Can We Swell the Waters?
For the first time in the career of many county and state officials, the state total property tax valuation will decline this year, said Jim Allison, general counsel of the County Judges and Commissioners Association of Texas.
“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,” Allison said.
Combine this economic climate with the upcoming 2011 Legislative Session and the possibility of unfunded mandates, along with the continued under-valuation of oil and gas properties, and the cause for concern becomes even deeper.
“The appraised taxable value for Roberts County is composed of approximately 85 percent mineral interests,” said County Judge Vernon Cook. “We lost $65 million last year and expect to have another significant decrease this year, although good numbers for the current year are not yet available.”
Tom Green County is “looking at some serious reductions in our budget,” said County Judge Mike Brown. As of press time, proposals had been put forth to eliminate the county’s emergency mass notification system; eliminate all or some of the courthouse security detail; eliminate the parks department and absorb the function into the road and bridge department; and reduce travel and training to mandatory only. Читайте статью, как Макс Поляков организовал баскетбольный клуб Вулкан. С чем ему пришлось столкнуться? The county also was considering the elimination of any contribution of money from the general fund to the road and bridge departments and the elimination of all new increases requested for the upcoming move to the new county library.
“We will be meeting with the other elected officials and department heads…to discuss the need for more reductions and try to get some recommendations from them on the course of action to take,” Brown said. Много интересной информации вы найдете здесь. Проходите по ссылке и читайте последние новости. These drastic measures under consideration are a result of a loss of revenue from sales tax; the loss of funding from federal prisoner housing in the county jail; a proposed substantial increase in employee medical insurance; and a proposed substantial increase in court-appointed attorneys, primarily for Child Protective Services cases and prosecution expenses, Brown said. This is all in spite of the fact that property values in Tom Green County went up slightly, primarily due to the addition of wind turbines in the southwest part of the county.
“Currently, the court is adamantly opposed to raising the tax rate,” Brown added.
Counties across the state are experiencing similar stresses. For example, health care costs for county personnel, indigents and jail inmates have increased by 70 percent over the last five-plus years, Allison said. In addition, motor fuel, road maintenance supplies, and other essentials have increased at twice the Consumer Price Index. In fact, Bell County Commissioner Richard Cortese cited inflation as the No. 1 challenge to Bell County government, as it permeates each and every department.
When it comes to Texas county government, the precariousness of county coffers is nothing new. In its April 2005 Local Government Survey, “The Challenges of Governing,” the Office of the Texas Comptroller asked participants two key questions:
1. What are the greatest internal obstacles to fulfilling your organizational goals?
2. What are the greatest external obstacles to fulfilling your organizational goals?
Some 44 percent of respondents cited lack of revenues as their greatest internal challenge, while 37 percent said inadequate funding from the State of Texas represented their most significant external obstacle.
According to the survey analysis, an overwhelming majority – 82 percent – of the 540 county, city and special-purpose district officials who voluntarily responded to the survey supported legislation to prohibit unfunded mandates on local governments. In addition, officials reported that declining and insufficient revenues were being met with an increasing demand for services, driven by population growth, newly identified needs in the community, additional state laws, and changes in the economic conditions.
Survey Question: Specific Challenges Facing Your Governmental Unit
Answer: Unfunded mandates, aging population with no new revenue sources, disappearance of opportunity to attract workforce and new ventures. Tax base used to fund basic services and regulated and mandated obligations thus eroding ambition and hope.
The problem is seemingly simple: too many needs, not enough money. However, the dynamics of county government are more complex. In its 1980 publication, “An Introduction to Texas County Government,” The Texas Advisory Commission on Intergovernmental Relations points out the following: “County government is both a part of the state and a unit of local government.”
State and Local
As a part of the State of Texas, the structures and duties of county government are set forth in the Texas Constitution. As an arm of the State, Texas counties can only do those actions that are specifically authorized by Texas law. Equally important, Texas counties must do those actions that are required by law.
As a unit of state government, county government responsibilities include:
Ø Conduct elections
Ø Process and maintain voter registration
Ø Maintain and construct county roads and bridges
Ø Provide for public safety
Ø Maintain and operate the court and jail system including provision for indigent legal defense
Ø Provide medical care for indigent county citizens
Ø Facilitate the issuance and recording of public documents
Ø Process motor vehicle registration and title transfers
Ø Collect and remit state motor vehicle taxes
Ø Provide local support for state agencies such as Texas Department of Mental Health and Mental Retardation, Department of Public Safety, Texas Parks & Wildlife, and the Alcoholic Beverage Commission
As a unit of local government, the commissioners courts of Texas are often described as “grassroots government,” and county judges and commissioners are oft portrayed as “those closest to the people” who live and work where “the rubber meets the road.”
