Come mid-September, if you are on the commissioners court, odds are at least one of the top stories in your local newspaper will mention your name – because you just voted on the property tax rate.
Setting the property tax rate – which goes hand in hand with adopting the county budget – is one of the primary financial responsibilities of the commissioners court.
“It’s a real juggling act,” said Nolan County Judge Tim Fambrough, “as we try to keep the tax rate as low as we can and still meet all of our expenses.”
The property tax is an ad valorem tax; ad valorem is a Latin phrase which means “according to value.”
The property tax is the largest source of funding for local services. Taxing units that provide these services include counties, school districts, cities, and special districts such as hospitals, utilities, junior colleges, flood control, and rural fire districts. These taxing units – which may have access to other revenue sources – decide how much funding they will need to provide public services, set their budgets, and then adopt a property tax rate to help meet that budget.
According to the Annual Property Tax Report, Tax Year 2002, about 3,655 local taxing units levied more than $27 billion in property taxes. The breakdown per taxing unit was:
counties – 14.1 percent of the total levy;
school districts – 60.1 percent;
cities – 15.3 percent; and
special districts – 10.5 percent.
Constituents do not always realize that the county portion of the total property tax is traditionally lower than that of other units. For instance, the school districts do not usually receive the same criticism the county does when it comes to the tax rate, said Runnels County Judge Marilyn Egan.
However, the recent legislative focus on reforming school funding, which is heavily supported by the property tax, has brought a renewed focus – and hopefully a better understanding – of the local property tax.
County Authority
The Texas Constitution sets a limit on a county’s authority to levy taxes. According to Article VIII, section 9, a county’s “general fund” tax is limited to a maximum of $.80 per $100 of property value.
The county is authorized to levy a $.15 road and bridge tax and a $.30 farm-to-market road/flood control tax; however, these taxes are subject to voter approval.
In addition, Article XI, section 7, authorizes, upon voter approval, counties on the Gulf of Mexico “to levy and collect such tax for construction of sea walls, breakwaters, or sanitary purposes, as may now or may hereafter be authorized by law, and may create a debt for such works and issue bonds in evidence thereof.” The tax is limited by state statute and may not exceed $.50 per $100 valuation, according to David B. Brooks’ “Texas Practice Series: County and Special District Law, Second Edition.”
Additional state laws, called “truth-in-taxation laws” give the local taxpayers a voice in decisions affecting their property tax rates. At the beginning of August, the county must calculate and publish two rates: the effective tax rate and the rollback tax rate.
The effective tax rate is the rate that will bring in the same amount of revenue that was collected in the previous year, excluding new properties that were added to the tax roll, said Gerald “Buddy” Winn, Brazos County tax assessor-collector and chief appraiser. The rollback rate is the rate that occurs when the effective rate has been exceeded by 8 percent. If the tax rate exceeds the rollback rate, voters may petition for an election to roll back the adopted rate to the rollback rate, Winn said.
Property tax rates across the state are as varied as the counties themselves, with some counties reaching the $.80 maximum, and others hovering in the 20- to 30-cent range.
Primary Players
The taxing units are primary participants in the property tax system, as is the office of the tax assessor-collector, which is charged with assessing or calculating the property value and collecting the taxes for the county. The office may enter into contract with other entities to collect the taxes. Other key players include the following, as explained by the Texas Comptroller of Public Accounts:
The property taxpayer, whether residential or business, is responsible for paying taxes and has a reasonable expectation that the taxing process will be fairly administered.
An appraisal district in each county, administered by a chief appraiser, sets the value of property each year. The appraisal district’s board of directors hires the chief appraiser. Local taxing units appoint the directors and fund the appraisal district according to a formula that is based on taxes.
An appraisal review board (ARB) settles disagreements between the taxpayer and the appraisal district about the taxability and value of property. The appraisal district’s board of directors appoints citizens from the community to serve as ARB members.
Basic Property Tax Schedule
The comptroller’s “Budgeting Handbook for Texas Counties” summarizes the property tax schedule as follows:
By July 25, or as soon thereafter as practical, the county’s chief appraiser submits to the county a certified estimate of the total appraised value of all property in the district that is taxable by the county.
The commissioners court approves the tax rate – usually in August or September. The court also authorizes discounts for early payments and approves split payments.
Taxes on the current tax roll are due by Jan. 31 of the following year. They may be collected beginning Oct. 1 of the current year. Discounts may be allowed according to the following amounts: 3 percent for payment in October or earlier; 2 percent in November, and 1 percent in December. Penalties and interest are assessed beginning Feb. 1. The tax assessor-collector’s office has the schedule of rates. Although current taxes are technically delinquent if not paid by Jan. 31, they are not normally reported on the delinquent tax roll until July 1. For budgeting and accounting purposes, it is useful to consider as current tax collections those taxes collected by June 30.
System Principles
Throughout the entire property tax process, all parties must adhere to principles set forth in the Texas Constitution. Winn discussed these principles at the last meeting of the North & East Texas County Judges and Commissioners Association.
1. Property taxation must be equal and uniform.
2. All property should be taxed at market value unless the constitution gives a different standard.
3. All property is taxable unless exempt by federal law or state constitution.
4. Property owners have a right to notice of increases in their tax rates and appraised values.
5. Property has one appraised value and one appraisal review board.
County Accountability
The property tax has been under scrutiny throughout 2004 as state leaders have sought to overhaul school finance. Proposals regarding reduction of the school property tax and elimination of the “Robin Hood” system have prompted some concerns that counties and cities might gradually absorb any reduction in the school property tax by raising their own rates. Consequently, the state leadership declared that any proposed public school finance proposal would be accompanied by tax revenue caps on counties and cities, requiring them to obtain voter approval before adopting any increase in the effective tax rate.
For the past year the County Judges and Commissioners Association of Texas and other affiliate organizations have united to protest revenue caps.
This concern – that counties would absorb reduction in the school tax – “ignores reality,” said CJCAT general counsel Jim Allison, in his April 2004 column in County Progress. “Counties are very fiscally conservative and already face rollback referendums and voter resistance to any tax increase.”
Unlike other states, Texas does not share its revenue with counties. Instead, counties are completely dependent on local revenues, with the property tax as the primary revenue source.
Revenue caps would deny counties the ability to respond to additional local needs and to state mandates, Allison said.
The commissioners court already works diligently to keep the tax rate as low as it can, said Fambrough. Nolan County’s tax rate went up about one cent to help support the 2004-2005 budget. Public response to the slight increase was fine, Fambrough said.
The Runnels County tax rate went down a fraction of a penny last year, Egan said. Of course, there are constituents who will continue to voice complaints over the tax rate.
“We tell them that we’re doing the best we can,” Egan said.
By Julie Anderson