Featured, from left: Rep. Terry Canales, D-Edinburg, Chair, House Committee on Transportation, in March 2019 reenacting for this portrait receiving his Chairman’s gavel from Speaker of the House Dennis Bonnen, R-Angleton.
Photograph By HOUSE PHOTOGRAPHY
Rep. Canales appointed by Speaker Bonnen to high-profile House-Senate committee aimed at restraining increases in local property taxes
Speaker of the House Dennis Bonnen, R-Angleton, on Friday, May 10, 2019, appointed Rep. Terry Canales, D-Edinburg, to the 10-member Conference Committee on Senate Bill 2.
“I am honored to have been selected by Speaker Bonnen to serve on the House Conference Committee to SB 2, the property tax reform bill,” said Canales. “Like many of my constituents, I am frustrated by ever-rising property taxes. The property tax system is needlessly confusing, and there is real fear from my constituents that they won’t be able to pay next year’s bill.”
This high-powered group of five senators and five state representatives has been empowered by Bonnen and Lt. Gov. Dan Patrick, R-Houston, to come up with an historic and sweeping state law that would include restraining increases in local property taxes on homes and businesses.
“It is imperative that the House and Senate work together to address the issue of rising property tax values by balancing the needs of our local governments, with the ability of Texans to afford their ever-increasing property tax appraisals,” Canales added.
The appointment is the most recent example of Canales’ continuing rise in legislative influence at the State Capitol and at the statewide level. He was also selected earlier this year by Bonnen to serve as Chair, House Committee on Transportation, which has substantial power over the fate of highways, airways, waterways, and railways vital to economic prosperity and safety in the Lone Star State.
Canales also made Texas legislative history by becoming the first Mexican American to become Chair, House Committee on Transportation, which also has jurisdiction over governmental entities, including the Texas Department of Motor Vehicles, the Texas Department of Transportation, and the Texas Transportation Commission, which administer and distribute billions of dollars every two years for projects statewide.
Property tax reform is one of the most high-profile issues during the current regular session of the 86th Texas Legislature. Gov. Greg Abbott, a Republican, Patrick, and Bonnen have made property tax reform one of their top priorities for the current 140-day regular session, which ends on Monday, May 27, 2019.
A conference committee is a committee composed of five members from each chamber appointed by the respective presiding officers to resolve the differences between the house and senate versions of a measure when the originating chamber refuses to concur in the changes made by the opposite chamber.
As passed on Monday, April 15, 2019, Senate Bill 2, by Sen. Paul Bettencourt, R-Houston, would establish a new rollback rate for cities, counties, and special districts of 3.5 percent and school districts will have a 2.5 percent rollback rate.
A rollback tax rate is the highest tax rate the taxing unit can set before taxpayers can start tax rollback procedures, according to the Texas Comptroller of Public Accounts. If a taxing unit adopts a tax rate that exceeds the rollback tax rate, voters in the taxing unit may petition for an election on the tax increase.
Tax Code sec. 26.07 allows voters to petition for an election to repeal a tax rate adopted by a taxing unit that exceeds the unit’s rollback tax rate, according to the House Research Organization, which is the nonpartisan research arm of the Texas House of Representatives. A petition for a rollback election must be signed by a certain percentage of the taxing unit’s registered voters and be submitted to the governing body of the taxing unit within 90 days of the tax rate’s adoption.
A taxing jurisdiction would be required to get voter approval in an automatic November election to go over this rollback rate, Bettencourt further explained following the Monday, April 15, 2019 passage of SB 2, noting the current roll back rate stands at 8 percent and has remained unchanged since 1981, despite dramatic changes to the inflation rate.
In general, the property tax tax is a real estate ad-valorem tax, calculated by a local government, which is paid by the owner of the property. The tax is usually based on the value of the owned property, including land.
Also according to the Texas Comptroller of Public Accounts:
The Texas local property tax is just that — a local tax, assessed locally, collected locally and used locally.
More than 4,100 local governments in Texas — school districts, cities, counties and various special districts — collect and spend these taxes.
Several types of local governments may tax your property. Texas counties and local school districts tax all nonexempt property within their jurisdictions. You also may pay property taxes to a city and to special districts such as hospital, junior college or water districts.
The governing body of each of these local governments determines the amount of property taxes it wants to raise and sets its own tax rate. Many, but not all, local governments other than counties contract with their county’s tax assessor-collector to collect the tax on their behalf.
The House Research Organization, which is the nonpartisan research arm of the Texas Legislature, provides details of House Bill 2, which is the companion bill of SB 2.
A companion bill is a bill filed in one chamber that is identical or very similar to a bill filed in the opposite chamber. Companion bills are used to expedite passage, as they provide a means for committee consideration of a measure to occur in both chambers simultaneously. A companion bill that has passed one chamber can then be substituted for the companion bill in the opposite chamber.
Highlights of the House Research Organization’s bill analysis of House Bill 2 (SB 2) follow:
Supporters of HB 2 (SB) 2 say:
The bill also would improve transparency and allow for more standardization in the property tax system.
HB 2 would provide Texas homeowners and businesses with a mechanism to alleviate the ever-increasing burden of property taxes. Property taxes in many Texas communities have been growing faster than average income, imposing a substantial financial burden on taxpayers.
Rising property taxes have caused Texans to be taxed out of their homes, not purchase homes at all, go out of business, or make cuts in crucial areas of their budgets. According to a February 2019 University of Texas/Texas Tribune poll, a majority of Texas voters say they pay too much in property taxes.