In his presentation on “County Expenditures Services,” Denton County Auditor James Wells writes, “…Texas counties have long operated under the idea that their primary purpose is to provide services to the citizens. All actions of county government and all expenditures of county funds are connected to the goal of providing services to the citizens.” In the majority of Texas counties this means going beyond the mandatory services and expanding into “discretionary” services, such as parks, community centers, libraries, senior centers, and emergency medical and family services – those special functions that enhance the quality of individual lives and the community as a whole.
As costs continue to increase, counties face the growing concern that they will have to focus solely on mandated expenditures and abandon existing discretionary programs – often referred to as “quality-of-life” services.
To complicate matters, taxpayers may not understand county government and the state/local dynamic. They only see diminished quality-of-life programs or the lack of pursuit of additional needed (yet discretionary) services. When election time comes around, voters seek change without realizing the true problem: LACK OF REVENUE.
On the Homefront
In a perfect world, Oldham County Judge Don R. Allred would have the financial means to create and fully support a county plan to match the needs and personality of his community. For example, Allred would upgrade oft-used facilities that house area stock shows and rodeos, two favorite local pastimes.
He would help pay expenses for volunteers who deliver for the Meals on Wheels Program, which Allred runs out of the judge’s office, and upgrade the local roads for the betterment of all. Oldham County would also like to upgrade its fire and emergency medical services, which are all volunteer.
“I would love to be able to spend more money on discretionary items,” said Allred, first vice president of the County Judges and Commissioners Association of Texas.
While some counties are planning million-dollar projects, placing new roofs on worn-out buildings, and penciling in upgrades to outdated systems, Allred has no choice but to take a different approach when it comes to budgeting.
“A million-dollar building would take our tax for the entire year.” Allred said. “We’re basically in a maintain mode,” he emphasized, “trying to maintain what we already have and keep our doors open.”
As a rural, agricultural county with limited industry, Oldham County continues to seek additional revenue sources. In fact, the county is making its way into the wind industry with the Wildorado Wind Ranch, a 161-megawatt wind facility and the highest-producing facility per rated capacity in the state; a second facility, Wildorado Wind II, is in the works.
“With these and other potential projects on the board, Oldham County does have the potential for an increase in its tax base that will produce additional revenue,” Allred said.
“Oldham County is working very hard to attract industry to help provide adequate services to its citizens and fulfill the responsibilities of county government,” he continued. “Although we are excited about the potential increase in tax base through this new industry, with the ever-increasing mandates placed on local governments and rising costs to provide these services, it remains to be seen how much tax relief can be provided.”
The Property Tax
The property tax, or ad valorem tax, is inarguably the largest revenue source for Texas counties. In Oldham County, the property tax represents over 60 percent of the income stream.
According to the Texas Constitution, Article VIII, Section 9, the county cannot levy a tax rate in excess of $.80 per $100 of property value for the county’s general fund, permanent improvement fund, road and bridge fund and jury fund.
On top of the $.80, 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, counties on the Gulf of Mexico can levy a special tax for construction of sea walls, breakwaters, or sanitary purposes, not to exceed $.50 per $100 valuation.
Counties are also authorized by several statutes to levy certain special purpose taxes. However, these taxes when combined with the general fund tax may not total more than $.80 per $100 assessed valuation.
Property tax rates across the state are as varied as the counties themselves, with some counties hovering in the 20- to 30-cent range and others approaching or even reaching the maximum.
Oldham County has been flirting with the maximum rate off and on for years and currently sits at a rate of 71 cents.
“We’re trying to work very hard to reduce the tax burden on the local property tax owner,” Allred said.
Even counties that have not approached the maximum rate are guarded when it comes to tapping the tax, the largest source of funding for all local services. Other taxing units include school districts, cities, and special districts such as hospital, utility, flood control and rural fire districts, along with rural colleges.
According to the latest Property Tax Report published by the Texas Comptroller of Public Accounts, in the tax year 2008, Texas local taxing units levied nearly $39 billion in property taxes. The counties’ share, some $6.3 billion, represented only 16.3 percent of the total property tax, with the school districts claiming 54.5 percent.
