For the first time in the career of many county and state officials the state total property tax valuation will decline this year. In many counties this decline will prompt a painful choice: 1) Reduce the county budget or 2) Increase the tax rate to maintain current revenues. Rather than increase the tax rate in a difficult economic environment, most counties are implementing austere budget efforts, cutting services, and postponing needed purchases. When prosperity returns and the tax base recovers, these counties hope to restore these needs within the confines of the present 8 percent rollback rate limitations.
However, if legislative proposals to apply more severe revenue caps by reducing the rollback rate and imposing mandatory referendums are adopted, recovery in the future years would be effectively prohibited. If the rollback rate is changed to population plus inflation, the county could not access the benefits of a recovered economy to restore services. Known as the “ratchet effect,” this process has left California and Colorado unable to access revenue after economic downturns. Services are forced to remain at the reduced level for lack of funding.
While Texas has experienced local valuation declines in oil and gas properties and commercial properties, this is the first statewide decline since the imposition of the rollback rate revenue caps. Before the Legislature convenes in January, please educate your legislators and provide information on the effect of the current recession on your tax base and the budget. Please urge them to resist any effort to impose more severe revenue caps, especially during this time of depleted resources.
For more information, please call me at 1-800-733-0699.