UPDATED AT 1042.
Austin, May 26 – Texas Senator Brandon Creighton, Republican of Conroe, celebrated passage of Senate Bill 2 yesterday, May 25, 2019, when the Texas Senate voted 21 to 9 to approve the Texas Property Tax Reform and Transparency Act of 2019 of which Creighton was one of the original authors with Senator Paul Bettencourt, Republican of Houston, and others. “No longer will Texas homeowners have their rising appraisals be used as a weapon against them,” Creighton said.
Creighton summarized the legislation, which also passed the Texas House of Representatives on an 88 to 50 vote: “Today, the Texas Senate passed sweeping legislation to reform the state’s property tax system—the most significant updates in over 50 years. This legislation, Senate Bill 2, provides meaningful appraisal transparency, true reform for Texas homeowners, and prevents local governments from collecting taxes over the rate of inflation. I was honored to serve as a chief negotiator on this landmark legislation and will stay engaged to ensure that Senate District 4 taxpayers are finally provided property tax relief.”
The legislation does not reduce property taxes but could slow the growth of such taxes. The bill requires a taxing authority – a county or city – to hold a referendum if its tax revenue in a proposed budget will rise more than 3.5% in the next year. School districts were included in Senate Bill 2, the reform bill, when it was filed but are not in the final version. Instead, under the public education measure, House Bill 3, which also passed both Houses of the Legislature yesterday, school districts with property values growing 2.5% or more would see tax rates automatically lowered to keep revenue growth in line.
The reform bill is not designed to cut taxes, but Governor Greg Abbott will also sign the omnibus school finance bill that lawmakers estimate would lower tax rates by an average of 8 cents per $100 valuation in 2020 and 13 cents in 2021. For the owner of a $250,000 home, the annual tax savings would be $200 in 2020 and $325 in 2021.
Senate Bill 2 requires taxing authorities to publish their no-new revenue tax rate each year, so that citizens may compare the taxing authority’s proposed tax rate with the no-new revenue tax rate. There are several other “transparency” provisions in Senate Bill 2.
Additionally, Senate Bill 2 requires appraisal districts to utilize USPAP standards, which are the standards generally recognized in fair market valuations among real estate professionals, as one of the methodologies for appraisal among a suite of methodologies, which the Texas Comptroller will promulgate.
The following charts show how the compression of the tax rates under the bills will occur. Remember that while the tax rate will decline, appraisal increases may easily swallow up the entire property tax reduction. Additionally, the source of the funds is surplus state revenue which came from the people.
It’s important to note that none of the school districts are reducing spending. To the contrary, government spending will vastly increase under this legislation. Instead, they’re moving around the name of the source of their tax dollars.
Senator Creighton explained to The Golden Hammer this morning, “Before these bills, if appraisals go up 10%, you pay a lot more on your tax bill. Now that these bills are passed, your appraisal going up doesn’t hurt you beyond growth of inflation, because local government can’t have more than 2.5 or 3.5%. So HB 3 cuts taxes and SB 2 limits what government can take from your rising appraisals.” Creighton said, “If government can’t have it , you keep it . That’s the answer we have been looking for on behalf of property owners since I came into the Legislature in 2007.”