While county officials statewide are well aware of the overburdened property tax – and taxpayers’ frustration with their property tax bills – they are limited by law. As an arm of the State of Texas, counties can only do those actions that are specifically authorized by Texas law, including using revenue sources sanctioned by law.
Property taxes fund approximately 90 percent of services in Loving County, said Dawn Watkins, county auditor. The remainder is funded by investment income and fees.
In the past year, Wichita County has received 80 percent of its funding from property taxes, 16 percent from fees, fines, licenses, permits, etc., and 4 percent from interest along with state, federal and miscellaneous sources of income, said County Judge Woodrow W. Gossom.
“While I have always been envious of those entities collecting sales tax, this has not been a good year for many as those revenues have declined which will cause an automatic tax rate increase,” Gossom said. “Our biggest fear is what will be dumped on us by the Legislature and the governor’s ‘budget knife’ that only cuts what was to come to us. Reductions in juvenile programs and delays in taking paper-ready prisoners are likely.”
In addition to the property tax, counties rely on fines and fees, intergovernmental revenue, and interest, along with miscellaneous revenues or transfers.
Intergovernmental revenue includes three primary categories.
1. Federal and state grants. These are program enhancers versus budget enhancers, and the money usually does not add to the county’s bottom line, Wells said. Generally speaking, the money funds a new or special program that the county does not choose to fund with its own revenue, or the money is obligated to a certain service, such as Help America Vote Act (HAVA) compliance.
2. Contractual money. Counties can contract with other entities to provide services. For example, the federal government pays Denton County to house prisoners, an arrangement in which, monetarily speaking, Denton County breaks even, Wells said.
3. Statutory money from the state. The State of Texas sends some money to counties, such as juror fee reimbursements and salary supplements for judges. In addition, the state pays the county a “commission” for collecting some taxes. During the automobile registration process the county collects the vehicle sales tax for the state; the state in turn allows the county to keep a portion of the tax. This statutory money can have an impact on the county’s bottom line, Wells said.
Denton County augments its income with several supplemental fees available to counties including:
1. Optional County Fee for Road and Bridge – Transportation Code 502.172. The commissioners court may impose a fee not to exceed $10 for registering a vehicle in the county. The revenue is dedicated to the county’s road and bridge fund.
2. Optional Child Safety Fee – Transportation Code 502.173. This $1.50 fee on vehicle registrations must be distributed to the municipalities in the county. The county can retain 10 percent as a collection fee and also a percentage based on the number of citizens living in the unincorporated area of the county.
3. County Clerk's Records Management and Records Archive Fees – Local Government Code Section 118. 0216. Both of these fees are optional and based on the county clerk’s recommendation. Denton County collects the records management fee at the maximum of $5 per document, but ceased collecting the archive fee as of October 2007 as it was deemed no longer needed.
4. Law Library Fee – Local Government Code Chapter 323.023This optional fee of up to $35 per civil case filing in county and district courts is based on the commissioners court's action and may only be used to support the county law library.
Counties may choose to implement other fees, such as Costs Paid by Defendants – Code of Criminal Procedure Article 102.0121. This statute authorizes a $500 optional fee on all defendants who are allowed to participate in a pretrial diversion program. However, Denton County does not assess this fee, Wells said.
Along with activating optional fees, counties may utilize tax options including:
1.County Sales Tax to Reduce Property Tax – Tax Code 323.101, 103. Counties that are not located in a transit authority may impose a sales tax for property tax relief with voter approval. The rate is one-half percent in counties with a city present and 1 percent in counties with no city present.
2.County Assistance District Sales Tax – Local Government Code Chapter 387. All Texas counties may seek voter approval to create a county assistance district (CAD) and adopt a local sales tax if the total combined rate of all local sales and use taxes would not exceed 2 percent at any location within the district. The permissible rates for the district sales tax are one-eighth, one-fourth, three-eighths, or one-half of one percent. The revenue must be dedicated to certain functions specified in the government code.
3.Sales Tax for Hospital/Health Services District – Tax Code 324.021-022, .5 percent. Population bracket of 50,000 or less in the county.
4.Sales Tax for Crime Control and Prevention District – Tax Code 323.105 and Local Government Code 363.055, up to .5 percent. Population bracket of greater than 130,000 in the county and in cities in which the county population is greater than 5,000.
