Featured: Pharr Mayor Ambrosio Hernández, M.D., during his third annual State of the City Address on Thursday, January 17, 2019. According to the Texas Comptroller of Public Accounts, Pharr’s retail economy showed the best rate of improvement among the major Valley cities for December 2018.
Photograph By ERNESTO RIVERA
Pharr shows best rate of improvement in retail economy among major Valley cities for December 2018; Sen. Hinojosa prepares for action on Monday on the Property Tax Reform Act of 2019
Pharr’s retail economy during December 2018 improved almost 44 percent over the same month last year – by far the best showing of all major Valley cities – while McAllen, Brownsville and Harlingen came in with the three highest numbers, in terms of local sales taxes collected, in December 2018, according to the Texas Comptroller of Public Accounts.
Edinburg, Pharr, Mission and Weslaco, in that order, rounded out the list of local retail taxes produced for the same monthly period, according to the state agency.
Statewide, Texas Comptroller Glenn Hegar announced on Wednesday, February 6, 2019, that he will send cities, counties, transit systems and special purpose taxing districts $953.9 million in local sales tax allocations for February, 4.6 percent more than in February 2018.
These allocations are based on sales made in December 2018 by businesses that report tax monthly; October, November and December 2018 sales by quarterly filers; and 2018 sales by businesses that report tax annually.
In a related economic development matter, the Senate Committee on Property Tax – of which Sen. Juan “Chuy” Hinojosa, D-McAllen, is a member – is scheduled to meet on Monday, February 11, 2019, to consider taking action on Senate Bill 2, the so-called Property Tax Reform and Relief Act of 2019. The measure would lower the rollback rate from the current 8% to 2.5% for taxing entities that collect more than $15 million in tax revenue annually. This bill also makes changes to the appraisal process.
“The filing of Senate Bill 2 means we are ready to roll up our sleeves and get to work,” said Hinojosa. “Property tax reform is a top priority for the Legislature this session. As a member of the Property Tax Committee, I have the opportunity to advocate for our working families burdened with paying a property tax bill that sometimes feels like a second mortgage.”
Public testimony on the measure, whose author is Sen. Paul Bettencourt, R-Houston, was taken during a meeting of the Senate Committee on Property Tax on Wednesday, February 6, 2019. No additional public testimony is scheduled to take place during this committee’s public meeting on Monday, February 11, 2019, which will be held in Room 2E.20 (Betty King Committee Room) at the Texas Capitol Complex in Austin.
“This bill is just a starting point, and I am committed to working with Chairman Bettencourt and the members of the committee to find a fair and equitable solution to our broken property tax system,” Hinojosa said. “This solution must include assurances that we will have sufficient revenue to properly fund public safety, education for our children, health care for our most vulnerable, and infrastructure for our continued growth and prosperity.”
Bettencourt serves as Chair of the Senate Committee on Property Tax, which includes, in addition to Hinojosa, Sen. Angela Paxton, R-McKinney, who is Vice Chair, Sen. Brando Creighton, R-Conroe; and Sen. Kelly Hancock, R-North Richland Hills.
Paxton is the wife of Attorney General Ken Paxton.
Edinburg, Mission, McAllen, and Harlingen also showed double-digit increases in their retail economies
All figures for Valley communities which collect a local sales tax on qualified retail purchases, along with every other governmental entity in Texas which do the same, are provided by the Texas Comptroller of Public Accounts.
Under the reporting system maintained online by the Texas Comptroller of Public Accounts, for all public entities which generate local sales taxes, monthly totals for individual cities, counties, transit systems and special purpose districts begin in November of each year.
The sales tax, formally known as the State Sales and Use Tax, is imposed on all retail sales, leases and rentals of most goods, as well as taxable services. Texas cities, counties, transit authorities and special purpose districts have the option of imposing an additional local sales tax for a combined total of state and local taxes of 8 1/4% (.0825).
The amount of local sales taxes collected helps reflect the strength of an economy, along with construction activities, per capita income, education, historical performances, and related trends.
