer, pres­i­dent of the Texas Tax­pay­ers and Re­search As­so­ci­a­tion. Craymer said ap­praisal notices now are like mys­te­ri­ous “black boxes” that even sea­soned tax ex­perts would have trou­ble fully un­der­stand­ing.

Cur­rently, mil­lions of Tex­ans are fight­ing the an­nual in­creases in the ap­praised value of their homes, yet few ever show up to the board hear­ings where school dis­tricts, cities, coun­ties and other gov­ern­ments are ac­tu­ally set­ting the tax rates that in­crease their tax bills.

In tes­ti­mony be­fore the Se­nate ear­lier this year, Jen­nifer Rabb, di­rec­tor and fel­low of the Mc­Nair Cen­ter for En­trepreneur­ship and Eco­nomic Growth at Rice Univer­sity, showed that in the five largest coun­ties, more than 800,000 peo­ple chal­lenged their ap­praisals in 2016, yet in the five coun­ties com­bined, fewer than 30 peo­ple showed up at rate hear­ings to try to stop tax hikes.

The prob­lem is that most peo­ple don’t know there are ac­tu­ally two sys­tems at play, said State Rep. Dustin Bur­rows, R-Lub­bock. While most tax­pay­ers pay close at­ten­tion when ap­praisal dis­tricts set the value of a property, far fewer are focused on the de­ci­sions by those local gov­ern­ments to set the tax rate.

“Some­where be­tween 75 and 85 per­cent of peo­ple who showed up to ap­praisal dis­tricts to protest their val­ues thought they were protest­ing their tax rates,” said Bur­rows, a key House au­thor of the tax re­form leg­is­la­tion.

Bon­nen said SB2 ad­dresses that mis­un­der­stand­ing. He said peo­ple will still get ap­praisal notices in the spring that they can challenge. But now in the sum­mer they will also get real-time tax notices that will show them the tax rates that are be­ing set by local gov­ern­ments, and how they will af­fect the tax bill. The notices will in­clude clear in­for­ma­tion on how to fight those in­creases and links to al­low peo­ple to in­stantly send com­ments about the rates to the elected of­fi­cials re­spon­si­ble.

Cap­ping in­creases

Those changes, how­ever, have largely been over­shad­owed by de­bate over more con­tro­ver­sial pro­vi­sions in the tax re­form pack­age that place limits on how much local gov­ern­ments can in­crease property tax col­lec­tions from year to year.

The law bars cities and coun­ties from in­creas­ing property tax col­lec­tions more than 3.5 per­cent in any year with­out a vote by the public. School dis­tricts would be capped at 2.5 per­cent. While those pro­vi­sions won’t lower taxes, they will re­duce the dra­matic in­crease in local property taxes many home­own­ers in high growth ar­eas have been feel­ing in Texas.

Cur­rently, local gov­ern­ments can in­crease col­lec­tions by 8 per­cent be­fore the public can pe­ti­tion for a roll­back elec­tion. Hous­ton is un­der dif­fer­ent rules be­cause of a voter ref­er­en­dum and can only go to 4 per­cent. Un­der the bill Ab­bott signed Wed­nes­day, all vot­ers would get an au­to­matic elec­tion in Novem­ber if a city or county tries to go over 3.5 per­cent.

If the 3.5 per­cent cap had been in place in 2017, more than half of Texas cities would have been un­af­fected by the cap. Ac­cord­ing to Texas State Comptrolle­r Data, of the 1,040 cities in Texas, 218 had not in­creased the ef­fec­tive rate from 2016 to 2017. An­other 307 had in­creases, but were less than 3.5 per­cent where the Leg­is­la­ture is propos­ing to cap cities now. That left 515 cities that did in­crease taxes my 3.5 per­cent or more.

Se­nate Bill 2, au­thored by State Sen. Paul Bet­ten­court, R-Hous­ton, also ad­dresses the ap­praisal re­view process when home­own­ers challenge their ap­praisals. Those changes in­clude re­quir­ing more train­ing for ap­praisal re­view board mem­bers, elim­i­nat­ing ap­praisal re­view board meet­ings on Sun­days, and re­quir­ing ap­praisal dis­tricts to use man­u­als is­sued by the Texas Comptrolle­r to stan­dard­ize meth­ods.

Ma­jor vic­tory for GOP

Getting any property tax re­form passed through the Leg­is­la­ture is seen as a ma­jor political vic­tory for Ab­bott and others who strug­gled for years to pass any ma­jor re­forms. On Wed­nes­day at a news con­fer­ence an­nounc­ing the bill sign­ing, Lt. Gov. Dan Patrick, a Repub­li­can who pre­sides over the Se­nate, re­minded re­porters he’s been fight­ing for 16 years in pol­i­tics for re­forms like these. In 2017, af­ter sim­i­lar tax re­forms failed to pass in ei­ther the reg­u­lar session or in a sub­se­quent spe­cial session, Bon­nen said he con­sid­ered quit­ting the Texas Leg­is­la­ture al­to­gether.

Bon­nen said that fail­ure may have been for the best be­cause the re­forms in the bill Ab­bott signed into law are far more sig­nif­i­cant than those law­mak­ers de­bated in 2017.

Ab­bott stressed that SB2 is part of a broader tax re­lief ef­fort. On Tues­day, Ab­bott signed a school fi­nance bill into law — HB 3 — that com­mits $5 bil­lion to­ward buy­ing down school property taxes. Ab­bott said SB2 is a pro­tec­tion to make sure those re­duced taxes don’t creep right back up over a few years, as has hap­pened with past property tax re­forms.

Un­der the school fi­nance bill, school property tax rates will be re­duced by an av­er­age of 8 cents per $100 of a home’s value in 2020 and by 13 cents in 2021. For the owner of a $200,000 home, that would amount to a de­crease of about $160 in 2020.

What isn’t in the tax re­form pack­ages is a pro­posed sales tax in­crease that Ab­bott, Patrick and Bon­nen pitched this spring in order to make deeper cuts to property taxes. But that pro­posal ran into road­blocks in both the Texas House and Se­nate and never passed.

On Wed­nes­day, Ab­bott didn’t fully com­mit to bring­ing the is­sue back for the next Leg­is­la­ture, but said if “vot­ers are adamant that they want to see property taxes re­duced even more,” then yes the sales tax swap would come back again.

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