5.Sales Tax for Landfill and Criminal Detention Center – Tax Code 325.021-022, .5 percent. County population bracket of 48,000 or less with cities greater than 22,000 bordering the Rio Grande.
6.Sales Tax for Venue Projects, Local Government Code 334.081, 083, up to .5 percent.
7.County Hotel Occupancy Tax for Certain Counties, Tax Code 352.002-003, 2 percent to 8 percent. See statute as numerous conditions apply.
8.County Hotel Occupancy Tax for Venue Project, Local Government Code 334.252, 254, up to 2 percent.
9.Admissions Tax on Tickets Sold at Venue Project, Local Government Code 334.151-152, up to 10 percent.
10. Facility Use Tax on Members of Sports Teams, Local Government Code 334.302-303, up to $5,000 per player per game.
11. Motor Vehicle Rental Tax for Venue Project, Local Government Code 334.102-103, up to 5 percent.
12. Parking Tax on Event Parking at Venue Facility, Local Government Code 334.201-202, up to $3 per vehicle.
13. Coin-operated Machine Occupation Tax, Occupations Code 2153.451, up to $15 per machine per year. Tax may not exceed one-fourth of state rate which is $60 per year.
Increased State Funding, Expanded Tax Revenues
According to Throckmorton County Judge Trey Carrington, the breakdown of the 2010 county tax levy is as follows:
Ø General fund: $.78
Ø Road and bridge: $.12
Ø Farm to market: $.0328
Ø Total tax levy: $.9328 for the county, hospital, and nursing home
“We’re just about maxed out,” Carrington said, and the main reason is the county hospital. Throckmorton County is 80 miles from Wichita Falls and Abilene.
“Some folks say sell all of our maintainers and keep the hospital,” Carrington said, “and others say go the other way.”
“We have a good hospital,” the judge continued, “with a good doctor and good staff.”
The county has explored grant opportunities, however most of those funds are for improvements rather than staffing, one of the hospital’s primary expenses.
Carrington said the key to easing his tax burden would be for the state to help fund rural hospitals.
“We have to keep that hospital open,” he maintained. “And we’re keeping it going at a tax rate of $.93.”
The state also should increase the county share of certain taxes, such as the gas tax, said Gossom. The county share of the gasoline tax has not been changed since the 1950s.
“My personal recommendation would be to make other sources of tax revenues available to all counties,” Wells said. The sales tax would be very beneficial to Denton County, which houses 40,000-plus students attending area universities.
These educational institutions, along with a state school and FEMA offices, have large amounts of property that are exempt from the property tax, and many of the students commute to Denton so they pay no property taxes in the county, Wells continued.
“A sales tax would allow the county to receive some tax revenue from these students and entities that use our services but don’t currently provide us any revenue,” he concluded.
Gossom echoed these sentiments, saying he would like to see taxes and fees applied at the counties’ discretion.
Sales Price Disclosure
In Oldham County with so little property on the tax rolls, Allred said mandatory sales price disclosure would help ensure that his county is getting its fair share of revenue. Commercial properties are often undervalued by appraisal districts when they cannot discover a sales price, leading to below-market appraisals.
“Studies have shown that residential property is consistently appraised closer to market value than commercial and industrial property,” Allison said. “This shifts the tax burden to homeowners. Mandatory sales price disclosure would help.”
Prior to the last legislative session, the Bexar County Appraisal District provided a sample of 40 properties in the county that had been undervalued by almost $350 million, shortchanging school districts and local governments some $10.5 million.
Prohibit Unfunded Mandates, Fight Caps
Along with looking for increased revenue, Texas counties fight a continual battle to keep the revenue they have.
“The Texas Legislature mandates services, such as indigent criminal defense, indigent health care, and other programs without full state funding,” Allison said. “The State of Texas requires many services, but provides no funding.”
The CJCAT supports a constitutional amendment prohibiting unfunded mandates; in fact, some 20-plus states have already passed such an amendment.
In a related issue, the CJCAT has rallied with other associations to fight proposed appraisal and revenue caps.
“Appraisal caps simply shift the tax burden between property owners distorting the market and creating inequities between taxpayers,” Allison said. Revenue caps are statutes that limit the ability of local governments to adopt their budgets and tax rates.
