Every time the Legislature sends ballot items to Texas voters, the Internet, direct mail, and auto-dial phone messages come into play. Sometimes usefully, sometimes not. Here's an example of the latter.
An e-mail now making the rounds claims ballot propositions scheduled for a vote Nov. 3 create a state property tax.
Not so.
"These propositions, neither singly nor in combination, have anything to do with a state property tax," said Dale Craymer, president of the Texas Taxpayers and Research Association (TTARA). "Their sole focus is better administration."
TTARA does not take a position on ballot items or in elections but does support and oppose legislation. TTARA did support and helped pass the House Joint Resolution that eventually became Proposition 3.
Lawmakers carefully studied property tax issues throughout 2008. While the final resolution of the 2009 Legislative Session did not go as far as many advocates of lower property taxes would like, the Legislature did adopt a series of technical fixes to the Texas property tax system designed to improve the administration of appraisals.
Because the property tax ballot propositions are the subject of so much discussion, LSR is supplementing our Oct. 2 article with a more detailed discussion of what those property tax amendments do and do not do.
Proposition 3
What the proposition does: The Texas Constitution currently prohibits administrative or judicial enforcement of "uniform standards and procedures" for property tax appraisal, except from the county in which the property is located. The amendment allows the state – by law – to enforce uniform appraisal standards.
This sounds like a bigger change than it actually is. The Comptroller currently conducts a property value study, where the state calculates the value of property in a school district. If the Comptroller finds that the estimate is more than five percent higher than the school district's value, then sanctions kick in, which can eventually include loss of state funding to the county's school districts.
In effect, the state enforces standards for property appraisal now, as the Comptroller issues an appraisal handbook, which can be used in court, and it prepares the value study. The catch is, it does so indirectly – by threatening school funding. It also licenses – and can revoke the licenses of – appraisers.
Proposition 3 allows the state to examine appraisal practices directly and order improvements, rather than doing so indirectly by threatening school funding.
"It ensures that everyone plays by the same set of rules so that the appraisal is done uniformly across the state," Craymer said.
What the proposition does not do:
*Create a statewide property tax. A state property tax is about rates, not appraisals. Article 8, Sect. 1-e of the Texas Constitution prohibits such a tax – either directly or indirectly. This provision remains intact, even with Proposition 3.
* Enact a "circuit-breaker" mechanism for property taxes. The Heritage Alliance's website contained a statement opposing Proposition 3, on grounds, among others, that Proposition 3 might pave the way for a "circuit-breaker" that would limit property taxes to a fixed percentage of a homeowner's income.
There is some question as to whether a "circuit breaker" proposal would require a constitutional amendment. To the extent it does, there are several constitutional provisions may have to be amended. The existing constitution requires equal and uniform taxation, prohibits forgiving valid taxes, and prohibits a state income tax. None of these three provisions is affected by Proposition 3. To the extent a constitutional amendment is required to implement a circuit-breaker, it would still be.
Proposition 2
What the proposition does: During interim testimony, lawmakers heard from Texas homeowners whose appraisals skyrocketed overnight because a shopping mall or some other form of commercial development opened nearby. Under current law, land is to be appraised at its "highest and best" use (read: the one that leads to the highest appraisal and property tax bill). There is an exception to current law for agricultural and timber valuations.
Proposition 2 allows homestead property to continue to be appraised as a home, as long as it is occupied as a residence. It applies only to property for which an owner claims the state homestead exemption. This exception would have the effect of lowering the appraisal, and therefore the property tax bill, of many properties statewide.
"What we have seen happen over these last number of years are folks who begin to find themselves taxed out of their homes because it's taxed as something it's not," said Michael Quinn Sullivan, president of Texans for Fiscal Responsibility, which has endorsed Propositions 2, 3, and 5. "Some of the best property taxpayer protection we can have is to ensure that people's homes are taxes as homes, not as mini-marts or condos."
What the proposition does not do: As with Proposition 3, some have argued that No. 2 could lead to a statewide property tax. The Texas Constitution's ban on a state property tax remains intact with Proposition 2.
Proposition 5
What the proposition does: This ballot item allows counties to consolidate their appraisal review boards. Currently, when a taxpayer appeals appraisal district value, it goes to that county's Appraisal Review Board. Current law requires each appraisal district to have its own Appraisal Review Board.
Two or more appraisal districts are currently allowed to consolidate fully, meaning that both the appraisal districts and Appraisal Review Boards become one. So far only Potter and Randall Counties (Amarillo) have done so.
But no other county has expressed interest in consolidating. Appraisal Review Boards, however, often value complex property types such as power plants, industrial development, or even commercial real estate. Yet in smaller communities, the expertise needed to assess objectively more complicated types of property may not be readily available. Proposition 5 allows the appraisal review boards to consolidate without requiring full consolidation of the appraisal districts.
What the proposition does not do: Mandate anything. The proposition is permissive, not mandatory. An appraisal district board of directors that does not want any consolidation at all can remain in its present form.
Proposition 1
What the proposition does: This constitutional amendment authorizes the Legislature to allow cities and counties to issue bonds to buy land, either to prevent encroachment near military bases or to put in utilities or roadways. It also authorizes the use of tax increment financing, a procedure whereby increases in property tax revenue in an area are used to pay off the bonds used to improve that area. The constitutional amendment is designed to make it easier for local government to make an area more attractive to the military. There is no enabling legislation that passed, so the new amendment would not go into effect until the Legislature passes a statute authorizing cities and counties to use the new powers the amendment grants.
What the amendment does not do: Again, the amendment is permissive not mandatory, so it does not force a city to buy land or issue bonds. It also does not grant new power over land; cities have long had the power of eminent domain. It also does not authorize special tax breaks.
What are others saying? The Republican Party of Texas has endorsed Propositions 2, 3, and 5. Texans for Fiscal Responsibility is endorsing Propositions 2, 3, and 5 and opposing Proposition 1. Americans for Prosperity is endorsing Propositions 2, 3, and 5. The Fort Worth Star-Telegram is opposing Propositions 2, 3, and 5. The Houston Chronicle endorses Propositions 1, 2, 3, and 5. The San Antonio Express-News opposes Propositions 2, 3, and 5 but backs Proposition 1. Many major newspapers have not yet printed their endorsements.