Property Tax Update: SB 2 Passed out of Senate

April 18, 2019

Legislative News

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On April 15, the Senate passed SB 2 by Chairman Paul Bettencourt (R-Houston), the Senate's property tax bill, with a final vote of 18-12-1. SB 2 remains a top priority bill for Lt. Gov. Dan Patrick, but support had stalled over the last two months as members considered the impacts to counties and other local governments. Discussions were ongoing when Patrick threatened to circumvent, and essentially undermine, Senate tradition. To avoid the "nuclear option," Sen. Kel Seliger (R-Amarillo), who has consistently voiced his opposition to the bill since the beginning of session, relented and allowed the bill to be considered on the floor.

Before final passage, Sen. John Whitmire (D-Houston) delivered an impassioned speech to members of the Senate expressing his dismay with the effort by certain legislators to infringe on local decision making and impose restrictions on local officials who are "people that are truly closer to their communities than we are." Sen. Whitmire's complete remarks are available on the Senate's archived audio/video website beginning at the 43-minute mark.

With respect to the bill's provisions, after considering 28 floor amendments and three hours of debate, two were eventually accepted. Sen. Bettencourt's floor amendment made the substantive changes which include moving the revenue cap from 2.5 percent to 3.5 percent for cities, counties and special purpose districts but retaining the 2.5 percent revenue cap for school districts. Other changes include a 15-day automatic extension to file a rendition statement when notice by a property owner is given, an increase in the minimum property value amount for a special ARB panel from $50 million to $75 million, and clarification that the Comptroller will prescribe widely accepted industry appraisal manuals.

Currently, revenue generated by new growth is exempted from the total property tax rate. So are costs associated with indigent defense and voter approved debt. SB 2 would not make changes to these attributes of the current property tax system.

Small taxing units, with combined local sales and property tax levies under $15 million annually, must hold an election in May 2020 for their voters to choose between a 3.5 percent rollback rate or keeping an 8 percent rollback rate.

The bill mandates that an online portal be created and maintained to provide property tax information for property owners. The site could be searched by address to identify relevant statistics, including property value, number and names of entities levying taxes, taxing rates, and meeting details for when the taxing rates are set. This is a compelling feature of the bill that will enhance the public posting requirements for tax hearings, but will require all taxing entities to comply with the additional posting requirements.

Less controversial components of the bill include a number of reforms to the appraisal appeal process, (e.g., when and how homeowners can protest the value of their home before an appraisal review board). In an effort to standardize the process, the Comptroller is directed to promulgate rules and produce materials which appraisal review boards are required to follow. The bill also prohibits protest hearings from taking place on Sundays, or after 7 p.m. during the week, and permits decisions by a review board to be binding with a majority vote instead of a unanimous vote.

The Senate bill was referred to the House Ways & Means Committee on April 16 and is expected to be set for a hearing on Wednesday, April 24 at 8 a.m.

The House postponed bringing HB 2, the House's property tax bill, by Chairman Dustin Burrows (R-Lubbock) to the House floor until April 24. In its current form, the bill differs considerably from the Senate version and currently contains a revenue cap of 2.5 percent that applies to counties, cities, and special districts. The House has exempted hospital districts, community colleges, emergency services districts, and school districts from the revenue cap.

Engaged county officials voicing concerns with the bill have generated considerable discussion leading to more than 180 pre-filed amendments being drafted. It is unlikely the two chambers will pass identical legislation. With less than 40 days left in the legislative session, it remains critical to stay engaged to track and help provide meaningful feedback in the final steps of the legislative process.