The present revenue caps allow a rollback referendum after a voter petition if the commissioners court increases the effective tax rate by more than 8 percent. Proposed legislation would eliminate the petition requirement and lower the rollback rate, Allison said. These caps can result in unnecessary election expenses and overuse of debt financing.
Revenue caps legislation fails to address one of the fundamental problems of county government, which is unfunded mandates, Allison continued.
Additional Revenue Sources: A Lesson From the Sunshine State
The Florida Constitution prohibits unfunded mandates. In addition, counties, municipalities and special districts share many common revenue sources to fund their government services. According to the Florida Comptroller's Office, the major sources of revenue are:
Charges for Services
Ad Valorem Property Taxes
Sales and Use Taxes
Licenses and Permit Fees
Fines and Forfeitures
In 2008 the Okaloosa County, Fla., budget was approximately $304 million, according to Okaloosa County Commissioner James Campbell. Some 18 percent of that $304 million came from the property tax.
Rather than a property tax rate, Florida counties set “millage rates” with one mill equaling $1 for every $1,000 of taxable property value. In 2008, the millage rate for Okaloosa County was 3.3443. This millage rate and resulting funds represent the ad valorem or property taxes.
So if the property tax provides 18 percent of the revenue in Okaloosa County, what about the remaining 82 percent?
County authority to raise revenue is defined in the Florida Legislative Committee on Intergovernmental Relations 2007 Local Government Financial Information Handbook:
Florida’s local governments possess the home rule authority to impose a variety of proprietary and regulatory fees to pay the cost of providing a service or facility or regulating an activity…The underlying premise for both types of fees is that local governments may charge, in a reasonable and equitable manner, for the facilities and services they provide or regulate.
Calling for Change
Every year come budget time county officials across the state are reminded of the over-burdened property tax and general lack of revenue sources. As an arm of the state, Texas counties must do those actions that are required by law, even when the State of Texas does not provide the necessary funding. In some counties, such as Oldham and Throckmorton, the county stretches every dollar, with little to none left for quality-of-life services.
For years the County Judges and Commissioners Association of Texas has taken a leadership role, passing regional and statewide resolutions asking the Texas Legislature to amend tax statutes to allowing counties to pursue additional revenue sources.
In fact, on June 23, the South Texas County Judges and Commissioners Association passed the following:
County Local Option Revenue Sources
WHEREAS, county revenue sources are extremely limited; and
WHEREAS, under current statutes, counties are forced to rely upon property taxes to fund necessary services; and
WHEREAS, county taxpayers should have the option to adopt a local sales tax, a local severance tax, a local motor fuel tax, an increase in local vehicle registration fees, and other revenue sources to reduce property taxes;
NOW, THEREFORE, BE IT RESOLVED, that the South Texas County Judges and Commissioners Association requests that the Legislature amend the tax statutes to allow the adoption of a county local option sales tax, a local option severance tax, a local option motor fuel tax, an increase in local vehicle registration fees, and other revenue sources for the reduction of property taxes without imposing any additional revenue caps.
As Texas county judges and commissioners look toward the next legislative session and schedule meetings with their senators and representatives, what message should they bring? Certainly one of pride in their county. Commissioners court members across the Lone Star State are known for their close connection to their communities and genuine concern for their citizenry. As evidenced by comments at recent CJCAT conferences, teamwork, unity, and an attitude of servant leadership characterize those at the grassroots level.
Local officials need to educate their state partners, sharing copies of CJCAT resolutions, county budgets, services, tax rates, and any consequential revenue shortages. Perhaps the collective message to Texas lawmakers should be along these lines: We are here to serve, and we need the tools to do so. The current revenue system limits our ability to grow, improve, and implement quality-of-life services. Please consider the following local option alternatives to the property tax, deemed workable by our counterparts in other states:
v Proprietary fees
Ø Franchise fees
Ø User fees
Ø Utility fees
v Regulatory fees
Ø Impact fees
Ø Inspection fees
Ø Stormwater fees
Ø Building permit fees
v Special assessments
v Additional local option taxes
Ø Local option fuel tax
Ø Local option tourist tax
Ø Local option severance tax
Ø Local option sales tax
v Additional shared revenue sources
It’s not a matter of becoming more like Florida and other states. Rather, it’s a matter of recognizing a problem and seeking a solution through education, idea-sharing, and forward-thinking, all for the betterment of the Great State of Texas.
By Julie Anderson