Bill Caption

Relating to ad valorem taxation.

Fiscal Notes

The bill's provision that reduces the revenue growth increment used for determination of the rollback tax rate from 8.0 percent to 2.5 percent for taxing units other than small taxing units would result in reduced tax revenues for school districts and increased costs to the state through operation of the school funding formulas.

The bill's prescribed method for calculating the school district no-new-revenue tax rate (a key component in the rollback tax rate) requires corresponding amendments to the Education Code which are not identified in the bill. Consequently, the cost to school districts and to the state cannot be estimated. 

Bill Analysis

SB 2 would reduce the rollback rate from 8 percent to 2.5 percent, and trigger an automatic election if the rollback rate exceeds 2.5 percent. This would apply only to taxing units that collect more than $15 million in property tax levy plus sales tax. For taxing units that collect no more than $15 million, the current 8 percent threshold and petition requirement for a rollback election would remain. However, voters in these taxing units would be able to vote in the next scheduled election to opt in to the 2.5 percent rollback rate.

Next, SB 2 would rename the effective tax rate to "no-new-revenue tax rate" and the rollback rate to “voter-approved rate” for better understanding. SB 2 would also create a new website to allow any property owner in the state to look up their customized proposed tax rate, no-new-revenue tax rate, and rollback tax rate for each taxing unit. This bill also re-formats the tax notice to be more understandable by taxpayers.

Finally, SB 2 would establish Appraisal Review Boards in counties with a population of one million or more for commercial properties that exceed $50 million in value. It would also create the Property Tax Administration Advisory Board to oversee the entire appraisal process.

No county or municipality budget for the 2020 fiscal year would be able decrease first responders’ compensation due to a reduction in the rollback rate.

Vote Recommendation Notes

Texas Action recommends supporting SB 2 because it promotes private property rights, individual liberty, and limited government. The heavy burden of skyrocketing local property taxes has forced many Texans out of their homes and businesses. SB 2 would slow the growth rate by imposing a 2.5 percent property tax revenue trigger—possibly preventing property taxes from doubling but every 29 years. The rollback rate was set at 8 percent during a time when inflation was much higher, necessitating a higher election trigger for taxing units. Since inflation is at a much more stabilized and lower rate, the rollback trigger should also be reset.

The name changes to "no-new-revenue tax rate" and “voter-approved rate” would also make the process more transparent and easier to understand for property owners and local officials. This bill would also give constituents a louder voice in the property tax process and make local leaders more accountable. 

Although Texas Action recommends supporting SB 2, it could be improved by removing the small tax unit exemption. The 2.5 percent rate should be applied uniformly to allow all Texans to benefit, whether they live in an urban area, the suburbs, or a rural area. Additionally, while slowing the growth rate is commendable, high property taxes are already overly burdensome and need to be reduced.

To be clear - this bill is about controlling the growth of property taxes but does not provide actual tax relief by reducing the current tax burden. We support SB 2 and encourage the legislature to also pass significant and meaningful property tax relief.