In terms of local sales tax revenue for December 2018, McAllen led all major Valley cities with$7,733,535.26, while Brownsville was second ($4,070,154.25), Harlingen was third ($2,994,058.63), and Edinburg was fourth ($2,482,749.56).
Among its many duties, the Texas Comptroller’s office is the state’s chief tax collector, accountant, revenue estimator and treasurer.
Based on the amount of sales taxes generated, according to the state comptroller’s office, the Valley’s major cities ranked accordingly in the following local sales tax figures:
December 2018 compared with December 2017
• McAllen: $7,733,535.26, up 12.07 percent compared with December 2017 ($6,900,279.99);
• Brownsville: $4,070,154.25, up 0.74 percent compared with December 2017 ($4,040,219.35);
• Harlingen: $2,994,058.63, up 11.71 percent compared with December 2017 ($2,680,037.21);
• Edinburg: $2,482,749.56, up 16.06 percent compared with December 2017 ($2,139,029.46);
• Pharr: $2,460,662.30, up 43.68 percent compared with December 2017 ($1,712,515.36);
• Mission: $1,708,976.99, up 14.59 percent compared with December 2017 ($1,491,312.79); and
• Weslaco: $1,344,775.90, up 7.82 percent compared with December 2017 ($1,247,148.83).
November 2o18 through December 2018 compared with November 2017 through December 2017
Under the reporting system maintained online by the Texas Comptroller of Public Accounts, for all public entities which generate local sales taxes, year-to-date totals begin in November of each year.
From November 2018 through December 2018, based on the amount of sales taxes generated, compared with November 2017 through December 2017, the Valley’s major cities ranked accordingly in the following local sales tax figures:
• McAllen: $13,237,717.62, from November 2018 through December 2018, up 11.13 percent compared with November 2017 through December 2017 ($11,911,126.62);
• Brownsville: $7,221,813.65, up 1.83 percent from November 2018 through December 2018, compared with November 2017 through December 2017 ($7,091,803.90);
• Harlingen: $4,879,690.09, from November 2018 through December 2018, up 6.03 percent compared with November 2017 through December 2017 ($4,602,102.54);
• Edinburg: $4,256,317.79, from November 2018 through December 2018, up 12.26 percent compared with November 2017 through December 2017 ($3,791,478.92);
• Pharr: $4,002,091.24, from November 2018 through December 2018, up 24.49 percent compared with November 2017 through December 2017 ($3,214,565.24);
• Mission: $2,919,511.02, from November 2018 through December 2018, up 8.62 percent compared with November 2017 through December 2017 ($2,687,586.77); and
• Weslaco: $2,295,176.40, from November 2018 through December 2018, up 3.67 percent compared with November 2017 through December 2017 ($2,213,813.11).
For details on local sales taxes generated in December 2018 by individual cities, counties, transit systems and special purpose districts, visit the Comptroller’s Monthly Sales Tax Allocation Comparison Summary Reports.
BETTENCOURT PROVIDES VIEWS ON HIS PROPOSED PROPERTY TAX REFORM AND RELIEF ACTION OF 2019
In the bill analysis of Bettencourt’s measure, he provides his views of Senate Bill 2, as he wrote it when it was filed before the Texas Legislature.
The bill, as what happens to most major pieces of legislation, likely will go through changes as it goes through the lengthly legislative process.
But if and before that happens, the language in the bill as it goes to a potential final vote by the members of the Senate Committee on Property Tax, is explained by Bettencourt in the following executive summary, known as the Author’s/Sponsor’s Statement of Intent:
Legislation has four main goals
S.B. 2, “The Property Tax Reform and Relief Act of 2019”, has four main goals:
• Lower the rollback rate from 8 percent to 2.5 percent for the largest taxing units in the state;
• Require an automatic tax ratification election if the rollback rate is exceeded, eliminating the petition requirement in current statute;
• Take information about the tax rates proposed by local taxing units more accessible to property owners and more timely; and
• Make it easier for property owners to express their opinions about proposed tax rates to local elected officials before tax rates are adopted.
Under current law, voters in any taxing unit may petition for a rollback election when the taxing unit adopts a total tax rate that includes an increase of more than 8 percent in the effective maintenance and operation rate.
