Email, Bill Longley, legislative counsel, Texas Municipal League, May 20, 2017

2:09 p.m.

The chart provided by Lt. Governor Patrick appears to take an average tax levy figure and calculate the levy under an 8 percent rollback rate versus a 5 percent rollback rate over the course of 20 years. The chart also appears to group all cities, counties, and special purpose districts together and assume that each is adopting a rate equal to the rollback rate (whether 8% or 5%) each year over the 20-year window.

While we haven’t run the numbers for counties or special purpose districts, we have analyzed comptroller data for city tax rates. The most recent data can be found here: https://comptroller.texas.gov/taxes/property-tax/reports/index.php (See under “Property Tax Biennial Report” and then “2014 and 2015 Values”).  Our understanding is that this data is self-reported by appraisal districts to the comptroller. The data isn’t perfect, but this is the only statewide collection of tax rate data.

I have attached a couple of spreadsheets that we put together analyzing the comptroller’s numbers. Please note that we have removed some data that appeared to be clearly inaccurate.

The Lt. Governor’s chart seems to indicate that every city, county, and special purpose district adopts a tax rate equal to the 8 percent rollback rate. Our analysis shows that the vast majority of cities haven’t been increasing their tax rates above the current 8 percent rollback rate. Beyond that most cities aren’t even increasing their tax rates beyond a hypothetical 5 percent rollback rate as proposed by the Senate version of SB 2:

• If you look at the 2015 city data, out of 963 cities, 258 cities adopted maintenance and operations tax rates less than or equal to the effective maintenance and operations tax rate. In other words, roughly 26 percent of Texas cities didn’t adopt tax rates that were any percentage above effective M&O, much less 8 percent above effective M&O (which would equal the current rollback rate). This means that, in theory, these cities adopted a property tax rate that would bring in the same amount of property tax revenue or less property tax revenue for M&O as in the previous year for properties taxed in both years.

• Of the remaining 705 cities that adopted rates that were some percentage above the effective M&O tax rate, 198 adopted M&O rates equal to or exceeding the 8 percent rollback rate in place under current law. The remaining 507 cities adopted an M&O tax rate higher than the effective rate, but lower than an 8 percent rollback rate. All in all, 765 out of 963 cities adopted an M&O rate less than the 8 percent rollback rate. Relatively few cities adopt rates exceeding the current 8 percent rollback rate. This is supported in the 2014 data as well. By our count, 209 cities adopted tax rates equal to or exceeding the 8 percent rollback rate in 2014.

• Our analysis of the comptroller data also shows that there are many cities in any given year that adopt rates lower than 5 percent beyond effective M&O. In 2014, 620 cities adopted tax rates lower than 5% beyond effective M&O. In 2015, the number was 587 cities.  In both cases, more than 60 percent of cities were under a 5 percent rollback rate, if it had been in place.

All of these numbers contradict the assertion that cities are adopting tax rates at the current 8 percent rollback rate every year, or would constantly adopt rates at the Senate-proposed 5 percent rollback rate in future years. Keep in mind also that there is variability each year depending upon the city. For instance, if a city adopts a rate equal to the 8 percent rollback rate one year, that has no bearing on the rate the city adopts the next year. There may be extenuating circumstances that force the city to adopt a high rate one year that aren’t present the following year. This is all to say that it would be extremely unusual for one city to adopt a rate that is the same percentage above the effective M&O rate every year. Municipal budgeting just isn’t that simple.  

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Thanks,

Bill Longley

Legislative Counsel

Texas Municipal League