HB 2 would give voters a greater say in whether increases in property taxes were warranted. At the same time, the bill would prevent the state’s economic growth from being undermined by these taxes. Reducing the rollback tax rate from 8 percent to 2.5 percent would bring the rate more in line with the current rate of inflation.
Removing the onerous requirements of petitioning for a rollback election by making such elections automatic and moving the election date to November to maximize voter participation would make the rate of property tax growth further responsive to the concerns of taxpayers.
HB 2 also would encourage more efficient government spending. Local governments either would have to convince voters that an adopted tax rate in excess of the rollback tax rate was needed to fund specific projects or services or would have to cut costs in other areas to avoid a rollback election. If desired spending concerned matters with broad community support, such as public safety, local governments would have nothing to fear from rollback elections.
The bill would provide for budgetary flexibility by allowing local governments that had not exceeded the rollback tax rate in prior years to bank this unused amount toward raising the rollback rate in a subsequent year, incentivizing local governments to adopt a tax rate below the rollback rate.
Local governments also could use the higher, 8 percent rollback tax rate for up to five years after being declared a disaster area.
As under current law, new property value would be subject to property tax but not factored into the rollback rate, meaning that growing cities and counties would see an increase in their budgets to meet the demand for expanded services.
Debt service also would be carved out of the rollback rate calculation. Local governments also could prepare for any emergencies by buying insurance, expanding their rainy day fund, or pooling resources with other similarly situated local governments.
HB 2 would return control to voters and provide them with greater oversight over the budgetary decisions of local governments.
HB 2 would improve the transparency and efficiency of the property tax system by providing taxpayers with real-time access to tax information, revising required notices, using easier-to-understand terminology, and making the process generally more taxpayer friendly.
The bill’s property tax database would save taxpayers the time and effort of searching newspapers and websites for tax notices by providing up-to- date, accurate information about how a proposed rate affected their tax bill, how it compared to their tax bill for the previous year, and where to go to learn more or voice concerns. This database would better inform taxpayers and allow them to engage in the rate setting process.
Revising required notices would prevent confusion. Taxpayers currently have difficulty understanding the notices they receive at various stages in the property tax appraisal and rate-setting process. Including an estimate of taxes due in the notice of appraised value often misleads property owners into believing that the notice reflects their tax bill. As a result, taxpayers tend to protest the appraised value of their property when they really intend to dispute their taxes, overburdening appraisal review boards (ARBs). On the other hand, there is often little participation in the rate-setting process that actually determines the amount of taxes property owners end up paying.
Opponents of HB 2 (SB 2) say:
HB 2 would limit local governments’ ability to provide critical services and usurp local control with a state-mandated, one-size-fits-all property tax cap, all while saving taxpayers relatively little.
HB 2 would provide only modest savings to taxpayers in comparison with the costs to local governments and could lead to unintended consequences.
The bill could lead to local governments adopting a tax rate equal to the rollback tax rate each year, even when additional revenue in that amount was not needed, in order to save for unforeseen contingencies. In order to avoid cutting spending on critical public safety and infrastructure, some cities could rescind the homestead, senior, and disabled exemptions, which are more effective mechanisms for providing tax relief than lowering the rollback rate. Some local governments also could turn to higher sales taxes and fees to make up for the revenue shortfall, all of which could impose a greater financial burden on those least able to pay.
HB 2 would make it difficult for local governments to pay for existing public safety and other critical services, let alone new services to meet the needs of a growing population. Most cities in the state spend about two-thirds of their budget on public safety. Some budget growth is driven by rising costs of living due to health insurance cost increases, wage increases, and inflation. Population growth and economic development also require cities to expand services further.
A 2.5 percent rollback rate would be so low that local governments could see a budget crisis even during average years. Such a low rollback tax rate could inhibit the ability of local governments to attract big employers, slowing economic growth in Texas. The bill also would limit the ability of local governments to deal with emergencies and lead to long-term cuts in property tax receipts in the event of a decrease in property values due to a recession.
In order to avoid cost-cutting, rollback elections would have to be held every year. These elections not only could cost millions and create a great deal of uncertainty but also could damage the credit ratings of local governments and prevent them from entering into long-term contracts due to increased uncertainty.
HB 2 would reduce local control by applying a one-size-fits-all approach to property taxation. Local governments have diverse needs, and local officials are in a better position than state legislators to understand the unique needs of their community. The bill would make it difficult for local officials to respond to these needs. Local control also could be undermined because of the difficulty in obtaining bonds due to the reduced credit rating that would be a possible consequence of lowering the rollback tax rate.
Voters already have a mechanism to voice their displeasure with increasing property taxes, which includes voting elected officials who raise taxes out of office. Mandating elections because of cost increases over which local governments have little control also could lead to voter fatigue, which could lead to decreased voter participation in important elections.
While HB 2 would be a step in the right direction, the bill would not do enough to counteract rising property taxes. The bill would not cover school districts, which account for a large portion of property tax bills. In addition, a reduced rollback tax rate would slow growth but would not reduce current taxes.
The House Research Organization has a more detailed report on House Bill 2 (SB 2) by logging onto:
Rep. Terry Canales, D-Edinburg, who is the Chair of the House Committee on Transportation, represents House District 40 in Hidalgo County, which includes portions or all of Edinburg, Elsa, Faysville, La Blanca, Linn, Lópezville, McAllen, Pharr and Weslaco. He may be reached at his House District Office in Edinburg at (956) 383-0860 or at the Capitol at (512) 463-0426. 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)