For taxing units that collect more than $15 million in property tax levy plus sales tax, S.B. 2 lowers the 8 percent threshold to 2.5 percent and requires an automatic rollback election if the taxing unit adopts a tax that exceeds the 2.5 percent threshold.
Taxing units that collect no more than $15 million in property tax levy and sales tax remain at the current 8 percent threshold and retain the current petition requirement for a rollback election.
S.B. 2 renames the effective tax rate as the “No-New-Revenue tax rate” so that property owners and local elected officials can better understand and utilize this benchmark for evaluating the tax rates proposed by local taxing units. The calculation currently referred to as the effective tax rate, and which S.B. 2 renames the No-New-Revenue tax rate, is required by Article 8, Section 21 of the Texas Constitution.
“Real-time tax rate notice”
S.B. 2 creates a new, online “real-time tax rate notice” to inform property owners of the tax rates proposed by their local taxing units. The real-time tax rate notice is analogous to the notice of appraised value that property owners receive each spring under current law and will be available at a website that allows property owners to enter their address and then view a tax rate notice customized to their property.
The notice will display each taxing unit in which the property is located, as well as the proposed tax rate, no-new-revenue tax rate, and rollback tax rate for each taxing unit. The notice will also display the taxable value of the property and will calculate the amount of property tax that would be imposed on the property at the proposed tax rate, the no?new-revenue tax rate, and the rollback tax rate.
The real-time tax notice will provide an email address for each local government within which a property is located so that property owners can express their support or opposition for the tax rates proposed by those local governments and, most importantly, will be available online in time for property owners to express their support or opposition for the proposed tax rates before those rates are adopted.
Tax rate notices must be easier to understand
S.B. 2 also revises and reformats the tax notice required by Section 26.06, Tax Code, to increase the understandability and usefulness of the notice to taxpayers. For example, the notice will clearly state whether or not the proposed tax rate represents a tax increase and whether or not a rollback election will be held if the taxing unit adopts the proposed tax rate.
The notice will also display a table comparing, both in dollar values and percentage change, (i) the property tax on the average homestead in the taxing unit last year to (ii) the property tax that would be imposed on the average homestead in the taxing unit this year at the proposed tax rate and the equivalent tax rate, so that property owners can clearly see whether the proposed tax rate represents a tax increase or decrease and the magnitude of the change.
To ensure compliance, S.B. 2 prohibits a local taxing unit from adopting a tax rate if the unit has not complied with procedures required by law that relate to accuracy, notification and transparency in the property tax process. S.B. 2 strengthens taxpayer remedies, in the form of an injunction, if taxing units fail to comply with those requirements.
Reforms proposed for the appraisal review process
S.B. 2 makes several reforms to the appraisal review process.
In counties with populations of one million or more, S.B. 2 establishes specialized Appraisal Review Board (ARB) panels to hear protests for different categories of commercial properties that exceed $50 million in value. The bill clarifies that a majority vote by ARB members is binding for decisions and thus prohibits ARB panels from requiring a unanimous vote.
S.B. 2 also eliminates Sunday ARB hearings and requires evening hearings to be scheduled to begin between 5 p.m. and 7 p.m. The bill sets the statutory deadline for filing all property tax protests to May 15, regardless of the type of property, and requires all appraisal districts to follow appraisal manuals issued by the Texas Comptroller. Finally, S.B. 2 eliminates the ability of local governments to challenge the value of an entire class of properties.
S.B. 2 also creates a Property Tax Administration Advisory Board in the Texas Comptroller’s office to oversee the entire property tax process.
S.B. 2 creates changes relating to both the rollback tax rate calculation and ballot language for ISD’s, including adjustments to the school district rollback tax rate calculation to reflect the 2.5 percent revenue cap recommendation in the Public School Finance Commission Report. The bill also modifies the required ballot language if an election is required due to a district wishing to exceed the 2.5 percent revenue increase.
Paul Townsend contributed to this article. For more on this and other Texas legislative news stories which affect the Rio Grande Valley metropolitan region, please log on to Titans of the Texas Legislature (TitansoftheTexasLegislature.com).